Mock Test Paper-2(MCQ)

Topics: ROI, Assessment Procedure, Penalties & Prosecution, Revision,

Settlement Commission & Advance Ruling

Assessment Procedure
1. An Assessing Officer entered a hotel run by a person, in respect of whom he exercises jurisdiction,
at 8.30 p.m. for the purpose of collecting information, which may be useful for the purposes of the
Act. The hotel is kept open for business every day between 8 a.m. and 10 p.m. As per the provisions
of section 133B,—
(a) The A.O. cannot enter the premises at 8.30 p.m. since it is after sunset
(b) The A.O. can enter premises at 8.30 p.m. and take away books of account kept at the hotel
after taking prior approval of the Principal Chief Commissioner or Chief Commissioner.
(c) The A.O. can enter premises at 8.30 p.m. and take away books of account kept at the hotel
after recording reasons for doing so.
(d) The A.O. can enter premises at 8.30 p.m. but cannot take away books of account kept at
the hotel

2. The assessment of Satpura Ltd. was completed under section 143(3) with an addition of Rs. 18 lakhs
to the returned income. Satpura Ltd. preferred appeal before the Commissioner (Appeals) which is
pending now. Which of the following statements is incorrect?
(a) The A.O. can initiate reassessment proceedings in respect of income chargeable to tax which
has escaped assessment, provided such income which has escaped assessment does not
form part of the additions of Rs. 18 lakhs to the returned income, which is the subject matter
of appeal.
(b) The A.O. can pass an order under 154(1) to rectify a mistake apparent from the record,
provided the rectification is in relation to a matter, other than the matter which has been
considered and decided in the appeal before Commissioner (Appeals).
(c) Under section 264, the Commissioner can revise the order pending before the
Commissioner (Appeals), if the revision pertains to a matter, other than the matter(s)
covered in the appeal before Commissioner (Appeals).
(d) Under section 263, if the order is prejudicial to the interests of the revenue, the
Commissioner can revise the order pending before the Commissioner (Appeals), if the
revision pertains to a matter, other than the matter(s) covered in the appeal before
Commissioner (Appeals).

3. Mr. A failed to comply with the provisions of section 203A for which penalty of Rs. 10,000 was levied
under section 272BB. Mr. A approached his consultant and asked him to file an appeal before the
Commissioner of Income-tax (Appeals) against the Penalty Order. Determine the appeal fee that is
required to be paid by Mr. A for filing the said appeal.
(a) Rs. 500
(b) Rs. 250
(c) Rs. 1,000
(d) Rs. 750

4. The Assessment Order under section 143(3) in the case of Mr. Z was passed on 31.03.2020 and the
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 notice of demand was served on the assessee on 02.04.2020 for levy of tax and interest. Mr. Z paid
the tax and interest due on 12.04.2020. An application was filed by Mr. Z under Section 270AA on
27.04.2020 before the Assessing Officer to grant immunity from imposition of penalty and the said
application was rejected by the Assessing Officer vide order dated 14.05.2020. The said order was
served on Mr. Z on 15.05.2020. By what date an appeal against the Assessment Order should be
presented by Mr. Z before the CIT (Appeals)?
(a) 02.05.2020
(b) 22.05.2020
(c) 21.05.2020
(d) 30.04.2020


5. Which of the following cannot be corrected while processing the return of income for A.Y.2021-22
under section 143(1)?
(a) any arithmetical error in the return
(b) an incorrect claim apparent from any information in the return
(c) disallowance of expenditure indicated in the audit report but not taken into account in
computing total income in the return.
(d) addition of income appearing in Form 26AS which has not been included in computing total
income in the return.

6. Mr. X received an assessment order dated 11.11.2020 on 15.11.2020 wherein his total income was
assessed at Rs. 20 lakh. The returned income of X was Rs. 5 lakh. However, Mr. X did not accept the
assessment order and filed an appeal against the same before the Commissioner of Income Tax
(Appeals). Now, while contesting the appeal, he wishes to submit some evidences that were not
submitted by him before the Assessing Officer. As the Tax Consultant of Mr. X, what will be your
advise to him regarding the submission of the said evidences?
(a) Commissioner of Income Tax (Appeals) has no power to accept any evidences other than
the evidences already submitted before the Assessing Officer.
(b) Commissioner of Income Tax (Appeals) may accept the additional evidences if the
conditions given in Rule 46A(1) of the Income-tax Rules, 1962 are satisfied.
(c) Commissioner of Income Tax (Appeals) may accept the additional evidences if the
conditions given in Rule 46(1) of the Income-tax Rules, 1962 are satisfied.
(d) Commissioner of Income Tax (Appeals) has no power to reject any evidences which the
Appellant wishes to submit before him during the appellate proceedings.

