With the Finance Bill 2016, the penalty regime in income-tax law is proposed to undergo a major overhaul. Earlier system provided for a levy of penalty, for concealment of income or furnishing inaccurate particulars of income, of an amount between 100% to 300% of the tax sought to be evaded. The newly proposed system classifies all variations made in the income into two categories – ‘under-reporting’ and ‘misreporting’. The penalties are now pegged at 50% and 200% of the prescribed tax base computed on under-reported or misreported income respectively. The changes are proposed to be implemented from Assessment Year 2017-18.
Penalty may be levied by Assessing Officer, Commissioner Appeals, Commissioner or Principal Commissioner (hereinafter referred to as AO for short). By using the word ‘may’ in the new section the legislature seeks to retain the existing fundamental feature of penalty that it should not be levied unless the conduct of assessee has been contumacious.
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