The Tax Publishers

Income Tax--Penalty

Overview of Section 271AAD

Prakash Mathur

There are many provisions that confer the power to impose penalty under the Income Tax Act, 1961. The Finance Act, 2020, has inserted new section 271AAD providing for penalty for false entry, etc. in books if account. It is effective from April 1, 2020.The Learned Author provides an overview of the same.

1. Introduction

Section 271AAD of the Income Tax Act, 1961 (' the Act') imposes penalty for a false entry in the books of account or an omission of any entry which is relevant for computation of total income, to evade tax liability. The learned author here attempts to make an analytical study of the section and share his views on the nature and scope of the section.

2. Overview of section 271AAD

In recent past, the GST Authorities have found several cases of fake invoicing by certain suppliers without actual supply of goods or services, in order to enable recipient of such fake invoice to claim ITC and reduce their GST liability. Since receipt of fake invoice without receipt of supply of goods goes to reduce the taxable income substantially and it vitiates actual books results, section 271AAD has been inserted in the Income Tax Act, 1961 to impose penalty.


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