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Non-cognizable classification of specified tax offences requires magistrate sanction before arrest or investigation, limiting summary enforcement.
Clause 492 of the Income Tax Bill, 2025 designates specified income tax offences as non-cognizable for purposes of the Bharatiya Nagarik Suraksha Sanhita, 2023 by means of a non-obstante provision. As a result, arrest cannot be effected without a magistrate-issued warrant and investigations into those offences require prior magistrate authorization, imposing judicial gatekeeping at the threshold of criminal proceedings and constraining unilateral police action in tax enforcement.
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Where a company commits an income-tax offence, the company and every person who was in charge of, and responsible to, the company for the conduct of the business at the time are statutorily deemed guilty and liable to prosecution, subject to a defence that the individual lacked knowledge or exercised all due diligence to prevent the offence; separate liability arises where the offence occurred with the consent, connivance, or neglect of officers, companies are punishable by fine while individuals may face full penal consequences, and definitions explicitly include firms and associations of persons.
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Enhanced penalties for repeat tax offences impose mandatory imprisonment and fine upon subsequent convictions under specified tax provisions.
A prior judicial conviction under any specified income tax offence triggers enhanced punishment: a person again convicted under any of those listed offences is subject to mandatory rigorous imprisonment and a mandatory fine, regardless of whether the subsequent conviction is for the same or a different listed offence; judicial discretion governs the precise sentence within the prescribed range, and the provision applies only after a prior conviction, not mere charge or prosecution.
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Abetment of false returns: broadened criminal exposure for facilitators with mandatory imprisonment and fines for culpable conduct.
Clause 484 criminalises abetment or inducement in making or delivering false tax-related statements, requiring that the abettor know the falsity or not believe the statement to be true. Punishment is tiered by the quantum sought to be evaded, with mandatory minimum imprisonment terms and fines, while procedural details and definitions such as "induce" are not specified, raising interpretive and evidentiary challenges. The clause mirrors prior law's structure but broad wording could implicate advisors and intermediaries absent judicial or legislative clarification.
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Falsification of accounting records: criminal liability for wilful false entries intended to enable another person to evade tax.
Clause 483 makes it an offence to wilfully make or cause false entries in books of account or other documents with intent to enable another person to evade tax, interest, or penalty; it requires proof of wilful conduct and intent but not proof that the beneficiary actually evaded liability, covers physical and electronic records relevant to tax proceedings, and prescribes rigorous imprisonment and a fine.
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False verification offences: criminal liability requires proved knowledge or recklessness, with graded imprisonment and mandatory fines.
The provision criminalises making false statements in any statutory verification or delivering false accounts where the person knows or believes the statement to be false or does not believe it to be true. Prosecution must prove this mental element beyond reasonable doubt. A graded penalty applies according to the financial impact of the falsity: substantial evasion attracts a higher term of rigorous imprisonment while other cases attract a lower term, and a fine is mandatorily imposed in addition to imprisonment.
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Willful failure to produce accounts triggers criminal liability including imprisonment and mandatory fine under the new tax provision.
Clause 481 establishes a penal offence for willful failure to produce accounts and documents called for by a notice under section 268(1), or willful non compliance with a direction under section 268(5), punishable by rigorous imprisonment for up to one year and liability to fine, with criminal prosecution requiring proof of willfulness beyond reasonable doubt and adherence to procedural safeguards; the clause mirrors prior law while leaving the fine quantum unspecified and raising interpretative issues regarding the threshold for willfulness and potential overlap with other provisions.
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Wilful failure to furnish return in search cases creates criminal liability, exposing taxpayers to imprisonment and fines.
