#THE EXPENDITURE-TAX ACT, 1987 
________ 

##ARRANGEMENT OF SECTIONS 
_________ 

SECTIONS 

1.  Short title, extent and commencement. 
2.  Definitions. 
3.  Application of the Act. 
4.  Charge of expenditure-tax. 
5.  Meaning of chargeable expenditure. 
6.  Tax authorities. 
7.  Collection and recovery of expenditure-tax. 
8.  Person responsible for collecting tax to furnish prescribed return. 
9.  Assessment. 
10.  Best judgment assessment. 
11.  Chargeable expenditure escaping assessment. 
12.  Rectification of mistake. 
13.  Time limit for completion of assessment and reassessment. 
14.  Interest on delayed payment of expenditure-tax. 
15.  Penalty for failure to collect or pay expenditure-tax. 
16.  Penalty for failure to furnish prescribed return. 
17.  Penalty for concealment of chargeable expenditure. 
18.  Penalty for failure to comply with notice. 
19.  Penalty not to be imposed in certain cases. 
20.  Notice of demand. 
21.  Revision of orders by the Commissioner. 
22.  Appeals to the Commissioner (Appeals). 
23.  Appeals to Appellate Tribunal. 
24.  Application of provisions of Income-tax Act. 
25.  Wilful attempt to evade tax, etc. 
26.  Failure to furnish prescribed returns. 
27.  False statement in verification, etc. 
28.  Abetment of false return, etc. 
29.  Certain offences to be non-cognizable. 
30.  Institution of proceedings and composition of offences. 
31.  Power to make rules. 
32.  Power to remove difficulties. 
33.  [Repealed.] 



#THE EXPENDITURE-TAX ACT, 1987 

##ACT NO. 35 OF 1987 

[14th September, 1987.] 

  An Act  to  provide  for  the  levy  of  a  tax  on  expenditure  incurred  in  certain  hotels [^1][or 
restaurants and for matters connected therewith or incidental thereto]. 

  BE it enacted by Parliament in the Thirty-eighth Year of the Republic India as follows:— 

1. **Short title, extent and commencement.**—(1) This Act may be called the Expenditure-tax Act, 1987. 

(2) It extends to the whole of India except the State of Jammu and Kashmir[^3]. 

(3) It  shall  come  into  force  on  such  date[^2] as  the  Central  Government  may,  by  notification  in  the 
Official Gazette, appoint. 

2. **Definitions.**—In this Act, unless the context otherwise requires,— 

(1) “assessee”  means  a  person  responsible  for  collecting  the  expenditure-tax  payable  under  the 
provisions of this Act; 

(2) “assessment  year”  means  the  period of twelve months commencing on the 1st day of April 
every year; 

(3) “Board”  means  the  Central  Board  of  Direct  Taxes  constituted  under  the  Central  Boards  of 
Revenue Act, 1963 (54 of 1963); 

(4) “chargeable expenditure” means the expenditure referred to in section 5; 

(5) “expenditure-tax” or “tax” means the tax chargeable under the provisions of this Act; 

(6) “hotel” includes a building or part of a building where residential accommodation is, by way 
of business, provided for a monetary consideration; 

(7) “Income-tax Act” means the Income-tax Act, 1961 (43 of 1961); 

(8) “person responsible for collecting” means a person who is required to collect tax under this 
Act or is required to pay any other sum of money under this Act and includes— 

  (a) every person in respect of whom any proceedings under this Act have been taken, and 

  (b) every person who is deemed to be an assessee-in-default under any provision of this Act; 

(9) “prescribed” means prescribed by rules made under this Act; 

[^1][(9A) “restaurant” means any premises, not being a restaurant situated in a hotel referred to in 
clause (1) of section 3, in which the business of sale of food or drink to the public is carried on and 
such premises, at the beginning of any month, are equipped with, or have access to, facilities for 
air-conditioning;] 

(10) “room  charges”  means  the  charges  for  a  unit  of  residential  accommodation  in  a  hotel  and 
includes the charges for— 

  (a) furniture, air-conditioner, refrigerator, radio, music, telephone, television, and 

  (b) such other services as are normally included by a hotel in room rent, 

  but does not include charges for food, drinks and any services other than those referred to in 
sub-clauses (a) and (b); 

[^1]. Ins. by Act 49 of 1991, s. 113 (w.e.f. 1-10-1991). 
[^2]. 1st November, 1987, vide notification No. S.O. 919(E), dated 14th October, 1987, see Gazette of India, Extraordinary, Part II, 
sec. 3(ii). 
[^3]. Vide notification No. S.O. 3912(E), dated 30th October, 2019, this Act is made applicable to the Union territory of Jammu and 
Kashmir and the Union territory of Ladakh. 



(11) all other words and expressions used herein but not defined and defined in the Income-tax 
Act shall have the meanings respectively assigned to them in that Act. 