7. Mr. Shiv was travelling from Delhi to Jodhpur on 05.07.2020 carrying FDRs of Rs. 20 Lakhs. The said
FDRs were seized by the police authorities and subsequently, requisitioned by the income-tax
authorities u/s 132A. The requisition was made on 20.07.2020. Now, the Assessing Officer has issued
notices to Shiv u/s 153A for A.Y. 2011-12 to A.Y. 2020-21. Whether the said notices issued by the
Assessing Officer u/s 153A are valid?
(a) Invalid. Notices can be issued u/s 153A in the present case by the Assessing Officer only for
A.Y. 2015-16 to A.Y. 2020-21, since FDRs do not constitute an asset for the purpose of
section 153A.
(b) Invalid. Notices can be issued u/s 153A in the present case by the Assessing Officer for A.Y.
2015-16 to A.Y. 2021-22.
(c) Notices are valid for A.Y. 2015-16 to A.Y. 2020-21. However, for A.Y. 2011-12 to A.Y. 2014-
15, notices can be issued u/s 153A only if the Assessing Officer has any evidence which

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 reveals that income, represented in form of asset is greater than or equal to Rs. 50 lakhs.
(d) Notices are valid for A.Y. 2011-12 to A.Y. 2020-21 as notices in case of requisition can be
issued for 10 assessment years immediately preceding the A.Y. relevant to the P.Y. in which
requisition is made.

8. A Ltd. filed its return of income for A.Y.2021-22 on 30th September, 2021. The return is selected for
regular assessment under section 143(3). The time limit for service of notice under section 143(2)
in this case is –
(a) 31.3.2022
(b) 30.6.2022
(c) 30.9.2022
(d) 31.3.2023

9. For A.Y.2020-21, XYZ Ltd. filed its return of income on 14.09.2020 declaring total income of Rs. 80
Lakhs. The Assessing Officer issued notice under Section 143(2) to XYZ Ltd. on 23.09.2021 stating
that there are certain points in connection with the return of income submitted by the Company on
which he would like to seek some other information. The Company attended the assessment
proceedings and the Assessment Order for A.Y. 2020-21 was passed under Section 143(3) by the
Assessing Officer on 31.05.2022. Determine whether the said Assessment Order is barred by
limitation.
(a) Yes, the Assessment Order is barred by limitation as the time limit for passing Assessment
Order expired on 31.03.2022.
(b) Yes, the Assessment Order is barred by limitation as the time limit for passing Assessment
Order expired on 31.03.2021.
(c) No, the Assessment Order is not barred by limitation as the time limit for passing
Assessment Order expires on 31.12.2022.
(d) No, the Assessment Order is not barred by limitation as the time limit for passing
Assessment Order expires on 31.03.2023.

10. After serving proper notice under the respective sections, which of the following assessments can
be concluded without giving opportunity of being heard to assessee?
(a) Assessment under section 143(3)
(b) Re-assessment under section 147
(c) Assessment under section 144
(d) Assessment under 153A in conformity with the directions issued under section 144C(5)

11. You are representing Ms. Deepak in proceedings initiated under section 147. You had appeared
couple of times and shared the submissions as asked by Assessing Officer. However, before
conclusion, it came to your knowledge, that Ms. Deepak was not served the notice for assessment
properly. What can be the possible course of action?
(a) Appeal on the ground of invalid notice to CIT(A)
(b) Object against non-service of notice anytime before completion of assessment
(c) Appeal on the ground of invalid notice to Appellate Tribunal
(d) Not object, since you have appeared and co -operated in the proceedings

12. Which of the followings are the consequences to be borne by an assessee on account of filing of

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 return of income for A.Y. 2020-21 after the due date prescribed under section 139(1) of the Income-
tax Act, 1961?
i. Liability to pay interest u/s 234A.
ii. Liability to pay late filing fee u/s 234F.
iii. Unabsorbed depreciation cannot be carried forward.
iv. Deduction u/s 80-IA will not be available.
v. Belated return of income cannot be revised.
vi. Business loss incurred cannot be carried forward to subsequent years.
(a) (i), (ii), (iv), (v), (vi)
(b) (i), (ii), (iv), (vi)
(c) (i), (iii), (iv), (v), (vi)
(d) (i), (ii), (iv), (v)

