When 200% Income tax penalty on Cash deposit in bank account analysis of newly inserted section 270A

When disproportionate cash deposited in bank account and case falls under any of below discussed clause in such a case penalty u/s 270A of the Act can be leviable for Misreporting of Income and as a results underreporting of income and in such a case penalty is levied at 200% of tax amount. There are several instances, as mentioned above, for misreporting of income out of which in my opinion disproportionate cash deposited in bank account may fall under any of following clauses:

(a) Misrepresentation or suppression of facts; or

(b) Recording of any false entry in the books of account; or

(c) Failure to record any receipt in books of account having a bearing on total income;

Let us analysis misrepresentation or suppression of facts; as far as misreporting of facts is concern it implies wrong reporting or misleading assertions about something. As far as suppression of facts is concerned it implies intentional non-disclosure. Thus wherever it is proved that there is any mala fide intention of the assessee for not disclosing any facts or for wrong disclosure, the case would fall within the ambit of misreporting of income. The burden of proving misreporting will be on the assessing officer, penalty for misreporting cannot be automatic unless AO is satisfied about misrepresentation, suppression, failure and falsity on the part of the Assessee. Or

Recording of any false entry in the books of account; where any entry made in books of accounts is false then the related under reporting income shall be on account of misreporting of income (like fake entry passed in books or entry pass in fake name etc). Hence, if person passes entries in his books of accounts which prove to be false and as a results income is underreported then penalty u/s 270A of Act can be imposed. Or

Failure to record any receipt in books of account having a bearing on total income:- where assessee fail to record any receipt in the books of accounts which has bearing on total income of the assessee the penalty u/s 270A of the Act can be leviable. It means if no entries is pass in books of account and assessee found to be receipt of any income or entries is pass but no income has not been offer for tax ( when entries is routed through balance sheet) in such a case penalty u/s 270A of the Act can be levied.

Any person deposit cash in his/her accounts which was disproportionate to his/her income (cases of disproportionate cash may be as under assesseee has never furnished return of income or  furnished income but has shown income below taxable limit and deposit cash 2.50 lakh or more in his/her bank account by 30th December 2016, or has furnished income which is above taxable limit say 10 lakh and deposit 20 lakh in his bank account) in such a case assessing officer may serve him/her a notice under the Act and ask him to give sources of such cash/income. Thereafter, after considering submission of the assessee, assessing officer may propose to impose penalty u/s 270A of the Act if case fall under any of under mentioned cases:

(a) Misrepresentation or suppression of facts; or (d) Recording of any false entry in the books of account; (e) failure to record any receipt in books of account having a bearing on total income;

Therefore, in order to safeguard against tax and penalty of 200% assessee should make sure that he has not Misrepresented or suppressed of any facts related to income or has correctly record entries in books of account (I;e receipt of income is shown as income and also offer for tax while filing return of income) and not shown as balance sheet items and skipped while filing return of income.

CA Anand Chandak

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