Penalty for failure to comply with provisions of section 187.

452

The Assessing Officer may impose on a person, a penalty of five thousand rupees for every day of the duration of failure where he fails to provide a facility for accepting payments through the prescribed electronic modes of payment, as referred to in section 187 except when he proves that there were good and sufficient reason for such failure.

Explanation

Section Summary:

Section 452 of the new income tax law imposes a penalty on individuals or businesses that fail to comply with the requirement to provide facilities for accepting payments through prescribed electronic modes, as outlined in Section 187. The penalty is levied for each day of non-compliance, unless the taxpayer can prove that there were valid reasons for the failure.

Key Changes:

• Introduction of Daily Penalty: Previously, there was no specific daily penalty for failing to provide electronic payment facilities. The new law introduces a penalty of ₹5,000 per day for non-compliance.
• Exception for Valid Reasons: The section allows taxpayers to avoid penalties if they can demonstrate "good and sufficient reasons" for the failure to comply.

Practical Implications:

• For Businesses: Businesses must ensure they have the necessary infrastructure to accept payments through prescribed electronic modes (e.g., UPI, debit/credit cards, etc.). Non-compliance could result in significant financial penalties.
• For Taxpayers: Taxpayers must be aware of the requirement and ensure compliance to avoid penalties. If there are legitimate reasons for non-compliance (e.g., technical issues), they must be prepared to provide evidence to the Assessing Officer.
• For Assessing Officers: They now have the authority to impose daily penalties, which increases their role in enforcing compliance with electronic payment requirements.

Critical Concepts:

• Prescribed Electronic Modes of Payment: These are the electronic payment methods specified by the government, such as UPI, debit/credit cards, net banking, etc.
• Good and Sufficient Reason: This refers to valid justifications for non-compliance, such as technical failures, natural disasters, or other unavoidable circumstances. The burden of proof lies with the taxpayer.

Compliance Steps:

1. Set Up Electronic Payment Facilities: Ensure that your business has the necessary systems in place to accept payments through prescribed electronic modes.
2. Maintain Documentation: Keep records of any technical issues or other valid reasons that may prevent compliance, as these may be required to avoid penalties.
3. Respond to Notices: If the Assessing Officer issues a notice for non-compliance, provide evidence of valid reasons (if applicable) to avoid penalties.

Examples:

• Scenario 1: A retail store fails to set up a UPI payment system despite being required to do so. The Assessing Officer imposes a penalty of ₹5,000 per day for the 10 days the store was non-compliant, resulting in a total penalty of ₹50,000.
• Scenario 2: A small business experiences a server outage that prevents them from accepting electronic payments for 3 days. They document the issue and provide evidence to the Assessing Officer, who waives the penalty due to the valid reason.

This section emphasizes the importance of adopting electronic payment systems and ensures stricter enforcement through daily penalties, while also providing a safeguard for taxpayers with legitimate reasons for non-compliance.