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Penalty for failure to answer questions, sign statements, furnish information,returns or statements, allow inspections, etc.

465(1)

A person shall be liable to pay a penalty of ten thousand rupees for each default or failure as mentioned below, if that person,—

  • (a) being legally bound to state the truth of any matter touching the subject of his assessment, refuses to answer any question put to him by an income-tax authority in the exercise of its powers under this Act; or
  • (b) refuses to sign any statement made by him in the course of any proceedings under this Act, which an income-tax authority may legally require him to sign; or
  • (c) to whom a summons is issued under section 246(1), either to attend to give evidence or to produce books of account or other documents at a certain place and time omits to attend or produce books of account or documents at the place or time; or
  • (d) fails to comply with a notice under section 268(1) or (2) or 270(8) or fails to comply with a direction issued under section 268(5).

465(2)

A person shall be liable to pay a penalty of five hundred rupees for every day during which the following failures continue, if that person fails to—

  • (a) comply with a notice under section 175(7); or
  • (b) give the notice of discontinuance of his business or profession as required by section 320(3); or
  • (c) furnish in due time any of the returns, statements or particulars mentioned in section 252 or section 397(3) or 507; or
  • (d) allow inspection of any register referred to in section 255 or of any entry in such register or to allow copies of such register or of any entry therein to be taken; or
  • (e) furnish the return of income as required under section263(1)(a)(iii) or (iv) or to furnish it within the time allowed and in the manner required under sections 263(1) and (2); or
  • (f) deliver or cause to be delivered in due time a copy of the declaration mentioned in section 393(6); or
  • (g) furnish a certificate under section 395(4); or
  • (h) deduct and pay tax under section 416(3); or
  • (i) furnish a statement under section 389(5)(a); or
  • (j) deliver or cause to be delivered in due time a copy of the declaration referred to in section 394(2); or
  • (k) deliver or cause to be delivered the statement within the time specified in section 397(3)(g); or
  • (l) deliver or cause to be delivered a statement within the time as prescribed under section 397(3)(e).

465(3)

The amount of penalty shall not exceed the amount of tax deductible or collectible for failures in relation to the following:––

  • (a) a declaration mentioned in section 393(6);
  • (b) a certificate as required by section 395(4); and
  • (c) statements under section 397(3)(b) or (e).

465(4)

Any penalty imposable under sub-section (1) or (2) shall be imposed—

  • (a) if the contravention, failure or default for which such penalty is imposable occurs in the course of any proceeding before an income-tax authority not below the rank of Joint Director or a Joint Commissioner, by such income-tax authority;
  • (b) in a case falling under sub-section (1)(d), by the income-tax authority who had issued the notice or direction referred to therein;
  • (c) in a case falling under of sub-section (2)(f), by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; and
  • (d) in any other case, by the Joint Director or the Joint Commissioner.

465(5)

In this section, “income-tax authority” includes a Principal Director General or Director General, Principal Director or Director, Joint Director and an Assistant Director or Deputy Director while exercising the powers vested in a court under the Code of Civil Procedure, 1908, when trying a suit in respect of the matters specified in section 246(1).

Explanation

Section Summary:

Section 465 of the new income tax law imposes penalties on individuals or entities for failing to comply with specific obligations under the Income Tax Act. These obligations include answering questions, signing statements, furnishing information, submitting returns, allowing inspections, and complying with notices or directions issued by income-tax authorities. The section aims to ensure compliance with tax laws and deter non-cooperation or negligence in tax-related matters.


Key Changes:

  1. Introduction of Daily Penalty: Under Section 465(2), a daily penalty of ₹500 is introduced for ongoing failures, such as not furnishing returns or statements on time. This is a new provision to encourage timely compliance.
  2. Capping of Penalty: Section 465(3) limits the penalty amount to the tax deductible or collectible in cases related to declarations, certificates, or statements.
  3. Authority to Impose Penalty: Section 465(4) specifies which income-tax authority can impose penalties based on the nature of the default or failure.

Practical Implications:

  1. Taxpayers and Businesses: Individuals and businesses must ensure timely compliance with notices, submissions, and inspections to avoid penalties. Non-compliance can lead to significant financial penalties, especially for ongoing defaults.
  2. Increased Scrutiny: Tax authorities now have clearer guidelines for imposing penalties, which may lead to stricter enforcement.
  3. Daily Penalty for Delays: Delays in filing returns, furnishing statements, or complying with notices can result in accumulating penalties, making timely compliance critical.

Critical Concepts:

  1. Income-Tax Authority: Includes high-ranking officials like Principal Director General, Director General, Joint Director, and others who have powers similar to a civil court under the Code of Civil Procedure, 1908.
  2. Default or Failure: Refers to non-compliance with specific obligations, such as refusing to answer questions, sign statements, or furnish required documents.
  3. Capped Penalty: For certain failures (e.g., declarations or certificates), the penalty cannot exceed the tax deductible or collectible.

Compliance Steps:

  1. Respond to Notices: Ensure timely responses to notices issued under Sections 268(1), 268(2), or 270(8).
  2. File Returns and Statements: Submit all required returns, statements, and certificates within the prescribed timelines.
  3. Allow Inspections: Cooperate with income-tax authorities during inspections or audits.
  4. Sign Statements: Sign any statements required by tax authorities during proceedings.
  5. Attend Summons: Attend hearings or produce documents when summoned under Section 246(1).

Examples:

  1. Scenario 1: A taxpayer fails to file their income tax return by the due date. Under Section 465(2), they will incur a daily penalty of ₹500 until the return is filed.
  2. Scenario 2: A business refuses to allow an income-tax authority to inspect its books of account. Under Section 465(1), the business will face a penalty of ₹10,000 for this default.
  3. Scenario 3: A taxpayer fails to furnish a declaration under Section 393(6). The penalty under Section 465(3) will not exceed the tax deductible or collectible related to that declaration.

By adhering to these provisions, taxpayers can avoid penalties and ensure smooth compliance with income tax laws.