Income Escaping Assessment u/s 147 (Penalties and prosecution if assessee not disclose proper income to the Income Tax Authority)

Section 147 gives the power to Assessing Officer (AO) to reopen the assessment proceedings, whenever AO finds that income has escaped assessment, they can reopen the case at anytime however before opening any case, AO must have reason to believe that either whole or part of income has escaped assessment. The processing for assessment is very transparent under AO will send a notice under section 148 to provide your income for the particular assessment year. The notice will be issued in a prescribed manner mentioning all the particulars in the notice you will be granted an opportunity of being heard for period 7-30 days from the date of notice issued.AO will verify whether the income has escaped or not. Notice for Income escaping assessment refers to any income earned by a taxpayer that is not reported to the tax authorities or underreported in the income tax return filed by the taxpayer. This income is not disclosed to the income tax department and therefore escapes taxation, leading to a loss of revenue for the government.

There may be various reasons for income escaping such as intentional non-disclosure, ignorance of tax laws, non-maintenance of proper accounting records, or failure to report income from all sources. The income tax department in India has various measures to detect such income, including data analytics, information from third-party sources, and scrutiny of returns.

Taxpayers who are found to have concealed income or furnished inaccurate information can face penalties and prosecution under the Income Tax Act. Therefore, it is important for taxpayers to comply with the tax laws and disclose all their income to the tax authorities to avoid penalties and legal consequences. The assessment under Section 147 of the Income Tax Act must be completed within 9 months. This timeline starts from the end of the financial year from when the notice was issued, as per Section 148 of the Income Tax Act.

Penalty and Prosecution

There are several penal provisions under The Income Tax Act, 1961 in India for taxpayers who fail to disclose their income or furnish inaccurate information in their income tax returns. The penal provisions are aimed at deterring taxpayers from evading taxes and ensuring compliance with the tax laws.

The penal provisions under the Income Tax Act, 1961 for income escaping notice under income tax in India are as follows:

Liable to Penalty u/s 271(1)(c): Penalty under this section levied  If a taxpayer is found to have concealed income or furnished inaccurate information in their income tax return, they may be liable to pay a penalty of 100% to 300% of the tax sought to be evaded.

Liable for Prosecution u/s 276C: If the tax authorities find any income that has escaped notice in the income tax return, they may initiate prosecution proceedings against the taxpayer. The taxpayer may be liable to pay a fine and/or undergo imprisonment from 6 months up to 7 years.

Penalty u/s 270A: under this section If a taxpayer underreports their income, they may be liable to pay a penalty of 50% of the tax payable on the underreported income.

It is an obligation for taxpayers to comply with the tax laws and disclose all their income to the tax authorities to avoid penalties and legal consequences.

CA KHALID REHMAN

(M.Com, Chartered Accountant)