Case Study:
Mr. Manish is engaged in the business of gold jewellery. A search was conducted u/s 132 in the business
premises of Mr. Manish on 20/12/2020. Authorisation of the search was issued a day before, i.e,
19/12/2020. During search, authorized officer seized some books of accounts of the assessee. At the time
of search, assessments u/s 143(3) for AYs 2018-19 and 2019-20 & reassessment proceedings u/s 147 for
AY 2016-17 were pending before the AO.
Based on the above facts, choose the most appropriate option to the questions given below-
13. Assessing Officer has to complete the search assessment in above case:
(a) Within 21 months from the end of FY in which last of the authorization for search u/s 132
was given, i.e, upto 31/12/2022
(b) Within 18 months from the end of FY in which last of the authorization for search u/s 132
was given, i.e, upto 30/09/2022
(c) Within 12 months from the end of FY in which last of the authorization for search u/s 132
was given, i.e, upto 31/03/2022
(d) Within 24 months from the end of FY in which last of the authorization for search u/s 132
was given, i.e, upto 31/03/2023

14. What would be the fate of pending assessments u/s 143(3) of AY 2018-19 & AY 2019-20 and
reassessment proceedings u/s 147 for AY 2016-17, after the search was completed during Dec 2020?
(a) Assessment proceedings u/s 143(3) for AY 2018-19 and AY 2019-20 & reassessment
proceedings u/s 147 for AY 2016-17 shall continue as such
(b) Assessment proceedings u/s 143(3) for AY 2018-19 and AY 2019-20 & reassessment
proceedings u/s 147 for AY 2016-17 shall abate
(c) Assessment proceedings u/s 143(3) for AY 2018-19 and AY 2019-20 shall continue as such
& reassessment proceedings u/s 147 for AY 2016-17 shall abate

15. What are the Assessment years for which notice can be issued for making post search assessments?
Assume that additional conditions prescribed in sec 153A for issuing notice for relevant AY's have
not been fulfilled:
(a) Notice u/s 153A can be issued for 6 AYs preceding the AY relevant to the PY in which search
is conducted, i.e, AY 2015-16 to AY 2020-21
(b) Notice u/s 153A can be issued for 10 AYs preceding the AY relevant to the PY in which search

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 is conducted, i.e, AY 2011-12 to AY 2020-21
(c) Notice u/s 153A can be issued for 8 AYs preceding the AY relevant to the PY in which search
is conducted, i.e, AY 2013-14 to AY 2020-21
(d) Notice u/s 153A can be issued for 4 AYs preceding the AY relevant to the PY in which search
is conducted, i.e, AY 2017-18 to AY 2020-21

16. Mrs. Ram, born on 1.4.1960, has a gross total income of Rs. 2,90,000 for A.Y.2021-22 comprising of
his salary income and interest on savings bank account. He does not claim any deduction under
Chapter VI-A. He pays electricity bills of Rs. 10,000 per month. He made a visit to Melbourne along
with his wife for a month for which he incurred to and fro flight charges of Rs. 1.20 lakhs. The
remaining expenditure for his visa, stay and sightseeing amounting to Rs. 80,000 was met by his son
residing in Melbourne. Is Mr. Ram required to file return of income, and if so, why?
(a) No, Ram is not required to file his return of income.
(b) Yes, Ram is required to file his return of income, since his gross total income/total income
exceeds the basic exemption limit.
(c) Yes, Ram is required to file his return of income since he pays electricity bills of Rs. 10,000
per month.
(d) Yes, Ram is required to file his return of income since he has incurred foreign travel
expenditure exceeding Rs. 1 lakh.

17. Which of the following statements are correct in relation to the power of an income-tax authority
to collect information which may be useful for the purposes of the Income-tax Act, 1961?
(i) The income-tax authority can enter the place of business of the assessee only after sunrise and
before sunset
(ii) The income-tax authority may enter the place of business only during the hours at which such
place is open for conduct of business
(iii) The income-tax authority may impound and retain in his custody for a period not exceeding
15 days books of account or other documents inspected by him. If he wishes to retain for a
period exceeding 15 days, he has to take the prior approval of Principal Chief Commissioner or
Chief Commissioner.
(iv) The income-tax authority can on no account remove or cause to be removed from the building
or place he has entered any books of account or other documents.
The correct answer is –
(a) (i) and (iii)
(b) (i) and (iv)
(c) (ii) and (iii)
(d) (ii) and (iv)

