Sunday 10 October 2010

Furnishing remitter details in pass book / pass sheet / account statement for credits received by customers through NEFT / NECS / EC


RBI/2010-11/230
DPSS (CO) EPPD No. 788/ 04.03.01 / 2010-11


The Chairman and Managing Director / Chief Executive Officer
of member banks participating in NEFT / NECS / ECS

Madam / Dear Sir,

Furnishing remitter details in pass book / pass sheet / account statement
for credits received by customers through NEFT / NECS / ECS

The volumes handled by the retail electronic payment products viz. National Electronic Funds Transfer (NEFT), National Electronic Clearing Service (NECS) and Electronic Clearing Service (ECS) variants are considerably increasing, which is indicative of their acceptability and popularity. Concomitant service delivery levels at banks should match customer requirements and expectations.

2. Complaints about incomplete details about the remitter (or beneficiary) and / or the source of credit (or debit) in the pass books / pass sheets / account statements, as also lack of uniformity across banks in providing even such minimal information are rising. A very generic mention as 'NEFT' or 'NECS' does not help customers in identifying the source of credits, particularly where multiple credits are afforded to their accounts through these products. The Procedural Guidelines on NEFT / NECS / ECS and various circulars issued from time to time clearly highlight the minimum information that should be provided to customers.

3. The Core Banking Solutions (CBS) of banks should be enabled to capture complete information from the relevant fields in the messages / data files which can be displayed to customers when they access their accounts online or provided to them additionally when they approach the branch counters / help desks / call centres. In the interest of straight-through capture of details from messages / data files and standardising the minimum information to be given in the pass books / pass sheets / account statements issued to customers, banks are advised to ensure the following  -

a) NEFT
Message N-02 - Inward transactions
The mandatory field 6091 contains the remitter's name, which should be picked up for the source of credit and information contained should be printed in the pass book / account statement. Banks originating transactions should ensure proper and meaningful details are provided in this field. Description of field 6091 is –

M
6091
Sending customer a/c name
50x
Sender’s account name

There is an optional field with tag 7495 that enables inclusion of additional sender-to-receiver information. Destination banks should capture and store this information in their CBS / other systems as appropriate, to be provided to the customer on request.

Message N-07 - Return transactions

M
2006
Related reference number
16x
Transaction reference number of the received inward credit message at bank branch that is returned
M
6366
Rejection code
50x
Description of the reason for rejection

Destination banks may also explore the possibility of using the Unique Transaction Reference (UTR) number to link / retrieve the original message received by them, based on which additional information can be provided as a service initiative when customers make requests online or through call centres.

The extant prescriptions relating to the information to be provided (a) to the remitters for transactions originated by them, and (b) transactions that are returned, shall continue to be applicable.

b) NECS / ECS Variants

The fields "user name" and “user credit reference” (serial numbers '9' and ‘10’ in the credit contra record) have a length of 33 (20 and 13) characters which should be printed in the pass book / account statement.

Sponsor banks need to advise user institutions to fill in these fields meaningfully, so that relevant information is passed on to the customers.

4. In addition to the above, banks are free to provide any additional details as they deem necessary or useful.

5. It is incumbent on the originating banks to ensure that all the relevant information as is provided to them is captured in the relevant fields in messages / data files.

6. Please acknowledge and ensure compliance with the requirements latest by January 1, 2011. These instructions are being issued under the powers conferred on the Reserve Bank of India by the Payment and Settlement Systems Act, 2007 (Act 51 of 2007).

