Penalty for failure to furnish statements, etc.

461(1)

Where a person, who is required to deliver or causes to be delivered a statement prescribed in section 397(3)(b), fails to do so within the time prescribed in the said section, or furnishes incorrect information in the said statement, the Assessing Officer may impose on such person, a penalty of a sum which shall not be less than ten thousand rupees but which may extend to one lakh rupees.

461(2)

No penalty shall be levied under sub-section (1) for delay in filing or non-filing of statement referred therein, if the person proves that—

• (a) tax deducted or collected along with the fee and interest, if any, was paid to the credit of the Central Government; and
• (b) the said statement was also delivered before the expiry of one month from the time prescribed in section 397(3)(b).

Explanation

Section Summary:

Section 461 of the new income tax law imposes penalties on individuals or entities who fail to furnish statements or provide incorrect information as required under Section 397(3)(b). The penalty applies if the statement is not submitted within the prescribed time or contains errors. However, penalties can be avoided under certain conditions, such as timely payment of taxes and submission of the statement within a grace period.

Key Changes:

1. Introduction of Penalty for Non-Compliance: This section introduces a penalty for failing to submit statements or providing incorrect information, which was not explicitly detailed in the prior income tax law.
2. Grace Period for Avoidance of Penalty: A new provision allows taxpayers to avoid penalties if they meet specific conditions, such as paying taxes and submitting the statement within one month of the deadline.

Practical Implications:

• For Taxpayers: Taxpayers must ensure timely submission of statements and accuracy of information to avoid penalties ranging from ₹10,000 to ₹1,00,000.
• For Businesses: Businesses responsible for tax deductions or collections must maintain accurate records and adhere to deadlines to prevent financial penalties.
• For Compliance Processes: Tax authorities will now have a clear framework to impose penalties for non-compliance, increasing the importance of timely and accurate reporting.

Critical Concepts:

• Section 397(3)(b): Refers to the requirement for delivering specific statements related to tax deductions or collections.
• Penalty Avoidance Conditions: To avoid penalties, taxpayers must:
  1. Pay the deducted or collected tax, along with any applicable fees and interest, to the Central Government.
  2. Submit the required statement within one month of the original deadline.

Compliance Steps:

1. Timely Submission: Ensure the statement under Section 397(3)(b) is submitted within the prescribed time.
2. Accuracy of Information: Verify that all details in the statement are correct to avoid penalties for incorrect information.
3. Payment of Taxes: Pay any deducted or collected taxes, along with fees and interest, to the Central Government.
4. Grace Period Utilization: If delayed, submit the statement within one month of the deadline to avoid penalties.

Examples:

• Scenario 1: A company fails to submit the required statement by the deadline but pays the deducted taxes and submits the statement within one month. No penalty will be imposed.
• Scenario 2: A business submits the statement on time but includes incorrect information. The Assessing Officer may impose a penalty ranging from ₹10,000 to ₹1,00,000.
• Scenario 3: An individual neither submits the statement nor pays the deducted taxes. The Assessing Officer will impose a penalty of at least ₹10,000, which could go up to ₹1,00,000.