Case Study:
Mr. Ram, is carrying on business of trading in furniture, whose annual turnover is around Rs. 70 to Rs.
80 lakhs. From A.Y.2019-20, he declares his profits on presumptive basis under section 44AD. His
brother, Mr. Shyam, is carrying on business of wholesale trading in food grains and his annual turnover
is around Rs. 3 crores. Mr. Shyam also exports food grains to South East Asian countries directly as well
as through his associates. The following are the particulars relating to Mr. Ram and Mr. Shyam from
A.Y.2018-19 to A.Y.2020-21 –
Mr. Ram
(i) Filed return of A.Y.2018-19 on 30.04.2020 in response to notice under section 148 served on
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 20.03.2020
(ii) Filed return of A.Y.2019-20 on 12.09.2019
(iii) Filed return of A.Y.2020-21 on 25.09.2020
Mr. Shyam
(i) Filed return of A.Y.2018-19 on 30.04.2020 in response to notice under section 148 served on
9.4.2020
(ii) Filed return of A.Y.2019-20 on 30.09.2019
Assessing Officer made a reference to the Transfer Pricing Officer on 02.04.2020 under section
92CA(1) during the course of proceeding for assessment of A.Y.2019-20 and the Transfer Pricing
Officer passed an order on 4.8.2020.
(iii) Filed return of A.Y. 2020-21 on 01.10.2020
From the information given above, choose the most appropriate answer to the following questions
(Q.No. 98 to 100)
18. What is the time limit available to the Assessing Officer for completion of Assessment of Mr. Ram
and Mr. Shyam for A.Y.2018-19?
(a) 31.3.2021 in both cases
(b) 31.3.2021 and 31.12.2021, respectively
(c) 30.09.2020 and 31.3.2022, respectively
(d) 31.3.2021 and 31.3.2022, respectively

19. What is the time limit available to the Assessing Officer for completion of assessment by passing
order under section 143 for A.Y.2019-20 for Mr. Ram and Mr. Shyam?
(a) 30.9.2021, in both cases
(b) 31.3.2021 and 31.3.2023, respectively
(c) 31.3.2021 and 31.3.2022, respectively
(d) 31.12.2021 and 31.12.2022, respectively

20. Assuming that Mr. Ram and Mr. Shyam have business losses pertaining to A.Y.2020-21, can they
carry forward such loss for set-off against the business income of A.Y.2021-22?
(a) Yes, both Mr. Ram and Mr. Shyam can carry forward their business losses of A.Y. 2020-21
for set-off against the business income of A.Y.2021-22.
(b) Mr. Ram can carry forward business losses of A.Y.2020-21 for set-off against his business
income of A.Y.2021-22; however, Mr. Shyam cannot do so.
(c) Mr. Shyam can carry forward business losses of A.Y.2020-21 for set-off against his business
income of A.Y.2021-22; however, Mr. Ram cannot do so.
(d) No, both Mr. Ram and Mr. Shyam cannot carry forward their business losses of A.Y. 2020-
21 for set-off against the business income of A.Y.2021-22.

21. Mr. X is aggrieved by an order passed under section 143(3) by the Assessing Officer. Mr. Y is
aggrieved by an order passed under section 272A by the Director General. What is the remedy
available to Mr. Xand Mr. Y and the time limit within which they should exercise the remedy?
a. Both Mr. X and Mr. Y have to file an appeal before Commissioner (Appeals) u/s 246A within
30 days of the date on which the order sought to be appealed against is communicated to
them
b. Both Mr. X and Mr. Y have to file an appeal before the Appellate Tribunal u/s 253 within 60
days of the date on which the order sought to be appealed against is communicated to them

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 c. Mr. X has to file an appeal u/s 246A before Commissioner (Appeals) within 30 days of the date
of service of the notice of demand relating to the assessment. Mr. Y has to file an appeal
u/s 253 before the Appellate Tribunal within 60 days of the date on which the order sought
to be appealed against is communicated to him
d. Mr. Y has to file an appeal before Commissioner (Appeals) u/s 246A within 60 days of the date
on which the order sought to be appealed against is communicated to him. Mr. X has to file
an appeal u/s 253 before the Appellate Tribunal within 30 days ofthe date of service of
the notice of demand relating to the assessment

1.
22. As per section 245N(a)(iv), advance ruling means determination or decision by the Authority for
Advance Rulings (AAR) whether an arrangement, which is proposed to be undertaken by a person
is an impermissible avoidance arrangement as referred to in Chapter X-A or not. For making an
application in this regard, the applicant has to be -
a. Only a Non-resident
b. Only a Resident
c. Only a Resident falling within such class or category of personsas notified by the Central
Government
d. Either a resident or a non-resident