1[3. Application of the Act.—This Act shall apply in relation to any chargeable expenditure— 

(1) 2[incurredbefore the 1st day of June, 2003 in a hotel] wherein the room charges for any unit of 
residential accommodation at the time of incurring of such expenditure are3[threethousand rupees or 
more per day] and where,— 

(a) a composite charge is payable in respect of such unit and food, the room charges included 

therein shall be determined in the prescribed manner; 

(b) (i) a composite charge is payable in respect of such unit, food, drinks and other services, 

or any of them, and the case is not covered by the provisions of sub-clause (a), or 

(ii)  it  appears  to  the  Assessing  Officer  that  the  charges  for  such  unit,  food,  drinks  or  other 
services  are  so  arranged  that  the  room  charges  are  understated  and  the  other  charges  are 
overstated,  

the Assessing Officer shall, for the purposes of this clause determine the room charges on such reasonable 
basis as he may deem fit; and 

(2) incurred in a restaurant 4[before the 1st day of June, 1992.] 
4. Charge of expenditure-tax.—Subject to the provisions of this Act, there shall be charged on and 

from— 

(a) the commencement of this Act5[but not after the 31st day of May, 2003], a tax at the rate of 

6[ten per cent.]of the chargeable expenditure incurred in a hotel referred to in clause (1) of section 3: 

Provided that nothing in this clause shall apply in the case of a hotel referred to in 7[clause (a) of 
sub-section (7) of section 80-IB] of the Income-tax Act during the period beginning on the 1st day of 
April, 1991 and ending on the 31st day of March, 2001: 

8[Provided  further  that  nothing  in  this  clause  shall  apply  in  the  case  of  a  hotel  referred  to  in 
9[clause (a) of sub-section (7) of section 80-IB] of the Income-tax Act, 1961 (43 of 1961) during the 
period beginning on the 1st day of April, 1998 and ending on the 31st day of March, 2008]. 

(b) the 1st day of October, 1991,  10[but not after the 31st day of May, 1992] a tax at the rate of 
fifteen  per  cent.  of  the  chargeable  expenditure  incurred  in  a  restaurant  referred  to  in  clause  (2)  of 
section 3. 
5. Meaning of Chargeable expenditure.—For the purposes of this Act, chargeable expenditure,— 

(1) in relation to a hotel referred to in clause (1) of section 3, means any expenditure incurred in, 

or payments made to, the hotel in connection with the provision of— 
(a) any accommodation, residential or otherwise; or 
11*   
(c) any accommodation in such hotel on hire or lease; or 
12*   
but does not include— 

* 

* 

* 

* 

* 

* 

* 

* 

(i) any expenditure which is incurred, or payment for which is made, in foreign exchange 

13[before the 1st day of October, 1992;] 

1. Subs. by Act 49 of 1991, s. 115, for sections 3 to 5 (w.e.f. 1-10-1991). 
2. Subs. by Act 32 of 2003, s. 102, for “incurred in a hotel” (w.e.f. 1-6-2003). 
3. Subs. by Act 20 of 2002, s. 115, for “two thousand rupees or more per day per individual” (w.e.f. 1-6-2002). 
4. Ins. by Act 18 of 1992, s. 105 (w.e.f 1-6-1992). 
5. Ins. by Act 32 of 2003, s. 103 (w.e.f. 1-6-2003). 
6. Subs. by Act 32 of 1994, s. 57, for “twenty per cent.” (w.e.f. 1-6-1994). 
7. Subs. by Act 27 of 1999, s. 98, for “clause (ii) of sub-section (5) of section 80-IA” (w.e.f. 1-4-2000). 
8. Ins. by Act 26 of 1997, s. 61 (w.e.f. 1-4-1998). 
9. Subs. by 27 of 1999, s. 98, for “clause (iia) or sub-section (5) of section 80-1A” (w.e.f. 1-4-2000). 
10. Subs.by Act 18 of 1992, s. 106, for “the commencement of this Act” (w.e.f. 1-6-1992). 
11. Sub-clause (b) omitted by Act 20 of 2002, s. 116 (w.e.f. 1-6-2002). 
12. Sub-clause (d) omitted by s. 116, ibid. (w.e.f. 1-6-2002).  
13. Ins. by Act 18 of 1992, s. 107 (w.e.f. 1-6-1992). 

3 

 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(ii) any expenditure incurred by persons within the purview of the Vienna Convention on 

Diplomatic Relations, 1961 or the Vienna Convention on Consular Relations, 1963; 

(iii) any expenditure incurred in any shop or in any office which is not owned or managed 

by the person who carries on the business of a hotel; 

(iv) any expenditure by way of any tax, including tax under this Act.  

Explanation.—For the purposes of this clause,— 

(a)  expenditure  incurred  or  any  payments  made  in  Indian  currency  obtained  by 
conversion  of  foreign  exchange  into  Indian  currency  shall  in  such  cases  and  in  such 
circumstances as may be prescribed be deemed to have been incurred or, as the case may be, 
made in foreign exchange; and 

(b)  “foreign  exchange”  and  “Indian  currency”  shall  have  the  meanings  respectively 
assigned to them in clauses (h) and (k) of section 2 of the Foreign Exchange Regulation Act, 
1973 (46 of 1973); 

(2) in relation to a restaurant referred to in clause (2) of section 3, means any expenditure incurred 
in,  or  payments  made  to,  a  restaurant  in  connection  with  the  provision  of  food  or  drink  by  the 
restaurant, whether at the restaurant or outside, or by any other person in the restaurant, but does not 
include any expenditure referred to in sub-clauses (ii) and (iv) of clause (1).]  
6.Tax authorities.—1[(1) Every Director General of Income-tax, Chief Commissioner of Income-tax, 
Income-tax 
Director 
(Appeals) 2[Additional  Director  of  Income-tax,3[Joint  Director  of  Income-tax,  Joint  Commissioner  of 
Income-tax]  Deputy  Director]  of  Income  tax,  Deputy  Commissioner  of  Income-tax,  Assistant  Director 
Income-tax,  Assistant  Commissioner  of  Income-tax,  Income-tax  Officer,  Tax  Recovery  Officer  and 
Inspector of Income-tax shall have the like powers and perform the like functions under this Act as he has 
and  performs  under the  Income-tax  Act,  and  for the exercise  of  his  powers and  the  performance  of his 
functions, his jurisdiction under this Act shall be the same as he has under the Income-tax Act.] 

