Source: http://aiftponline.org/journal/2015/march/finance-bill-2015-penalties-ss-2711c-271d-271e-271fab-271ga-271-i-273b-285a/
Timestamp: 2019-04-23 14:56:02+00:00

Document:
1.1	Section 271(1)(c) of the income-tax Act provides for levy of penalty for concealment of income or furnishing inaccurate particulars of income. Clause (iii) to sub-section (1) of section 271 provides for imposition of penalty of an amount which shall not be less than the amount of tax sought to be evaded but which shall not exceed three times the amount of tax sought to be evaded by reason of the concealment of particulars of income or the furnishing of inaccurate particulars of such income.
(iii) In any other case, where difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished.
1.3	As per section 115JB(1), where in the case of a company, the tax payable on the total income as computed under the Act in respect of any previous year relevant to the assessment year commencing on or after 1-4-2012 is less than 18.5 per cent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of 18.5 per cent. This is known as Minimum Alternate Tax (MAT).
(ii) Tax on total income computed as per normal provisions of the Income-tax Act.
1.4	In the case of companies at the time of assessment tax on income under normal provisions and as per MAT provisions is computed and compared. If the amount of tax payable under the MAT provisions comes higher, then the same is levied on the company. However, there may be some additions to normal income. In such a case, a question arises as to whether concealment penalty under section 271(1)(c) can be levied for the additions so made.
i.	CIT v. Nalwa Sons Investments Ltd. (2010) 327 ITR 543(DEL)(HC). The SLP against the above decision was dismissed by the Apex Court in CIT v. M/s Nalwa Sons Investment Ltd on 4-5-2012 Special Leave to Appeal (Civil) No(s). 18564/2011.
ii.	Unisons Hotels Ltd. vs. DCIT (2013) 40 taxmann.com 237 (Del.)(HC).
1.6	Thus all the courts were unanimous in its decision on the said issue. To overcome these overwhelming judicial precedents, the Finance Bill, 2015 proposes to substitute Explanation 4 to section 271(1)(c) so as to provide that penalty will be levied on additions made under general provisions if they constitute concealment or inaccurate particulars even if the tax is ultimately paid on the Book Profits.
The first proviso provides that where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished on any issue is considered both under general provisions and under the provisions contained in section 115JB or section 115JC, such amount shall not be reduced from total income assessed while determining the amount under item D.
The second proviso further provides that where the provisions contained in section 115JB or section115JC are not applicable, the item (C – D) in the formula shall be ignored.
It is further proposed to provide that where in any case the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into income, the amount of tax sought to be evaded shall be determined in accordance with the formula contained in clause (a) with the modification that the amount to be determined for item (A – B) in that formula shall be the amount of tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income.
It is also proposed to provide that where in any case to which Explanation 3 applies, the amount of tax sought to be evaded shall be the tax on the total income assessed as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice under section 148. These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to assessment year 2016-17 and subsequent years.
i)	Problems have arisen in the computation of amount of tax sought to be evaded where the concealment of income or furnishing inaccurate particulars of income occurs in the computation of income under provisions of section 115JB or 115JC of the Act and also under the provisions other than the provisions of section 115JB or 115JC of the Act.
ii)	Further, as pointed out courts have held that penalty under section clause (c) of sub-section (1) of section 271 cannot be levied in cases where the concealment of income occurs under the income computed under general provisions and the tax is paid under the provisions of section 115JB or 115JC of the Act.
iii)	Tax paid under the provisions of section 115JB or 115JC over and above the tax liability arising under general provisions is available as credit for set off against future tax liability. Understatement of income and the tax liability thereon under general provisions results in larger amount of such credit becoming available to the assessee for set off in future years. Therefore, where concealment of income, as computed under the general provisions, has taken place, penalty under clause (c) of sub-section (1) of section 271 should be leviable even if the tax liability of the assessee for the year has been determined under provisions of section 115JB or 115JC of the Act.
Ambiguity in the second proviso.
(ii)	Whether the non-applicability means that where assessee being a company is liable to pay tax under general provisions and not on book profits, then the item (C-D) is to be ignored.
4.2	The implication of the first interpretation is that in the case of a corporate assessee even if the tax is paid under general provisions , penalty u/s. 271(1)(c ) would be levied on adjustments made to book profits by the Assessing Officer i.e penalty u/s. 271(1)(c ) would be levied on both, adjustments made under general provisions as well as adjustments made to book profits even when tax is payable under general provisions.