Penalties & Prosecution

23. Mr. Ganesh and Mr. Rajesh, resident Indians aged 60 years and 80 years, respectively, have not
furnished their returns of income for the P.Y.2020-21. However, the total come assessed in respect
of such year under section 144 is Rs. 8 lakhs and Rs. 5 lakhs, respectively. Is penalty leviable under
section 270A, and if so, what is the quantum of penalty?
(a) No penalty is leviable under section 270A in the hands of either Mr. Ganesh or Mr. Rajesh
(b) Yes; Rs. 36,400 and Rs. 5,200, respectively
(c) Yes; Rs. 37,700 and Rs. 6,500, respectively
(d) Penalty of Rs. 36,400 leviable in the hands of Mr. Ganesh; No penalty leviable in the hands
of Mr. Rajesh.

24. Mr. Mahesh is found to be the owner of two gold chains of 50 gms each (market value of which is
Rs. 1,45,000 each) during the financial year ending 31.3.2021 but he could offer satisfactory
explanation for Rs. 50,000 spent on acquiring these gold chains. As per section 115BBE, Mr. Mahesh
would be liable to pay tax of-
(a) Rs. 1,87,200
(b) Rs. 2,26,200
(c) Rs. 1,49,760
(d) Rs. 1,80,960

25. In the course of search operations under section 132 in the month of May, 2021, Mr. Aakash makes
a declaration under section 132(4) on the earning of income not disclosed in respect of P.Y. 2020-
21. He also explains the manner in which he has derived such income and he pays the tax together
with interest on such income and declares such income in the return of income filed by him in the
month of July, 2021. Is penalty leviable in this case?
(a) No penalty is attracted since Mr. Aakash has voluntarily made a declaration under section
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 132(4).
(b) Penalty@10% of undisclosed income would be attracted even if Mr. Aakash has voluntarily
made a declaration under section 132(4).
(c) Penalty@30% of undisclosed income would be attracted even if Mr. Aakash has voluntarily
made a declaration under section 132(4).
(d) Penalty@60% of undisclosed income would be attracted even if Mr. Aakash has voluntarily
made a declaration under section 132(4).

26. Mr. Ram, a resident individual aged 55 years, has not furnished his return of income for A.Y.2021-
22. However, the total income assessed in respect of such year under section 144 is Rs. 12 lakh.
Determine the quantum of penalty leviable under section 270A?
(a) Penalty leviable is Rs. 1,79,400, being tax payable on total income of Rs. 12 lakh
(b) Penalty leviable is Rs. 89,700, being 50% of tax payable on Rs. 12 lakh
(c) Penalty leviable under section 270A is Rs. 53,300, being 50% of tax payable on under-
reported income of Rs. 9.50 lakhs (i.e., Rs. 12 lakhs - basic exemption limit of Rs. 2.50 lakhs)
(d) Penalty leviable under section 270A is Rs. 1,06,600, being tax payable on under-reported
income of Rs. 9.50 lakhs (i.e., Rs. 12 lakhs - basic exemption limit of Rs. 2.50 lakhs)

27. Suppose Mr. Naveen is an employee working in a public sector. What will be the consequence of
the following transaction for A.Y. 2021-22?
-He repaid a loan in cash of Rs. 24,000 (including interest of Rs. 5,000), which he took from his friend
for higher studies.
(a) Disallowance under section 40A(3) of Rs. 24,000
(b) Penalty under section 271E of Rs. 24,000 due to violation of section 269T
(c) Penalty under section 271E of Rs. 19,000 due to violation of section 269T
(d) No disallowance or Penalty under section 271E, since the principal loan amount is less than
Rs. 20,000

28. A search u/s 132 of the Income-tax Act, 1961 was carried out in the case of Mr. M on 20.12.2020.
During the course of search, the assessee admitted the additional income of Rs. 50 crore as
additional sales for the financial year 2019-20. While filing his return of income in response to notice
u/s 153A, M did not declare the said income.
Determine the amount of penalty excluding surcharge and cess to be payable by M in respect of the
said undisclosed income.