Income-tax,  Commissioner 

Income-tax,  Commissioner 

of 

of 

of 

(2) All officers and persons employed in the execution of this Act shall observe and follow the orders, 

instructions and directions of the Board: 

Provided that no such orders, instructions or directions shall be issued— 

(a)  so  as  to  require  any  tax  authority  to  make  a  particular  assessment  or  to  dispose  of  a 

particular case in a particular manner; or 

(b)  so  as  to  interfere  with  the  discretion  of  the  4[Chief  Commissioner  or  Commissioner] 

(Appeals) in the exercise of his appellate functions. 
(3) Every 5[Assessing Officer] employed in the execution of this Act shall observe and follow the 
orders, instructions and directions issued for his guidance by the 6[Director General or Director or by 
the  Chief  Commissioner  or  Commissioner]  or  by  the 7[Additional  Commissioner  of  Income-tax 
or] 8[Joint Commissioner] within whose jurisdiction he performs his functions. 
9[7.  Collection  and  recovery  of  expenditure-tax.—(1)  Where  any  chargeable  expenditure  is 

incurred in a hotel referred to in clause (1) of section 3,— 

(a) if such expenditure relates to any of the services, specified in sub-clauses (a) to (d) of clause 

(1) of section 5, provided by the hotel, the person who carries on the business of such hotel; and 

(b) if such expenditure relates to any of the services, specified in sub-clause (b) or sub-clause (d) 

of clause (1) of section 5, provided by the other person referred to therein, such other person,  

1. Subs. by Act 26 of 1988, s. 73, for sub-section (1) (w.e.f. 1-4-1988). 
2. Subs. by Act 32 of 1994, s. 58, for “Deputy Director” (w.e.f. 1-6-1994). 
3. Subs. by Act 21 of 1998, s. 82, for “Additional Commissioner of Income-Tax” (w.e.f. 1-10-1998). 
4. Subs. by Act 26 of 1988, s. 72, for “Commissioner” (w.e.f. 1-4-1988). 
5. Subs. by, s. 72, ibid., for “Income-tax Officer” (w.e.f. 1-4-1988). 
6. Subs. by Act 26 of 1988, s. 73, for “Director of Inspection or by the Commissioner” (w.e.f 1-4-1988). 
7. Subs. by Act 32 of 1994, s. 58, for “Deputy Commissioner” (w.e.f. 1-6-1994). 
8. Subs. by Act 21 of 1998, s. 82, for “Deputy Commissioner” (w.e.f 1-10-1998). 
9. Subs. by Act 49 of 1991, s. 116, for section 7 (w.e.f. 1-10-1991). 

4 

 
                                                           
shall collect the expenditure-tax at the rate specified in clause (a) of section 4. 

(2) Where any chargeable expenditure is incurred in a restaurant referred to in clause (2) of section 3 
1[before  the  1st  day  of  June,  1992]  in  relation  to  any  services  specified  in  clause  (2)  of  section  5  and 
where such services are— 

(a) provided by the restaurant, the person who carries on the business of such restaurant; and  

(b) provided by the other person, such other person,  

shall collect the expenditure-tax at the rate specified in clause (b) of section 4. 

(3) The tax collected during any calendar month in accordance with the provisions of sub-sections (1) 
and(2)  shall  be  paid  to  the  credit  of  the  Central  Government  by  the  10th  of  the  month  immediately 
following the said calendar month. 

(4) Any person responsible for collecting the tax, who fails to collect the tax in accordance with the 
provisions of sub-section (1) or sub-section (2) shall, notwithstanding such failure, be liable to pay the tax 
to the credit of the Central Government in accordance with the provisions of sub-section (3).] 

8.  Person  responsible  for  collecting  tax  to  furnish  prescribed  return.—(1)  Every  person 
responsible for collecting the tax shall before the expiry of four months from the 31st day of March in 
each year, furnish or cause to be furnished to the 2[Assessing Officer] in the prescribed form and verified 
in the prescribed manner, a return in respect of the immediately preceding financial year showing— 

(a) the aggregate of the payments received in respect of chargeable expenditure; 

(b) the amount of the tax collected; 

(c) the amount of the tax paid to the credit of the Central Government; and 

(d) such other particulars as may be prescribed. 

(2)  In  the  case  of  any  person  who,  in  the  opinion  of  the  2[Assessing  Officer],  is  responsible  for 
collecting tax under this Act and who has not furnished a return under sub-section (1), the    2[Assessing 
Officer] may, before the expiry of the financial year in which the return is to be furnished, issue a notice 
to him and serve the same upon him, requiring him to furnish within thirty days from the date of service 
of  the  notice  the  return  in the  prescribed  form  and  verified  in  the  prescribed  manner  setting  forth  such 
other particulars as may be prescribed. 

(3)  Any  person  responsible  for  collecting  the  tax  who  has  not  furnished  the  return  within  the  time 
allowed  under  sub-section  (1)  or  sub-section  (2),  or  having  furnished  a  return  under  sub-section  (1)  or 
sub-section  (2)  discovers  any  omission  or  wrong  statement  therein,  may  furnish  a  return  or  a  revised 
return, as the case may be, at any time before the assessment is made.  