4.3	The implication of the second interpretation is that in the case of corporate assessee where tax is payable under the general provisions, then no penalty u/s. 271(1)(c) would be levied on adjustments made to book profits by the Assessing Officer.
4.4	It appears that the second interpretation is the correct interpretation as the object and purpose of the amendment is to levy penalty u/s. 271(1)(c) on additions made under general provisions when tax is ultimately payable on book-profits and not vice versa. However, this issue may not be free from controversy and it is important that the same is clarified in the Act or by means of a circular.
The amendment is prospective or retrospective?
(i)	That which lays down the conditions for imposition of penalty.
(ii)	That which provides for computation of the quantum of penalty.
Section 271(1)(c) and clause (iii) relate to the conditions for imposition of penalty, whereas, on the other hand, Explanation 4 to section 271(1)(c) relates to the computation of the quantum of penalty.
4.5.2	Though retrospectivity is not to be presumed and rather there is presumption against retrospectivity, according to Craies (Statute Law, 7th Edn.), it is open for the Legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the legislature intended a particular section to have a retrospective operation, the courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the Courts may be called upon to construe the provisions and answer the question whether the Legislature had sufficiently expressed that intention giving the statute retrospectivity. Four factors are suggested as relevant : (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and (iv) what it was the Legislature contemplated.
The present amendment clarifies that the same is remedial in so much so that none of the Courts appreciated the vital aspect that as tax paid under the provisions of section 115JB or 115JC over and above the tax liability arising under general provisions is available as credit for set off against future tax liability, understatement of income and the tax liability thereon under general provisions results in larger amount of such credit becoming available to the assessee for set off in future years. Hence, the amendment is to be given a retrospective effect as it is clarificatory and not substantive.
4.5.3	The Apex Court in the case of CIT v Gold Coin Health Food P. Ltd. (2008) 304 ITR 308(SC) clinches the issue of retrospectivity in the present case. The Apex Court in CIT v. Prithipal Singh and Co. (2001) 249 ITR 670 (SC) had held that where there is no taxable income or tax assessed for payment then penalty u/s. 271(1)(c) is not leviable. This decision resulted in the amendment of Explanation 4 by Finance Act 2002 w.e.f. 1-4-2003 so as to provide that penalty would be leviable even when the returned loss is reduced or converted into profit. The Apex Court in the case of Virtual Soft Systems Ltd. v. CIT (2007) 289 ITR 83 (SC) held that the amendment to Explanation 4 by Finance Act, 2002 was prospective and not retrospective. However this decision came to be overruled by the larger bench of the Apex Court in the decision of CIT v Gold Coin (supra) wherein it was held that the amendment is clarificatory. The present amendment is on similar lines and would thus be retrospective.
4.6.1	There is nothing in the Finance Bill to indicate that the amendment is clarificatory. In fact the Finance Bill unequivocally states that the effective date of the amendment is 1-4-2016.
4.6.2	The existing provisions of Explanation 4 were clear and unambiguous and hence there cannot be any case of obvious omission. In fact all the courts were unanimous in holding that on interpretation of Explanation 4 and sub-section (iii) of section 271(1)(c) penalty on additions made under general provisions is not applicable if tax is payable on book profits.
4.6.3	The Apex Court in the case of CIT v. Gold Coin Health Food P. Ltd. (supra) while deciding the issue of retrospectivity in the context of amendment brought by Finance Act 2002 considered CBDT Circular No 204 dtd. 24-7-1976 reported in (1977) 110 ITR (St) (21, 48) and recommendations of the Wanchoo Committee which stated that penalty was leviable in case of loss also and said circular was holding the field prior to the amendment brought about by the Finance Act, 2002 and thus the amendment was held to be clarificatory. The present amendment does not reiterate the position of law as declared by any statutory circular etc. issued prior to the amendment. Also the Notes on Clauses of the Finance Bill, 2002 stated that the amendment to Explanation 4 was clarificatory. Whereas the Notes on Clauses relating to the present amendment doesn’t state so.
“The income of the assessee was thus assessed under section 115JB and not under the normal provisions. It is in this context that we have to see and examine the application of Explanation 4.
The above decision of the Delhi High Court has been affirmed by the larger bench of the Apex Court, Apex Court in CIT v. Nalwa Sons (2012) 12 Taxmann.com 184 (SC).
