Penalty for Incomplete or Incorrect Returns (s.113 of the ACP)

Introduction

Filing a tax return with incorrect information can lead to fines and special penalties. This article explains the offence under section 113 of the Income Tax Act 1967 (ACP 1967), the applicable penalties and the defence of good faith.

Offence under s.113(1) of the ACP 1967

Under subsection 113(1) of the ACP 1967, any person who:

• (a) makes an incorrect return by omitting or understating any income required to be reported; or
• (b) provides incorrect information relating to a matter affecting the sufficiency of his own tax or another person's —

is guilty, unless he satisfies the court that the return/information was made in good faith.

Penalties

On conviction:

• is liable to a fine of not less than RM1,000 and not more than RM10,000; and
• shall pay a special penalty of twice the amount of the tax undercharged as a result of the incorrect return/information (or that would have been undercharged had the return/information been accepted as correct).

Difference from s.112

s.112 of the ACP 1967 applies to failure to submit the return form (failure to file). s.113 applies to returns/information that are incorrect — two different offences.