Demonitization of Currency Notes

[dugarsanjay]

Hi,

Suppose a person has a undeclared income in form of cash. Due to demonetization he deposits the whole amount in his bank account and pays thereon tax @ maximum marginal rate.

In his Return of Income for AY 2017-18 he declared the same as Unexplained Cash Credits u/s 68.

Now since the income is being declared by him voluntarily and offered for tax, can AO impose penalty under section 271, 270A or any other sections of Income Tax Act.

[CaGoutamBaid]

No penalty can be imposed u/s 271 for the AY 2017-18 onward, therefore AO cannot invoked provision of section 271 for the income declared for AY 2017-18.

Penalty u/s 270A can be imposed if authority found that assessee under reported its income. In absence of any provision in section 270A under which it can be said that assessee under reported its income in circumstances where assessee declares income in return filed by it but source of the same cannot explained, no penalty can be imposed u/s 270A.

In my opinion there is no other provision under which AO can impose penalty.

Legal consequence other than income tax may be arise in absence of explanation about source of income. (Enforcement Director, Money Laundering etc.)

[balas123]

Hi Dugar,

To supplement,  as clarified by GautamBaid,

a. Yes No Penalty can be imposed when the assesse declares undisclosed income in his return of income (ITR).

b. Penalty cannot be imposed without assesse being given an opportunity to be heard.

c. U/s 270A, penalty can be imposed equal to 200% of tax payable if under declared income arising from misreporting which includes misrepresentation or suppression of facts. If this were to be invoked, then penalty is leviable, to answer your query.

In the case cited, assesse is to declare entire amount as declared income in the ITR and thereby not attracting under reported  income and hence penalty will not get attracted.

d. Based on the nature of income being declared, other legal actions may get attracted which cannot be ruled out as this program has not stated immunity from prosecution. Service Tax (if service income) or Central Excise OR ED or BM/AML  related prosecutions MAY get attracted.

Hope this helps.

Balaji Srini FCA., LL.B.