What are the provisions for dealing with tax-related offenses and penalties?

Answer By law4u team

In India, tax-related offenses and penalties are primarily governed by the Income Tax Act, 1961, the Goods and Services Tax (GST) Act, 2017, and various other taxation laws. Here are the key provisions related to tax offenses and penalties: Income Tax Act, 1961: Offenses: Tax-related offenses under the Income Tax Act include tax evasion, failure to file returns, incorrect information in tax returns, and concealment of income. Penalties: The Act prescribes penalties for various offenses, including: Failure to File Returns: A penalty of up to ₹5,000 may be imposed for not filing returns within the stipulated time. Concealment of Income: If a taxpayer is found to have concealed income or provided inaccurate information, a penalty of 100% to 300% of the tax evaded may be levied. Late Filing Penalty: A late fee for not filing tax returns on time, which varies based on the delay, is imposed under Section 234F. Goods and Services Tax (GST) Act, 2017: Offenses: GST offenses include failure to register under GST, non-filing of GST returns, providing false information, and claiming fraudulent input tax credits (ITC). Penalties: The GST Act imposes several penalties, including: General Penalty: A penalty of ₹10,000 or 10% of the tax due, whichever is higher, for non-compliance with provisions. Fraudulent Claims: If a taxpayer is found guilty of fraud, the penalty can be as high as 100% of the tax amount involved. Failure to Maintain Records: Penalties for failure to maintain proper records as required under GST regulations. Criminal Offenses: In severe cases, tax offenses may lead to criminal prosecution. Under the Income Tax Act and GST Act, certain offenses such as willful tax evasion or falsification of documents can attract imprisonment of up to seven years along with fines. Proceedings and Appeals: Taxpayers have the right to appeal against penalties and orders issued by tax authorities. Appeals can be made to the Commissioner of Income Tax (Appeals) or the Appellate Tribunal, depending on the jurisdiction and type of tax. Settlement Commission: Taxpayers can approach the Income Tax Settlement Commission to resolve disputes related to tax liabilities. The commission can provide immunity from penalties and prosecution if the taxpayer voluntarily discloses undisclosed income. Voluntary Disclosure Schemes: The government may introduce voluntary disclosure schemes from time to time, allowing taxpayers to declare undisclosed income or rectify errors in exchange for reduced penalties or immunity. Compounding of Offenses: In certain cases, tax authorities may allow the compounding of offenses, which enables taxpayers to settle the matter by paying a compounding fee instead of facing prosecution. Time Limit for Imposing Penalties: Generally, there are specific time limits within which tax authorities can impose penalties, often ranging from six months to two years from the date of the offense, depending on the nature of the violation. Tax Recovery Measures: In cases of unpaid taxes, the tax authorities have various recovery measures, including attaching bank accounts, seizing assets, and imposing restrictions on the taxpayer's ability to travel abroad. In summary, tax-related offenses in India are subject to strict provisions under various tax laws, with specific penalties for non-compliance, concealment, and fraudulent activities. The legal framework provides avenues for appeals, settlements, and compounding of offenses, ensuring that taxpayers have options to address their tax obligations while promoting compliance and accountability.

Answer By Ayantika Mondal

Dear client, Offences under GST and respective applicable penalties are enlisted under the The CGST Act. The provisions of offences and penalties are dealt with from Section 122 to Section 128 of the CGST Act. Offences under GST- An offence is a breach of a law or rule, i.e. an illegal act. Similarly, an offence under GST is a breach of provision of the GST Act and Rules. There are 21 offences under CGST. For easy understanding, these have been grouped into heads as given below- 1. Fake or wrong invoices- A taxable person supplies any goods/services without any invoice or issues a false invoice. He issues any invoice or bill without supply of goods/services in violation of the provisions of GST. He issues invoices using the identification number of another bonafide taxable person. 2. Fraud- He submits fake financial records/ documents or files fake returns to evade tax. Does not provide information/gives false information during proceedings. 3. Tax evasion - He collects any GST but does not submit it to the Government within 3 months. Even if he collects any GST in contravention of provisions, he still has to deposit it to the Government within 3 months. Failure to do so will be an offence under GST. He obtains a refund of any CGST/SGST by fraud. He takes and/or utilizes input tax credit without actual receipt of good and services. 3. Supply/transport of goods- He transports goods without proper documents. Supplies/transports goods that he knows will be confiscated. Destroys/tampers goods that have been seized. 4. Others- He has not registered under GST although he is required to by law. He does not deduct TDS or deducts less amount where applicable. He does not collect TCS or collects less amount where applicable. Being an Input Service Distributor, he takes or distributes input tax credit in violation of rules. Penalties under GST- The word Penalty is not specifically defined in GST and so it takes the meaning from various judicial pronouncements and principles of Jurisprudence. A penalty is a punishment imposed by law for committing an offence or failing to do something that was the duty of a party to do. 1. in fraud- An offender has to pay a Penalty amount of tax evaded/short deducted, etc., i.e. 100% penalty, subject to minimum of Rs. 10,000. Conclusion - These rules of penalty are generally the same in all laws whether tax laws or contract law or any other law. Every taxable person, on whom the penalty is imposed, will be served with a show cause notice first and will have a reasonable opportunity of being heard. The tax authority will give an explanation regarding the reason for the penalty and the nature of offence. When any person voluntarily discloses a breach of law, the tax authority may use his fact to reduce the Penalty. Should you have any queries, please feel free to contact us!