Procedural Defaults and Penalties in Indian Tax Law : Clause 465 of the Income Tax Bill, 2025 Vs. Section 272A of the Income Tax Act, 1961

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....cal function of ensuring that taxpayers and other stakeholders adhere to procedural requirements such as answering questions, signing statements, furnishing information, and allowing inspections. These provisions are designed not only to deter non-compliance but also to reinforce the integrity and efficiency of the tax administration system. This commentary provides a comprehensive analysis of Clause 465, examines its objectives, interprets its key provisions, explores practical implications, and offers a detailed comparative analysis with the existing Section 272A. The commentary also highlights areas of continuity, change, and potential ambiguity, aiming to guide practitioners, policymakers, and affected stakeholders. Objective and Purpo....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... defaults; * Providing a clear and predictable penalty regime for taxpayers and administrators alike. Detailed Analysis of Clause 465 of the Income Tax Bill, 2025 1. Structure and Scope Clause 465 is divided into five sub-sections, each addressing different aspects of penalty imposition for non-compliance with various statutory requirements: * Sub-section (1): Specifies a penalty of Rs. 10,000 per default for certain failures (e.g., refusal to answer questions, sign statements, attend in response to summons, comply with certain notices or directions). * Sub-section (2): Imposes a penalty of Rs. 500 per day for continuing defaults in respect of a wider set of procedural failures (e.g., failure to comply with notices, furnish returns....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....); * Failure to furnish returns, statements, or particulars (sections 252, 397(3), 507); * Failure to allow inspection of registers (section 255); * Failure to furnish returns or declarations within prescribed timelines (sections 263(1), 393(6), 395(4), 416(3), 389(5)(a), 394(2), 397(3)(g), 397(3)(e)). The per-day penalty structure is designed to incentivize prompt compliance and penalize prolonged default, with the aggregate penalty potentially reaching substantial amounts for protracted failures. 4. Cap on Penalties: Sub-section (3) Recognizing the principle of proportionality, this sub-section limits the total penalty in respect of certain failures (e.g., relating to declarations, certificates, and statements) to the amount of t....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....parative Analysis with Section 272A of the Income Tax Act, 1961 1. Structural Parity and Evolution Both provisions are structurally similar, with Clause 465 largely mirroring Section 272A in terms of the types of defaults penalized, the quantum of penalties, and the authorities empowered to impose them. However, Clause 465 updates references to sections and procedures consistent with the restructured Income Tax Bill, 2025. 2. Types of Defaults Covered Provision Types of Defaults Section 272A(1) Refusal to answer questions, sign statements, attend/produce documents in response to summons, comply with certain notices/directions. Clause 465(1) Similar defaults, with updated references to new sections (e.g., section 246(1) for su....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....nbsp;updates all cross-references to sections of the new Bill (e.g., section 246(1) for summons, section 268 for notices, etc.), reflecting a re-codification and possible rationalization of procedural requirements. This modernization aims to streamline compliance in a digital and evolving tax environment. 8. Scope and Breadth While the essential scope remains the same, Clause 465 may cover new or updated obligations arising from the new Bill's provisions, especially those related to digital filings, new forms of declarations, and statements. 9. Unique Features and Potential Issues * Absence of Explicit Hearing Provision: As noted, Clause 465 does not expressly provide for a hearing before imposition of penalty, unlike Section 272A(....