Sections 122 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 122(1) gets the attention. The two sub-sections after it are more likely to arise — one on every demand, and the other against people who are not the taxpayer.
Section 122(2): a registered person who supplies goods or services on which tax has not been paid, short paid or erroneously refunded, or where credit has been wrongly availed or utilised, is liable to a penalty of — (a) for any reason other than fraud, wilful misstatement or suppression, ₹10,000 or ten per cent of the tax due, whichever is higher; (b) for fraud, wilful misstatement or suppression, ₹10,000 or the tax due, whichever is higher. Section 122(3): any person who aids or abets any of the twenty-one offences, deals with goods liable to confiscation, receives or deals with a contravening supply of services, fails to appear before an officer when issued with a summons, or fails to issue an invoice or account for one, is liable to a penalty which may extend to twenty-five thousand rupees.
Section 122(2): the penalty that sits under every demand
The structure mirrors s.74A(5) exactly:
| Basis | s.122(2) | s.74A(5) |
|---|---|---|
| Non-fraud | ₹10,000 or 10% of tax due, higher | 10% of tax due or ₹10,000, higher |
| Fraud, wilful misstatement, suppression | ₹10,000 or the tax due, higher | The tax due |
So the same conduct generates a penalty under both. Which is precisely why s.75(13) exists: where any penalty is imposed under s.73, s.74 or s.74A, no penalty for the same act or omission shall be imposed on the same person under any other provision of this Act.
The practical position: where a demand is adjudicated under s.74A and its penalty imposed, a separate s.122(2) penalty for the same short payment is barred. A notice proposing both should be met with s.75(13) in terms. Section 75(7) →
Where s.122(2) does operate independently: where a penalty is imposed without a demand under s.73, s.74 or s.74A — for example where the tax has already been paid but the penalty is pursued separately under s.127.
Section 122(3): the five acts, and who they reach
"Any person" — not a taxable person, not a registered person. Anyone.
(a) Aids or abets any of the offences specified in clauses (i) to (xxi) of sub-section (1). The full twenty-one. This is the clause under which advisers, employees, transporters and counterparties are drawn into penalty proceedings.
(b) Acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with any goods which he knows or has reasons to believe are liable to confiscation.
Note the mental element: knows or has reasons to believe. A transporter or warehouse keeper handling goods in the ordinary course, without that knowledge or reason to believe, is outside the clause — and the contemporaneous record of what documents were checked is what establishes it. Section 130 confiscation →
(c) Receives or is in any way concerned with the supply of, or in any other manner deals in any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules. The services analogue of clause (b), with the same mental element.
(d) Fails to appear before the officer of central tax, when issued with a summons for appearance to give evidence or produce a document in an inquiry.
This is the clause that matters most in practice, because it attaches to a routine event. Section 70(1A), inserted w.e.f. 01.11.2024, makes attendance binding; s.122(3)(d) supplies the penalty. Non-attendance is never the right response to a summons — reply in writing before the date, give the reason, and propose alternatives. Section 70 summons →
(e) Fails to issue an invoice in accordance with the provisions of this Act or the rules, or fails to account for an invoice in his books of account.
The penalty: "may extend to twenty-five thousand rupees."
"May extend to" — why section 126 applies here
Because s.122(3) sets a ceiling rather than a fixed sum or percentage, s.126(6) does not disapply the general disciplines. So the whole of s.126 governs the quantum:
- no penalty for a minor breach — tax involved under ₹5,000 — or for an easily rectifiable documentation error made without fraudulent intent or gross negligence;
- the penalty must be commensurate with the degree and severity of the breach;
- no penalty without a hearing;
- the order must specify the nature of the breach and the applicable law;
- voluntary disclosure before discovery is a mitigating factor.
Contrast s.122(1) and s.122(2), both of which produce an amount by formula and are therefore within the s.126(6) carve-out. Section 126 →
Section 122(1B): the e-commerce operator penalty
Inserted by the Finance Act, 2023 w.e.f. 01.10.2023, and its opening words substituted by the Finance (No. 2) Act, 2024, effective retrospectively from 01.10.2023, notified through Notification No. 17/2024-CT dated 27.09.2024, to read "Any electronic commerce operator, who is liable to collect tax at source under section 52" — replacing the earlier "Any electronic commerce operator who".
The substitution narrows it. Only an ECO liable to collect TCS under s.52 is within the sub-section.
The three acts:
- (i) allows a supply through it by an unregistered person, other than a person exempted from registration by a notification;
- (ii) allows an inter-State supply through it by a person not eligible to make such supply;
- (iii) fails to furnish the correct details in the s.52(4) statement of any outward supply of goods effected through it by a person exempted from obtaining registration.
The penalty: ₹10,000, or an amount equivalent to the tax involved had such supply been made by a registered person other than a person paying tax under s.10, whichever is higher.
Note the comparator: the tax that would have been payable by a regular registered person — expressly not a composition taxpayer. E-commerce operators →
Key takeaways
- Section 122(2) mirrors the s.74A(5) penalty — 10% or ₹10,000 for non-fraud, the tax due or ₹10,000 for fraud.
- Section 75(13) bars it where a penalty is imposed under s.73, s.74 or s.74A for the same act.
- Section 122(3) reaches any person, with a penalty "which may extend to" ₹25,000.
- Clause (d) penalises failure to appear on a summons — read with the binding attendance duty in s.70(1A).
- Clauses (b) and (c) require the person to know or have reasons to believe — a real defence for transporters and intermediaries.
- Because s.122(3) sets a ceiling, the whole of s.126 applies to its quantum.
Read next
- Section 122(1): The Twenty-One Offences and the Penalty
- Section 126: General Disciplines Relating to Penalty
- Section 70: Summons and the Judicial Proceeding
- Section 127: Power to Impose Penalty in Certain Cases
Disclaimer: Positions stated as on 5 September 2026, based on the CGST Act as amended to 31 March 2026 (ICAI Bare Law, 12th edition).