Amendment of section 271FAA to comply with the Automatic Exchange of Information (AEOI) framework (TAX ADMINISTRATION)

Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

The existing provisions of the sub-section (1) of section 271FAA of the Act inter-alia, provide that if a person referred to in sub-section (1) of section 285BA of the Act, who is required to furnish a statement under that section, provides inaccurate information in the statement, and where (a) the inaccuracy is due to a failure to comply with the due diligence requirement prescribed under sub-section (7) of section 285BA or is deliberate on the part of that person; or (b) the person knows of the inaccuracy at the time of furnishing the statement of financial transaction or reportable account, but does not inform the prescribed income-tax authority or such other authority or agency; or (c) the person discovers the inaccuracy after the statement of financial transaction or reportable account is furnished and fails to inform and furnish correct information within the time specified under sub-section (6) of section 285BA, then, the prescribed income-tax authority under sub-section (1) of section 285BA may direct that such person shall pay, by way of penalty, a sum of fifty thousand rupees.

2. The provisions of section 271FAA apply in case the specified person furnishes inaccurate statement of the financial transactions / reportable account as prescribed under section 285BA of the Act. While reviewing India’s CRS legislative framework under the Automatic Exchange of Information (AEOI) framework, the Global Forum on Transparency and Exchange of Information for Tax purposes has formed a view that the penal sanction available under the said section for inaccuracies would not automatically extend to all cases where due diligence was not correctly done if the information did not lead to incorrect reporting.

3. In view of the foregoing, it is proposed to make the following amendments in section 271FAA to clarify that penalty under the said section shall be attracted in any of the following circumstances–

(i) furnishing inaccurate information in the statement shall be liable;

(ii) failure to comply with due diligence requirement in the statement;

4. Further, in section 273B, it is proposed to add the reference of section 271FAA in order to provide that no penalty shall be imposable for any failure referred to in the said section, if the assessee proves that there was reasonable cause for such failure.

5. This amendment will take effect from the 1st day of October, 2024.

[Clauses 79 & 82]

Full Text:

Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

Dated: 24-7-2024