Yours faithfully
(G. Padmanabhan)
Chief General Manager

Notification No : DPSS (CO) EPPD No. 788/ 04.03.01 / 2010-11

Tuesday 31 August 2010

A brief on Penalties & Prosecutions under the Income tax Act, 1961

There are three modes built in the fiscal legislation for encouraging tax compliance: (a) Charge of Interest, (b) imposition of penalty (c) launching of prosecution against tax delinquents.  While charging of interest is compensatory on character, the imposition of penalty and institution of prosecution proceedings act as strong deterrents against potential tax delinquents.
What are the defaults which may invite levy of penalty?
Chapters XVII and XXI of Income-tax Act, 1961, contain various provisions empowering an Income-tax Authority to levy penalty in case of certain defaults.  The following defaults may invite levy of penalty:
(i)   When the assessee is in default or is deemed to be in default in making payment of tax, including the tax deducted at source, advance tax and the self assessment tax.  [Section 221 read with Sec.201(1)]
(ii)  Failure to pay the advance tax as directed by the Assessing Officer or as estimated by the assessee. [Section 273(1)]
(iii) Failure to comply with a notice issued under section 142(1) or 143(2) or failure to comply with the direction issued under section 142(2A) to get the accounts audited. [Section 271(1)(b)]
(iv)  Concealment of particulars of income or furnishing of inaccurate particulars of income. [Section 271(1)(c)]
(v)   Failure to maintain books of accounts and documents by persons carrying on profession or business as prescribed under section 44AA. [Section 271A]
(vi)  Failure to get the accounts audited in prescribed circumstances or failure to obtain the prescribed audit report within prescribed time period of failure to furnish the audit report along with the return, as required under section 44AB. [Section 271B]
(vii) Failure to subscribe to the eligible issue of capital [Section 271BB]
(viia)       Penalty for failure to deduct tax at source. [Section 271C]
(viii)        Accepting of any loan or deposit or repayment of deposit of Rs.20,000 or more otherwise than by account payee cheque or account payee draft, in contravention of the provisions of Section 269SS. [Section 271D]
(viiia)      Repayment of loan in contravention of the conditions imposed in section 269T. [Section 271E]
(viiib)          A.      Failure of file the return of income as required under Section 239 (1), shall entail imposition of penalty. [Section 271F]
B. Failure to file the return as required under the proviso to Section 139(1), in the event of assessee fulfilling the prescribed conditions, i.e., certain persons in occupation of immovable property or owner of motor vehicle or subscriber to telephone, one who incurred expenditure on foreign travel, the holder of the creditcard or a member of a club, subject to specific conditions, are required to file the return as per proviso to Section 139(1), failing which penalty may be imposed.  (Proviso to Section 271F)
(ix) Refusal to answer in contravention of legal obligation. [Section 272A(1)(a)]
(x)  Refusal to sign any statement made in the course of income-tax proceedings. [Section 272A(1)(b)]
(xi) Failure to attend or give evidence or produce books of accounts and documents in compliance with the requirements of summons under section 131(1). [Section 272A(1)(c)]
(xii) Failure to comply with the provisions of section 139A dealing with the application for and allotment of Permanent Account Number or General Index Register Number. [Section 272A(1)(d)]
(xiii)        Failure to furnish information regarding securities. [Section 272A(2)(a)]
(xiv)        Failure to give notice of discontinuance of business or profession. [Section 272A(2)(b)]
(xv) Failure to furnish in due time information sought under section 133 of Income-tax Act. [Section 272A(2)(c)]
(xvi)        Failure to furnish in due time prescribed returns/statements. [Section 272A(2)(c)]
(xvii)       Failure to allow inspection or take copies of registers of registers of companies.  [Section 272A(2)(d)]
(xviii)      Failure to furnish in due time the return of income by charitable or religious institutions.  [Section 272A(2)(e)]
(xix)        Failure to deliver in due time a copy of declaration of non-deduction of tax at source u/s.197A. [Section 272A(2)(f)]
(xx) Failure to furnish a certificate of tax deducted at source to the person on whose behalf tax has been deducted or collected as required by Section 203 or Section 206C. [Section 272A(2)(g)]
(xxi)        Failure to deduct and pay tax from salary payable to an employee as directed by the Assessing Officer or the Tax Recovery Officer as required by Section 226(2). [Section 272A(2)(h)]
(xxii)       Failure to allow an Income-tax Authority to collect any information useful or relevant to the purposes of Income-tax Act u/s.133B. [Section 272AA)]
(xxiii)      Failure to comply with the provisions of section 203a dealing with tax Deduction Account Number [Section 272BB]
Is the levy of penalty automatic?
No penalty under the Income-tax Act is imposed unless the person concerned has been given reasonable opportunity of being heard.
What is the minimum and maximum penalty leviable?
The quantum of penalty leviable depends upon the nature of default.  The relevant section of Income-tax Act prescribe the minimum and maximum penalties which can be levied.
Can the penalty be reduced or waived?