The amendment will affect lot of cases pending at the appellate stages where the issue of penalty on additions made under general provisions in case of tax payable on book profits is involved if the amendment is held to be retrospective. The Finance Minister in his speech stated that he desired to give sufficient time to enable taxpayers to arrange their affairs in tune with the amendments and therefore the incumbent establishment would not resort to restrospective amendment. It is therefore expected that there should be specific clarification to avoid controversies. Also, the possible ambiguity in the second proviso may be taken care of in the Act or may be clarified by the CBDT.
1.1	Sections 271D/271E of the Income-tax Act, 1961 as it stands today levy penalty for accepting/repaying loan or deposit, except otherwise than, by an account payee cheque or account payee bank draft, or through electronic transfer through a bank account.
1.2	The incumbent establishment in furtherance of its initiative to curb generation of black money, has proposed to amend the said sections so as to provide that penalty shall be levied for accepting/paying from/to any person any sum of money, whether as advance or otherwise, in relation to transfer of an immovable property (whether or not such transfer takes place) except otherwise than by way of specified modes.
2.1	The existing provision contained in section 271D of the Income-tax Act provides that if a person accepts any loan or deposit in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so accepted.
2.2	Thus, section 269SS prohibited acceptance of (i) loan or (ii) deposit otherwise than by a mode prescribed therein and violation of section 269SS entailed a penalty u/s. 271D.
2.3	The existing provision contained in section 271E of the Income tax Act provides that if a person repays any loan or deposit referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so repaid.
2.4	Thus section 269T prohibited acceptance of (i) loan or (ii) deposit otherwise than by a mode prescribed therein and violation of section 269T entailed a penalty u/s 271E.
3.1	Clause 69 of the Bill seeks to amend section 271D to provide that if a person accepts any loan or deposit or specified sum referred to in section 269SS in contravention of the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so accepted. Similarly, clause 70 of the Bill seeks to amend section 271E to provide that if a person repays any loan or deposit or specified advance referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified advance so repaid.
3.2	Thus clause 69 and clause 70 of the Bill makes not only acceptance/repayment of loan or deposit in contravention of sections 269SS/269T subject to penalty but also acceptance/repayment of specified sum/specified advance in contravention of section 269SS/section 269T subject to penalty.
3.3	This amendment is made as a consequence of substitution of existing section 269SS and section 269T by clause 68 and clause 69 of the Finance Bill respectively. The said clauses effectively prohibit even acceptance/repayment of a specified sum/specified advance otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account. The term specified sum is defined in Explanation (iv) to section 269SS as any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place. Similarly the term specified advance is defined in Explanation (iv) to section 269T as any sum of money in the nature of advance, by whatever name called, in relation to transfer of an immovable property, whether or not the transfer takes place.’.
4.1	The Finance Minister during his budget speech stated that while finalising tax proposals he has adopted certain broad themes. The first and foremost pillar of his tax proposal theme was “ Measures to curb black Money”. It is no secret that black money eats into the vitals of our economy and society. It is equally true that the problems of poverty and inequity cannot be eliminated unless generation of black money and its concealment is dealt with effectively and forcefully. In our country transactions in real estate generates lots of black money. In the direction of curbing generation and utilisation of black money in real estate transactions, the Finance Bill proposed to amend the provisions of sections 269SS and 269T of the Income-tax Act so as to prohibit acceptance or re-payment of advance in cash of ` 20,000 or more for any transaction in immovable property. Consequently the Finance Bill also proposed to provide a penalty of an equal amount in case of contravention of such provisions.
4.2	Also, there are judicial precedents wherein it has been held that advance given against property could not be treated as loan or deposit covered within the purview of section 269SS and therefore, no penalty under section 271D is leviable. Hence, it was necessary to widen the scope of provisions of section 269SS and section 269T to include transactions relating to immovable property.
4.3	The provisions of section 271D and section 271E are covered by section 273B which provides immunity from penalty in case of a reasonable cause. In Commissioner of Income Tax v. Raj Kumar Sharma (2007) 294 ITR 131 (Raj), Narotam Singh Mann v. Income Tax Officer (2004) 90 TTJ (Asr.) 683, Assistant Commissioner of Income Tax v. Vinman Finance & Leasing Ltd. (2008) 115 ITD 115, Harpal Singh v. Assessing Officer (2008) 12 DTR (Jd)(Trib.) 529, Narayan Ram Chhaba v. Income Tax Officer & Anr. (2005) 96 ITD 163 (Jd)(TM) penalty has been deleted u/ss. 271D/271E r.w. section 273B.
According to the Finance bill the amendment will take effect from 1st June, 2015.
