Penalty Provisions for deterrence against non-cooperation with tax authorities : Clause 466 of Income Tax Bill, 2025 Vs. Section 272AA of Income-tax Act, 1961

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....s, in several respects, the existing Section 272AA of the Income-tax Act, 1961, which prescribes a penalty for failure to comply with section 133B. Both provisions are part of the broader regulatory framework designed to ensure compliance and provide deterrence against non-cooperation with tax authorities. This commentary provides a comprehensive analysis of Clause 466, exploring its legislative context, objectives, detailed provisions, practical implications, and a comparative analysis with Section 272AA of the 1961 Act. The analysis will highlight similarities, distinctions, and the evolution of penalty provisions within the Indian income tax regime. Objective and Purpose The imposition of penalties within the income tax framework serve....

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.... right to be heard. The inclusion of Clause 466 in the Income Tax Bill, 2025, continues this trend by maintaining a moderate penalty amount and aligning the provision with contemporary standards of administrative justice. Detailed Analysis of Clause 466 of the Income Tax Bill, 2025 Text of Clause 466 If a person fails to comply with the provisions of section 254, the Joint Commissioner, Deputy Director or Assistant Director or the Assessing Officer, may impose a penalty which may extend up to one thousand rupees on him. Key Elements of the Provision 1. Triggering Event: Failure to Comply with Section 254 * The penalty is attracted only upon failure to comply with section 254. The nature of obligations u/s 254 is crucial in determinin....

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....anguage ("may impose") suggests discretion. - The clause does not distinguish between willful and inadvertent non-compliance, nor does it provide any defense such as "reasonable cause," which may be relevant in certain circumstances. Ambiguities - The scope of section 254 (which triggers the penalty) is not provided, making it difficult to assess the full ambit of Clause 466. - The absence of a requirement to record reasons or provide justification for the quantum of penalty may result in inconsistent application. - The lack of an express appellate mechanism in the clause itself could be a point of concern, though general provisions for appeals against penalty orders may be available elsewhere in the Act. Comparative Analysis with....

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....y imposition, embodying the principle of audi alteram partem (hear the other side). Clause 466 is silent on this critical safeguard. * Specificity of Trigger: Section 272AA is tied to non-compliance with a survey operation (section 133B), while Clause 466 is tied to section 254, the contents of which are not specified here. * Omission of "Without Reasonable Cause": Originally, Section 272AA included the phrase "without reasonable cause," which was later omitted. Clause 466, from inception, contains no such requirement, indicating a strict liability approach. Practical Implications For Taxpayers and Other Persons - Both Clause 466 and Section 272AA impose a duty to cooperate with tax authorities during specific statutory processes (a....