Penalty in respect of certain income.

443(1)

The Assessing Officer or the Joint Commissioner (Appeals) or Commissioner (Appeals) may impose a penalty of 10% of the tax payable under section 195(1)(i), on an assessee if the income determined in his case for any tax year includes any income referred to in section 102, 103, 104, 105 or 106.

443(2)

The penalty under sub-section (1) shall be payable in addition to the tax payable under section 195.

443(3)

No penalty shall be levied on income referred to in section 102, 103, 104, 105 or 106 to the extent such income has been included by the assessee in the return of income furnished under section 263 and the tax as per section 195(1)(i) has been paid on or before the end of the relevant tax year.

443(4)

No penalty under section 439 shall be imposed upon the assessee in respect of income referred to in sub-section (1).

443(5)

The provisions of sections 471 and 472 shall as far as may be, apply in relation to the penalty referred to in this section.

Explanation

Section Summary:

Section 443 of the new income tax law introduces penalties for taxpayers whose income includes specific types of income referred to in sections 102, 103, 104, 105, or 106. The penalty is 10% of the tax payable under section 195(1)(i) and is imposed by the Assessing Officer or appellate authorities. The section also provides exceptions where no penalty will be levied if the taxpayer has already included such income in their return and paid the applicable tax on time.

Key Changes:

1. Introduction of Penalty: A new penalty of 10% of the tax payable under section 195(1)(i) is introduced for income falling under sections 102, 103, 104, 105, or 106.
2. Exceptions to Penalty: No penalty will be levied if the taxpayer has disclosed the income in their return and paid the tax before the end of the relevant tax year.
3. Interaction with Other Penalties: The section clarifies that no penalty under section 439 will apply to income covered under this section.
4. Application of Procedural Provisions: The procedural rules under sections 471 and 472 (related to penalties) will apply to penalties imposed under this section.

Practical Implications:

1. For Taxpayers: Taxpayers must ensure that any income falling under sections 102, 103, 104, 105, or 106 is accurately disclosed in their tax returns and that the applicable tax is paid on time to avoid penalties.
2. For Businesses: Businesses must review their income streams to identify if any income falls under the specified sections and ensure compliance to avoid additional penalties.
3. For Compliance Processes: Tax authorities will now have a clear framework to impose penalties on non-compliant taxpayers, increasing the importance of accurate reporting and timely tax payments.

Critical Concepts:

1. Sections 102, 103, 104, 105, 106: These sections likely refer to specific types of income (e.g., undisclosed income, income from undisclosed sources, etc.). The exact nature of these incomes should be cross-referenced with the relevant sections.
2. Section 195(1)(i): This section pertains to the tax payable on certain types of income. The penalty under section 443 is calculated as 10% of this tax.
3. Sections 471 and 472: These sections deal with procedural aspects of penalties, such as notice, hearing, and appeal processes. Their application ensures that penalties under section 443 follow the same procedural safeguards.

Compliance Steps:

1. Identify Applicable Income: Review income streams to determine if any fall under sections 102, 103, 104, 105, or 106.
2. Disclose in Tax Return: Ensure such income is included in the tax return filed under section 263.
3. Pay Tax on Time: Pay the tax due under section 195(1)(i) before the end of the relevant tax year to avoid penalties.
4. Maintain Documentation: Keep records of income disclosure and tax payments to substantiate compliance if questioned by tax authorities.

Examples:

1. Scenario 1: A taxpayer earns income from an undisclosed source (falling under section 102) but fails to include it in their tax return. The Assessing Officer determines this income during an audit. The taxpayer will be liable for a penalty of 10% of the tax payable on this income under section 195(1)(i), in addition to the tax itself.
2. Scenario 2: Another taxpayer earns income under section 103 but includes it in their tax return and pays the tax before the year-end. In this case, no penalty will be levied under section 443.

This section emphasizes the importance of accurate income disclosure and timely tax payments to avoid penalties.