Section 271AAC

Section 271AAC — the law in short

What the courts have decided on section 271AAC, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Deepak Maratha v Union of India High CourtHelps taxpayerHigh Courts differ
  My demonetisation cash deposit was added for the year ended 31 March 2017 and taxed at 60% under section 115BBE. Can that rate reach income of that year?
  The Rajasthan High Court held that it cannot. The rate in section 115BBE was raised from 30% to 60% by the Taxation Laws (Second Amendment) Act, 2016, which received assent on 15 December 2016 and came into force at once - but the amendment to section 115BBE(1) was separately expressed to take effect from 1 April 2017. The law applicable to an assessment year is the law in force on the first day of that year, and a change made after a financial year has begun cannot govern the tax liability for that year unless it is expressly made retrospective. Nothing in the 2016 Act says section 115BBE is retrospective. Doubling a rate alters existing rights and is not a procedural or clarificatory change. So for the financial year 2016-17 the law in force on 1 April 2016 governs, at 30%, and the 60% rate applies from the financial year 2017-18 onwards; section 271AAC, which depends on section 115BBE, is prospective in the same way.
• Krishnakumar Manda v DCIT, Circle-12(1), Hyderabad ITATHelps departmentNo later treatment found
  The addition under the s.68 group has been confirmed and I never showed the income in my return. Is there any discretion left to the AO not to levy the s.271AAC penalty?
  On this decision, none. The Hyderabad Bench held that once income of the s.68 to s.69D kind is brought to tax and sustained, and the conditions of the proviso are not satisfied, the levy of the s.271AAC penalty is automatic and mandatory, and the language of the section leaves the AO no discretion.
• Shankar Lal Ludhani v DCIT, Central Circle, Ajmer ITATHelps taxpayerNo later treatment found
  I left the surrendered cash out of my original return and brought it in only by a revised return under s.139(5). Does the proviso to s.271AAC(1) still protect me?
  On this decision, yes. The Jaipur Bench held that once a revised return is filed the original stands withdrawn and is substituted by the revised return, so where the revised return has been accepted as a return under s.139 the proviso to s.271AAC(1) is answered and the penalty cannot stand.
• Rohit Khandelwal v AC/DCIT, Central Circle, Muzaffarpur ITATHelps taxpayerNo later treatment found
  I disclosed the seized cash and paid the s.115BBE tax, but my return was a belated one under s.139(4). The AO says the proviso to s.271AAC(1) only saves a return under s.139(1). Is he right?
  No. The proviso says "return of income furnished under section 139" and does not confine itself to s.139(1); the Tribunal held that where the legislature meant a particular sub-section it said so, and deleted the penalty on a belated return filed under s.139(4).

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.