Page 15 - DTPA Journal December 21

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The government made two changes in the amended Act, 1961. Hence, such disallowance of expenses
section: - may lead to double additions.
1. Reflected in the return of income furnished Imposition of penalty u/s 271AAD of I.T.Act,
under section 139 of Income Tax Act, 1961 1961.
2. Taxation at flat rate of sixty per cent. The Finance Act,2020, has introduced a new
section 271AAD in Chapter XXI – Penalties
As per the old provisions, if any assessing officer
Imposable to discourage taxpayers to manipulate
finds or assesses any income by invoking the
his books of accounts by recording false entries
provisions of section 68, section 69, section 69A,
including fake invoices to claim wrong input
section 69B, section 69C or section 69Dof Income
credit in GST/VAT. The said section has been
Tax Act, 1961, such income was required to be
inserted following the investigation of
taxed @ 30%. However, as per amended
Maharashtra Sales Tax Department, who had
provisions, the rate of tax at which such income
unearthed a scam of fictitious invoices in excess
required to be taxed has been changed to 60%.
of Rs.10,000/- Crores claiming input credit of
Further, the amendment provision also covers the
VAT under the Sales Tax Act. Even under the GST
transactions declared by the assessee in its return of
regime, the GST department unearthed few big
income u/s 139of Income Tax Act, 1961, which are
scams of bogus invoices amounting to more than
later found to be unexplained.
Rs.1,000/- crores, involving availing of GST
The impact of such disallowance, as stated in the Input Credit. The new section which was made
illustration mentioned earlier, may be doubled if effective from 1st April 2020 reads as under –
provisions of section 115 BBEof Income Tax Act,
“271AAD. (1) Without prejudice to any other
1961 are invoked by the Assessing Officer i.e. If the
provisions of this Act, if during any proceeding
expenses claimed by the assessee are found to be
under this Act, it is found that in the books of
bogus and it is established that expenses were in the
account maintained by any person there is—
nature of accommodation entry, then not only such
expense will be disallowed u/s 69Cof Income Tax (i) a false entry; or
Act, 1961 but it shall attract theprovisions of
(ii) an omission of any entry which is relevant for
section 115 BBEof Income Tax Act, 1961 and a tax
computation of total income of such person, to
rate of 60%. Further, the assessment of the broker
evade tax liability, the Assessing Officer may
can also be reopened u/s 148of Income Tax Act,
direct that such person shall pay by way of penalty
1961and income shown by him as brokerage may
a sum equal to the aggregate amount of such false
be treated as income from other sources and by
or omitted entry.
applying section 115 BBEof Income Tax Act,
1961, the 60% rate of tax can be charged in the case (2) Without prejudice to the provisions of sub-
of broker also asbecause once it is established that section (1), the Assessing Officer may direct that
the assessee has taken accommodation entries in any other person, who causes the person referred
the guise of brokerage, the brokerage received by to in sub-section (1) in any manner to make a false
payee also becomes bogus credit entries and entry or omits or causes to omit any entry referred
attracts the provisions of Section 68 of Income Tax to in that sub-section, shall pay by way of penalty

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