Sections 271B and 271BA of Income Tax Act 1961 - Tax Audit and Section 92E Report Penalties
Sections 271B and 271BA prescribe penalties for specified reporting defaults under the Income-tax Act, 1961. Section 271B concerns failure to get accounts audited or furnish the audit report required by section 44AB. Section 271BA concerns failure to furnish the accountant's report required by section 92E for international transactions or specified domestic transactions.
Section 271B - Failure to get accounts audited
Section 271B applies where a person fails to get accounts audited for a previous year or years relevant to an assessment year, or fails to furnish the report of audit, as required by section 44AB. The Assessing Officer may direct payment of a penalty equal to 0.5 per cent of total sales, turnover or gross receipts in business, or gross receipts in profession, for the relevant previous year or years, subject to a maximum of Rs. 1,50,000.
| Default under Section 271B | Penalty |
|---|---|
| Failure to get accounts audited or furnish the audit report required by section 44AB | 0.5 per cent of total sales, turnover or gross receipts in business, or gross receipts in profession, or Rs. 1,50,000, whichever is less. |
What is Section 44AB?
Section 44AB is the tax-audit provision of the Income-tax Act, 1961. It requires specified persons carrying on business or profession, and certain persons covered by presumptive taxation provisions, to get their accounts audited by an accountant when the statutory conditions are satisfied.
For business, the general turnover threshold under the 1961 Act is Rs. 1 crore. The enhanced threshold of Rs. 10 crore applies where the statutory cash-receipt and cash-payment conditions are satisfied. For profession, the gross-receipts threshold is Rs. 50 lakh. Other clauses of section 44AB can require audit in specified presumptive-taxation situations.
Forms 3CA, 3CB and 3CD
Rule 6G prescribes the audit-report framework for section 44AB. Form 3CA with Form 3CD applies where the person's accounts are required to be audited under another law. Form 3CB with Form 3CD applies where the accounts are not required to be audited under another law. Form 3CD contains the prescribed statement of particulars.
Section 271BA - Penalty for failure to furnish report under Section 92E
Section 271BA applies where a person fails to furnish the report from an accountant required by section 92E. The Assessing Officer may direct that the person pay a penalty of Rs. 1,00,000.
| Default under Section 271BA | Penalty |
|---|---|
| Failure to furnish the accountant's report required by section 92E | Rs. 1,00,000. |
What is Section 92E?
Section 92E requires a person who has entered into an international transaction or a specified domestic transaction during the previous year to obtain a report from an accountant and furnish that report in the prescribed form and manner. The prescribed report under the 1961 Act is Form 3CEB.
The report contains prescribed particulars relating to international transactions and specified domestic transactions and forms part of the transfer-pricing compliance framework contained in Chapter X of the Income-tax Act.
Reasonable cause and Section 273B
Section 273B is important when considering penalties under sections 271B and 271BA. It provides, for the penalties specified in that section, that no penalty shall be imposable if the person proves that there was reasonable cause for the failure. Whether reasonable cause exists depends on the facts and evidence of the particular case.
Difference between Sections 271B and 271BA
| Point | Section 271B | Section 271BA |
|---|---|---|
| Underlying compliance | Tax audit under section 44AB | Accountant's report under section 92E |
| Primary subject | Audit of business or professional accounts | International transactions and specified domestic transactions |
| Penalty | 0.5 per cent of relevant turnover or gross receipts, capped at Rs. 1,50,000 | Rs. 1,00,000 |
| Reasonable-cause protection | Section 273B applies | Section 273B applies |
Evidence and proceedings before implementation of Bharatiya Sakshya Adhiniyam 2023
For proceedings and evidentiary questions governed by the law before the Bharatiya Sakshya Adhiniyam, 2023 came into force, the Indian Evidence Act, 1872 applied where legally applicable, together with the special provisions and procedural rules of the Income-tax Act. The liability under sections 271B and 271BA, however, arises from the statutory compliance requirements of the Income-tax Act and must be examined with the relevant tax-audit or section 92E reporting records.
Official Income Tax resources
The Income Tax Department provides the current utilities and guidance for Income Tax Forms and audit reports, including Forms 3CA-3CD and 3CB-3CD. The Department also provides guidance for Form 3CA-3CD and Form 3CB-3CD.