9.  Assessment.—(1)  For  the  purpose  of  making  an  assessment  under  this  Act,  the  2[Assessing 
Officer] may serve on any person who has furnished a return under section 8 or upon whom a notice has 
been  served  under  sub-section  (2)  of  section  8  (whether  a  return  has  been  furnished  or  not)  a  notice 
requiring  him  on  a  date  therein  to  be  specified,  to  produce  or  cause  to  be  produced  such  accounts  or 
documents  or  other  evidence  as  the  2[Assessing  Officer]  may  require  for  the  purposes  of  this  Act  and 
may,  from  time  to  time,  serve  further  notices  requiring  the  production  of  such  further  accounts  or 
documents or other evidence as he may require. 

(2) The 2[Assessing Officer], after considering such accounts, documents or other evidence, if any, as 
he  has  obtained  under  sub-section  (1)  and  after  taking  into  account  any  relevant  material  which  he has 
gathered, shall, by an order in writing, assess the chargeable expenditure and the amount of tax payable 
on the basis of such assessment. 

1. Ins. by Act 18 of 1992, s. 108 (w.e.f. 1-6-1992). 
2. Subs. by Act 26 of 1988, s. 72, for “Income-tax Officer” (w.e.f. 1-4-1988). 

5 

 
                                                           
10. Best judgment assessment.—If— 

(a)  any  person  fails  to  make  the  return  required  by  any  notice  given  under  sub-section  (2)  of 

section 8 and has not made a return or a revised return under sub-section (3) of that section, or 

(b) any person having made a return fails to comply with all the terms of a notice issued under 

sub-section (1) of section 9, or  

(c)  the1[Assessing  Officer]  is  not  satisfied  with  the  correctness  or  the  completeness  of  the 

accounts of the assessee,  

the  1[Assessing Officer], after taking into account all the relevant material which he has gathered, shall, 
by an order in writing, make the assessment of the chargeable expenditure to the best of his judgment and 
determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment. 

11. Chargeable expenditure escaping assessment.—If— 

(a) the 1[Assessing Officer] has reason to believe that by reason of omission or failure on the part 
of the assessee to make a return under section 8 for any assessment year or to disclose wholly and 
truly all material facts necessary for his assessment for any assessment year, chargeable expenditure 
for that year has escaped assessment or has been under-assessed, or 

(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the 
part  of  the  assessee,  the  1[Assessing  Officer]  has,in  consequence  of  information  in  his  possession, 
reason  to  believe  that  chargeable  expenditure  assessable  in  any  assessment  year  has  escaped 
assessment or has been under-assessed,  

he may, in cases falling under clause (a), at any time, and in cases falling under clause (b), at any time 
within four years from the end of that assessment year, serve on the assessee a notice containing all or any 
of  the  requirements  which  may  be  included  in  a  notice  under  section  8  and  may  proceed  to  assess  or 
reassess the chargeable expenditure, and the provisions of this Act shall, so far as may be, apply, as if the 
notice was a notice issued under that section. 

12. Rectification of mistake.—(1) With a view to rectifying any mistake apparent from the record, 
the tax  authority  referred to  in section  6  which  passed  any  order  under  the  provisions  of this  Act  may, 
within four years of the date on which such order was passed, amend the order. 

(2)  Where  any  matter  has  been  considered  and  decided  in  any  proceeding  by  way  of  appeal  or 
revision  relating  to  an  order  referred  to  in  sub-section  (1),  the  authority  passing  such  order  may, 
notwithstanding  anything  contained in  any  law  for the  time  being  in  force,  amend  the  order  under that 
sub-section in relation to any matter other than the matter which has been so considered and decided. 

(3) Subject to the other provisions of this section, the authority concerned— 

(a) may make an amendment under sub-section (1) of its own motion, and 

(b) shall make such amendment if any mistake is brought to its notice,— 

(i) by the assessee; or 
(ii) where the authority concerned is the 2[Chief Commissioner or Commissioner] (Appeals), 

by the 1[Assessing Officer]. 

(4)  An  amendment,  which  has  the  effect  of  enhancing  an  assessment  or  reducing  a  refund  or 
otherwise increasing the liability of the assessee, shall not be made under this section unless the authority 
concerned  has  given  notice  to  the  assessee  of  its  intention  so  to  do  and  has  allowed  the  assessee  a 
reasonable opportunity of being heard. 

(5) Where an amendment is made under this section, an order shall be passed in writing by the tax 

authority concerned. 

(6) Subject to the other provisions of this Act, where any such amendment has the effect of reducing 

the assessment, the1[Assessing Officer] shall make any refund which may be due to such assessee. 

1. Subs. by Act 26 of 1988, s. 72, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Subs. by s. 72, ibid., for “Commissioner” (w.e.f. 1-4-1988). 

6 

 
                                                           
(7)  Where  any  such  amendment  has  the  effect  of  enhancing  the  assessment  or  reducing  the  refund 
already made, the  1[Assessing Officer] shall serve on the assessee a notice of demand in the prescribed 
form specifying the sum payable and such notice of demand shall be deemed to be issued under section 
20 and the provisions of this Act shall apply accordingly. 

