I have read whole of the incometax act and iam confused about various things.. Tell me when the penalty is imposed by department...? Impsoing penalty necessary means to prosecution ... ? Or when the compounding is done??? If a case comes in scrutiny and fine is imposed means that compounding is done?? So tell me clearly that the when penalty is imposed and when prosecution and compunding is done?
- Penalty is imposed for non-compliance, non-disclosure, non-filing etc. Penalty is additional liability on the assessee apart from tax evaded, interest and fine.
- Prosecution is for specified cases such as TDS deducted and not deposited. Compounding is payment of interest in lieu of prosecution.
Thanks
Hi,
There are several provisions under which penalty can be imposed.
Refer section 270-273 for details about penalties under income tax act. Penalty is levied at the discretion of AO. In scrutiny, generally, penalty u/s 270A is initiated for underreporting/ misreporting of income.
Penalty and prosecution is different. Penalty means monetary fine. Prosecution means jail. Prosecution is very rarely excercise. Refer section 275-280 for details on prosecution.
Compounding is practically not prevalent in income tax matters. Scrutiny does not mean compounding.
Please take a phone consultation for detailed understanding.
Why compounding is practically not prevalant in incometax matters..? Misreporting or underreporting means willful default then would it liable to prosecution? And if penalty paid than prosecution is also liable?
Hi,
Chapter XXI of the Income-tax Act containing sections 270 to 275 provides for levy of penalties under the Income-tax Act in respect of various defaults committed by an assessee such as, concealment of income, failure to furnish return, failure to provide required information or attend proceedings and failure to comply with provisions regarding deduction of tax at source or certain other requirements under the Act.
Similarly, Chapter XXII of the Act containing sections 275A to 280D provides for prosecution for various defaults committed by an assessee under the Income-tax Act relating to filing of return, disclosure of income or failure to deposit tax deducted or collected at source.
You can go through the relevant sections.
Penalty and prosecution are two different things.
Penalty is imposed if the assessee has wilfully tried to evade tax or had not disclosed full income.
There are different types of penalty u/s 270A, 271C, 271F etc. They are for different purposes for not filing ITR, for accepting loan in cash.
Prosecution is a extreme situation which is mainly done if the assessee doesn't pay his due taxes even after repeated reminders or tries to transfer property to save himself from recovery of tax.
There are various immunity from prosecution and penalty but it all depends on the facts of case.
There is still no compounding principle in direct tax as is available in Indirect tax.
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Thank you
Practically, if penalty is paid then no prosecution liable.