Section 465 Penalty for failure to answer questions, sign statements, furnish information, returns or statements, allow inspections, etc.

Income-tax Act, 2025

At a Glance

The document is Clause 465 of the Income Tax Bill, 2025 - (Old Version), which prescribes penalties for failures such as refusal to answer questions, failure to sign statements, omission to produce documents, and defaults in furnishing returns or allowing inspections. It matters because it prescribes monetary sanctions and administrative authorities for enforcement, affecting taxpayers, withholding agents and income-tax authorities. Effective date or enactment timing: Not stated in the document.

Background & Scope

Statutory hook: Clause 465 of the Income Tax Bill, 2025 (Old Version). The Clause falls under the chapter titled "PENALTIES" within the Bill. Coverage: penal consequences for (1) discrete defaults attracting a fixed penalty and (2) continuing failures attracting a daily penalty. The text lists specific sections (e.g., 175(7), 246(1), 263(1) etc.) whose non-compliance triggers penalties. Definitions: "income-tax authority" is defined in sub-section (5) as including various hierarchical offices and officers when exercising powers vested in a court under the Code of Civil Procedure, 1908, in respect of matters in section 246(1). No other definitions are provided in the Clause.

Statutory Provision Mode

Text & Scope

Clause 465 is structured in five sub-sections. Sub-section (1) prescribes a fixed penalty of ten thousand rupees for each default where a person (a) refuses to answer questions legally required to be answered in assessment proceedings, (b) refuses to sign a statement the authority may legally require, (c) omits to attend or produce books/documents in response to a summons issued u/s 246(1), or (d) fails to comply with specified notices or directions (explicitly: notices u/s 268(1) or (2), section 270(8), or direction u/s 268(5)).

Sub-section (2) prescribes a continuing penalty of five hundred rupees per day for a set of delays or omissions, including failure to comply with a notice u/s 175(7); failure to give a notice of discontinuance u/s 320(3); failure to furnish returns/statements/particulars mentioned in section 252, section 397(3) or section 507; refusal to allow inspection of registers u/s 255; delays in furnishing return of income referred to in section 263(1)(a)(iii) or (iv) or in the manner/time required by sections 263(1) and (2); failure to deliver a copy of declaration mentioned in section 393(6); failure to furnish a certificate u/s 395(4); failure to deduct and pay tax u/s 416(3); failure to furnish a statement u/s 389(5)(a); failure to deliver a copy of the declaration referred to in section 394(2); and failures relating to statements u/s 397(3)(g) or 397(3)(e) as specified.

Sub-section (3) caps the penalty amounts for certain failures, providing that the penalty shall not exceed the amount of tax deductible or collectible for failures concerning (a) declaration mentioned in section 393(6); (b) certificate u/s 395(4); and (c) statements u/s 397(3)(b) or (e).

Sub-section (4) allocates authority to impose penalties under sub-sections (1) and (2): where the contravention occurs in a proceeding before an income-tax authority not below Joint Director/Joint Commissioner, that authority shall impose the penalty; for cases under sub-section (1)(d) the authority who issued the notice/direction will impose the penalty; in cases of sub-section (2)(f) the Principal Chief Commissioner/Chief Commissioner/Principal Commissioner/Commissioner shall impose the penalty; and in other cases the Joint Director or Joint Commissioner shall impose the penalty.

Sub-section (5) defines "income-tax authority" for the purposes of the Clause, including officers up to Director General/Principal Director General and officers exercising Code of Civil Procedure powers when trying suits in respect of matters in section 246(1).

Interpretation

The Clause employs a textual, instrument-like approach: it lists specific defaults and connects each to a monetary penalty. The provisions indicate an intent to provide both lump-sum penalties for discrete refusals/omissions and daily penalties for continuing defaults. The cap in sub-section (3) suggests a legislative intent to limit liability where the failure relates to amounts that are themselves deductible or collectible taxes. The allocation of authority in sub-section (4) reflects an administrative intent to ensure penalties are imposed by officers who are on record in the relevant proceedings or who occupy specified seniority levels. No express legislative history or purposive statement is provided in the Clause.

