Explained: New penalty section of 271AAD

Life 365    24-Mar-2020
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PENALTY SHALL ALSO be levied on any other person who causes the person required to maintain books of account to make or causes to make any false entry or omit or cause to omit any entry in books of account
 
The Finance bill 2020 has inserted new penalty section 271AAD The amendment will take effect from 1st April 2020. It deals with penalizing for false entries in books of accounts. This insertion would help to reduce the issuance of fake invoices under both Income Tax and GST.
 
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Finance Bill, 2020 proposes to levy penalty on any person under two circumstances: If the assessee, who is found to have made false entries or any entries relevant for computation of total income has been not disclosed to evade tax liability. The false entries include use or intention to use forged or false documents such as a fake invoice. Or any invoice of supply or receipts of goods or services issued by any person without actual supply or receipt of goods or services or an invoice in respect of supply or receipt of goods or services or both to or from a person who does not exist.
 
The budget provides the penalty of an amount equal to the sum of such false or omitted entries that may be levied. Even any person who causes a person to make a false entry or causes omission would also be penalized with the sum which is equal to the aggregate amount of such false entry or omitted entry.
 
False entry is a wide term, which includes sales, purchase, expenses, loans and other expenses, whether shown in books or not. The invoice is said to be false in GST when a taxable person: supplies any goods or services or both without the issue of any invoice or issues an incorrect or false invoice with regard to any such supply; or issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder; or issues any invoice or document by using the registration number of another registered person; Then in such cases, he shall be liable to pay a penalty of Rs 10,000 or amount equivalent to the tax evaded, whichever is higher.
 
Also, a person convicted may be sentenced to imprisonment which may extend to five years. a taxable person fails to issue an invoice in accordance with the provisions of this Act or the rules made thereunder or fails to account for an invoice in his books of account; Then he shall be liable to a penalty which may extend to Rs 25,000.