1.1	In the case of offshore funds, under the existing provisions, the presence of a fund manager in India may create sufficient nexus of the offshore fund with India and may constitute a business connection in India even though the fund manager may be an independent person. Therefore, apart from taxation of income received by the fund manager as fees for fund management activity, income of off-shore fund from investments made in countries outside India may also get taxed in India due to such fund management activity undertaken in, and from, India constituting a business connection. Obviously such a tax regime would be detrimental or at least create roadblocks in the efforts of the present establishment to infuse more and more foreign investments in India for the growth of India.
1.2	Further, there are a large number of fund managers who are of Indian origin and are managing the investment of offshore funds in various countries. These persons are not locating in India due to the above tax consequence.
(ii)	That income of the fund from the investments outside India would not be taxable in India solely on the basis that the fund management activity in respect of such investments have been undertaken through a fund manager located in India.
1.4	Section 9A requires that every eligible investment fund shall, in respect of its activities in a financial year, furnish within ninety days from the end of the financial year, a statement in the prescribed form to the prescribed income-tax authority containing information relating to the fulfilment of the above conditions or any information or document which may be prescribed.
1.5	In case of non furnishing of the prescribed information or document or statement as required under section 9A, a penalty of ` 5 lakh shall be leviable on the fund by virtue of section 271FAB.
Clause 71 seeks to insert a new section 271FAB of the Income-tax Act relating to penalty for failure to furnish statement or information or document by an eligible investment fund. It is proposed to provide that if any eligible investment fund which is required to furnish a statement or any information and document under sub-section (5) of section 9A fails to furnish such statement or information and the document within the time prescribed under that sub-section, the income-tax authority prescribed under the said sub-section may direct that such fund shall pay, by way of penalty, a sum equal to five hundred thousand rupees.
3.1	The second pillar of taxation proposals theme of the Finance Minister this year is job creation through revival of growth and investment and promotion of domestic manufacturing and ‘Make in India’. In this direction it is proposed to undertake a series of steps to attract capital, both domestic and foreign.
3.2	The present taxation structure has an inbuilt incentive for fund managers to operate from offshore locations. The managers taking care of off-shore fund houses were forced to manage their investment activity from outside India due to the fear of adverse tax consequences in respect of income of such fund houses. To encourage such offshore fund managers to relocate to India, this finance bill proposes to modify the Permanent Establishment (PE) norms to the effect that mere presence of a fund manager in India would not constitute PE of the offshore funds resulting in adverse tax consequences.
3.3	Thus a new section 9A has been proposed whereby the income of the fund houses may not be taxable subject to the fulfilment of conditions mentioned therein.
3.4	Sub-section (5) of Section 9A casts a liability on such eligible fund houses to furnish statement, information or documents, as required, within a period of 90 days from the end of the financial year. These statements, information and documents would be relating to compliance of various terms and conditions contained in section 9A.
3.5	As section 9A effectively makes an exception to the rule, it is very important that the conditions contained therein are strictly adhered to and no wrongful advantage is taken. Thus, in order to ensure that the eligible fund house complies with reporting requirements as specified in sub-section (5) of section 9A, section 271FAB is proposed to be inserted to provide for penalty of ` 5 lakhs in case of non-compliance.
3.6	Further section 273B is proposed to be amended to include the reference of the proposed new section 271FAB relating to penalty for failure to furnish information or document by eligible investment fund.
The Finance Act 2008, had inserted sub-section (6) to section 195 which required any person referred to in sub-section (1) of section 195, responsible for making cross-border payments which are chargeable to tax to furnish information relating to such payment in Form Nos. 15CA and 15CB read with Rule 37BB. However, no penalty was provided for non-furnishing of information.
Clause 73 of the Bill seeks to insert a new section 271-I in the Income-tax Act relating to penalty for failure to furnish information or for furnishing inaccurate information under section 195. It is proposed to insert a new section 271-I so as to provide that if a person, who is required to furnish information under sub-section (6) of section 195, fails to furnish such information; or furnishes inaccurate information, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of one lakh rupees.
3.1	The person responsible for making cross-border payment was required to furnish information as envisaged in Form 15CA and 15CB while making such payments, as per section 195(6) of the Act.
3.2	The mechanism of obtaining information in respect of remittances fulfils twin objectives of ensuring deduction of tax at appropriate rate from taxable remittances as well as identifying the remittances on which the tax was deductible but the payer has failed to deduct the tax. Therefore, obtaining of information only in respect of remittances which the remitter declared as taxable defeats one of the main principles of obtaining information for foreign remittances i.e. to identify the taxable remittances on which tax was deductible but was not deducted.