13. Time limit for completion of assessment and reassessment.—(1) No order of assessment shall 
be made under section 9 or section 10 at any time after the expiration of a period of four years from the 
end of the assessment year in which the chargeable expenditure was first assessable, or one year from the 
date of the filing of the return or revised return under section 8, whichever is later. 
(2) No order of assessment or reassessment shall be made under section 11,— 

(a)  where  the  assessment  or  reassessment  is  to  be  made  in  a  case  falling  within  clause  (a)  of 
section 11 for which a notice has been served upon the assessee, at any time after the expiration of a 
period of four years from the end of the assessment year in which the said notice was served; 

(b)  where  the  assessment  or  reassessment  is  to  be  made  in  a  case  falling  within  clause  (b)  of 

section 11, for which a notice has been served, after the expiration of a period of— 

(i) four years from the end of the assessment year in which the chargeable expenditure was 

first assessable, or 

(ii) one year from the date of service of such notice,  

whichever is later. 

(3) Notwithstanding anything contained in sub-sections (1) and (2), an order of fresh assessment in 
pursuance  of  an  order  passed  under  section  21,  section  22  or  section  23,  setting  aside  or  cancelling  an 
assessment, may be made at any time before the expiry of four years from the end of the financial year in 
which the order under section 21 is passed by  2[the Commissioner, or the order is received by the Chief 
Commissioner or Commissioner, as the case may be, under section 22 or section 23] shall be substituted.  
(4) The provisions of sub-sections (1) and (2) shall not apply to the assessment or reassessment made 
in consequence of, or to give effect to, any finding or direction contained in an order under section 21, 
section 22, section 23 3[or any order of the National Tax Tribunal or of a High Court] or Supreme Court 
in a proceeding by way of reference or appeal under this Act or any order of any court in a proceeding 
otherwise than by way of an appeal or reference under this Act and such assessment or reassessment may, 
subject to the provisions of sub-section (3), be completed at any time. 

Explanation.—In  computing  the  period  of  limitation  for  the  purposes  of  this  section,  the  period 
during  which  the  assessment  proceeding  is  stayed  by  an  order  or  injunction  of  any  court  shall  be 
excluded. 

14.  Interest  on  delayed  payment  of  expenditure-tax.—Every  person  responsible  for  collecting 
expenditure-tax and paying it to the credit of the Central Government in accordance with the provisions of 
section 7, who fails to credit the tax to the account of the Central Government within the period specified 
in that section, shall pay simple interest at the rate of 4[one per cent.] for every month or part of a month 
by which such crediting of tax is delayed.  

5[15. Penalty for failure to collect or pay expenditure-tax.—Any person responsible for collecting 
expenditure-tax  in  accordance  with  the  provisions  of  sub-section  (1)  or  sub-section  (2)  of  section  7,  
who— 

(a) fails to collect such tax; or 

(b)  having  collected  the  tax,  fails  to  pay  such  tax  to  the  credit  of  the  Central  Government  in 

accordance with the provisions of sub-section (3) of that section,  

1. Subs. by Act 26 of 1988, s. 72, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Subs. by s. 74, ibid.,for “the Commissioner, or, as the case may be, the order under section 22 or section 23 is received by the 

Commissioner” (w.e.f. 1-4-1998). 

3. Subs. by Act 49 of 2005, s. 30 and the Schedule, for “or any order of a High Court” (w.e.f. 28-12-2005). 
4. Subs. by Act 54 of 2003, s. 22, for “one and one-fourth per cent.” (w.e.f. 8-9-2003). 
5. Subs. by Act 49 of 1991, s. 117, for section 15 (w.e.f. 1-10-1991). 

7 

 
                                                           
shall pay,— 

(i)  in  the  case  referred  to  in  clause  (a),  in  addition  to  paying  tax  in  accordance  with  the 
provisions of sub-section (4) of that section, by way of penalty, a sum equal to the amount of tax 
that he failed to collect; and 

(ii) in  the  case referred to in  clause  (b), in  addition to  paying  interest in  accordance  with the 
provisions of section 14, by way of penalty, a sum which shall not be less than one hundred rupees 
but which may extend to two hundred rupees for every day during which the failure continues, so, 
however, that the penalty under this clause shall not exceed the amount of tax that he failed to pay.] 

16. Penalty for failure to furnish prescribed return.—If a person fails to furnish in due time the 
return  which  he is  required  to  furnish  under  sub-section  (1)  of section  8  or  by  notice  given  under sub-
section (2) of that section, he shall pay, by way of penalty, a sum which shall not be less than one hundred 
rupees, but which may extend to two hundred rupees for every day during which the failure continues. 

17. Penalty for concealment of chargeable expenditure.—If the 1[Assesing Officer] or the 2[Chief 
Commissioner or Commissioner] (Appeals) in the course of any proceedings under this Act is satisfied 
that  any  person  has  concealed  particulars  of  chargeable  expenditure  or  has  furnished  inaccurate 
particulars of such chargeable expenditure, he may direct that such person shall pay by way of penalty, in 
addition to any expenditure-tax payable by him, a sum which shall not be less than, but which shall not 
exceed  twice,  the  amount  of  tax  sought  to  be  evaded  by  reason  of  concealment  of  particulars  of 
chargeable expenditure or the furnishing of inaccurate particulars of such chargeable expenditure: 

Provided that if the amount of chargeable expenditure (as determined by the 1[Assessing Officer] on 
assessment)  in  respect  of  which  particulars  have  been  concealed  or  inaccurate  particulars  have  been 
furnished  exceeds  a  sum  of  twenty-five  thousand  rupees,  the  1[Assessing  Officer]  shall  not  issue  any 
direction  for  payment  by  way  of  penalty  without  the  previous  approval  of  the  3[Additional 
Commissioneror, as the case may be, of the Deputy Commissioner]. 