Clause 480 penalises a person who, following a search and pursuant to a notice under section 294(1)(a), wilfully fails to furnish a return of income within the prescribed time. The provision requires proof of deliberate non compliance, treats the offence as criminal, and prescribes imprisonment along with a court levied fine, while prosecutions remain subject to ordinary criminal procedure and due process safeguards.
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Willful failure to file returns attracts graded criminal penalties including imprisonment and fine; an extended cure period limits prosecutions.
Clause 479 criminalizes the willful failure to furnish returns of income, applying to statutory filing obligations and notice-triggered duties, and establishes a graded criminal penalty regime tied to the tax that would have been evaded. It preserves a mens rea requirement, mandates imprisonment and fine across tiers, and provides exemptions including a one-year cure period to avoid prosecution and a de minimis exception for non-corporate taxpayers, while raising interpretative issues on the definition of wilfulness and calculation of evaded tax.
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Wilful tax evasion criminalisation: updated offence framework tightens penalties and preserves additional monetary sanctions for deliberate under-reporting.
Clause 478 establishes an offence of wilful attempt to evade tax, penalty, or interest, including under-reporting, distinguishing evasion of liability from evasion of payment. It prescribes graded sentences with discretionary fines and makes offenders liable to any other penalties under the Act. The provision's inclusive definition-false entries, false statements, wilful omissions, and other enabling circumstances-broadens prosecutorial scope while retaining the requirement to prove mens rea and preserving procedural safeguards for prosecution.
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Failure to remit tax collected at source: criminal liability retained with a filing linked safe harbour to encourage timely compliance.
Clause 477 criminalizes failure to remit tax collected at source, adopting a strict liability approach that imposes custodial sentence and fine while offering a statutory safe harbour where TCS is deposited on or before the time prescribed for filing the TCS statement, thereby aligning penal consequences and procedural exemption with the existing framework.
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Criminal liability for failure to remit TDS expands enforcement and broadens managerial responsibility, with strict penalties.
Clause 476 criminalizes failure to deposit taxes deducted or collected at source under Chapter XIX-B, extending liability to those who "pay or ensure payment" and prescribing rigorous imprisonment and fine. A proviso bars prosecution if the tax is credited to the Central Government on or before the time prescribed for filing the relevant TDS statement, while cross references to notes and tables expand the catalogue of covered transactions and may complicate interpretation.
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Fraudulent asset dissipation criminalized: intent-based offence bars transfers aimed at defeating prescribed tax recovery proceedings.
Clause 475 penalizes the fraudulent removal, concealment, transfer, or delivery of any property or interest with the intent to prevent it from being taken in execution of a prescribed recovery certificate, requiring proof of deceitful intent and applying to tangible and intangible interests; it retains the punitive framework of rigorous imprisonment and fine while replacing an explicit Second Schedule reference with a flexible "as prescribed" linkage to recovery procedures.
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Failure to provide inspection facilities criminalises obstruction during tax inspections, attracting imprisonment and fine under the new bill.
Clause 474 of the Income Tax Bill, 2025, makes it an offence to fail to afford an authorised officer the necessary facility to inspect books of account or other documents under section 247(1)(b)(ii), punishable with rigorous imprisonment for up to two years and a fine. The clause largely mirrors Section 275B of the 1961 Act, raises interpretive issues about the definition of "necessary facility" and mens rea, and creates potential overlaps with other penal provisions, while preserving continuity in enforcement policy.
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Contravention of tax authority orders may attract imprisonment and fine under the new income tax framework.
Clause 473 establishes an offence for contravening orders under section 247(1)(viii) or (4), penalising such contraventions with rigorous imprisonment up to the statutory maximum and a fine. The clause focuses on breaches concerning custody, retention, or handling of assets or records during investigative processes. It does not specify mens rea or procedural attributes such as cognizability or bailability, so application and defences will be shaped by judicial interpretation and the Bill's broader procedural framework.

