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Provisions under Income Tax Act (Section 271AAD)
Penalty for false entry / fake invoices [inserted vide Finance Act, 2020 – w.e.f. 01.04.2020]
The above new provisions of Section 271AAD of the Income Tax Act impose a penalty for fake invoicing; fake
entries and omission of entries in the books of accounts. Further, the penalty under Section 271AAD is also
imposed on the other person who induces the defaulter to commit such an offensive act.
Analysis of Penal Provisions under Income Tax Act.

Pre-requisite Amount of Penalty Demand other than penalty
for penalty u/s 271AAD

-False entry Equal to false entry or This Section starts with “Without prejudice to any other provisions of
-found in books omittedentry this Act” which literally means that this provision for penalty will be
-During any in addition to any other penalty levied or tax imposed under any
proceedings other section of the Income Tax Act.
under this act
Thus, this penalty is in addition to demand if raised for tax,
interest u/s 115BBE( tax on undisclosed income) and penalty
u/s 270A ( penalty for underreporting and misreporting of income),
271AAB( (Penalty if search also initiated in income tax Act)
or 271AAC ( Penalty for undisclosed income).

Conclusion:
From the above reference, it can be concluded that provisions under Income Tax are harsher than the
provisions under GST. In GST there can be demand of 36000 for wrong ITC and penalty on a fake invoice of
Rs. 100000/- (considering rate of tax 18%) whereas in Income tax, demand of tax interest and penalty can
be between 2 to 2.5 lakhs. Thus, a genuine tax payer should take an utmost care and precaution while
dealing with new supplier party. Further to prove genuineness of transaction, they should keep all records
like Tax Invoice (including E- Invoice), E way Bill, Toll tax receipt, Inward entry, CCTV camera showing truck
number and receipt of goods. By this they can prove the genuine transaction and receipt of goods which is a
basic condition for availing ITC.

52 The longer I live, the more beautiful life becomes.