TaxTMI 
TaxTMI 
Penal Provisions for Failure to File Income Tax Returns : Clause 479 of Income Tax Bill, 2025 Vs. Section 276CC of the Income-tax Act, 1961
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....ncome-tax Act, 1961. With the introduction of the Income Tax Bill, 2025, Clause 479 is proposed to replace or supplement this regime, reflecting updated legislative intent and policy considerations. This commentary undertakes a detailed analysis of Clause 479 of the Income Tax Bill, 2025, followed by a comparative examination with the existing Section 276CC of the Income-tax Act, 1961. The analysis covers the legislative objectives, the scope and structure of the provisions, their practical implications, and potential issues in interpretation. The comparative section elucidates the similarities, differences, and possible policy shifts, providing a comprehensive understanding for legal practitioners, tax professionals, and policy analysts. ....
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....ing, analogous to section 139(1) of the 1961 Act. * Sections 268(1) and 280: These likely correspond to situations where the Assessing Officer issues a notice requiring return filing, similar to sections 142(1) and 148 of the 1961 Act. The provision thus covers both general statutory obligations and specific compliance in response to departmental notices. 2. Graded Punishments Based on Quantum of Tax Evasion Clause 479(1) introduces a two-tiered penalty structure: * Clause 479(1)(a): If the tax that "would have been evaded if the failure had not been discovered" exceeds Rs. 25 lakh, the punishment is rigorous imprisonment for a term not less than six months and up to seven years, and also a fine. * Clause 479(1)(b): In all other ca....
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....eguards by: * Limiting prosecution to willful failures, thus excluding bona fide errors. * Providing clear monetary thresholds for more severe punishment. * Exempting cases where the default is cured within a prescribed period or where the tax impact is negligible. However, the clause could raise interpretational issues regarding, for instance, the precise calculation of "tax that would have been evaded," the exact scope of "wilful" conduct, and the interplay with other compliance provisions. Comparative Analysis with Section 276CC of the Income-tax Act, 1961 1. Triggering Circumstances and Covered Returns * Section 276CC: Applies to wilful failure to furnish returns u/s 139(1) (original return), or in response to notices u/s 142....
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..... * Clause 479: * No prosecution if return furnished before expiry of one year from end of tax year, or u/s 263(6) within prescribed time. * No prosecution if tax payable (non-corporate) after accounting for advance tax, self-assessment tax, TDS/TCS paid before expiry of one year from end of tax year, does not exceed Rs. 10,000. * Key Difference: The critical change is the extension of the compliance window - from "before the expiry of the assessment year" u/s 276CC to "before the expiry of one year from the end of the tax year" in Clause 479. This effectively grants taxpayers a longer period to cure their default and avoid prosecution, reflecting a more lenient and facilitative approach. 4. Mens Rea and Subjective Requirements *....
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.... taxpayers in both provisions, reflecting a policy of stricter standards for companies. 8. Fringe Benefit Tax and Obsolete Provisions * Section 276CC contains references to fringe benefit tax returns, which are now obsolete. * Clause 479 omits such references, reflecting legislative streamlining and removal of redundant provisions. 9. Fine as a Mandatory Component * Both provisions make fine a mandatory component of the punishment, further increasing the deterrent effect. 10. Legislative Modernization * Clause 479 evidences a move towards a more modern, streamlined, and taxpayer-friendly penal regime, without diluting the seriousness of wilful non-compliance. Ambiguities and Interpretational Issues While Clause 479 broadly alig....
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.... exemptions. However, the requirement to establish "wilful" default may entail evidentiary challenges, and the carve-outs may limit prosecution in many cases, focusing resources on serious and high-value defaults. 4. Compliance and Procedural Considerations Taxpayers must be vigilant in tracking statutory deadlines and responding to departmental notices. Even after default, prompt rectification within one year can avert prosecution. The provision incentivizes early compliance and may reduce litigation around minor or technical defaults. Conclusion Clause 479 of the Income Tax Bill, 2025, represents a largely continuity-based but somewhat liberalized approach to prosecuting wilful failure to furnish returns of income. The provision prese....