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Comparison of Section 143 "Special provisions in respect of certain undertakings in North-Eastern States." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

3 September, 2025

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Section 143 Special provisions in respect of certain undertakings in North-Eastern States.

Income-tax Act, 2025

At a Glance

This document is the Bill version titled "Clause 143" within the Income Tax Bill, 2025 (old version). It provides special tax relief for specified undertakings in North-Eastern States by allowing a 100% deduction of profits and gains from eligible businesses for ten consecutive tax years starting from the initial tax year. It matters to taxpayers operating eligible businesses/units in the specified North-Eastern States and to the tax administration. Effective date or enactment date: Not stated in the document.

Background & Scope

Statutory hooks: Clause 143 (Bill) proposes a special deduction in respect of profits and gains of certain undertakings in the North-Eastern States. The provision references other statutory provisions - notably section 140(4), (5) and (6) (for re-establishment/reconstruction) and the second proviso to section 80-IB(4) of the Income-tax Act, 1961 - for interaction and limiting rules. Coverage: manufacturing/production of "eligible article or thing", substantial expansion of such manufacture/production, and carrying on specified "eligible business". Definitions provided in the clause include "eligible article or thing", "eligible business", "initial tax year", "North-Eastern States" (list of eight states), and "substantial expansion". The clause sets eligibility conditions and prescribes exclusivity of this deduction vis-`a-vis other Chapter deductions.

Statutory Provision Mode

Text & Scope

The clause allows, where gross total income includes profits and gains from a qualifying undertaking carrying on an eligible activity, a deduction equal to 100% of such profits and gains for ten consecutive tax years commencing with the "initial tax year". The clause applies only to undertakings which have, during the period beginning 1 April 2007 and ending with 1 April 2017, begun or begin in any of the specified North-Eastern States to-(a) manufacture/produce an eligible article/thing; (b) undertake substantial expansion to manufacture/produce an eligible article/thing; and (c) carry on an eligible business. The clause imposes pre-conditions on formation: the undertaking must not be formed by splitting up or reconstruction of an existing business; it must not be formed by transfer to a new business of previously used plant/machinery; an express exception to the first condition exists for re-establishment/reconstruction/revival in the circumstances set out in section 140(4).

Interpretation

The clause achieves its purpose by setting an unconditional quantitative benefit (100% deduction) subject to temporal, geographic and formation criteria. The text indicates legislative intent to incentivise industrial and service activity in the North-Eastern States for undertakings started in a discrete historical window (2007-2017). The reference to section 140(4) suggests Parliament intended to align the relief with pre-existing rules governing re-established undertakings, preventing arbitrary exclusion. The exclusivity clause (no deduction under any other section of this Chapter in relation to the profits and gains) evinces an intent to avoid double counting of deductions within the same Chapter.

Exceptions/Provisos

Carve-outs and conditions in the clause include:

  • Ineligibility where formation is by splitting up or reconstruction of an existing business (subject to the section 140(4) exception).
  • Ineligibility if formed by transferring previously used plant/machinery to new business (with application of section 140(5) and (6)).
  • Exclusion of certain articles: tobacco and manufactured tobacco substitutes (Ch. 24), pan masala (Ch. 21), plastic carry bags under 20 microns (Ministry of Environment notifications cited), and petroleum products (Ch. 27) produced by refineries.
  • Eligible businesses list excludes lower-tier hotels (below two-star), sets capacity thresholds (nursing homes >=25 beds), and prescribes scope for training institutes and IT hardware manufacturing among other items.
  • Aggregate limit: no deduction under this clause or under the second proviso to section 80-IB(4) of the Income-tax Act, 1961 shall together exceed ten tax years.

Illustrations

  • Example 1: A new two-star hotel in Assam commencing operations in the initial tax year within the specified period would, subject to meeting formation and other conditions, be entitled to claim a 100% deduction of profits for ten consecutive tax years starting that initial tax year. (Facts such as dates or compliance procedures: Not stated in the document.)
  • Example 2: An information-technology hardware manufacturer in Manipur that undertakes a "substantial expansion" (as defined: >=25% increase in plant & machinery book value measured on the first day of that tax year) within the qualifying period would begin the ten-year deduction period from the "initial tax year" defined as the tax year in which substantial expansion is completed.

Interplay

The clause expressly invokes sections 140(4)-(6) for treatment of certain formational exceptions and re-established entities, and it cross-refers to the second proviso to section 80-IB(4) of the Income-tax Act, 1961 for aggregate duration limits. No other Rules/Notifications/Circulars are cited in the clause text. Potential interpretive issues (from the text): the precise effect of the cross-reference to section 140 provisions and operationalising the ten consecutive years where an undertaking previously claimed another relief are to be determined by reference to those provisions; the clause itself does not provide procedural rules for claiming the deduction. (Any administrative procedure or forms: Not stated in the document.)

