Direct taxes - 1 ( UNIT - 5 ) Refunds, penalty and procedures

                           Refund  Of  Tax

'Refund ' means ''to pay back''. If any person satisfies the assessing officer that the amount of tax paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable under the I.T act for that year he shall be entitled to a refund of the excess.

Refund. - How arises : 

            Ordinarily the case of refund arises on account of following :
(i) The total tax deducted at source is higher than the amount of tax liability as determined on regular assessment.
(ii) The amount of advance tax paid or the tax paid on the basis of self - assessment exceeds the tax liability as determined on regular assessment.
(iii) By the rectification of a mistake
(iv) By the order of judgement in an appeal
(v) Where relief for double taxation is granted.
Persons entitled to claim refund in certain special cases :   
(1) The assessee, who has paid the tax.
(2) Where the income of one person is included in the total income of any other person, the latter alone shall be entitled to refund in respect of such income.
(3) Where through death, incapacity, insolvency, liquidation or other cause, a person is unable to claim or receive any refund due to him, his legal representative or other trustee or guardian or receiver, as the case may be entitled to claim or receive such refund for the benefit of such person or his estate.

Procedure  for  claiming refund  :  

•  The assessee has to apply for a refund and the application shall be in the prescribed form(Form No.30) and shall be verified in the prescribed manner.
• The application for refund shall be accompained by a return unless the claimant has already made such a return to the A.O. 
• Where any part of the total income of a person making a claim for refund of tax consists of dividends or any other income from which tax has been deducted at source, the application for refund shall be accompained by the certificates received in this connection.
• No such claim shall be allowed, unless it is made within 1 year from the end of the A.Yr to which the claim is related.

Belated   claim  for  refund  :  

 Assessing officers have been authorised to admit belated refund claims upto rs. 5,00,000 provided that the following conditions are fulfilled : 

• The refund arises as a result of tax deducted at source, collected at sourcevor payment of advance tax.
• The income of the assessee is not assessable in the hands of any other person under any provisions of the Act
• Interest shall not be paid on belated claim of refund.

Refund  on Appeal, etc :

Where the refund becomes due to the assessee as a result if rectification of mistake or any order passed in appeal or revision, the assessing officer(A.O.) shall refund the amount to the assessee without any apication in this behalf. In these cases there is no time limit for the refund.

Interest  on  refund  : 

The rate of interest shall be one-half percent for every month or part of a month of the delay in the grant of refund.

Interest on Excess Refund : 

 Where the refund is granted to the assessee on the basis of return(u/s 143(1)) and 

(i) no refund is due on regular assessment, or

(ii) the amount of refund u/s 143(1) exceeds the amount refundable on regular assessment, the assessee shall be laible to pay simple interest @ one- half percent on the excess amont refunded, for every month or part of a month from the date of grant of refund till the date of regular assessment.

     Where as a result of rectification of mistake or appeal or revision or an order of the settlement commission, the amount of refund granted u/s 143(1) held to be correctly allowed then, the interest chargeable shall be reduced accordingly.

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                    Penalities   and    procedures

• A timely and consistent paying of taxes and filing of returns ensures the government has money for public welfare at any point of time. To make sure that taxpayer does not default in paying taxes or disclosing the information, there are several penalties prescribed under the Act.
• A penalty a punishment imposed on the taxpayer for being non compliant. Listed below is a summary of some of the important and most common penalties.

 1. Default in making  payment of tax  :   The amount of penalty leviable will be as deter mined by the assessing officer. However, the amount will not exceed the amount of tax in arrears.

2. Under - reporting of income :

• If the income assessed/ reassessed exceeds the income declared by the assessee, or in cases where return has not been filed and income exceeds the basic exemption limit, penalty at 50% of tax payable on such under reported income shall be leviable.
• 200% of tax is payable if under-reporting resulted from Misreporting of income

3. Failure to maintain books of accounts and other documents

• Normally, the amount of penalty leviable will be ₹25,000
• In case, the assessee is a person who has entered into international transaction, penalty will be 2% of the value of such international transaction or specified domestic transaction

4. Undisclosed income : Where the income determined includes undisclosed income, penalty @10% is payable. However, no such penalty will be leviable, if such income was included in the return, and tax was paid before the end of the relevant previous year.