Exceptions/Provisos

No separate proviso clauses are present except the cap in sub-section (3), which functions as a monetary limitation for specified failures. There are no express exceptions for reasonable cause, waiver, or mitigation in the Clause. The Clause does not state any appeal route, remission power, or reconciliation mechanism within its text. Not stated in the document: any criteria for determining when a refusal is justified or procedural safeguards prior to imposition.

Illustrations

• Example 1: A taxpayer refuses to answer questions in an assessment proceeding when legally bound to state the truth. Under sub-section (1)(a) the taxpayer is liable to a penalty of Rs.10,000 for that default.
• Example 2: An employer delays furnishing a statement u/s 397(3)(e); for each day of delay the employer incurs Rs.500 per day until delivery, subject to imposition by the authority specified in sub-section (4). (No further procedural detail is provided.)
• Example 3: A person fails to deliver a copy of the declaration mentioned in section 393(6); sub-section (3) would cap the penalty such that it cannot exceed the amount of tax deductible/collectible in relation to that failure.

Interplay

The Clause cross-references multiple sections (e.g., 175, 246, 263, 320, 393, 395, 397, 416 etc.), indicating that it operates in conjunction with substantive and procedural provisions elsewhere in the Bill/Act. The Clause itself does not reproduce or explain the content of those sections; hence the practical application of these penalties requires consultation of the referenced provisions. Not stated in the document: any interaction with other penalty provisions (e.g., whether these penalties are cumulative with other penalties) or explicit primacy/alternative applicability rules.

Practical Implications

• Compliance and risk areas: Entities and individuals who are required to respond to income-tax proceedings, produce books, sign statements, allow inspections, furnish returns, deliver declarations, deduct/pay tax, or furnish certificates face fixed or daily monetary exposures for non-compliance. The lack of an express procedural safeguard in the Clause implies that the administrative imposition of penalties could proceed on the basis of the officer's determination of default.
• Record-keeping/evidence points: Because refusals, omissions and delays are actionable, taxpayers and agents should retain contemporaneous records showing service/compliance (dates of furnishing returns, copies of declarations delivered, proof of production of documents, correspondence responding to notices). Not stated in the document: any prescribed forms, notices or proof standards for contesting penalty imposition.

Key Takeaways

• Clause 465 prescribes a Rs.10,000 fixed penalty for specific discrete defaults including refusal to answer, refusal to sign, failure to attend/produce documents and non-compliance with certain notices or directions.
• A continuing penalty of Rs.500 per day applies to a defined list of delays or failures, including non-furnishing of returns/statements, failure to allow inspection of registers, and failures relating to declarations and certificates.
• Penalties for some failures are capped by reference to the amount of tax deductible or collectible (sub-section (3)).
• Imposition authority is allocated by the Clause, with certain penalties to be imposed by the officer presiding over the relevant proceeding or by specified senior commissioners (sub-section (4)).
• The Clause cross-references multiple substantive sections; effective application requires reading those provisions. The Clause does not provide procedural safeguards, appeal/rectification mechanisms, or mitigation criteria within its text.

Differences between Section 465 of the Income-tax Act, 2025 and Clause 465 of the Income Tax Bill, 2025 - (Old Version)

Practical impact of these changes:

• Alteration of cross-references (e.g., 393(6) to 393(7), 389(5)(a) to 392(5)(a), 394(2) to 394(3), omission of 268(2)) changes the precise triggers for penalty. This can broaden or narrow scope depending on the substantive content of those referenced sections; precise impact requires reading the referenced sections. From the Clause alone, the changed numerical references create potential uncertainty and may shift which acts/omissions attract penalty.
• The Bill's inclusion of 268(2) (which is omitted in the Act) in sub-section (1)(d) in the Bill version would have created an additional trigger for the Rs.10,000 penalty; its omission in the Act narrows that particular limb.
• The rearrangement and expansion of timing-related items u/s 397(3) in the Act (adding sub-items and differing paragraph references) suggests a more granular allocation of penalties tied to specific sub-clauses, which may alter when the daily penalty applies and which officer imposes it. Practitioners must map the precise operative text of section 397(3) to determine the concrete effect.
• Overall: changes are technical and reference-specific but carry practical significance because penalty liability turns on exact statutory cross-references; stakeholders must verify the current Act text rather than relying on the Bill's old numbering.

Full Text:

Section 465 Penalty for failure to answer questions, sign statements, furnish information, returns or statements, allow inspections, etc.