What the courts have decided on section 271, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Anurag Dalmia v Income Tax Office
High CourtHelps taxpayerValidity unconfirmed
The Tribunal has deleted the additions and the penalty has been cancelled. The criminal complaint is still pending on exactly the same allegations. Does it survive?
No, where the complaint rests on the same material. The Delhi High Court quashed complaints under s.276C(1)(i), s.277(1) and s.276D, holding that once the Tribunal had set aside the additions on merits and the penalty had been cancelled, no offence survived and quashing of the prosecution followed automatically. It also held that the presumption of a guilty mind under s.278E arises only if a prima facie case is disclosed in the complaint.
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Vijay Television P Ltd v DRP
High CourtHelps taxpayer
The AO skipped the draft order and passed a final one. Can a corrigendum cure that?
No. The procedure in s.144C is mandatory and the draft order is the gateway to the eligible assessee's right to go to the DRP. Once a final order is passed, with a demand notice and penalty proceedings, the AO is functus officio and a corrigendum cannot convert it into a draft; the defect is an absence of power, not a curable mistake.
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Statutory position — s.271AA(2): a flat five hundred thousand rupees for failing to furnish the master file under s.92D(4), imposed by the PRESCRIBED AUTHORITY and not by the Assessing Officer — and how it differs from the two per cent penalty in s.271AA(1)
CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
We did not file Form 3CEAA. Which penalty applies, who imposes it, and is it a percentage of anything?
Section 271AA(2) provides: "If any person fails to furnish the information and the document as required under sub-section (4) of section 92D, the prescribed income-tax authority referred to in the said sub-section may direct that such person shall pay, by way of penalty, a sum of five hundred thousand rupees." It is a flat figure — five lakh rupees — not a percentage, and the power is in the PRESCRIBED AUTHORITY under s.286(1), not in the Assessing Officer or the Commissioner (Appeals). That is what distinguishes it from s.271AA(1), which is the older penalty: without prejudice to s.270A, s.271 or s.271BA, where a person in respect of an international transaction or specified domestic transaction fails to keep and maintain the information and document required by s.92D(1) or (2), or fails to report such transaction which he is required to do, or maintains or furnishes an incorrect information or document, the ASSESSING OFFICER OR COMMISSIONER (APPEALS) may direct payment of "a sum equal to two per cent of the value of each international transaction or specified domestic transaction entered into by such person". Both sub-sections are named in s.273B, so no penalty is imposable under either if the person proves there was reasonable cause for the failure.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.