Evolution of Penalty Provisions for Failure to Collect Tax at Source : Clause 449 of the Income Tax Bill, 2025 Vs. Section 271CA of the Income Tax Act, 1961

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.... 449 of the Income Tax Bill, 2025 and Section 271CA of the Income Tax Act, 1961. Both provisions address the imposition of penalties for failure to collect tax at source, but they are situated in different legislative contexts and reflect certain differences in approach, structure, and administrative mechanisms. This commentary provides an in-depth analysis of Clause 449 of the Income Tax Bill, 2025, examining its objective, detailed provisions, and practical implications. It then undertakes a comparative analysis with Section 271CA of the Income Tax Act, 1961, highlighting similarities, differences, and the legislative evolution in this area. The analysis aims to elucidate the legal, procedural, and policy dimensions of these provisions, o....

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....ess of administrative refinement. Clause 449 of the Income Tax Bill, 2025 represents a legislative update, aligning with the broader restructuring and modernization of Indian tax law envisaged in the new Income Tax Bill. It seeks to consolidate, simplify, and clarify the penalty provisions, ensuring consistency and administrative efficiency. Detailed Analysis of Clause 449 of the Income Tax Bill, 2025 1. Text and Scope Clause 449(1) of the Income Tax Bill, 2025 reads: If any person fails to collect the whole or in part, the tax as required under Chapter XIX-B, the Assessing Officer may impose on him, a penalty equal to the tax which such person failed to collect. The provision is succinct, but its implications are significant. The key ....

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....s for cases involving genuine or bona fide errors, as the provision appears to mandate a penalty in all cases of failure, regardless of intent or circumstances. 5. Comparative Legislative Structure Clause 449 is structurally and substantively similar to Section 271CA, but with minor differences in the referencing of chapters (Chapter XIX-B in the new Bill vs Chapter XVII-BB in the 1961 Act) and the explicit identification of the Assessing Officer as the penalty-imposing authority. Comparative Analysis with Section 271CA of the Income Tax Act, 1961 Textual Comparison Section 271CA (as amended): "(1) If any person fails to collect the whole or any part of the tax as required by or under the provisions of Chapter XVII-BB, then, such pers....

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....pose penalties in the Joint Commissioner, but an amendment (effective 1 April 2025) shifts this power to the Assessing Officer. Clause 449, from the outset, vests this power in the Assessing Officer, aligning with the new administrative structure. * Procedural Detailing: Section 271CA contains two sub-sections, explicitly addressing the authority for penalty imposition and incorporating a transitional provision. Clause 449 is more concise, with a single sub-section and no explicit procedural or transitional provisions. * Drafting Style: Clause 449 uses the phrase "may impose," indicating discretion, whereas Section 271CA uses "shall be liable to pay," suggesting a more mandatory approach. This subtle difference could have implications f....

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....e, often imposing penalties equal to the amount not collected. However, some countries provide for graded penalties, interest, or additional sanctions for repeated or willful defaults. The Indian approach, as reflected in both Section 271CA and Clause 449, emphasizes proportionality and administrative simplicity. Practical Implications and Stakeholder Impact For Businesses and Collectors The provisions create a strong compliance incentive, as any failure to collect tax results in a direct financial penalty. Businesses must implement rigorous compliance systems, especially in sectors where TCS obligations are complex or frequently triggered. The clarity and proportionality of the penalty amount facilitate risk assessment and compliance pl....