3.3	In view of this, the said sub-section (6) of Section195 is proposed to be substituted by clause 48 of the Finance Bill with effect from the 1st day of June, 2015 to provide that the person responsible for paying any sum, whether chargeable to tax or not, to a non-resident, not being a company, or to a foreign company, shall be required to furnish the information of the prescribed sum in such form and manner as may be prescribed.
3.4	Further, currently there is no provision for levying of penalty for non-submission/inaccurate submission of the prescribed information in respect of remittance to non-resident.
3.5	Hence, for ensuring submission of accurate information in respect of remittance to non-resident, section 271-I is inserted in the Act to provide that in case of non-furnishing of information or furnishing of incorrect information under sub-section (6) of section 195 of the Act, a penalty of one lakh rupees shall be levied.
3.6	However, the provisions of section 273B of the Act are suitably amended to provide that no penalty shall be imposable under this new provision if it is proved that there was reasonable cause for non-furnishing or incorrect furnishing of information under sub-section (6) of section 195 of the Act.
This amendment will take effect from 1st June, 2015.
Penalty for failure to answer questions, sign statements, furnish information, returns or statements, allow inspections, etc.
The provisions of section 272A of the Act provide for penalty for non-compliance with various procedural requirement under the Income-tax Act. The Government deductors/collectors i.e. Drawing and Disbursing Officer (DDO)are allowed to make payment of tax deducted/collected by them through book entry under the existing mechanism. The DDO, thereafter, intimates such amount to the concerned officer who credits the amount to the credit of Central Government through book entry. The concerned officers were required to furnish detail of payment made through book entry in the prescribed Form 24G. However, the compliance was not effectively done by the concerned officers resulting into delay in furnishing of the TDS/TCS statement by the DDO. In order to improve the reporting of payment of TDS/TCS made through book entry and to make existing mechanism enforceable, sections 200 and 206C of the Act is proposed to be amended by Finance Bill, 2015 to ensure timely furnishing of information by the concerned officer. Further, to ensure compliance of this proposed obligation of filing statement, section 272A of the Act is proposed to be amended by Finance Bill, 2015 so as to provide for a penalty of ` 100 for each day of default during which the default continues subject to the limit of the amount deductible or collectible in respect of which the statement is to be furnished.
Clause 74 of the Bill seeks to amend section 272A of the Income-tax Act relating to penalty for failure to answer questions, sign statements, furnish information, returns or statements, allow inspections, etc. The proposed amendment seeks to insert a new clause (m) in sub-section (2) of section 272A to provide that if any person fails to deliver or cause to be delivered a statement within the time as may be prescribed under sub-section (2A) of section 200 or sub-section (3A) of section 206C, then, such person shall pay, by way of penalty, a sum of one hundred rupees for every day of such default. It is also proposed to amend first proviso to sub-section (2) of the said section so as to provide that the amount of penalty for failure to file statements under sub-section (2A) of section 200 or under sub-section (3A) of section 206C shall not exceed the amount of tax deductible or tax collectible, as the case may be.
3.1	Under the existing scheme of payment of TDS and TCS, Government deductors / collectors are allowed to make payment of tax deducted/collected by them without production of challan i.e., through book entry. For payment of tax deducted/collected through book entry, the Drawing and Disbursing Officer (DDO) intimates the TDS/TCS amount to the Pay and Accounts Officer or the Treasury Officer or the Cheque Drawing and Disbursing Officer (PAO/TO/CDDO) who credits the TDS/TCS amount to the credit of Central Government through book entry. For generating credit for TDS/TCS paid through book entry by the Government deductors, Rule 30 and Rule 37CA of the Income-tax Rules, 1962 provide that the PAO/TO/CDDO shall file the detail of payment of TDS/TCS made through book entry in the prescribed Form 24G.
3.2	There was no specific section in the Act to enforce timely filing of the same by the concerned officer. Delay in furnishing of the Form 24G resulted into delay in furnishing of the TDS/TCS statement by the DDO. In order to improve the reporting of payment of TDS/TCS made through book entry and to make existing mechanism enforceable, sections 200 and 206C of the Act is proposed to be amended by clause 50 and clause 53 respectively of the Finance Bill to ensure timely furnishing of information by the concerned officer by providing that where the tax deducted [including paid under section 192(1A)] / collected has been paid without the production of a challan, the PAO/ TO/CDDO or any other person by whatever name called who is responsible for crediting such sum to the credit of the Central Government, shall furnish within the prescribed time a prescribed statement for the prescribed period to the prescribed income-tax authority or the person authorised by such authority by verifying the same in the prescribed manner and setting forth prescribed particulars.