18.  Penalty  for  failure  to  comply  with  notice.—If  the  1[Assessing  Officer]  in  the  course  of  any 
proceedings  under  this  Act  is  satisfied  that  any  person  has  failed  to  comply  with  a  notice  under  sub-
section (1) of section 9, he may direct that such person shall pay, by way of penalty, in addition to any tax 
payable by him, a sum which shall not be less than ten per cent. but which shall not exceed fifty per cent. 
of the amount of the tax, if any, which would have been avoided if the chargeable expenditure returned by 
such person had been accepted as the correct chargeable expenditure. 

19.  Penalty  not  to  be  imposed  in  certain  cases.—Notwithstanding  anything  contained  in  the 
provisions  of  section  15,  section  16,  section  17  or  section  18,  no  penalty  shall  be  imposable  on  the 
assessee for any failure referred to in the said provisions if he proves that there was reasonable cause for 
the said failure. 

20. Notice of demand.—When any tax, interest, penalty or any other sum is payable under this Act, 
the  1[Assessing  Officer]  shall  serve  upon  the  assessee  a  notice  of  demand  in  the  prescribed  form, 
specifying the sum so payable and the amount of chargeable expenditure in relation to which such sum is 
payable. 

21.  Revision  of  orders  by  the  Commissioner.—(1)  The  Commissioner  may,  either  of  his  own 
motion or on application by the assessee for revision, call for the record of a proceeding under this Act 
which has been taken by the 1[Assessing Officer] subordinate to him and may make such enquiry or cause 
such  enquiry  to  be  made  and,  subject  to  the  provisions  of  this  Act,  may  pass  such  order  thereon  as  he 
thinks fit. 

(2) No order which is prejudicial to the assessee shall be passed under this section unless the assessee 

has been given an opportunity of being heard. 

1. Subs. by Act 26 of 1988, s. 72, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Subs. by s. 72, ibid., for “Commissioner” (w.e.f. 1-4-1988). 
3. Subs. by Act 32 of 1994, s. 59, for “Deputy Commissioner” (w.e.f. 1-6-1994). 

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(3) No order under this section shall be passed by the Commissioner, if an appeal against the notice of 
demand  issued  by  the  1[Assessing  Officer]  under  section  20  is  pending  before  the  Commissioner 
(Appeals). 

(4)  No  order  under  this  section  shall  be  passed  after  the  expiry  of  two  years  from  the  end  of  the 

financial year in which the order sought to be reviewed has been passed. 

2[(6) On every application by an assessee for revision under this sub-section, made on or after the 1st 
day of October, 1998, an order shall be passed within one year from the end of the financial year in which 
such application is made by the assessee for revision. 

Explanation.—In  computing  the  period  of  limitation  for  the  purposes  of  this  sub-section,  the  time 
taken  in  giving  an  opportunity  to  the  assessee  to  be  re-heard  under  the  proviso  to  section  24  and  any 
period during which any proceeding under this section is stayed by an order or injunction of any court 
shall be excluded. 

(7) Notwithstanding anything contained in sub-section (6), an order in revision under that sub-section 
may be passed at any time in consequence of or to give effect to any finding or direction contained in an 
order of the Appellate Tribunal,3[the National Tax Tribunal,] the High Court or the Supreme Court.] 

22.  Appeals  to  the  Commissioner  (Appeals).—(1)  Any  person  objecting  to  the  amount  of 
expenditure-tax  for  which  he  is  assessed  by  the  1[Assessing  Officer],  or  denying  his  liability  to  be 
assessed  under  this  Act,  or  objecting  to  an  order  levying  penalty  under  this  Act,  may  appeal  to  the 
Commissioner (Appeals). 

4[(2) Every appeal shall be in the prescribed form and shall be verified in the prescribed mannerand in 
respect of appeals filed on or after the 1st day of October, 1998, shall be accompanied by a fee of two 
hundred and fifty rupees.] 

(3) An appeal shall be presented within thirty days of the receipt of the notice of demand relating to 

tax, interest or penalty under this Act: 

Provided that the Commissioner (Appeals) may admit an appeal after the expiration of the said period 

if he is satisfied that the appellant had sufficient cause for not presenting it within that period. 

(4) The Commissioner (Appeals) shall hear and determine the appeal and, subject to the provisions of 
this Act, pass such orders as he thinks fit and such orders may include an order enhancing the assessment 
or penalty. 

5[(4A)  In  every  appeal,  the  Commissioner  (Appeals),  where  it  is  possible,  may  hear  and  determine 
such appeal within a period of one year from the end of the financial year in which such appeal is filed 
under sub-section (1)]. 

Provided  that  an  order  enhancing  the  assessment  or  penalty  shall  not  be  made  unless  the  person 

affected thereby has been given a reasonable opportunity of showing cause against such enhancement. 

(5)  The  procedure  to  be  adopted  in  the  hearing  and  determination  of  the  appeals  shall,  with  any 

necessary modification, be in accordance with the procedure applicable in relation to income-tax. 

