Section 271AAD: Penalty for False entries Or Omitted entries

Section 271AAD of IT Act
A new section 271AAD insert by the finance bill 2020 which impose the penalty for false entry, etc. in books of account.

Summary of section 271AAD: –

  • This section is applicable from 01-04-2020.
  • Section 271AAD is applicable in case, if assessing officer found during proceeding any false entries or omission of any relevant entry in the books of accounts,
  • Penalty shall be equal to the aggregate of such false or omitted entry.
  • Under this section both the following may be penalised:
    • Assessee and
    • Any other person (e.g. Supplier or Buyer) who causes assessee make the false entry or omit any entry.

For example, (Fake Invoice, Bogus Sale & Purchase transactions).

Extract of Section ‘271AAD of the Income Tax Act
  1. Without prejudice to any other provisions of this Act, if during any proceeding under this Act, it is found that in the books of account maintained by any person there is—
    • a false entry; or
    • an omission of any entry which is relevant for computation of total income of such person, to evade tax liability,
  2. Without prejudice to the provisions of sub-section (1), the Assessing Officer may direct that any other person, who causes the person referred to in sub-section (1) in any manner to make a false entry or omits or causes to omit any entry referred to in that sub-section, shall pay by way of penalty a sum equal to the aggregate amount of such false or omitted entry.

Explanation. ––For the purposes of this section, “false entry” includes use or intention to use–

  • forged or falsified documents such as a false invoice or, in general, a false piece of documentary evidence; or
  • invoice in respect of supply or receipt of goods or services or both issued by the person or any other person without actual supply or receipt of such goods or services or both; or
  • invoice in respect of supply or receipt of goods or services or both to or from a person who does not exist.’.