(a) Rs. 5 crore

(b) Rs. 10 crore
(c) Rs. 15 crore
(d) Rs. 30 crore

29. Following are the details given in the case of PQR, which is a partnership firm for A.Y. 2021-22:
Returned total income 1,00,00,000
Total income determined u/s 143(1)(a) 1,10,00,000
Total income assessed u/s 143(3) 1,50,00,000
Total income reassessed u/s 147 2,00,00,000
Compute the amount of under-reported income, on which penalty shall be leviable on reassessment

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 u/s 147.
(a) Rs. 90,00,000
(b) Rs. 1,00,00,000
(c) Nil
(d) Rs. 50,00,000

30. P Ltd. is a domestic company which filed its return of income for A.Y. 2021-22 declaring a total
income of Rs. 1,15,00,000. The assessment in its case was opened by the Assessing Officer by issuing
notice u/s 143(2). The Assessing Officer doubted the genuineness of loans taken by the company
and added an amount of Rs. 5,00,000 to the total income u/s 68 as cash credits. What shall be the
effective rate at which the said income of Rs. 5,00,000 shall be taxable in the hands of P Ltd.?
(a) 77.25 %
(b) 66.768 %
(c) 78 %
(d) 33.384 %

31. In the course of search operations under section 132 in May, 2021, Mr. Hari makes a declaration
under section 132(4) on the earning of income in respect of P.Y.2020-21 not disclosed in the books
of account. Mr. Hari explains the manner in which income was derived and pays the tax, together
with interest in respect of such income. However, he does not disclose such income in his return of
income filed on 31.7.2021. Is penalty leviable in this case, and if so what is the quantum of penalty?
(a) No penalty is leviable since Mr. Hari has made a declaration under section 132(4)
(b) Penalty@10% is leviable
(c) Penalty@30% is leviable
(d) Penalty@60% is leviable

Case Study
MCS Pvt. Ltd. is a company engaged in services of consultancy & business advisory. It provides various
services like financial management, project advisory, business mergers, business valuations, etc. During
the financial year 2020-21, it has provided various services and it’s total revenue / gross receipts amounted
to Rs. 70,00,00,000. This is the first year of their operation and the company thinks it has faultered in
various compliances. Moreover, during the year it received following loans in cash from various vendors
due to some business exigency:
 Rs. 25,00,000 availed from Mr. A on 15th April 2020
 Rs. 21,000 availed from Mr. B on 15th May 2020
 Rs. 11,000 availed from Mr. C on 15th June 2020
Further, MCS Pvt. Ltd. repaid the following amounts as loan repayments:
 Rs. 8,000 to Mr. A on 15th July 2020 in cash
 Rs. 2,50,000 to Mr. A on 15th August 2020 through account payee cheque
 Rs. 21,000 to Mr. A on 15th September 2020 through RTGS
 Rs. 15,000 to Mr. A on 15th October 2020 through crossed cheque
MCS Pvt. Ltd. has also received an amount of Rs. 2,00,000 for services rendered to Mr. Shyam through
bearer cheque. Also, he received cash for services rendered to Mr. Ankit of Rs. 90,000. Furthermore, MCS
Pvt. Ltd. does not know about the applicability of tax audit under section 44AB of the Income-tax Act,
1961.
From the information given above, choose the most appropriate answer to questions
32. What is the amount of penalty, if any, which MCS Pvt. Ltd. will have to bear on availing loan in

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 cash from various vendors?
(a) Penalty of Rs. 25,32,000 under section 271E
(b) Penalty of Rs. 25,21,000 under section 271D
(c) Penalty of Rs. 25,00,000 under section 271E
(d) Penalty of Rs. 25,32,000 under section 271D

33. What is the amount of penalty leviable on repaying loan in cash to Mr. A?
(a) Penalty of Rs. 23,000 under section 271E
(b) Penalty of Rs. 23,000 under section 271D
(c) Penalty of Rs. 44,000 under section 271D
(d) Penalty of Rs. 44,000 under section 271E

34. Has MCS Pvt. Ltd. violated any provision of the Income-tax Act, 1961 while receiving payment from
Mr. Shyam and Mr. Akhil? If yes, what is the amount of penalty which MCS Pvt. Ltd. is liable to pay?
(a) Yes, contravention of section 269ST in receiving payment from Mr. Shyam; Penalty of Rs.
2,00,000 under section 271DA; No contravention in receiving payment from Mr. Akhil
(b) Yes, contravention of section 269ST in receiving payment from Mr. Shyam and Mr. Akhil &
Penalty of Rs. 2,90,000 under section 271DA
(c) Yes, contravention of section 269SU in receiving payment from Mr. Shyam & Penalty of Rs.
2,00,000 under section 271DB is attracted; No contravention in receiving payment from Mr.
Akhil
(d) No violation on receiving payment from either Mr. Shyam or Mr. Akhil

