Section 274(2)

Section 274(2) — the law in short

What the courts have decided on section 274(2), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Mussadilal Ram Bharose Supreme CourtHelps taxpayerSuperseded by amendment
  My income was estimated at a higher profit rate after my books were rejected, so my return fell well short of the assessment. Does that by itself mean penalty for concealment?
  No. The Supreme Court held that the Explanation to section 271(1) raises a presumption, not a conclusion. Once the returned income falls below the stipulated proportion of the assessed income, the onus shifts to the assessee to show that the failure did not arise from fraud or gross or wilful neglect - but that onus is rebuttable. Where the fact-finding body, on relevant and cogent material, is satisfied that the assessee was not guilty and the Revenue leads no further evidence, no penalty follows. Whether the onus is discharged is a question of fact, and its answer raises no question of law.
• P. Murali Mohana Rao v Addl. CIT, Range-1, Hyderabad ITATHelps taxpayerNo later treatment found
  The Additional Commissioner has levied Rs 30,000 on me personally, as the chartered accountant representing my client, for not attending on three dates in answer to section 131 summons. Does he even have the power to pass that order?
  On this reasoning, no. Because section 272A(1) imposes Rs 10,000 for each default, the penalty in law was Rs 10,000 per default and not Rs 30,000 in aggregate; and on the thresholds in section 274(2) a penalty of that amount is for the Income-tax Officer to impose, so the Tribunal held the Addl. CIT had no jurisdiction to pass the order. It also held there was reasonable cause under section 273B, that one show-cause notice cannot support penalties for three separate defaults, and that the completion of the client's assessment under section 143(3) rather than section 144 showed the subsequent compliance was good compliance.
• Statutory position — s.275 as substituted: penalty limitation now runs from the end of the QUARTER CBDT Circulars & InstructionsCuts both ways
  I am checking whether a penalty order is out of time. Is the old six-months-from-the-end-of-the-month rule still the test?
  No. Section 275 has been substituted, and under the substituted provision no penalty order under Chapter XXI may be passed after the expiry of six months from the end of the QUARTER in which the triggering event occurs, with five separate triggers in clauses (a) to (e). The financial-year limb and the month-end limb of the old sub-section (1), and the old proviso giving one year from the end of the financial year in which the appellate order was received, are gone.

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.