Penalty for Failure to Furnish the Equalisation Levy (EL) Statement [Section 172]

Here’s a detailed explanation of the penalty for failure to furnish the Equalisation Levy (EL) statement under Section 172 of the Finance Act, 2016:

1. Overview of Section 172

Section 172 imposes penalties for failing to file the annual Equalisation Levy statement (Form 1) as required under Section 167. This ensures compliance with reporting obligations for both:

• Assesseesdeducting EL (6% levy on specified services)
• E-commerce operatorsliable for EL (2% levy on digital transactions)

2. Penalty Provisions

A.  Basic Penalty

• ₹100 per dayof default, starting from the due date (June 30 of the next financial year) until compliance is achieved
• No maximum limit– penalty continues accumulating until the statement is filed

B.  Additional Consequences

1. 1. Prosecution Risk:
      • Willful failure to file may lead to:
        • Imprisonmentfrom 3 months up to 3 years
        • Fineas determined by the court
        • Bothimprisonment and fine in serious cases

1. 2. Processing Delays:
      • Late filings delay:
        • Refund processing
        • Intimation under Section 168
        • Rectification requests under Section 169

3. Key Compliance Requirements

4. Practical Examples

Case 1: Company fails to file Form 1 for FY 2023-24 by June 30, 2024

• Files on September 15, 2024 (77 days late)
• Penalty: 77 × ₹100 = ₹7,700

Case 2: E-commerce platform ignores filing completely

• After 1 year: ₹36,500 penalty + risk of prosecution

5. Mitigation Strategies

1. Voluntary Compliance:
   • File immediately upon realizing oversight
   • Pay accrued penalties promptly
2. Reasonable Cause Defense:
   • May avoid penalty if genuine reasons exist (e.g., natural disasters)
   • Requires submission of evidence to Assessing Officer
3. Professional Assistance:
   • Consult tax experts for:
     • Late filings
     • Dispute resolution
     • Appeals process

6. Recent Updates

• The 6% levy on online adsmay be abolished from April 2025
• 2% e-commerce levyremains in force
• All filing obligationscontinue for past periods

Key Takeaways

1. The penalty is ₹100/day with no upper limit
2. Willful default risks criminal prosecution
3. Timely filing avoids:
   • Mounting penalties
   • Legal complications
   • Processing delays