As per the newly inserted Section 271AAD of the Income Tax Act, 1961 which is effective from 1st April, 2020, if during any proceeding, it is found that in the books of account maintained by any person there is a false entry, or an omission of any entry relevant for evading tax liability, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum equal to the aggregate amount of such false or omitted entry.
The Assessing Officer may also direct that any other person who causes to make a false entry or omits or causes to omit any entry, shall pay by way of penalty a sum equal to the aggregate amount of such false or omitted entry.
The section further explains that “false entry includes use or intention to use forged or falsified documents such as a false invoice or, in general, a false piece of documentary evidence; or by invoice in respect of supply or receipt of goods or services or both issued by the person or any other person without actual supply or receipt of such goods or services or both, or invoice in respect of supply or receipt of goods or services or both to or from a person who does not exist.
CBDT vide Circular dated 11.01.2020 has instructed the Income Tax officers that the provisions of Section 271AAD may be invoked in cases where such provisions are attracted.
Text of Section 271AAD of the Income Tax Act, 1961
Penalty for false entry, etc., in books of account.
271AAD. (1) Without prejudice to any other provisions of this Act, if during any proceeding under this Act, it is found that in the books of account maintained by any person there is—
(i) a false entry; or
(ii) an omission of any entry which is relevant for computation of total income of such person, to evade tax liability, the Assessing Officer may direct that such person shall pay by way of penalty a sum equal to the aggregate amount of such false or omitted entry.
(2) Without prejudice to the provisions of sub-section (1), the Assessing Officer may direct that any other person, who causes the person referred to in sub-section (1) in any manner to make a false entry or omits or causes to omit any entry referred to in that sub-section, shall pay by way of penalty a sum equal to the aggregate amount of such false or omitted entry.
Explanation.—For the purposes of this section, “false entry” includes use or intention to use—
(a) forged or falsified documents such as a false invoice or, in general, a false piece of documentary evidence; or
(b) invoice in respect of supply or receipt of goods or services or both issued by the person or any other person without actual supply or receipt of such goods or services or both; or
(c) invoice in respect of supply or receipt of goods or services or both to or from a person who does not exist.
For ready reference of our readers the CBDT Circular is as under:
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