CHAPTER - XII
PENALTIES
Penalty for under-reporting of tax base
224. (1) Every person shall be liable to a penalty if he has willfully under reported the tax base for any financial year.
(2) The penalty referred to in sub-section (1) shall be a sum which shall not be less than, but which shall not exceed two times, the amount of tax payable in respect of the amount of tax base under reported for the financial year.
(3) A person shall be deemed to have willfully under reported the tax base, if-
(a) he has failed to file the return of tax bases by the due date, as required by subsection (1) of section 148;
(b) the tax base assessed is greater than the tax base disclosed in the return of tax bases; or
(c) the tax base reassessed is greater than the tax base assessed immediately before the reassessment.
(4) The amount of tax base under reported shall be the aggregate amount of the addition, or disallowance, made by the Assessing Officer, Commissioner or Commissioner (Appeals), as the case may be.
(5) The aggregate amount of the addition, or disallowance, made by the Assessing Officer in assessment, or reassessment, shall,-
(a) in a case where no return of tax base has been filed as required by any provision of this Code, be the assessed tax base, as reduced by the maximum amount not chargeable to tax;
(b) in a case where the return of tax base has been filed as required by section 148, be the amount of the tax base assessed, as reduced by the tax base disclosed in the return so filed;
(c) in a case where the return has been filed as required by section 151 or section 153, be the aggregate of,-
(i) the tax base disclosed in the return so filed, as reduced by the maximum amount not chargeable to tax; and
(ii) the amount of the tax base assessed, as reduced by the tax base disclosed in the return so filed;
(d) in a case where no return of tax base has been filed as required by section 148, section 151 or section 152 but the return of tax base has been filed as required by section 166, be the tax base reassessed, as reduced by the maximum amount not chargeable to tax; and
(e) in a case where a return of tax base has been filed as required by section 148, section 151 or section 152 and the return of the tax base has also been filed as required by section 166, be the amount of the tax base reassessed, as reduced by the tax base assessed immediately before the reassessment.
(6) The aggregate amount of the addition, or disallowance, made by the Commissioner in revision, shall be tax base assessed consequent to revision, as reduced by the tax base assessed in the order so revised.
(7) The aggregate amount of the addition, or disallowance, made by the Commissioner (Appeals) in appeal, shall be the aggregate of all enhancements made by the Commissioner (Appeals) in the order under appeal.
(8) The aggregate amount of the addition, or disallowance, referred to in sub-sections
(5) to (7) shall include-
(a) the amount of any money or the value of bullion, jewellery or other valuable article or thing, hereinafter referred to as 'assets', found in the possession of the assessee, or under his control, in the course of search under section 139, if-
(i) the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income for any financial year which has ended before the date of search;
(ii) the due date for filing the return of tax base for the financial year has expired; and
(iii) the return of tax base for the financial year has-
(A) not been furnished before the date of the search; or
(B) been furnished before the date of search but such income has not been declared therein;
(b) the amount, or value, of assets belonging to the assessee and delivered to the requisitioning officer under sub-section (4) of section 140 or handed over to the Assessing Officer under section 142, if -
(i) the assessee claims that such assets have been acquired by him by utilising (wholly or partly) his income for any financial year which has ended before the date of search during the course of which the assets were seized;
(ii) the due date for filing the return of tax base for the financial year has expired; and
(iii) the return of tax base for the financial year has-
(A) not been furnished before the date of search during the course of which the assets were seized; or
(B) been furnished before the date of search but such income has not been declared therein;
(c) any tax base based on any entry in any books of account or other documents or transactions, if-
(i) the assessee claims that such entry in the books of account or other documents or transactions represents his tax base, wholly or in part, for any financial year which has ended before the date of search during the course of which the assets were seized;
(ii) the due date for filing the return of tax base for the financial year has expired; and
(iii) the return of tax base for the financial year has-
(A) not been furnished before the date of search during the course of which the assets were seized; or
(B) been furnished before the date of search but such income has not been declared therein;
(9) However, the aggregate amount of the addition, or disallowance, referred to in sub-sections (5) to (7) shall not include the following:-
(a) amount relating to addition, or disallowance, in respect of which the assessee offers an explanation and the Assessing Officer is satisfied that :
(i) the explanation is bonafide;
(ii) the assessee has disclosed all the facts material to the addition or disallowance;and
(iii) the assessee has disclosed all the facts relating to the explanation.
(b) amount relating to addition, or disallowance, determined on the basis of an estimate by the Assessing Officer, if the accounts are correct and complete to the satisfaction of the Assessing Officer but the method employed is such that, in the opinion of the Assessing Officer, the income cannot properly be deduced therefrom;
(c) the amount relating to addition, or disallowance, pertaining to any issue, determined on the basis of an estimate by the Assessing Officer, if the assessee,-
(i) has, on his own, estimated a lower amount of addition or disallowance on the same issue;
(ii) has included such amount in the computation of his tax base; and
(iii) has disclosed all the facts material to the addition or disallowance;
(d) the amount of tax base in respect of which the liability to tax has been discharged by way of pre-paid taxes;and
(e) the amount of undisclosed tax base referred to in section 225.
(10) The tax payable in respect of the aggregate amount of the addition, or disallowance, shall be the amount of tax calculated on the aggregate amount of the addition, or disallowance, made by the Assessing Officer, in assessment, -
(a) at the maximum marginal rate in the case to which Paragraph A or Paragraph B of Rule I of the First Schedule applies; and
(b) at the rate specified in Rule I of the First Schedule, in all other cases.
(11) No addition, or disallowance, of an amount shall form the basis for imposition of penalty, if -
(a) the same amount of the addition, or disallowance, has formed the basis of imposition of penalty in the case of the person for the same or any other financial year;or
(b) the amount relates to any addition, or disallowance, made pursuant to the adjustment under section 155.
(12) The penalty referred to in sub-section (1) shall be imposed, by an order in writing, by the -
(a) Assessing Officer, if the amount of tax base under reported is determined in assessment, or reassessment;
(b) Commissioner, if the amount of tax base under reported is determined in revision of the tax base by the Commissioner; or
(c) Commissioner (Appeals), if the amount of tax base under reported is determined in appeal against an assessment, or a reassessment.
