The Finance Bill, 2025, introduces significant changes to penalty provisions under the Income Tax Act. Sections 271C, 271CA, 271D, 271DA, 271DB, and 271E will now allow penalties to be imposed by the Assessing Officer, replacing the current authority of the Joint Commissioner. This is subject to prior approval from the Joint Commissioner when the penalty amount exceeds the threshold set under section 274(2). To ensure consistency, corresponding amendments are proposed for appealable orders under section 246A. Additionally, section 271BB, which penalized failure to subscribe to eligible capital issues under section 88A (now omitted), is proposed to be repealed as it is obsolete. These amendments aim to streamline penalty processes and align the authority with the assessing entity. All proposed changes will take effect from April 1, 2025.
Budget 2025: Certain penalties to be imposed by the Assessing Officer
Sections 271C, 271CA, 271D, 271DA, 271DB and 271E of the Act, inter-alia, provide that penalty under these sections shall be imposed by the Joint Commissioner. Though, assessment in such cases were being made by the Assessing Officer, penalty under these sections were being imposed by the Joint Commissioner.
2. In order to rationalize the process, it is proposed to amend sections 271C, 271CA, 271D, 271DA, 271DB and 271E of the Act so that penalties under these sections shall be levied by the Assessing Officer in place of Joint Commissioner, subject to the provisions of sub-section (2) of section 274 of the Act. Thus, Assessing Officer shall take the prior approval of Joint Commissioner for the passing of penalty order, where penalty amount exceeds the limit specified in sub-section (2) of section 274 of the Act.
3. It is further proposed to make consequential amendment in clause (n) of sub-section (1) of section 246A of the Act.
4. Section 271BB of the Act provides the penalty for the failure to subscribe to the eligible issue of capital. It further provides that, any person who fails to subscribe any amount of subscription to the units issued under any scheme referred to in sub-section (1) of section 88A of the Act to the eligible issue of capital under that sub-section within the period of six months specified therein, may be directed by the Joint Commissioner to pay, by way of penalty, a sum equal to twenty per cent of such amount. However, section 88A has already been omitted vide Finance (No. 2) Act, 1996 with retrospective effect from 1st April, 1994. In the absence of the parent section, relevance of the penalty section in the case of any failure does not exist. Therefore, it is proposed to omit the section 271BB of the Act.
5. These amendments will take effect from the 1st day of April, 2025.
[Clauses 69, 76, 77, 78, 79, 80, 81 & 82]
Extract of Relevant Clauses of Finance Bill, 2025
Clause 68 of the Bill seeks to omit section 206CCA of the Income-tax Act relating to special provision for collection of tax at source for non-filers of income-tax return.
This amendment will take effect from 1st April, 2025.
Clause 69 of the Bill seeks to amend section 246A of the Income-tax Act relating to appealable orders before Commissioner (Appeals).
Clause (ja) of sub-section (1) of the said section provides that an order of imposing or enhancing penalty under sub-section (1A) of section 275 may be appealed before the Commissioner (Appeals).
It is proposed to amend the said clause so as to provide that an order of imposing or enhancing penalty under sub-section (2) of section 275 may be appealed before the Commissioner (Appeals).
It is also proposed to consequentially amend clause (n) of sub-section (1) of the said section so as to omit the words “made by a Deputy Commissioner”.
These amendments will take effect from 1st April, 2025.
Clause 76 of the Bill seeks to omit the section 271BB of the Income-tax Act relating to failure to subscribe to the eligible issue of capital.
The said section provides that, any person who fails to subscribe any amount of subscription to the units issued under any scheme referred to in sub-section (1) of section 88A to the eligible issue of capital under that sub-section within the period of six months specified therein, may be directed by the Joint Commissioner to pay, by way of penalty, a sum equal to twenty percent of such amount.
Section 88A has been already omitted vide Finance (No.2) Act, 1996 with retrospective effect from 1st April, 1994. In the absence of the parent section, relevance of any section on penalty, does not exist.
It is, therefore, proposed to omit section 271BB.
This amendment will take effect from 1st April, 2025.
Clause 77 of the Bill seeks to amend the section 271C of the Income-tax Act relating to penalty for failure to deduct tax at source.
Sub-section (2) of the said section provides that any penalty under sub-section (1) shall be imposed by the Joint Commissioner.
It is proposed to insert a proviso in the said sub-section so that such penalty shall be imposed by the Assessing Officer in place of Joint Commissioner on or after 1st day of April, 2025 subject to the provisions of sub-section (2) of section 274.