The Commissioner of Income-tax may reduce or waive the amount of any penalty imposed or imposable, if prescribed conditions are satisfied.  The assessee should voluntarily and in good faith make full and true disclosure of income prior to the detection of concealment by the Assessing Officer.  In certain cases of genuine hardship,  the penalty levied can be reduced/waived if the assessee has co-operated in any enquiry relating to the assessment and recovery of taxes.  The waiver/reduction of penalties is discretionary and dependent upon satisfaction or prescribed conditions.  No assessee can, a matter of right, claim waiver or reduction of penalty imposed or imposable upon him.  [Section 273A]
Office and prosecution under the income tax act.  why is prosecution necessary?
In the fight against tax evasion, the imposition of monetary penalty alone is not sufficient.  A calculating tax evader finds it profitable to evade tax for years, if he knows that he may get away with it by paying penalty in the year in which he is caught.  However, the prospect of landing in jail is a far more dreaded consequence and works as a deterrent.  Further, for more serious defaults, sometimes launching of prosecution is prescribed without prescribing monetary penalties.
The Parliament has, therefore, been enacting deterrent laws for effective implementation of tax laws.  The Income-tax Act contains a separate chapter XXII wherein offences have been defined and punishment provided.
What are the offences punishable under the income tax act?
The following offences committed by a person are punishable:
(i)     Removal, parting with or otherwise dealing with books of accounts, documents, money, bullion, jewellery or other valuable article or thing put under restraint during the search. [Section 275A]
(ii)    Fraudulent removal, concealment, transfer or delivery of any property or any interest in the property with the intention to thwart recovery of tax. [Section 276]
(iii)   Failure on the part of a liquidator or receiver of a company to give notice of his appointment to the Assessing Officer or failure to set apart amount notified by the Assessing Officer, or parting away of company’s properties in contravention of income-tax provision. [Section 276A]
(iv)    Failure to enter into written agreement or failure to furnish the statement of immovable property intended to be transferred u/s.269UC, or failure to surrender or deliver the property u/s.269UE, purchased by the Appropriate Authority or doing or omitting to do anything u/s.269UL, which will have the effect oftransfer of property without the permission of the Appropriate Authority (under the provisions of Chapter XX-C) [Section 276AB]
(v)     Failure to pay to the credit of the Central Government the tax deducted at source.  [Section 276B]
(va)   Failure to pay the tax collected at source. [Section 276BB]
(vi)    Willful attempt to evade any tax, penalty or interest [Section 276C(1)]
(vii)   Willful attempt to evade the payment of any tax, penalty or interest levied under Income Tax Act. [Section 276C(2)]
(viii)  Willful failure to furnish in due time return of income.  [Section 276CC)]
(viiia)    Failure to furnish return of income in Search Cases as required under section 158BC [Section 276CCC]
(ix)    Willful failure to produce accounts and documents as directed by issue of notice under section 142(1) [Section 276D]
(x)     Willful failure to get the accounts audited as directed by the Assessing Officer under section 142(2A). [Section 276D]
(xi)    Making of a statement in verification or delivery of an account or statement which is false and which the concerned person knows or believes to be false or does not believe to be true. [Section 277]
(xii)   Abetting or inducing another person to make and deliver an account or statement or declaration relating to any taxable income which is false and which he either knows or believes to be false. [Section 278]
(xiii)  Punishment for 2nd & subsequent offences in cases of certain defaults. [Section 278A]
No person shall be punished for any failure if he proves that there is reasonable cause failure. [Section 278AA].
Who is liable to be prosecuted?
Any person, committing the offence is liable to be prosecuted.  In this connection it is not necessary that the person should be an assessee under the Income-tax Act.  In the case of an offence committed by a Company, Firm, Association of Persons or Body of Individuals, every person in charge of or responsible for the conduct of the business of the concern as well as the concern are deemed to be guilty.  Similarly, in the case of an offence by a Hindu Undivided Family, the karta thereof is deemed to be guilty of the offence.
Is mens rea or culpable mental state or guilty intention necessary?
In case of willful act of omission or commission, the court shall presume the existence of culpable mental state.  However, the accused can rebut this presumption by producing necessary evidence before the court.  (Section 278E).
Can the offence be compounded?
Section 279(2) of Income-tax Act empowers a Chief Commissioner of Director General of Income-tax to compound an offence either before or after the institution of prosecution proceeding.
When public servant liable to be prosecuted?
If a public servant furnishes any information in contravention of the provisions of Section 138(2), prosecution may be instituted against him with the previous sanction of the Central Government. (Section 280).

