6 Most Dangerous Provisions of Income Tax | Section 270A | 144 | 147 | 148 | 131 | 276B | Taxpundit

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Published at : 07 Jan 2021
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Income Tax India : Following are 6 Most Dangerous Sections/Provisions of Income Tax Act, 1961 which has severe consequences :-

1. Section 144 : Best Judgement Assessment :- The Best Judgment Assessment is a procedure under the IT Act to comply with the principles of natural justice. Vide Section 144 of the Income Tax Act, 1961 the Assessing Officer is under an obligation to make an assessment of the total income or less to the best of his judgment in the following cases.

a. If the person fails to make a return or required under s. 139(1) and he has not made a return or a revised return under ss. (4) or (5) of that section.

b. If any person fails to comply with all the terms and conditions stipulated under a notice u/ss. 142 or fails to comply with the directions requiring him to get his accounts audited in terms of section 142(2A).

c. If any person, after having filed a return fails to comply with the with all the terms of a notice under section 143(2) requiring his presence or production of evidence and documents; or

d. If the Assessing officer is not satisfied about the correctness and the completion of the accounts of the assessee if no method of accounting has been regularly employed by the assessee.

In case of best judgment assessment an assessee has a right to file an appeal under S. 246A or to make an application for revision under S.246 to the Income Tax Commissioner. The best judgment assessment can only be made after giving the assessee an opportunity of being heard.

2. Section 147/148 : Reassessment :- If an AO has any reason to believe that any income chargeable to tax has escaped assessment, the AO has authority to reopen the case for scrutiny. Section 147 of the Income Tax Act gives the I-T Department power to reassess your previously filed I-T returns. An Assessing Officer can pick your return for reassessment based on a certain pre-defined criteria by sending you an Income Escaping Assessment notice under section 148 of Income Tax Act.

You can get notice u/s 148 if the assessing officer has a reason to believe that your income which was chargeable to tax has escaped assessment. If he has materials to support his belief, he will record his reasons in writing and send you a notice u/s 148. The AO cannot simply change his mind and decide to re-investigate your case without any valid reason.

3. Section 270(A) : Under-reporting income or inflating deductions/exemptions in income tax return can attract heavy penalties ranging from 50% to 200% of tax evaded.

As per the amended section 270A of the Income Tax Act, in case of misreporting of income the income tax officer can levy a penalty of 200 per cent of the amount of tax payable on under-reported income.

However, if income is under-reported due to any other case, the penalty shall be 50% of tax payable on under-reported income.

4. Section 271C : Section 271C of Income Tax Act deals with penalty for failure to deduct TDS or remit TDS with the Income Tax Department. The maximum amount of penalty under Section 271C is the amount of tax which the taxpayer failed to deduct or pay as required under TDS regulations.

5. Section 276B : If a person, without reasonable cause or excuse, fails to deduct or after deducting fails to pay the tax as required by or under the provisions of sub-section (9) of section 80E or Chapter XVII-B, he shall be punishable with rigorous imprisonment for a term which may extend to six months, and shall also be liable to fine which shall be not less than a sum calculated at the rate of fifteen per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid.

6. Section 131 & 272A(1) : Section 131 of the Income Tax Act empowers the income tax authorities to conduct inquiries. It provides powers to summon persons / witnesses, examine them under oath, compel production of books of account and documents, and issue commissions. Non-compliance with the summons / notice issued under section 131 may result in levy of penalty of rupees 10,000 for such a default.

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