23.  Appeals  to  Appellate  Tribunal.—(1)  Any  assessee  aggrieved  by  an  order  passed  by  a 
Commissioner under section 21, or an order passed by a Commissioner (Appeals) under any provision of 
this Act, may appeal to the Appellate Tribunal against such order. 

1. Subs. by Act 26 of 1988, s. 72, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Ins. by Act 21 of 1998, s. 83 (w.e.f. 1-10-1998). 
3. Ins. by Act 49 of 2005, s. 30 and the Schedule (w.e.f. 20-12-2005). 
4. Subs. by Act 21 of 1998, s. 84, for sub-section (2) (w.e..f. 1-10-1998). 
5. Subs. by Act 27 of 1999, s. 99, for sub-section (4) (w.e.f. 1-6-1999). 

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(2) The Commissioner may, if he objects to any order passed by the Commissioner (Appeals) under 
any provision of this Act, direct the  1[Assessing Officer] to appeal to the Appellate Tribunal against the 
order.  

(3) Every appeal under sub-section (1) or sub-section (2) shall be filed within sixty days of the date 
on  which  the  order  sought  to  be  appealed  against  is  communicated  to  the  assessee  or  to  the 
Commissioner, as the case may be. 

(4) The 1[Assessing Officer] or the assessee, as the case may be, on receipt of a notice that an appeal 
against the order of the Commissioner (Appeals) has been preferred under sub-section (1) orsub-section 
(2) by the other party may, notwithstanding that he may not have appealed against such order or any part 
thereof, within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in 
the  prescribed  manner,  against  any  part  of  the  order  of  the  Commissioner  (Appeals),  and  such 
memorandum shall be disposed of by the Appellate  Tribunal as if it were an appeal presented within the 
time specified in sub-section (3). 

(5)  The  Appellate  Tribunal  may  admit  an  appeal  or  permit  the  filing  of  a  memorandum  of  cross-
objections after the expiry of the relevant period referred to in sub-section (3) or sub-section (4), if it is 
satisfied that there was sufficient cause for not presenting it within that period. 

(6) An appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the 
prescribed  manner  and  shall,  except  in  the  case  of  an  appeal  referred  to  in  sub-section  (2)  or  a 
memorandum  of  cross-objections  referred  to  in  sub-section  (4),  be  accompanied  by  2[a  fee  of  one 
thousand rupees in the case of appeals filed on or after the 1st day of October, 1998.] 

(7)  Subject  to  the  provisions  of  this  Act,  in  hearing  and  making  an  order  on  any  appeal  under  this 
section,  the  Appellate  Tribunal  shall  exercise  the  same  powers  and  follow  the  same  procedure  as  it 
exercises and follows in hearing and making an order on any appeal under the Income-tax Act. 

24.  Application  of  provisions  of  Income-tax  Act.—The  provisions  of  the  following  sections  and 
Schedules  of  the  Income-tax  Act  and  theIncome-tax  (Certificate  Proceedings)  Rules,  1962,  as  in  force 
from time to time, shall apply with necessary modifications as if the said provisions and the rules referred 
to expenditure-tax instead of to income-tax:— 

3[2(44), 118, 120, 129, 131 to 136 (both inclusive)] 138,  4[139A, 140, 144A, 145], 159 to 163 (both 
inclusive),  166,  167,  170,  171,  173  to  179  (both  inclusive),  187,  188,  5[188A]  189,  220  to  227  (both 
inclusive), 229,  6*** 232, 237 to 245 (both inclusive), 254 to 262 (both inclusive), 265, 266, 268, 269, 
278B, 278C, 278D, 278E,  5[279B], 281, 281B, 282, 283, 284, 287, 288, 288A, 288B, 289 to 293 (both 
inclusive), the Second Schedule and the Third Schedule:  

Provided  that  references  in  the  said  provisions  and  rules  to  the  “assessee”  shall  be  construed  as 

references to an assessee as defined in this Act. 

25.  Wilful  attempt  to  evade  tax,  etc.—If  a  person  wilfuly  attempts  in  any  manner  whatsoever  to 
evade collection or payment of any tax, penalty or interest chargeable or impossible under this Act, or to 
understate  the  aggregate  of  the  chargeable  expenditure,  he  shall,  without  prejudice  to  any  penalty  that 
may  be  imposable  on  him  under  any  other  provision  of  this  Act,  be  punishable  with  rigorous 
imprisonment for a term which shall not be less than three months but which may extend to seven years 
and with fine. 

1. Subs. by Act 26 of 1988, s. 72, for “Income-tax Officer” (w.e.f. 1-4-1988).  
2. Subs. by Act 21 of 1998, s. 85, for “a fee of two hundred rupees” (w.e.f. 1-10-1998). 
3 Subs. by Act 26 of 1988, s. 75, for “2(43B) and (44), 118,125,125A, 128 to 136 (both inclusive )” (w.e.f. 1-4-1988). 
4. Subs. by Act 49 of 1991, s. 118, for “140, 144A”  (w.e.f. 1-10-1991). 
5. Ins. by s. 118, ibid. (w.e.f. 1-10-1991). 
6. The figures “231,” omitted by Act 26 of 1988, s. 75 (w.e.f 1-4-1988).  