35. What is the time limit for filing Tax Audit Report for A.Y. 2021-22 and the amount of penalty if the
company does not file its tax audit report within the due date?
(a) 30.09.2021; Rs. 35,00,000 under section 271A
(b) 31.10.2021; penalty leviable is Rs. 35,00,000 under section 271B
(c) 30.10.2021; penalty leviable is Rs. 1,50,000 under section 271B
(d) 31.03.2021; penalty leviable is Rs. 1,50,000 under section 271

Case Study:
The following are the particulars relating to four Indian companies, namely, A Ltd., B Ltd., C Ltd. and D
Ltd.–
Particulars A Ltd. B Ltd.
Date of setting up/registration 1.9.2019 1.11.2020
Main object Manufacture of steel Manufacture of apparel
Place Madhya Pradesh Warangal in Telengana
Value of new plant and machinery Rs. 10 crore Rs. 10 crore
installed and put to use on the date of
setting up of the company
Gross Total Income of P.Y.2020-21 Rs. 4.90 crore Rs. 2.80 crore
Particulars of new employees
employed during the P.Y.2020-21
No. of new employees employed on 1000 1000
the date of setting up of the company

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 Monthly emoluments to employees by
account payee cheque:
500 employees Rs. 24,000 per Rs. 24,000 per employee
employee
500 employees Rs. 25,100 per Rs. 26,000 per employee
employee
Particulars C Ltd. D Ltd.
Date of setting up/registration 1.4.2000 1.1.2005
Main object Trading of leather Trading of food grains
goods
Place Tamil Nadu Karnataka
Turnover of P.Y.2016-17 Rs. 347 crore Rs. 201 crore
Turnover of P.Y.2017-18 Rs. 395 crore Rs. 225 crore
Turnover of P.Y.2018-19 Rs. 499 crore Rs. 251 crore
Turnover of P.Y.2019-20 Rs. 350 crore Rs. 342 crore
Turnover of P.Y.2020-21 Rs. 424 crore Rs. 380 crore
Details of income returned &
assessed for A.Y.2021-22
As per return of income filed Rs. 14 crores Rs. 17 crores
Income determined u/s 143(1)(a) Rs. 16 crores Rs. 20 crores
Income assessed u/s 143(3) Rs. 20 crores Rs. 22 crores
Based on the above facts, choose the most appropriate option to the questions given below-
36. What would be the tax liability of B Ltd. for A.Y.2021-22, if it avails the beneficial tax rates under the
special provisions inserted by the Taxation Laws (Amendment) Act, 2019 in the Income-tax Act, 1961
by fulfilling the conditions specified thereunder? Assume that the gross total income reflects the
computation under the special provisions.
(a) Rs. 70,47,040
(b) Rs. 22,88,000
(c) Rs. 25,16,800
(d) Rs. 17,16,000

37. What would be the tax liability of A Ltd. for A.Y.2021-22, if it avails the beneficial tax rates under the
special provisions inserted by the Taxation Laws (Amendment) act, 2019 in the Income-tax Act, 1961
by fulfilling the conditions specified thereunder? Assume that the gross total income reflects the
computation under special provisions.
(a) Rs. 1,23,32,320
(b) Rs. 40,84,040
(c) Rs. 14,59,740
(d) Rs. 9,95,280

38. What would be the total income (rounded off) of A Ltd. and B Ltd. for A.Y.2021-22, if they do not
opt for the special provisions inserted by the Taxation Laws (Amendment) Act, 2019 in the
Income-tax Act, 1961? Assume that the gross total income reflects the computation under the
special provisions.
(a) Rs.2,90,00,000; Rs.2,40,00,000
(b) Rs.58,00,000; Rs.2,40,00,000
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 (c) Rs.2,90,00,000; Rs.60,00,000
(d) Rs.58,00,000; Rs.60,00,000

39. What would be the quantum of penalty payable by C Ltd. under section 270A, assuming that the
under-reporting of income is not due to mis-reporting and none of the additions made in the
assessment qualifies under section 270A(6)? Assume that C Ltd. has not opted for the special
provisions inserted by the Taxation Laws (Amendment) Act, 2019.
(a) Rs. 58,24,000
(b) Rs. 69,88,800
(c) Rs. 87,36,000
(d) Rs. 1,04,83,200

40. What would be the quantum of penalty payable by D Ltd. under section 270A, assuming that the
under-reporting of income is due to mis-reporting? Assume that D Ltd. has not opted for the special
provisions inserted by the Taxation Laws (Amendment) Act, 2019.
(a) Rs. 1,16,48,000
(b) Rs. 1,39,77,600
(c) Rs. 2,91,20,000
(d) Rs. 3,49,44,000

