False or omitted entries? Watch out penalty u/s 271AAD of the Income Tax Act, 1961.

After introduction of section 271AAD in the Income Tax Act, 1961 the assessee needs to be very vigilant and ensure that no false entry to evade tax is recorded in the books of accounts of the assessee. The said section has been introduced with effect from 01/04/2020 and the same primarily provides for a penalty equivalent the amount of any false entry in the books of account of the assessee.

The objective of introduction of section 271AAD is to curb the recording of any bills in the books of accounts of the assessee wherein the goods and services mentioned in the bills have not actually been received by the assessee.

The penalty of equivalent amount of any such bill recorded in the books of accounts also seems to be justified as the purpose of the same is to act as deterrent for the assessee to indulge into any such practice.

The section also empowers the assessing officer to impose the penalty of the equivalent amount on any other person who causes the assessee to record any such false entry in its books of accounts.

The existing penalty provisions in the Income Tax Act, 1961 did not address situations wherein such type of entries are detected during the course of survey or search of an assessee. The relevant section 270A primarily provided for penal consequences in the case of difference between the returned and the assessed income.

This section 270AAD introduced with effect from 01/04/2020 should hopefully result in ensuring that the assessee does not record false bills in its books of accounts without receiving the necessary goods or services for the same. On the contrary even in the case of genuine purchase of goods or services the assessee must ensure that proper bills for the same have been received and the supplier of goods and services is properly accounting for the same.

Visit Our Website casunilarora