All About Penalty Under Section 286 & 271GB of Income Tax Act

Section 286 and 271GB of IT Act

Under section 286 of the Income Tax Act, there are certain entities that are obliged to file a report in regard to the international group. Any failure in furnishing the reports with valid information and on time will lead to penalties. The penalties are mentioned under section 271GB of the Income Tax Act.

The write-up is written with the intention to make viewers understand the applicability of penalty as directed by provisions of section 271GB.

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Penalty u/s 271GB is Applicable Under the Following Cases:

• The entity obliged for serving the reports to the administration (u/s 286(2)) fails to do so
• The entity obliged for serving the accurate information and documents fails to do so within the prescribed time limit (u/s 286(6))
• The information or documents are incomplete or inaccurate in the reports furnished under section 286 (2)
• The entity is found guilty of furnishing the wrong reports to the notice issued under section 286 (6)

If any of the aforesaid conditions are witnessed by the income tax authorities, then they are rightful of imposing the penalties (under the section 271GB) on defaulting entities or any related entity responsible for furnishing the reports.

Provisions of Section 286 of the Income Tax Act

The provision holds the entity responsible for furnishing the reports to income tax authorities on behalf of the international group to which it is a part.

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The report is mandatory compliance in every accounting year. It is furnished in the form 3CEAD within 12 months from the expiry of the relevant accounting year.

Provisions under section 286(6) of the income tax act empower the tax authorities to issue a notice seeking the information from certain entities along with the documents to prove the authenticity of the information provided.

The deadline for furnishing the form along with appropriate documents is 30 days from the receipt of the notice.

Penalty Mentioned Under Section 271GS of Income Tax Act

Amount – The defaulting entity is charged Rs. 5,000 per day for failure in furnishing the reports. The amount increases per day until the failure doesn’t exceed one month. The penalty becomes 15,000 a day if the delay continues after one month.

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Failure in Furnishing the Documents – Inappropriate or incomplete information, if presented by the company in Form 3CEAD will invite a notice from the tax officials asking the concerned entity to pay Rs. 5,000 per day starting from the day on which the deadline line for filing expires.

If Failure Continues – The notice is sent to the entity and still, it continues the delay in filing the forms then the tax authority is rightful of charging Rs. 50,000 per day starting from the date of serving the notice until the entity files its compliance.

Section 271 Penalties Mentioned Under IT for Presenting Inappropriate or Incomplete Information

Laws for penalty imposition if an entity is found guilty of furnishing the inappropriate/incomplete information.

Amount – Rs. 5 Lakhs is charged in case the entity furnishes the wrong or incomplete information or is unable to present the document proving the authenticity of the information furnished.

The said penalty is imposed under section 271GB of Income Tax Act pertaining to the following conditions –

• If the concerned entity is able to detect the errors in the information at the time of submitting the reports but doesn’t inform the same to the tax authorities.
• The concerned entity comes to know about the error soon after submitting the reports but fails to inform the authorities and furnish the correct information within 15 days of detecting the error.
• The concerned entity is responsible for intentionally submitting the wrong information or documents in response to the notice sent u/s 286 (6).

To be noted: As mentioned u/s 273B, if the defaulting firm is able to justify the reason for not furnishing the reports then no penalty will be surcharged under section 271GB.