Section 271FAA of ITA, 1961 : Section 271Faa: Penalty For Furnishing Inaccurate Statement Of Financial Transaction Or Reportable Account

Explanation using Example

Imagine a bank, XYZ Bank Ltd., which falls under the category of 'reporting financial institution' as per clause (k) of sub-section (1) of section 285BA of the Income-tax Act, 1961. The bank is required to furnish annual statements of financial transactions to the Income Tax Department, detailing significant financial transactions by its customers.

In a given year, XYZ Bank Ltd. inadvertently fails to include information about a series of high-value transactions in the statement due to an oversight in following the due diligence procedures prescribed by the Act. This oversight falls under point (a) mentioned in Section 271FAA. After submitting the report, the bank realizes the mistake but neglects to inform the tax authority or correct the information within the time frame specified by the Act, which corresponds to points (b) and (c).

Upon discovery of this non-compliance, the Income Tax Authority may impose a penalty on XYZ Bank Ltd. According to Section 271FAA, the penalty would be a sum of fifty thousand rupees for providing inaccurate information in the statement of financial transactions.