Offences by Hindu undivided family.

488(1)

Where an offence under this Act has been committed by a Hindu undivided family, the karta thereof shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

488(2)

Nothing contained in sub-section (1) shall render the karta liable to any punishment, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

488(3)

Irrespective of anything contained in sub-section (1), where an offence under this Act has been committed by a Hindu undivided family, a member of such Hindu undivided family shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly, if it is proved that—

• (a) the offence has been committed with the consent or connivance of such member; or
• (b) the offence is attributable to any neglect on the part of such member.

Explanation

Section Summary:

This section addresses the liability of a Hindu Undivided Family (HUF) and its members for offences committed under the Income Tax Act. It specifies who is held responsible for such offences and under what conditions.

Key Changes:

1. Karta's Liability: The karta (head of the HUF) is deemed guilty of any offence committed by the HUF unless they can prove lack of knowledge or due diligence.
2. Member's Liability: Members of the HUF can also be held liable if they are found to have consented to, connived in, or neglected to prevent the offence.

Practical Implications:

• For Kartas: The karta must ensure compliance with tax laws and maintain proper records to avoid liability. If an offence occurs, the karta must demonstrate that they were unaware or took all necessary steps to prevent it.
• For HUF Members: Members must be vigilant and ensure they are not complicit in any tax-related offences. Negligence or active involvement can lead to personal liability.

Critical Concepts:

• Hindu Undivided Family (HUF): A legal entity recognized under Hindu law, consisting of all persons lineally descended from a common ancestor, including their wives and unmarried daughters.
• Karta: The head of the HUF, typically the eldest male member, responsible for managing the family's affairs.
• Due Diligence: The effort made by the karta to prevent the commission of an offence, which can be used as a defense.

Compliance Steps:

1. Maintain Records: Ensure all financial transactions and tax filings are accurate and up-to-date.
2. Regular Audits: Conduct internal audits to identify and rectify any potential issues.
3. Educate Members: Inform all members of the HUF about their responsibilities and the consequences of non-compliance.

Examples:

• Scenario 1: An HUF fails to report certain income in its tax return. The karta is held liable unless they can prove they were unaware of the omission and had taken steps to ensure accurate reporting.
• Scenario 2: A member of the HUF knowingly provides false information to the tax authorities. Both the karta and the member can be held liable, with the member facing additional penalties for their direct involvement.

This section emphasizes the importance of collective responsibility within an HUF and the need for proactive measures to ensure compliance with tax laws.