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

Introduction

Section 465 lists separate procedural failures, with a ₹10,000 amount for each default in sub-section (1) and ₹500 for each continuing day under sub-section (2). The relevant officer and any cap depend on the particular failure, so the notice must be matched to the correct clause.

Key takeaways

₹10,000 penalty - one-off defaults (sub-section 1)

A person is liable to a penalty of ₹10,000 for each of the following defaults or failures:

• Being legally bound to state the truth of any matter touching the subject of his assessment, refusing to answer any question put to him by an income-tax authority in the exercise of its powers under the Act.
• Refusing to sign any statement made by him in the course of any proceedings under the Act, which an income-tax authority may legally require him to sign.
• Being issued a summons under section 246(1) to attend and give evidence, or to produce books of account or other documents at a certain place and time, and omitting to attend or produce them.
• Failing to comply with a notice under section 268(1) or 270(8), or failing to comply with a direction issued under section 268(5).

₹500-per-day penalty - continuing failures (sub-section 2)

A person is liable to a penalty of ₹500 for every day during which the following failures continue, where that person fails to:

• Comply with a notice under section 175(7).
• Give notice of discontinuance of business or profession as required by section 320(3).
• Furnish in due time any of the returns, statements or particulars mentioned in section 252 or 397(3) or 507.
• Allow inspection of any register referred to in section 255, or of any entry in it, or allow copies of that register or entry to be taken.
• Furnish the return of income as required under section 263(1)(a)(iii) or (iv), or furnish it within the time allowed and in the manner required under section 263(1) and (2).
• Deliver, or cause to be delivered in due time, a copy of the declaration required under section 393(7).
• Furnish a certificate under section 395(4).
• Deduct and pay tax under section 416(3).
• Furnish a statement under section 392(5)(a).
• Deliver, or cause to be delivered in due time, a copy of the declaration required under section 394(3).
• Deliver, or cause to be delivered, the statement within the time specified in section 397(3)(b).
• Deliver, or cause to be delivered, a statement within the time as may be prescribed under section 397(3)(e).
• Deliver, or cause to be delivered, a statement within the time as may be prescribed under section 397(3)(g)(i).

Cap linked to tax deductible or collectible

For failures relating to a declaration required under section 393(7), a certificate as required under section 395(4), and statements under section 397(3)(b) or (e), the amount of penalty shall not exceed the amount of tax deductible or collectible.

Who imposes the penalty

Any penalty under sub-section (1) or (2) is imposed as follows:

• Where the contravention, failure or default occurs in the course of a proceeding before an income-tax authority not below the rank of Joint Director or a Joint Commissioner - by that income-tax authority.
• Under sub-section (1)(d) - by the income-tax authority who had issued the notice or direction in question.
• Under sub-section (2)(f) - by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
• In any other case - by the Joint Director or the Joint Commissioner.

Meaning of "income-tax authority" in this section

"Income-tax authority" includes a Principal Director General or Director General, Principal Director or Director, Joint Director and an Assistant Director or Deputy Director, while exercising the powers vested in a court under the Code of Civil Procedure, 1908, when trying a suit in respect of the matters specified in section 246(1).

Step-by-step flow for applying Section 465

1. 1

   Is the default one of the one-time defaults in Section 465(1)?

   These are refusing to answer a question, refusing to sign a statement, not attending or producing documents under a summons under section 246(1), or not complying with a notice under section 268(1) or 270(8) or a direction under section 268(5).

   • Yes: Penalty of ₹10,000 for each default; then go to the next step to check for any Section 465(2) failure.
   • No: Go to the next step.
2. 2

   Is it a continuing failure listed in Section 465(2)?

   Examples are notices under section 175(7), returns or statements under sections 252, 397(3) or 507, the return under section 263, statements under section 397(3)(b), (e) or (g)(i), and the other items in clauses (a) to (m).

   • No: No Section 465(2) penalty. If step 1 found a Section 465(1) default, skip to step 4; otherwise Section 465 does not apply.
   • Yes: Penalty of ₹500 for every day the failure continues; go to the next step.
3. 3

   Does the Section 465(3) cap apply?

   For a declaration under section 393(7), a certificate under section 395(4), and statements under section 397(3)(b) or (e), the penalty cannot exceed the tax deductible or collectible.

4. 4

   Who imposes the penalty?

   Under Section 465(4): the authority (not below Joint Director or Joint Commissioner) before whom the default occurs; for Section 465(1)(d), the authority that issued the notice or direction; for Section 465(2)(f), the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner; otherwise the Joint Director or Joint Commissioner.

5. 5

   Check for reasonable cause

   Section 470 covers Section 465(1)(c), 465(1)(d) and 465(2) only. Refusing to answer (clause (1)(a)) or refusing to sign (clause (1)(b)) is not listed there.

Practical checklist

Glossary

Continuing default

A failure measured by each day it continues under the specified clauses of section 465(2).

Summons

A requirement under section 246(1) to attend or produce books or documents, addressed in section 465(1)(c).

Frequently asked questions