Section 271J — Penalty for Furnishing Incorrect Information in Reports or Certificates (Accountants, Merchant Bankers, Registered Valuers)
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live. A penalty of Rs. 10,000 for each incorrect report or certificate, levied on an accountant, merchant banker or registered valuer who furnishes incorrect information in any report or certificate under the Act/Rules. Subject to reasonable cause under section 273B.
Finance Act, 2026: No amendment by the Finance Act, 2026.
Mechanism: An accountant/merchant banker/registered valuer furnishes incorrect information in a report or certificate under the Act/Rules → penalty of Rs. 10,000 for each such report/certificate → unless reasonable cause is shown under section 273B.
Litigation profile: Lightly litigated so far, but professionally sensitive. The key issues are what constitutes "incorrect information" (as opposed to a bona fide professional opinion or a matter of estimate/judgment), and the reasonable-cause defence.
A. COMMENTARY
A penalty on the professional, not the assessee
Section 271J is unusual: it penalises the professional — the chartered accountant (as defined "accountant"), merchant banker, or registered valuer — for furnishing incorrect information in a report or certificate, rather than the taxpayer. It was introduced to improve the reliability of the certifications on which the Department relies (audit reports, valuation reports, certificates).
"Incorrect information" versus bona fide professional judgment
The provision must be read narrowly so as not to penalise honest professional opinion. "Incorrect information" connotes a factual statement that is wrong, not a difference of professional judgment, an estimate within a permissible range, or a legal view later found untenable. A valuation or audit conclusion reached bona fide on disclosed facts and accepted methodology is not "incorrect information"; otherwise every rejected professional opinion would attract penalty. The CBDT, while introducing the section, indicated it targets demonstrably incorrect information, and the reasonable-cause shield in section 273B protects bona fide professional work.
Reasonable cause and natural justice
Being within section 273B, the penalty yields to reasonable cause. The professional is entitled to a section 274 opportunity (a show-cause notice — now expressly required from 1-3-2026 by the Finance Act, 2026 amendment to section 274) and to demonstrate that the information was furnished bona fide on the basis available.
B. STATUTORY TEXT (verbatim)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025; Finance Act, 2026 changes are noted above.
Penalty for furnishing incorrect information in reports or certificates.
271J. Without prejudice to the provisions of this Act, where the Assessing Officer or the Joint
Commissioner (Appeals) or the Commissioner (Appeals), in the course of any proceedings under this Act,
finds that an accountant or a merchant banker or a registered valuer has furnished incorrect information in
any report or certificate furnished under any provision of this Act or the rules made thereunder, the
Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) may direct that
such accountant or merchant banker or registered valuer, as the case may be, shall pay, by way of penalty, a
sum of ten thousand rupees for each such report or certificate.
Explanation.—For the purposes of this section,—
(a) "accountant" means an accountant referred to in the Explanation below sub-section (2) of section
288;
(b) "merchant banker" means Category I merchant banker registered with the Securities and Exchange
Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992
(15 of 1992);
(c) "registered valuer" means a person defined in clause (oaa) of section 2 of the Wealth-tax Act, 1957
(27 of 1957).
C. AUTHORITIES
Direct authority is still developing; the candour rule applies. The principles below reflect the narrow construction required to preserve bona fide professional opinion and the reasonable-cause shield.
1. Narrow construction — bona fide opinion is not "incorrect information"
Principle — fact wrong, not judgment disputed
Proposition "Incorrect information" means information that is factually wrong; a bona fide professional opinion, an estimate within a defensible range, or a legal view later rejected is not "incorrect information", and section 271J is not attracted.
Use The core defence protecting honest professional certification from penalty.
Principle — disclosed basis and accepted methodology
Proposition Where the report/certificate is based on disclosed facts and accepted methodology, and the professional acted in good faith, no penalty lies; the provision is not a tool to penalise rejected professional judgment.
Use Supports valuers and auditors whose conclusions are merely disagreed with.
2. Reasonable cause and procedure
Hindustan Steel Ltd v. State of Orissa (1972) 83 ITR 26 (SC)
Holding Penalty is not to be imposed for a technical/bona fide default; discretion is to be exercised judicially.
Use Applied to protect bona fide professional work under section 273B.
Principle — show-cause and opportunity under section 274
Proposition The professional must be given a reasonable opportunity of being heard under section 274 (and, from 1-3-2026, by way of a show-cause notice to that effect) before any section 271J penalty is imposed.
Use The procedural safeguard for the certifying professional.
Prepared for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the official Act; case-law holdings are the author’s summaries for professional use.
