Section 271J Penalty on CAs. Madras High Court, Writ dismissed for non appearance

Section 271J Penalty on CAs was challenged in Madras High Court. The Court had accepted the writ petition. However, the appeal was dismissed for non appearance of Petitioner

In a recent judgment, Madras High Court dismissed the Writ Petition challenging Section 271J Penalty on CAs. The Court had accepted the writ petition. However, the appeal was dismissed for non appearance of Petitioner.

ABCAUS Case Law Citation:
ABCAUS 1232 (2017) (05) abcaus.in HC

The Finance Act, 2017 has inserted a new penal provision wef 01/04/2017 namely, section 271J relating to penalty for furnishing incorrect information in reports or certificates by professionals including chartered accountants.

Under the provisions of the Income Tax Act, 1961 (‘the Act’) assessees in order to get certain deductions/benefits or to avoid penalty are required to furnish several reports and certificates from merchant bankers, registered valuers and particularly from chartered accountants (CAs). 

As per the provisions of section 271J, a penalty of Rs. 10000/- can be imposed by the Assessing Officer or Commissioner (Appeals) if they find any incorrect information in any report or certificate furnished. However, since the introduction of the said penal provisions, lots of hue and cry has been made and even ICAI in its post budget memorandum has sought the withdrawal of the penal provisions. While whether the penalty will set right the mal-practices/casual approach  adopted by professionals (if any) in issuing the reports/certificates or subject them to harassment might be a highly debatable issue. 

However, the section 271J has been challenged before the Hon’ble Madras High Court praying the declaration that the explanation clause (a) of Section 271J of the Income Tax Act, 1961 by Finance Act, 2017 which reads as “Accountant” means an accountant referred to in the Explanation below sub-section (2) of Section 288 as invalid, null and void violating Article 19(1)(g) & 21 of the Constitution.

The Hon’ble Court had accepted the writ petition filed by a Chartered Accountant and in 2017, the Hon’ble Chief Justice in 2017 directed issuance of notice to the respondents.

However, the appeal was listed two times in 2024 and finally due to non appearance of the Petitioner , the appeal was dismissed.

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• Object of assessment proceedings is not to find empirically correct solution on every fact issue – HC
• Penalty u/s 270A deleted as assessee filed revised computation during scrutiny
• Penalty u/s 271B for unfilled column 40 in Tax Audit Report Form 3CD deleted by ITAT
• Merely ex-parte rectifying computation without amending assessment order not make it nullity- ITAT
• Once assessee discharges primary onus, it shifts to AO to bring evidence to contrary – ITAT