Differences between the two provisions and practical impact

  • Source/status: Document 1 is presented as "Section 143 of Income-tax Act, 2025" (enacted provision); Document 2 is labelled "Clause 143 of Income Tax Bill, 2025 - Old Version" (bill text).
    • Practical impact: One is framed as enacted legislation, the other as an earlier bill text; enacted text is authoritative. (This observation is drawn from the document headings.)
  • Temporal phrase regarding the terminal date of the eligible period: Document 1 (Act) states the period as "beginning on the 1st April, 2007 and ending before the 1st April, 2017"; Document 2 (Bill) states "beginning on the 1st April, 2007 and ending with the 1st April, 2017."
    • Practical impact: The Act's "ending before" excludes 1 April 2017 as a qualifying date for undertakings that begin on that day; the Bill's "ending with" would include that day. This difference affects the eligibility of undertakings that commenced on 1 April 2017.
  • Condition/exception structure for re-established/reconstructed undertakings: Document 2 separates an explicit clause (3)(c) stating that condition (a) shall not apply to undertakings formed by re-establishment/reconstruction/revival as referred in section 140(4); Document 1 integrates that exception by parenthetical qualification in clause (3)(a) (mirroring section 140(4) language).
    • Practical impact: Substantively similar, but drafting differs-Document 2 expresses the exception as a standalone clause, which may be clearer in the bill form; the Act embeds the exception within clause (3)(a). No clear substantive divergence in eligibility is evident from the texts themselves.
  • Typographical/wording differences: Document 2 contains a typographical truncation ("bio-technolog;") and slightly different punctuation/word order in certain subsections (e.g., placement of commas and "and").
    • Practical impact: Primarily drafting/typographical; the Act text corrects such errors. Absent substantive amendments, these do not alter legal effect other than clarity.
  • Other differences: Document 1 explicitly states "Irrespective of anything contained in this Act" in subsection (6) and adds minor variations in sub-section labeling (e.g., Document 1 uses "(8) For the purposes of this section,-" then lists definitions).
    • Practical impact: Largely stylistic drafting; material coverage of deductions, duration (ten tax years), ineligibility for other chapter deductions, and the list of eligible businesses/articles remain consistent across both texts.

Practical Implications

  • Compliance and risk areas: Taxpayers must ensure strict compliance with formation criteria (no splitting/reconstruction except as allowed u/s 140(4)), substantiate that plant and machinery are new (or otherwise satisfy section 140(5)/(6) requirements) and document the date of commencement or completion of substantial expansion to establish the "initial tax year". Absent such documentation, entitlement could be contested by the tax authorities. The clause itself does not state procedural safeguards or evidence standards. (Not stated in the document.)
  • Record-keeping/evidence points: Maintain contemporaneous records evidencing commencement dates, investment in plant & machinery (book values), particulars of any reconstruction or re-establishment, and capacity thresholds (e.g., nursing home bed count). Preserve invoices and fixed asset registers to evidence the 25% increase for "substantial expansion". The clause does not set evidentiary standards or audit procedures. (Not stated in the document.)

Key Takeaways

  • The provision grants a 100% deduction of profits and gains from eligible activities in North-Eastern States for ten consecutive tax years starting from the "initial tax year".
  • Eligibility is confined to undertakings begun (or substantially expanded) within a discrete window (1 April 2007 to 1 April 2017 as per the Bill text) - timing is determinative; any variance in the terminal date materially affects eligibility for undertakings commencing on 1 April 2017.
  • Formation conditions bar benefits to undertakings formed by splitting/reconstruction or by transfer of used plant/machinery, subject to exceptions aligning with section 140 provisions.
  • Certain goods (tobacco, pan masala, specified plastic bags, refinery products) are excluded; the clause specifies a closed list of eligible businesses with capacity/quality thresholds.
  • The deduction is exclusive: no other deduction under the same Chapter can be claimed in relation to the same profits and gains; aggregate relief periods (this clause + section 80-IB(4) second proviso) cannot exceed ten tax years.
  • The Bill text contains minor drafting defects (e.g., "bio-technolog;") and differs from the Act text in a temporal phrase ("ending with" vs "ending before") and in clause structuring; such differences can have concrete eligibility consequences.
  • Procedural, evidentiary and effective date details are not provided in the Bill text. (Not stated in the document.)

Full Text:

Section 143 Special provisions in respect of certain undertakings in North-Eastern States.

Topics

Acts Income Tax