Penalty for failure to submit statement under section 505.

460

If a person required to furnish statement under section 505, fails to do so within the period prescribed under that section, the Assessing Officer may impose on him, a penalty of—

• (a) one thousand rupees for every day for which the failure continues, if the period of failure does not exceed three months; or
• (b) one lakh rupees in any other case.

Explanation

Section Summary:

Section 460 of the new income tax law imposes a penalty on individuals or entities who fail to submit a statement as required under Section 505 within the prescribed time frame. The penalty is designed to enforce compliance with reporting obligations.

Key Changes:

• Introduction of Penalty Structure: Previously, penalties for non-compliance with reporting requirements were either not explicitly defined or were less structured. Section 460 now introduces a clear, tiered penalty structure based on the duration of the failure to submit the required statement.
  • Daily Penalty: A penalty of ₹1,000 per day applies if the failure to submit the statement continues for up to three months.
  • Lump-Sum Penalty: If the failure exceeds three months, a flat penalty of ₹1,00,000 is imposed.

Practical Implications:

• For Taxpayers and Businesses: This section emphasizes the importance of timely submission of statements under Section 505. Non-compliance can lead to significant financial penalties, which increase with the duration of the delay.
• For Assessing Officers: The section provides a clear framework for imposing penalties, ensuring consistency in enforcement.

Critical Concepts:

• Section 505: Refers to the requirement for individuals or entities to furnish specific statements (e.g., financial transactions, tax deductions, etc.) to the tax authorities within a prescribed time frame.
• Assessing Officer: The tax authority responsible for evaluating tax returns, assessing tax liabilities, and imposing penalties for non-compliance.

Compliance Steps:

1. Identify Reporting Obligations: Determine if you are required to submit a statement under Section 505.
2. Adhere to Deadlines: Ensure the statement is submitted within the prescribed time frame to avoid penalties.
3. Maintain Documentation: Keep records of all submissions to provide proof of compliance if questioned by the Assessing Officer.

Examples:

• Scenario 1: A business fails to submit a statement required under Section 505 for 60 days. The Assessing Officer imposes a penalty of ₹1,000 per day, totaling ₹60,000.
• Scenario 2: Another entity delays submission for 4 months. Since the delay exceeds three months, a flat penalty of ₹1,00,000 is imposed, regardless of the additional days.

This section underscores the importance of timely compliance with reporting requirements to avoid escalating penalties.