41. Dinesh, a resident individual of age of 47 years, has not furnished his return of income for the A.Y.
2021-22. However, his total income forsuch year as assessed u/s 144 is `18 lakhs. Is penalty under
section 270A attracted and if so, what is the quantum of penalty?
(a) No; penalty under section 270A is not attracted since he has not filed his return of income,
hence, this is not a case of underreporting or misreporting of income.
(b) Yes; penalty is Rs.3,66,600
(c) Yes; penalty is Rs.1,83,300
(d) Yes; penalty is Rs.1,44,300

42. Mr. X made a fixed deposit of ` 12,000 with a non-banking finance company (NBFC) on 1.4.2020
in cash. Thereafter, he made anotherfixed deposit of ` 7,500 with the same NBFC on 1.8.2020 by
bearer cheque. On 31.3.2021, he made yet another fixed deposit of ` 8,000 with the same NBFC
by an account payee cheque. Which of the following statements is correct?
(a) Penalty under section 271D is attracted at the time of acceptance of first deposit on
1.4.2020
(b) Penalty under section 271D is attracted at the time of acceptance of second deposit on
1.8.2020
(c) Penalty under section 271D is attracted at the time of acceptance of third deposit on
31.3.2021
(d) Penalty under section 271D is not attracted

Revision
43. Mr. Rajesh is aggrieved by an order passed by the Commissioner of Income-tax imposing penalty
under section 270A for under-reporting of income. What is the appellate remedy available to him
under the Income-tax Act, 1961 and the specified time limit within which he has to file an appeal?
(a) He can file an appeal to Commissioner (Appeals) u/s 246A within 30 days of service of such
order.
(b) He can file an appeal to Commissioner (Appeals) u/s 246A within 60 days of service of such

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 order.
(c) He can file an appeal to Appellate Tribunal u/s 253 within 30 days of service of such order.
(d) He can file an appeal to Appellate Tribunal u/s 253 within 60 days of service of such order.

44. Which of the following orders are not appealable before Commissioner (Appeals)?
(a) An order of penalty under section 271B for failure to get accounts audited.
(b) An order made under section 163 treating the assessee as an agent of a non- resident.
(c) An order of assessment passed by the Assessing Officer in pursuance of directions of Dispute
Resolution Panel
(d) An order made under section 201 deeming a person to be an assessee-in-default for non-
deduction of tax at source

45. The Assessing Officer within his jurisdiction surveyed a popular CyberCafé at 1 a.m. in night for
the purpose of collecting information whichmay be useful for the purposes of the Income-tax Act,
1961. The Cyber Café is kept open for business every day between 2 p.m. and 2 a.m. He impounded
and retained in his custody, books of account and other documents inspected by him, after
recording his reasons for doing so,for 12 days. Which of the following statements is correct?
(a) The Assessing Officer’s action in entering the cyber café at 1 a.m. and impounding books of
account and documents inspected by him is in order
(b) The Assessing Officer’s action in entering the cyber café at 1 a.m. is not in order, since he
can enter the cyber café only after sunrise but before sunset
(c) The Assessing Officer’s action in entering the cyber café at 1 a.m. and in impounding books
of account and documents inspectedby him are not in order, since he can enter the cyber
café only after sunrise but before sunset and he does not have the powerto impound
books of account under section 133B
(d) The Assessing Officer’s action in entering the cyber café at 1 a.m. is in order but impounding
books of account and documents inspected by him is not in order, since he does not have
the power to impound books of account under section 133B

SETCOM & AAR

46. An application for advance ruling was made on 31.05.2020 in relation to a transaction proposed to
be undertaken by Mr. Andrew, a resident of Germany. On 07.07.2020, he decides to withdraw the
said application.
(a) Application cannot be withdrawn once filed
(b) Application can be withdrawn on 07.07.2020 only with special permission of Principal Chief
Commissioner
(c) Application cannot be withdrawn since 30 days from date of application have passed
(d) Application can be withdrawn on 07.07.2020 with permission of the AAR, if the
circumstances of the case so justify
47. An application for advance ruling has been filed on 01/09/2020 before authority for advance ruling.
Authority is bound to pronounce with ruling:
(a) Within 1 month of receipt of application
(b) Within 3 months of receipt of application
(c) Within 1 year of receipt of application
(d) Within 6 months of receipt of application

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