Offences by companies
[Section-487 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 487(1) of Income Tax Act 2025
487(1) If an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
Section 487(2) of Income Tax Act 2025
487(2) The provisions of sub-section (1) shall not apply if the person referred in the said sub-section proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
Section 487(3) of Income Tax Act 2025
487(3) If it is proved that an offence under this Act has been committed by a company with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, then irrespective of the provisions of sub-section (1), such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Section 487(4) of Income Tax Act 2025
487(4) Where an offence committed by a company under this Act is punishable with imprisonment and fine, then, without prejudice to the provisions contained in sub-section (1) or (3), such company shall be punished with fine and every person referred to in sub-section (1), or the director, manager, secretary or other officer of the company referred to in sub-section (3), shall be liable to be proceeded against and punished as per the provisions of this Act.
Section 487(5) of Income Tax Act 2025
487(5) In this section,—
- 487(5)(a) “company” means a body corporate and includes—
- (i) a firm; and
- (ii) an association of persons or a body of individuals, whether incorporated or not; and
- 487(5)(b) “director”, in relation to—
- (i) a firm, means a partner in the firm;
- (ii) any association of persons or a body of individuals, means any member controlling the affairs thereof.
FAQs on Section 487 of Income Tax Act 2025
What happens if a company commits an offence under the Income Tax Act, 2025?
If a company commits an offence under this Act, the company itself and every person who was in charge of and responsible for the conduct of its business at the time of the offence are deemed to be guilty and can be proceeded against and punished accordingly.
Can a responsible person avoid liability for a company’s offence?
Yes, a responsible person can avoid liability if they prove that the offence was committed without their knowledge or that they exercised all due diligence to prevent its commission.
Are directors and officers also liable if the offence was due to their consent or negligence?
Yes, if the offence was committed with the consent, connivance, or due to the neglect of a director, manager, secretary, or other officer of the company, they are deemed guilty and are liable to be punished.
What if the offence is punishable with both imprisonment and fine?
In such a case, the company shall be punished with fine, and the individuals held responsible under sub-sections (1) or (3) shall be proceeded against and punished as provided in the Act.
Who is considered a “company” under Section 487?
A “company” includes a body corporate, a firm, and an association of persons or a body of individuals, whether incorporated or not.
Who is considered a “director” under this section?
In the case of a firm, a “director” means a partner. For an association of persons or body of individuals, it refers to any member controlling its affairs.
Does the liability apply only to companies incorporated under company law?
No, the definition includes not only incorporated bodies but also firms and unincorporated associations or bodies of individuals.
Can multiple individuals be prosecuted for the same offence by a company?
Yes, both the company and multiple individuals responsible at the relevant time, including those whose consent or neglect led to the offence, can be prosecuted.
What is meant by “due diligence” in avoiding liability?
Due diligence refers to all reasonable steps and precautions taken by a person to prevent the commission of the offence.
Is ignorance a valid defense for persons in charge of the company?
Yes, but only if they can prove that the offence was committed without their knowledge and despite their diligent efforts to prevent it.
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