Penalty for failure to comply with provisions of section 185
[Section-450 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 185, the Assessing Officer may impose on him, a penalty equal to the amount of the loan or deposit or specified sum so taken or accepted.
FAQs on Section 450 of Income Tax Act 2025
What is Section 450 of the Income Tax Act, 2025 about?
Section 450 prescribes a penalty for failure to comply with the provisions of section 185, which relates to the acceptance or taking of loans, deposits, or specified sums.
When does Section 450 come into effect?
Section 450 comes into effect from 1st April, 2026.
What triggers a penalty under Section 450?
A penalty is triggered if a person takes or accepts any loan, deposit, or specified sum in contravention of Section 185.
Who can impose the penalty under Section 450?
The penalty under Section 450 may be imposed by the Assessing Officer.
What is the amount of penalty levied under Section 450?
The penalty is equal to the amount of the loan, deposit, or specified sum that was taken or accepted in violation of Section 185.
Is there any discretion in the amount of penalty under Section 450?
No, the penalty is fixed and equal to the contravened amount.
Does Section 450 apply to both individuals and entities?
Yes, Section 450 applies to any “person” as defined in the Act, which includes individuals, companies, firms, and other entities.
Can a person be penalized under Section 450 even if the transaction is later reversed?
Yes, the penalty applies for the act of taking or accepting the amount in contravention, irrespective of later reversal.
What is considered a “specified sum” under Section 450?
A specified sum refers to any sum as defined under Section 185 of the Act, which must be consulted for clarity.
Can a person appeal against the penalty under Section 450?
Yes, the person penalized may appeal as per the provisions related to appeal procedures in the Act.
Does Section 450 require a prior opportunity of being heard before penalty is imposed?
Yes, principles of natural justice would generally require that the person be given an opportunity to be heard before the penalty is imposed.
Is there any minimum threshold for the penalty under Section 450?
No, there is no minimum threshold; the penalty equals the amount of the contravention itself.
Is the penalty under Section 450 compoundable?
This depends on the compounding provisions under the Act, which need to be referred to separately.
Can Section 450 be invoked for genuine business transactions?
If such transactions violate the specific prohibitions under Section 185, they may still attract penalty under Section 450 regardless of intent.
Is there a limitation period for initiating penalty under Section 450?
The general limitation provisions for penalties under the Act would apply, but specific details must be verified from procedural sections.
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