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Explanation.—For the purposes of this section, a wilful attempt to evade collection or payment of any 

tax, penalty or interest chargeable or imposable under this Act shall include a case where any person— 

(i)  has  in  his  possession  or  control  any  books  of  account  or  other  documents  (being  books  of 
account  or  other  documents  relevant  to  any  proceeding  under  this  Act)  containing  a  false  entry  or 
statement; or 

(ii) makes or causes to be made any false entry or statement in such books of account or other 

documents; or 

(iii)  wilfully  omits  or  causes  to  be  omitted  any  relevant  entry  or  statement  in  such  books  of 

account or other documents; or  

(iv) causes any other circumstances to exist which will have the effect of enabling such person to 

evade collection or payment of any tax, penalty or interest chargeable or imposable under this Act. 

26. Failure to furnish prescribed returns.—If a person fails to furnish in due time the return which 
he is required to furnish under sub-section (1) of section 8 or by a notice given under sub-section (2) of 
that  section,  he  shall,  without  prejudice  to  any  penalty  that  may  be  imposable  on  him  under  any  other 
provision of this Act, be punishable with rigorous imprisonment for a term which shall not be less than 
three months but which may extend to seven years and with fine. 

27.  False  statement  in  verification,  etc.—If  a  person  makes  a  statement  in  any  verification  under 
this Act or any rule made thereunder, or delivers an account or statement which is false, and which he 
either knows or believes to be false, or does not believe to be true, he shall be punishable with rigorous 
imprisonment for a term which shall not be less than three months but which may extend to seven years 
and with fine. 

28.  Abetment  of false return,  etc.—If  a  person abets  or  induces  in  any  manner  another  person  to 
make and deliver an account or a statement or declaration relating to any chargeable expenditure which is 
false and which he either knows to be false or does not believe to be true or to commit an offence under 
section  25,  he  shall  be  punishable  with  rigorous  imprisonment  for  a  term  which  shall  not  be  less  than 
three months but which may extend to seven years and with fine. 

29.  Certain  offences  to  be  non-cognizable.—Notwithstanding  anything  contained  in  the  Code  of 
Criminal Procedure, 1973 (2 of 1974), an offence punishable under section 25 or section 26 or section 27 
or section 28 shall be deemed to be non-cognizable within the meaning of that Code. 

30. Institution of proceedings and composition of offences.—(1) A person shall not be proceeded 
against  for  any  offence  under  section  25  or  section  26  or  section  27  or  section  28,  except  with  the 
previous sanction of the 1[Chief Commissioner or Commissioner:] 

Provided  that  no  such  sanction  shall  be  required  where  the  complainant  before  the  court  is  a 

Commissioner (Appeals). 

(2)  The  1[Chief  Commissioner  or  Commissioner]  may,  either  before  or  after  the  institution  of 
proceedings, compound any offence punishable under section 25 or section 26 or section 27 or section 28. 
31. Power to make rules.—(1) The Board may, subject to the control of the Central Government, by 

notification in the Official Gazette, make rules for carrying out the provisions of this Act. 

(2)  In  particular,  and  without  prejudice  to  the  generality  of  the  foregoing  power,  such  rules  may 

provide for all or any of the following matters, namely:— 

(a) the manner in which the room charges may be determined under 2[sub-clause (a) of clause (1) 
of section 3] in cases where composite charges are payable in respect of residential accommodation 
and food; 

1. Subs. by Act 26 of 1988, s. 72, for “Commissioner” (w.e.f. 1-4-1988). 
2. Subs. by Act 49 of 1991, s. 119, for “sub-section (2) of section 3” (w.e.f. 1-10-1991). 

11 

 
 
                                                           
(b) the cases and the circumstances in which payments made in Indian, currency by conversion of 
foreign exchange into Indian currency shall be deemed to have been made in foreign exchange for the 
purposes of clause (a) of the Explanation to 1[clause (1) of section 5.]  

(c) the form in which returns under section 8 may be furnished, the manner in which they may be 

verified and the other particulars which a form may contain; 

(d) the form in which a notice of demand may be served on the assessee under sub-section (7) of 

section 12; 

(e) the form in which appeals under section 22 or under sub-section (6) of section 23 may be filed 

and the manner in which they may be verified; 

(f) the manner in which a memorandum of cross-objections under sub-section (4) of section 23 

may be verified; 

(g) any other matter which by this Act is to be or may be prescribed. 

(3)  The  power  to  make  rules  conferred  by  this  section  shall  on  the  first  occasion  of  the  exercise 
thereof include the power to give retrospective effect to the rules or any of them from a date not earlier 
than the date of commencement of this Act. 

(4) The Central Government shall cause every rule made under this section to be laid, as soon as may 
be after it is made, before each House of Parliament, while it is in session for a total period of thirty days 
which may be comprised in one session or in two or more successive sessions, and if, before the expiry of 
the session immediately following the session or the successive sessions aforesaid, both Houses agree in 
making any modification in the rule or both Houses agree that the rule should not be made, the rule shall 
thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that 
any such modification or annulment shall be without prejudice to the validity of anything previously done 
under that rule. 

32. Power to remove difficulties.—If any difficulty arises in giving effect to the provisions of this 
Act, the Central Government may, by order, not inconsistent with the provisions of this Act, remove the 
difficulty: 

Provided  that  no  such  order  shall  be  made  after  the  expiry  of  a  period  of  two  years  from  the 

commencement of this Act. 

33.[Consequential  amendments.]—Rep.  by  Repealing  and  Amending  Act,  2001  (30  of  2001),  s.  2 

andthe First Schedule (w.e.f. 3-9-2001). 

1. Subs. by Act 49 of 1991. s. 119, for “section 5” (w.e.f. 1-10-1991). 

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