Penalties Chart under Income Tax Act

SectionNature of DefaultBasis of
Charge
Quantum
of penalty
221(1)Failure to pay tax; i.e., non-payment of tax required by notice u/s. 156.Amount of tax in arrears
271(1)(b)Non-compliance with notice u/s. 142(1) to file returns or to produce documents required by assessing officer or u/s. 143(2) to produce evidence on which assessee relies or u/s. 142(2A) to get accounts audited.Rs. 10,000
271(1)(c)Concealment of the particulars of income, or furnishing inaccurate particulars thereof.Tax sought to be evaded100 % to 300 % of tax sought to be evaded
271AFailure to maintain books or documents u/s. 44AA.Rs. 25,000
271AAFailure to keep and maintain information and documents u/s. 92D.International transaction2% of International transaction
271BFailure to get accounts audited and furnish Tax Audit Report as required u/s. 44AB.Total Sales, Turnover, or Gross Receipts0.5% of total sales, turnover or gross receipts, or Rs. 1,00,000 whichever is less
271BAFailure to furnish a report as required u/s. 92E.Rs. 1,00,000
271CFailure to deduct the whole or part of the tax as required by or under Chapter XVII-B (Ss. 192 to 196D) or failure to pay the whole or part of tax u/s. 115-O.Tax failed to be deductedEqual to the amount failed to be deducted
271DContravention of the provisions of S. 269SS; i.e., by taking or accepting any loan or deposit otherwise than by ways specified therein.Amount of loan or deposit so taken or acceptedEqual to the amount of loan or deposit so taken or accepted
271EContravention of S. 269T; i.e. repayment of any deposit otherwise than by modes specified therein.Amount of deposit so repaidEqual to the amount of deposit so repaid
271FFailure to furnish Return of Income under sub-section (1) of S. 139 before the end of the relevant Assessment Year.Rs. 5,000
Failure to furnish Return of Income under proviso to sub-section (1) of S. 139 by the due date.Rs. 5,000
271GFailure to furnish information or document u/s. 92D (3).International transaction2 % of such default.
272A(1)Failure to answer questions, sign statements, attend summons u/s. 131(1), apply for permanent account number u/s. 139A.Rs. 10,000
272A(2)Failure to:Rs. 100 for every day during which the failure continues.
Comply with notice u/s. 94(6) furnishing information regarding securities
Give notice of discontinuance of business – S. 176(3)
Furnish in due time returns, statements, or particulars u/s. 133, 206 or 285B
Allow inspection of any register(s) – S. 134
Furnish returns u/s. 139(4A)
Deliver in due time a declaration mentioned in S. 197A
Furnish a certificate u/s. 203.
Deduct and pay tax u/s. 226(2)
Furnish returns/ statements/ certificate u/s. 206C
Furnish a statement of particulars of perquisites and profits in lieu of salary u/s. 192(2C)
272AA(1)Failure to furnish the prescribed information required u/s. 133B (Refer to Form No. 45D).Rs. 1,000
272BFailure to apply for Permanent Account Number (PAN)Rs. 10,000
272BB(1)Failure to apply for Tax Deduction Account No. (TAN) (S. 203A)Rs. 10,000
272BBBFailure to apply for Tax Collection Account No. (TCN)Rs. 10,000
Note:
No penalty is imposable for any failure u/ss. 271(1)(b), 271A, 271AA, 271B, 271BA, 271BB, 271C, 271D, 271E, 271F, 271G, 272A(1)(c) or (d), 272(2), 272AA(1), 272B, 272BB(1) and 272BBB(1), if the person or assessee proves that there was a reasonable cause for such failure (S. 273B).

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