Beware!! Penalty for wrong entry in Books of Accounts u/s 271AAD!

Finance Act, 2020 introduced penalty provision to curb malpractices of issuing fake invoice. As explained by memorandum to Finance Bill, 2020 that after introduction of GST, several cases are found by GST authority where supplier are fraudulently claiming ITC on the basis of fake invoices to reduce their overall GST liabilities. These invoices are issued by racketeers who do not have any business or profession and invoices issued are without actual supply of goods or services.

As per 271AAD, if during any proceeding, it is found that in the books of account maintained by any person there is a false entry, or an omission of any entry relevant for evading tax liability, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum equal to the aggregate amount of such false or omitted entry.

“false entry includes use or intention to use forged or falsified documents such as a false invoice or, in general, a false piece of documentary evidence; or by invoice in respect of supply or receipt of goods or services or both issued by the person or any other person without actual supply or receipt of such goods or services or both, or invoice in respect of supply or receipt of goods or services or both to or from a person who does not exist.