Abetment of false return, etc.
484
If a person abets or induces in any manner another person––
- (a) to make and deliver an account or a statement or declaration relating to any income chargeable to tax which is false and which he either knows to be false or does not believe to be true; or
- (b) to commit an offence under section 478(1), he shall be punishable,— (i) in a case, where the amount of tax, penalty or interest which would have been evaded, if the declaration, account or statement had been accepted as true, or which is wilfully attempted to be evaded, exceeds twenty-five lakh rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and shall also be liable to fine; (ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and shall also be liable to fine.
Explanation
Section Summary:
Section 484 of the Income Tax Act deals with the abetment or inducement of false returns, accounts, or statements related to taxable income. It penalizes individuals who encourage or assist others in submitting false information to evade taxes or commit tax-related offenses. This section aims to deter tax fraud and ensure compliance by imposing strict penalties, including imprisonment and fines.
Key Changes:
- New Provision: This section introduces specific penalties for abetting or inducing others to file false returns or commit tax offenses under Section 478(1). Previously, such abetment may have been addressed under general provisions, but this section now explicitly defines the consequences.
- Tiered Penalties: The penalties vary based on the scale of tax evasion. If the evaded amount exceeds ₹25 lakh, the punishment is more severe (up to 7 years of imprisonment). For smaller amounts, the punishment is less severe (up to 2 years of imprisonment).
Practical Implications:
- For Individuals and Businesses: Taxpayers must ensure that they do not knowingly or unknowingly assist others in filing false returns or evading taxes. This includes avoiding actions like providing false documentation, misrepresenting income, or encouraging others to do so.
- For Tax Professionals: Professionals preparing returns or advising clients must ensure the accuracy of information provided. Any involvement in abetting false filings could lead to severe penalties.
- For Enforcement Authorities: This section strengthens the legal framework to prosecute individuals involved in facilitating tax evasion, even if they are not the primary offenders.
Critical Concepts:
- Abetment: This refers to actively encouraging, assisting, or inducing someone to commit a tax-related offense, such as filing a false return.
- False Return: A return that contains incorrect or misleading information about income, deductions, or other tax-related details.
- Section 478(1): This section deals with offenses like willful evasion of tax, falsification of books, or failure to maintain proper records.
- Tiered Penalties: The severity of punishment depends on the amount of tax evaded. If the evaded amount exceeds ₹25 lakh, the punishment is more severe.
Compliance Steps:
- Verify Information: Ensure all financial information provided in tax returns is accurate and supported by proper documentation.
- Avoid Involvement: Do not assist or encourage others to file false returns or evade taxes, even indirectly.
- Maintain Records: Keep detailed records of all financial transactions to substantiate the accuracy of tax filings.
- Stay Informed: Be aware of the consequences of abetting tax evasion, including potential imprisonment and fines.
Examples:
- Scenario 1: A business owner asks their accountant to underreport income by ₹30 lakh to reduce tax liability. If the accountant complies, both the owner and the accountant could face penalties under Section 484. The accountant, for abetting, could face up to 7 years of imprisonment and a fine.
- Scenario 2: A friend advises another to claim false deductions of ₹10 lakh on their tax return. If caught, the friend could be punished with up to 2 years of imprisonment and a fine for abetting the false filing.
This section underscores the importance of honesty and accuracy in tax filings and the severe consequences of facilitating tax evasion.