Penalty for false entry, etc., in books of account
[Section-444 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 444(1) of Income Tax Act 2025
444(1) The Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals), may impose a penalty equal to the aggregate amount of false or omitted entry, where during any proceeding under this Act, it is found that in the books of account maintained by any person there is—
- 444(1)(a) a false entry; or
- 444(1)(b) an omission of any entry which is relevant for computation of total income of such person, to evade tax liability.
Section 444(2) of Income Tax Act 2025
444(2) Without prejudice to sub-section (1), the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) may impose a penalty equal to the aggregated amount of false or omitted entry, on any other person, who causes the person referred to in the said sub-section in any manner to make a false entry or omits or causes to omit any entry referred to in that sub-section.
Section 444(3) of Income Tax Act 2025
444(3) In this section, “false entry” includes use or intention to use—
- 444(3)(a) forged or falsified documents such as a false invoice or, in general, a false piece of documentary evidence; or
- 444(3)(b) invoice in respect of supply or receipt of goods or services or both issued by the person or any other person without actual supply or receipt of such goods or services or both; or
- 444(3)(c) invoice in respect of supply or receipt of goods or services or both to or from a person who does not exist.
FAQs on Section 444 of Income Tax Act 2025
What is the penalty under Section 444(1) for a false or omitted entry in books of account?
The penalty is equal to the aggregate amount of the false or omitted entry discovered during proceedings under the Act.
Who can impose the penalty under Section 444(1)?
The penalty can be imposed by the Assessing Officer, the Joint Commissioner (Appeals), or the Commissioner (Appeals).
What constitutes a false entry under Section 444(3)?
A false entry includes use or intention to use forged or falsified documents, fake invoices for non-existent supply or receipt of goods or services, or invoices involving fictitious persons.
Can a penalty be imposed on someone other than the person maintaining the books of account?
Yes, under Section 444(2), a penalty can also be imposed on any other person who causes or helps the main person to make a false entry or omit a relevant entry.
What is the quantum of penalty under Section 444(2) for persons other than the main person?
The penalty is equal to the aggregate amount of the false or omitted entry caused or facilitated.
Does omission of a relevant entry also attract penalty?
Yes, omission of any entry relevant for computation of total income with intent to evade tax liability also attracts penalty under Section 444(1).
What are examples of forged or falsified documents as per Section 444(3)(a)?
Examples include fake invoices or any other false documentary evidence presented as genuine.
Is the penalty under Section 444 limited to intentional acts only?
Yes, the section targets intentional false entries or omissions made to evade tax.
Are both goods and services covered under the term “false entry”?
Yes, false entries include fake invoices for goods, services, or both.
Is there any lower or upper limit prescribed for the penalty amount?
No specific monetary limits are prescribed; the penalty equals the aggregate value of the false or omitted entry.
Can the penalty be imposed during any type of proceeding under the Act?
Yes, the penalty can be imposed during any proceeding under the Income Tax Act, 2025.
Does Section 444 provide for any exceptions or reliefs from penalty?
No exceptions or reliefs are provided within the section itself; it imposes strict liability for false or omitted entries.
Can an appeal be made against a penalty imposed under Section 444?
While Section 444 itself doesn’t mention appeals, general appeal provisions under the Act would apply.
Is an invoice from a non-existent supplier considered a false entry?
Yes, as per Section 444(3)(c), such an invoice qualifies as a false entry.
Who is liable if a false entry is made on advice of an accountant or consultant?
The person maintaining the books is primarily liable under 444(1), and the advisor may also be liable under 444(2) if they caused or facilitated the entry.
