Penalty for failure to submit statement under section 505

Section 460 — PENALTY FOR FAILURE TO SUBMIT STATEMENT UNDER SECTION 505

Section 460 of the Income-tax Act, 2025 corresponds to s. 271GC of the Income-tax Act, 1961.

STATUTORY ARCHITECTURE

Section 460 is the penalty provision for failure to furnish the statement required by s. 505. Section 505 requires every non-resident having a liaison office in India, set up as per the guidelines issued by the Reserve Bank of India under the Foreign Exchange Management Act, 1999, to prepare and deliver to the Assessing Officer having jurisdiction a statement in respect of its activities in a tax year, in the form, with the particulars and within the period prescribed. If a person required to furnish that statement fails to do so within the prescribed period, the Assessing Officer may impose a penalty computed by reference to the length of the default.

KEY ELEMENTS

• Person liable: any person required to furnish a statement under s. 505.
• Default: failure to furnish the statement within the period prescribed under s. 505.
• Authority: the Assessing Officer, who "may impose" the penalty.
• Clause (a): ₹1000 for every day for which the failure continues, if the period of failure does not exceed three months.
• Clause (b): ₹100000 in any other case.

CHANGES FROM THE 1961 ACT

The section corresponds to s. 271GC of the 1961 Act and is substantively the same. Visible differences: the statement is the one under s. 505 instead of s. 285 of the 1961 Act; the amounts are expressed in figures (₹1000 and ₹100000) instead of words ("one thousand rupees" and "one lakh rupees"); and the operative words "may direct that such person shall pay, by way of penalty, a sum of" become "may impose on him, a penalty of". The three-month threshold and the per-day structure are unchanged.

PRACTITIONER NOTES

• The penalty is linked to the prescribed period under s. 505, so the prescribed due date for the statement is the starting point for measuring the failure.
• Where the failure does not exceed three months, the penalty accrues day by day; in any other case a fixed amount of ₹100000 applies instead of the daily amount.
• The wording "may impose" makes the levy a matter for the Assessing Officer's decision rather than an automatic consequence.
• The obligation under s. 505 is framed for a non-resident having a liaison office in India, and relates to its activities in a tax year.

CROSS-REFERENCES

• s. 505 — the statement by a non-resident having a liaison office, and the prescribed period, whose breach triggers the penalty.
• s. 271GC of the 1961 Act — corresponding provision.
• s. 285 of the 1961 Act — the statement referred to in s. 271GC.