3.3	To ensure compliance of this proposed obligation of filing statement, it is proposed to amend the provisions of section 272A of the Act so as to provide for a penalty of ` 100/- for each day of default during which the default continues subject to the limit of the amount deductible or collectible in respect of which the statement is to be furnished.
3.4	The penalty u/s. 272A is subject to the protection of reasonable cause u/s. 273B. In Commissioner of Income Tax v. Gordhanbhai Jethabhai (1994) 205 ITR 279 (Guj.), Superintending Engineer v. Income Tax Officer (1996) 54 TTJ (Jp) 608 , Royal Metal Printers (P.) Ltd. v. Additional Commissioner of Income-Tax, (Tds) Range 3, Mumbai  37 Sot 139 (Mum.), Harsiddh Construction (P) Ltd. v. Deputy Commissioner of Income Tax (2001) 70 TTJ (Ahd.) 266 & Sudershan Auto & General Finance v. Commissioner of Income- tax (1998) 60 ITD 177 (Del.) penalty u/s. 272A(2) has been deleted on account of reasonable cause.
The Finance Bill, 2015 has proposed a new section 285A casting a responsibility on the Indian entity, through or in, which the Indian assets are held by the foreign company or the entity whose value is substantially derived by the Indian assets. The Indian entity is obligated to furnish information relating to the transaction having the effect of directly or indirectly modifying the ownership structure or control of the Indian entity, or documents as required. Section 271GA is proposed to be inserted to provide for penalty to the tune of 2% of the value of transaction or INR 5,00,000, as the case may be, in the event of failure to furnish such information or document by the Indian entity.
2.1	Clause 76 of the Bill seeks to insert a new section 285A relating to furnishing of information by an Indian concern in certain cases. It is proposed to provide that where any share or interest in a company or entity registered or incorporated outside India derives, directly or indirectly, its value substantially from the assets located in India as referred to in the Explanation 5 to clause (i) of sub-section (1) of section 9, and such company or, as the case may be, entity holds such assets in India through or in an Indian concern, then, any such Indian concern shall, for the purposes of determination of income accruing or arising in India, under the clause (i) of sub-section (1) of section 9, furnish within the prescribed period to the prescribed income-tax authority the relevant information or document, in such manner and form as is prescribed in this behalf.
2.2	Consequently clause 72 of the Bill seeks to insert a new section 271GA relating to penalty for failure to furnish information or document under section 285A. It is proposed to provide that if any Indian concern which is required to furnish any information or document under the proposed section 285A, fails to do so, the Income-tax authority as may be prescribed in the said section 285A, may direct that such Indian concern shall pay, by way of penalty,– (i) a sum equal to two per cent. of the value of the transaction, in respect of which such failure has taken place, if such transaction had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern; (ii) a sum of five hundred thousand rupees in any other case.
3.1	The Bombay High Court in Vodafone International Holdings B.V. v. Union of India (2010) 329 ITR 126 (Bom.) had dismissed the writ petition of Vodafone and the Court rejected the argument of Vodafone that what was transferred was only shares of an Cayman Island Company i.e., foreign company and therefore, the argument that no capital gains will arise on sale of shares in foreign company was rejected.
3.2	Vodafone filed an appeal to the Supreme Court and Supreme Court in Vodafone International Holdings B. V. v Union of India (2012) 341 ITR 1 (SC) reversed the Bombay High Court decision. Supreme Court held that Assessing Officer in India had no jurisdiction to tax the transaction which took place outside India and what was transferred was the shares of a foreign company and not Indian Business.
3.3	The Finance Act, 2012 made retrospectively amendment in the definition of Transfer under section 2(47); Capital asset under section 2(14) and deemed accrual of income under Section 9 in order to affirm the judgment of Bombay High Court in the case of Vodafone and to nullify the Supreme Court judgment in the said case.
3.5	The present Finance bill provides a mechanism to determine “value substantially from assets in India”. These changes would require the Indian concern to furnish information or documents relating thereto.
3.6	Thus new section 285A is introduced to provide for furnishing of information or documents by the said Indian concern and new section 271GA is introduced to provide for penalty for failure to furnish information as required by Section 285A.
3.7	Further section 273B is proposed to be amended to include the reference of the proposed new section 271GA.
These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent years.

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