No more false entry in Income Tax and GST

As we all know that there are several cases in which the GST authorities caught the fraudulent claim of Input Tax credit(ITC). So, to overcome this problem and to stop this kind of fraud some massive steps are taken in the Union Budget 2020. In the Union budget, a new penalty section 271AAD has been introduced which will be included in the Income Tax Act through Finance Bill, 2020. The amendment will be applicable from 01st April, 2020. In this section, there are penalties for false entries in the books of accounts. The number of the fake bills under both Income tax and GST can be reduced with the help of this new section. 

What is considered to be a false entry?

1. In Income Tax

Now, the question which is very common is what is considered to be a false entry. Finance Bill, 2020 proposes to levy penalty on any person under two circumstances:

• who is found to have made false entries, 

• any entries relevant for computation of total income have been omitted to evade tax liability. Here, false entries include use or intention to use: 

1. Forged or false documents such as a fake invoice. 

2. Any invoice of supply or receipts of goods or services issued by any person without actual supply or receipt of goods or services. 

• An invoice in respect of supply or receipt of goods or services or both to or from a person who does not exist. Then penalty of an amount equal to the sum of such false or omitted entries may be levied. Even any person who causes a person to make a false entry or causes omission would also be penalized with the sum which is equal to the aggregate amount of such false entry or omitted entry. False entry is a wide term, which includes sales, purchase, expenses, loans, etc. whether shown in books or not.

        2. In GST

The invoice is said to be false in GST when a taxable person:   

• supplies any goods or services or both without the issue of any invoice or issues an incorrect or false invoice with regard to any such supply; 

• issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder; 

•  issues any invoice or document by using the registration number of another registered person; Then in such cases, he shall be liable to pay a penalty of Rs. 10,000 or amount equivalent to the tax evaded, whichever is higher. Also, a person convicted may be sentenced to imprisonment which may extend to 5 years. 

• fails to issue an invoice in accordance with the provisions of this Act or the rules made thereunder or fails to account for an invoice in his books of account; Then he shall be liable to a penalty which may extend to Rs. 25,000.

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