Mandatory Electronic Payments and Penalty Regimes : Clause 452 of the Income Tax Bill, 2025 Vs. Section 271DB of the Income-tax Act, 1961

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....ns reflect the government's policy to promote digital payments and ensure that businesses provide customers with accessible, secure, and transparent electronic payment options. The significance of these provisions lies in their alignment with the national agenda of digitization, financial transparency, and curbing the shadow economy. The transition from Section 271DB to Clause 452 is not merely a renumbering but reflects a legislative update in the context of a new Income Tax Bill, potentially harmonizing and refining the penalty framework. This commentary provides an in-depth analysis of Clause 452, its objectives, operational mechanics, implications, and a detailed comparison with Section 271DB, thus illuminating the legislative traje....

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....wing the demonetization exercise and the Digital India initiative. The 2025 Bill continues this trajectory, indicating the policy's enduring relevance. Detailed Analysis Clause 452 of the Income Tax Bill, 2025 1. Text of the Provisions Clause 452 (Income Tax Bill, 2025): The Assessing Officer may impose on a person, a penalty of five thousand rupees for every day of the duration of failure where he fails to provide a facility for accepting payments through the prescribed electronic modes of payment, as referred to in section 187 except when he proves that there were good and sufficient reason for such failure. Section 271DB (Income-tax Act, 1961): (1) If a person who is required to provide facility for accepting payment throu....

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....effective from 1 April 2025, aligns with Clause 452, vesting this power in the Assessing Officer. - Clause 452 directly empowers the Assessing Officer, streamlining the administrative process and potentially expediting penalty proceedings. d) Reasonable Cause Exception Both provisions contain a saving clause: if the person can prove that there were "good and sufficient reasons" for failure, no penalty is to be imposed. This introduces an element of discretion and fairness, ensuring that penalties are not imposed in cases of genuine hardship or circumstances beyond the taxpayer's control. e) Prescribed Electronic Modes While the text of Clause 452 and Section 271DB refers to "prescribed electronic modes of payment," the specifics ar....

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.... detailed procedural guidance, which may require supplementary rules. - Transition Issues: Businesses transitioning from the old regime to the new Bill need clarity regarding ongoing defaults and continuity of obligations. Interpretation and Ambiguities i) Scope of Applicability - The scope is determined by the underlying sections (section 187/section 269SU), which usually apply to businesses with turnover exceeding a specified threshold (e.g. Rs. 50 crore in the preceding financial year). - Ambiguities may arise regarding the definition of "person," especially in the context of partnerships, LLPs, and companies, and whether the obligation extends to all branches or only to the principal place of business. ii) Good and Sufficient R....

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....minals, integrate with UPI systems, and train staff, incurring additional costs. 2. Regulatory and Administrative Impact - Enforcement: The shift to the Assessing Officer as the penalty-imposing authority may result in faster and more decentralized enforcement, but may also lead to inconsistent practices unless clear guidelines are issued. - Dispute Resolution: The "good and sufficient reason" exception is likely to generate litigation, as taxpayers may contest penalties on grounds of technical or operational difficulties. 3. Consumer and Market Impact * - Consumer Empowerment: The provision ensures that consumers can insist on electronic payment options, reducing reliance on cash and enhancing transactional transparency. * - Mark....