Practical Dimensions of Penalty for Non-Submission of Accountant's Report in Indian Taxation : Clause 447 of the Income Tax Bill, 2025 Vs. Section 271BA of the Income-tax Act, 1961

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....h an accountant's report u/s 92E, primarily in the context of transfer pricing. Both provisions serve as enforcement mechanisms to ensure compliance with statutory reporting requirements, thereby facilitating the effective administration of the income tax regime. This commentary undertakes a comprehensive analysis of Clause 447, examining its legislative intent, the specific mechanics of its operation, its practical implications, and potential interpretational issues. Furthermore, the commentary juxtaposes Clause 447 with Section 271BA, highlighting similarities, differences, and the evolution of legislative policy in this domain. The analysis is aimed at providing an in-depth understanding for legal practitioners, tax professionals, a....

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....on 172 under the 2025 Bill is not detailed here, the legislative approach is to ensure that any area of tax law necessitating accountant certification is backed by enforceable penalties for non-compliance, thus strengthening the integrity of the tax system. Detailed Analysis of Clause 447 of the Income Tax Bill, 2025 1. Textual Breakdown 447. If any person fails to furnish a report from an accountant as required by section 172, the Assessing Officer may impose a penalty of one lakh rupees on such person. The provision is concise and unambiguous, comprising the following essential elements: * Triggering Event: Failure to furnish a report from an accountant as required by section 172. * Authority: The Assessing Officer is empowered to....

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....nalysis with Section 271BA of the Income-tax Act, 1961 1. Textual Comparison Clause 447 of the Income Tax Bill, 2025 Section 271BA of the Income-tax Act, 1961 If any person fails to furnish a report from an accountant as required by section 172, the Assessing Officer may impose a penalty of one lakh rupees on such person. If any person fails to furnish a report from an accountant as required by section 92E, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of one hundred thousand rupees. Both provisions are nearly identical in structure and language, differing only in the section referenced (section 172 vs. section 92E) and the terminology ("may impose" vs. "may direct that such person....

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....ave also recognized the availability of relief where the taxpayer demonstrates reasonable cause. The requirement for natural justice-such as issuance of a show-cause notice and an opportunity of being heard-has been emphasized in administrative practice. It is expected that similar interpretational principles will apply to Clause 447, ensuring that the provision is implemented in a manner consistent with principles of fairness and proportionality. 5. Unique Features and Potential Conflicts * Uniformity: Both provisions adopt a uniform penalty, promoting certainty and administrative efficiency. * Potential Overlap: If section 172 of the 2025 Bill covers transactions already subject to section 92E under the existing Act, there could be ....

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....could be viewed as unduly harsh in cases of genuine hardship or inadvertent error. * Procedural Safeguards: The provision does not specify the procedure to be followed by the Assessing Officer before imposing the penalty, such as the requirement for a show-cause notice or an opportunity of being heard. These safeguards may be provided elsewhere in the Act or in subordinate legislation. Practical Implications 1. Impact on Taxpayers Clause 447 imposes a significant compliance requirement on taxpayers subject to section 172. They must ensure that the requisite accountant's report is obtained and furnished within the prescribed timeline. Failure to do so exposes them to a fixed monetary penalty, regardless of the quantum of the transac....