Sections 271A and 271AA of Income Tax Act: Penalty for Books, Records and Transfer Pricing Documentation

Sections 271A and 271AA of the Income-tax Act, 1961 deal with two different record-keeping defaults. Section 271A concerns failure to keep, maintain or retain books of account and documents required by section 44AA and the applicable rules. Section 271AA concerns specified failures relating to transfer pricing information and documents for international transactions and specified domestic transactions.

Current-law context: This article explains sections 271A and 271AA of the Income-tax Act, 1961 for proceedings governed by that Act. The Income-tax Act, 2025 came into force from 1 April 2026, subject to its repeal and savings provisions. For a proceeding after the statutory transition, the corresponding provision and savings rules should also be checked.

Section 271A: Failure to keep, maintain or retain books of account and documents

Section 271A applies where a person fails to keep and maintain books of account or other documents required by section 44AA or the rules made under that section for a previous year, or fails to retain those books and documents for the period prescribed by the rules.

Meaning of Section 44AA

Section 44AA prescribes the obligation of specified persons carrying on a profession or business to keep and maintain books of account and other documents that enable the Assessing Officer to compute taxable income in accordance with the Income-tax Act. The detailed books, documents and retention requirements are supplemented by the Income-tax Rules, 1962.

Penalty under Section 271A

The penalty under section 271A is a fixed sum of Rs. 25,000. The provision operates without prejudice to sections 270A and 271. Under the statutory text, the Assessing Officer, Joint Commissioner (Appeals) or Commissioner (Appeals), as applicable, may direct payment of the penalty.

Section 271AA: Transfer pricing information and documentation defaults

Section 271AA deals with information and documentation obligations associated with an international transaction or specified domestic transaction. It operates alongside sections 270A, 271 and 271BA.

Meaning of international transaction and specified domestic transaction

An international transaction is governed principally by section 92B and generally concerns specified transactions between associated enterprises where the statutory conditions are satisfied. A specified domestic transaction is defined in section 92BA and covers the domestic transactions specified by that provision when the applicable statutory conditions are met.

Information and documents under Section 92D

Section 92D requires prescribed information and documents to be kept and maintained by persons entering into international transactions or specified domestic transactions. The supporting requirements are prescribed under the Income-tax Rules, including transfer pricing documentation obligations.

Defaults covered by Section 271AA(1)

Penalty may arise where a person, in respect of an international transaction or specified domestic transaction:

fails to keep and maintain information and documents required by section 92D(1) or section 92D(2);
fails to report a transaction that is required to be reported; or
maintains or furnishes incorrect information or documents.

Penalty amount under Section 271AA(1)

The penalty is a sum equal to 2 percent of the value of each international transaction or specified domestic transaction entered into by the person in respect of which the statutory default occurs.

Section 271AA(2): Failure to furnish information and documents under Section 92D(4)

If a person fails to furnish information and documents required under section 92D(4), the prescribed income-tax authority referred to in that provision may direct the person to pay a penalty of Rs. 5,00,000.

Sections 271A and 271AA compared

Provision	Nature of default	Penalty
Section 271A	Failure to keep, maintain or retain books of account and other documents required by section 44AA or the applicable rules.	Rs. 25,000.
Section 271AA(1)	Specified failures relating to information, documentation or reporting of international transactions or specified domestic transactions.	2 percent of the value of each relevant transaction.
Section 271AA(2)	Failure to furnish information and documents required under section 92D(4).	Rs. 5,00,000.

Reasonable cause and Section 273B

Section 273B is important when considering penalties under sections 271A and 271AA. Subject to the terms of section 273B, penalty is not imposable for specified failures where the person proves that there was reasonable cause for the failure. Whether reasonable cause exists depends on the facts, evidence and statutory requirements applicable to the case.

Statutory provisions at a glance

Section 271A: Failure to keep, maintain or retain books of account and other documents required by section 44AA or the rules may attract a penalty of Rs. 25,000.

Section 271AA(1)(i): Covers failure to keep and maintain information and documents required by section 92D(1) or 92D(2).

Section 271AA(1)(ii): Covers failure to report a transaction required to be reported.

Section 271AA(1)(iii): Covers maintaining or furnishing incorrect information or documents.

Section 271AA(1) penalty: 2 percent of the value of each relevant international transaction or specified domestic transaction.

Section 271AA(2): Failure to furnish information and documents required under section 92D(4) may attract a penalty of Rs. 5,00,000.

Official resources

Related penalty provisions

The applicable version of the Income-tax Act and Rules should be checked for the relevant assessment year and proceeding.