CHAPTER XXI — PENALTIES IMPOSABLE
Section 271J — Penalty for Furnishing Incorrect Information in Reports or Certificates (Accountants, Merchant Bankers, Registered Valuers)
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live. A penalty of Rs. 10,000 for each incorrect report or certificate, levied on an accountant, merchant banker or registered valuer who furnishes incorrect information in any report or certificate under the Act/Rules. Subject to reasonable cause under section 273B.
Finance Act, 2026: No amendment by the Finance Act, 2026.
Mechanism: An accountant/merchant banker/registered valuer furnishes incorrect information in a report or certificate under the Act/Rules → penalty of Rs. 10,000 for each such report/certificate → unless reasonable cause is shown under section 273B.
Litigation profile: Lightly litigated so far, but professionally sensitive. The key issues are what constitutes "incorrect information" (as opposed to a bona fide professional opinion or a matter of estimate/judgment), and the reasonable-cause defence.
A. COMMENTARY
A penalty on the professional, not the assessee
Section 271J is unusual: it penalises the professional — the chartered accountant (as defined "accountant"), merchant banker, or registered valuer — for furnishing incorrect information in a report or certificate, rather than the taxpayer. It was introduced to improve the reliability of the certifications on which the Department relies (audit reports, valuation reports, certificates).
"Incorrect information" versus bona fide professional judgment
The provision must be read narrowly so as not to penalise honest professional opinion. "Incorrect information" connotes a factual statement that is wrong, not a difference of professional judgment, an estimate within a permissible range, or a legal view later found untenable. A valuation or audit conclusion reached bona fide on disclosed facts and accepted methodology is not "incorrect information"; otherwise every rejected professional opinion would attract penalty. The CBDT, while introducing the section, indicated it targets demonstrably incorrect information, and the reasonable-cause shield in section 273B protects bona fide professional work.
Reasonable cause and natural justice
Being within section 273B, the penalty yields to reasonable cause. The professional is entitled to a section 274 opportunity (a show-cause notice — now expressly required from 1-3-2026 by the Finance Act, 2026 amendment to section 274) and to demonstrate that the information was furnished bona fide on the basis available.
B. STATUTORY TEXT (verbatim)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025; Finance Act, 2026 changes are noted above.
Penalty for furnishing incorrect information in reports or certificates.
271J. Without prejudice to the provisions of this Act, where the Assessing Officer or the Joint
Commissioner (Appeals) or the Commissioner (Appeals), in the course of any proceedings under this Act,
finds that an accountant or a merchant banker or a registered valuer has furnished incorrect information in
any report or certificate furnished under any provision of this Act or the rules made thereunder, the
Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) may direct that
such accountant or merchant banker or registered valuer, as the case may be, shall pay, by way of penalty, a
sum of ten thousand rupees for each such report or certificate.
Explanation.—For the purposes of this section,—
(a) "accountant" means an accountant referred to in the Explanation below sub-section (2) of section
288;
(b) "merchant banker" means Category I merchant banker registered with the Securities and Exchange
Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992
(15 of 1992);
(c) "registered valuer" means a person defined in clause (oaa) of section 2 of the Wealth-tax Act, 1957
(27 of 1957).
C. AUTHORITIES
Direct authority is still developing; the candour rule applies. The principles below reflect the narrow construction required to preserve bona fide professional opinion and the reasonable-cause shield.
1. Narrow construction — bona fide opinion is not "incorrect information"
Principle — fact wrong, not judgment disputed
Proposition "Incorrect information" means information that is factually wrong; a bona fide professional opinion, an estimate within a defensible range, or a legal view later rejected is not "incorrect information", and section 271J is not attracted.
Use The core defence protecting honest professional certification from penalty.
Principle — disclosed basis and accepted methodology
Proposition Where the report/certificate is based on disclosed facts and accepted methodology, and the professional acted in good faith, no penalty lies; the provision is not a tool to penalise rejected professional judgment.
Use Supports valuers and auditors whose conclusions are merely disagreed with.
2. Reasonable cause and procedure
Hindustan Steel Ltd v. State of Orissa (1972) 83 ITR 26 (SC)
Holding Penalty is not to be imposed for a technical/bona fide default; discretion is to be exercised judicially.
Use Applied to protect bona fide professional work under section 273B.
Principle — show-cause and opportunity under section 274
Proposition The professional must be given a reasonable opportunity of being heard under section 274 (and, from 1-3-2026, by way of a show-cause notice to that effect) before any section 271J penalty is imposed.
Use The procedural safeguard for the certifying professional.
Prepared for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the official Act; case-law holdings are the author’s summaries for professional use.