This amendment will take effect from 1st April, 2025.
Clause 78 of the Bill seeks to amend the section 271CA of the Income-tax Act relating to penalty for failure to collect tax at source.
Sub-section (2) of the said section provides that penalty under sub-section (1) shall be imposed by the Joint Commissioner.
It is proposed to insert a proviso in the said sub-section so that such penalty shall be imposed by the Assessing Officer in place of Joint Commissioner on or after the 1st day of April, 2025 subject to the provisions of sub-section (2) of section 274.
This amendment will take effect from 1st April, 2025.
Clause 79 of the Bill seeks to amend the section 271D of the Income-tax Act relating to penalty for failure to comply with the provisions of section 269SS.
Sub-section (2) of said section provides that penalty under sub-section (2) shall be imposed by the Joint Commissioner.
It is proposed to insert a proviso in the said sub-section so that such penalty shall be imposed by the Assessing Officer in place of Joint Commissioner on or after the 1st day of April, 2025 subject to the provisions of sub-section (2) of section 274.
This amendment will take effect from 1st April, 2025.
Clause 80 of the Bill seeks to amend the section 271DA of the Income-tax Act relating to penalty for failure to comply with the provisions of section 269ST.
Sub-section (2) of the said section provides that penalty under sub-section (1) shall be imposed by the Joint Commissioner.
It is proposed to insert a proviso in the said sub-section so that such penalty shall be imposed by the Assessing Officer in place of Joint Commissioner on or after the 1st day of April, 2025 subject to the provisions of sub-section (2) of section 274.
This amendment will take effect from 1st April, 2025.
Clause 81 of the Bill seeks to amend the section 271DB of the Income-tax Act relating to penalty for failure to comply with the provisions of section 269SU.
Sub-section (2) of said section provides that any penalty under sub-section (1) shall be imposed by the Joint Commissioner.
It is proposed to insert a proviso in the said sub-section so that such penalty shall be imposed by the Assessing Officer in place of Joint Commissioner on or after the 1st day of April, 2025 subject to the provisions of sub-section (2) of section 274.
This amendment will take effect from 1st April, 2025.
Clause 82 of the Bill seeks to amend the section 271E of the Income-tax Act relating to penalty for failure to comply with the provisions of section 269T.
Sub-section (2) of said section provides that any penalty under sub-section (1) shall be imposed by the Joint Commissioner.
It is proposed to insert a proviso in the said sub-section so that such penalty shall be imposed by the Assessing Officer in place of Joint Commissioner on or after the 1st day of April, 2025 subject to the provisions of sub-section (2) of section 274.
This amendment will take effect from 1st April, 2025.
Extract of Relevant Amendment Proposed by Finance Bill, 2025
68. Omission of section 206CCA.
Section 206CCA of the Income-tax Act shall be omitted.
76. Omission of section 271BB.
Section 271BB of the Income-tax Act shall be omitted. Omission of section 271BB.
77. Amendment of section 271C.
In section 271C of the Income-tax Act, in sub-section Amendment of
(2), the following proviso shall be inserted, namely:––
“Provided that any penalty under sub-section (1) on or after the 1st day of April, 2025, shall be imposed by the Assessing Officer.”.
78. Amendment of section 271CA.
In section 271CA of the Income-tax Act, in sub-section (2), the following proviso shall be inserted, namely:––
“Provided that any penalty under sub-section (1), on or after the 1st day of April, 2025, shall be imposed by the Assessing Officer.”.
79. Amendment of section 271D.
In section 271D of the Income-tax Act, in sub-section (2), the following proviso shall be inserted, namely:––
“Provided that any penalty under sub-section (1), on or after the 1st day of April, 2025, shall be imposed by the Assessing Officer.”.
80. Amendment of section 271DA.
In section 271DA of the Income-tax Act, in sub-section (2), the following proviso shall be inserted, namely:––
“Provided that any penalty under sub-section (1) on or after the 1st day of April, 2025, shall be imposed by the Assessing Officer.”.
81. Amendment of section 271DB.
In section 271DB of the Income-tax Act, in sub-section (2), the following proviso shall be inserted, namely:––
“Provided that any penalty under sub-section (1) on or after the 1st day of April, 2025, shall be imposed by the Assessing Officer.”.
82. Amendment of section 271E.
In section 271E of the Income-tax Act, in sub-section (2), the following proviso shall be inserted, namely:––
“Provided that any penalty under sub-section (1) on or after the 1st day of April, 2025, shall be imposed by the Assessing Officer.”.
