Penalty in respect of certain income (omitted)

Section 443 — PENALTY IN RESPECT OF CERTAIN INCOME (OMITTED)

Section 443 was omitted by the Finance Act, 2026, w.e.f. 1-4-2026. Before its omission it corresponded to s. 271AAC of the Income-tax Act, 1961.

STATUTORY ARCHITECTURE

Section 443 has been omitted by the Finance Act, 2026, w.e.f. 1-4-2026. The commentary below describes the pre-2026 position, from the text reproduced in the footnote to the Act. The section provided for a penalty where the income determined in an assessee's case for any tax year included income referred to in s. 102, 103, 104, 105 or 106.

KEY ELEMENTS

Pre-2026 position (text before omission w.e.f. 1-4-2026):

• Sub-section (1): the Assessing Officer, the Joint Commissioner (Appeals) or the Commissioner (Appeals) could impose a penalty of 10% of the tax payable under s. 195(1)(i), where the income determined for any tax year included income referred to in s. 102, 103, 104, 105 or 106.
• Sub-section (2): the penalty was payable in addition to the tax payable under s. 195.
• Sub-section (3): no penalty was leviable to the extent such income had been included by the assessee in the return of income furnished under s. 263 and the tax as per s. 195(1)(i) had been paid on or before the end of the relevant tax year.
• Sub-section (4): no penalty under s. 439 was to be imposed on the assessee in respect of income referred to in sub-section (1).

CHANGES FROM THE 1961 ACT

Before its omission, s. 443 corresponded to s. 271AAC of the 1961 Act. Comparing the two texts: the rate of 10% is the same; the 1961 references to s. 68, 69, 69A, 69B, 69C and 69D, s. 115BBE and s. 139 appear as s. 102 to 106, s. 195 and s. 263; the proviso became sub-section (3); and where s. 271AAC(2) of the 1961 Act barred penalty under s. 270A of the 1961 Act, sub-section (4) barred penalty under s. 439. The 1961 text also contained a non obstante clause ("notwithstanding anything contained in this Act other than the provisions of section 271AAB") and applied ss.274 and 275 of the 1961 Act to the penalty; neither appears in the pre-2026 text of s. 443.

PRACTITIONER NOTES

• With effect from 1-4-2026, s.443 is no longer in the Act. Income referred to in s.195(1)(b), that is, income under s.102 to 106 determined by the Assessing Officer and not reflected in the return, is now a case of misreporting under s.439(11)(g), inserted by the Finance Act, 2026 from the same date. It attracts penalty at 200 per cent of the tax payable on the under-reported income (s.439(10)), not 10 per cent, and the bar on s.439 penalty in former sub-section (4) has gone with the section. Waiver under s.440(1)(c) is available on payment of additional income-tax of 120 per cent of that tax. The omission and the 2025 Act both take effect from 1-4-2026, and penalties for tax years beginning before that date remain under the 1961 Act (s.536(2)(d)), so s.443 appears never to have applied to any tax year.
• Under the pre-2026 text, the penalty could be avoided to the extent the income was offered in the return under s. 263 and the tax under s. 195(1)(i) was paid by the end of the relevant tax year; both conditions had to be met.

CROSS-REFERENCES

• s. 102, 103, 104, 105 and 106 — the income that attracted the penalty.
• s. 195(1)(i) — the tax on which the 10% penalty was computed.
• s. 263 — the return of income in which the income had to be included to avoid the penalty.
• s.439 — the penalty for under-reporting and misreporting of income, formerly barred in respect of the same income by sub-section (4); since 1-4-2026 such income is misreporting under s.439(11)(g).
• s. 271AAC of the 1961 Act — the corresponding provision.