• • Where Search has been initiated on/ after 1/7/2012 but before 15/12/2016,
  a. If undisclosed income is admitted during the course of Search and assessee pays tax and interest and files return, Penalty @ 10% of such undisclosed income is payable.
  b. If undisclosed income is not admitted but the same is furnished in the return filed after such search, 20% of such undisclosed income is payable.
  c. In all other cases, penalty is leviable @ 60%
  • Where Search has been initiated on/ after 15/12/2016,
  a. If undisclosed income is admitted during the course of Search and assessee pays tax and interest and files return, Penalty @ 30% of such undisclosed income is payable.
  b. In all other cases, penalty is leviable @ 60%

  5. Audit and Audit Report

• If the assessee fails to get his accounts audited, or obtain audit report, or furnish report of such auditor, penalty will be leviable at the ₹1,50,000 or ½% of the total sale/ Turnover/ gross receiptswhichever is lesser
• Failure of assessee to furnish Audit reportrelated with foreign transaction, a penalty @ ₹1,00,000 will be payable

6. TDS/TCS

• Where a person fails to deduct tax at source, he will be liable to pay a penalty equal to the amount of tax which he has failed to deduct/ pay.
• Where a person fails to collect tax at source, he will be liable to pay a penalty equal to the amount of tax which he has failed to collect.

• Failure to furnish TDS/TCS statement or furnishing incorrect statements, shall attract a penalty ranging from ₹10,000 to ₹1,00,000
• Failure to furnish information/ furnishing inaccurate information related with TDS deduction related with Non residentsshall attract a penalty of ₹100,000

7. Penalty for using modes other than Account payee cheque/ draft/ ECS

• If a person takes/ accepts loan/ deposit except by way of Account payee cheque/ account payee draft/ ECS, and if the aggregate amount exceeds ₹20,000, he shall be liable to pay a penalty of an amount equal to such loan/ deposit.

• If, an amount of ₹2,00,000 or more is received in aggregate from a person in a day/ single transaction/ relating to one event, a penalty equal to such amount will be payable.

          If a person repays loan/ deposit and such amount so repaid exceeds ₹20,000 and the amount has been repaid except by way of Account payee cheque/ account payee draft/ ECS, an amount equal to such loan/ deposit shall be payable.

8. Failure to furnish statements/ information

• Failure to furnish statement of financial transaction or reportable account shall attract a penalty of ₹100 for each day of failure. And if the failure is in response to a notice to report on specified financial transaction, the penalty shall be ₹500 for each day of failure

• A penalty of ₹50,000 shall be attracted for furnishing inaccurate statement of financial transaction/ reportable account

• Failure of an eligible investment fund to furnish any statement / information/ document within the prescribed time shall attract a penalty of ₹5,00,000

• Failure to furnish any information/ document in relation to international transaction shall attract a penalty of 2% of the value of such transaction

• Failure to furnish any information/ document by an Indian Concern related with international transaction, shall attract a penalty of 2% of the value of transaction or ₹50,000 in some cases.

• If a report/ certificate is required to be furnished by an Accountant/ Merchant Banker/ Registered Valuer and such information is found to be incorrect, a penalty of ₹10,000 for each report/ information is payable

• Failure to furnish information by any person who is attending/ helping carrying the business/ profession of any person, in whose building/ place the income tax authority has entered for collecting information shall attract a penalty of upto ₹1,000

• Non furnishing of report by any reporting entity which is obliged to furnish Country by Country report will attract penalty as follows:

Period of delay	Penalty
Less than or equal to 1 month	₹5000 per day
Continuing default	₹50,000 per day from the beginning of service of order
Submission of inaccurate information	₹5,00,000

9. Others

• Failure to apply/quote/ intimate PAN/ quoting false PAN shall attract a penalty of ₹10,000
• Failure to apply/quote TAN/ quoting false TAN shall attract a penalty of ₹10,000

• In case of the following defaults, ₹10,000 will be the penalty leviable,

1. Refusal to answer questions put by the Department
2. Refusal to sign statements made in income tax proceedings
3. Non compliance with summons to give evidence/ produce books of accounts
4. Failure to comply with a notice.

Reference : Income tax _ Dr. Mehrotra

                                             Dr.Goyal