Section 271(4) explains that if the partners in the registered partnership firm have distributed profits otherwise than in accordance with the partnership agreement on the basis of which the firm is registered under this act and the partner has returned his income below its real amount, then the Assessing officer or the Commissioner (Appeals) may direct the partner in addition to the tax payable, pay by way of penalty a sum not exceeding one and a half times the amount of tax which has been avoided, or would have been avoided if the income returned by such partner had been accepted as his correct income. Also he would not be eligible to claim any refund or other adjustment by reason of such direction by the Assessing officer.
| Section | Nature of default | Minimum penalty | Maximum penalty |
| (1) | (2) | (3) | (4) |
| 271(4) | Distribution of profit by registered firm otherwise than in accordance with partnership deed and as a result of which partner has returned income below the real income | Up to 150 per cent of the difference between tax on partner’s income assessed and tax as income returned | 150% of the difference between the tax on partner’s income assessed and income returned. |
Reference:
Section 271(4), of Income tax act, 1961-
Failure to furnish returns, comply with notices, concealment of income, etc. under section 271(4)
If the Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that the profits of a registered firm have been distributed otherwise than in accordance with the shares of the partners as shown in the instrument of partnership on the basis of which the firm has been registered under this Act, and that any partner has thereby returned his income below its real amount, he may direct that such partner shall, in addition to the tax, if any, payable by him, pay by way of penalty a sum not exceeding one and a half times the amount of tax which has been avoided, or would have been avoided if the income returned by such partner had been accepted as his correct income; and no refund or other adjustment shall be claimable by any other partner by reason of such direction.