Amended and updated notes on section 278B of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to Offences by companies.
Chapter XXII (Sections 275A to 280D) of the Income Tax Act 1961 deals with the provisions related to offences and prosecutions. Section 278B of IT Act 1961 provides for Offences by companies.
Recently, we have discussed in detail section 278AB (Power of Principal Commissioner or Commissioner to grant immunity from prosecution) of IT Act 1961. Today, we learn the provisions of section 278B of Income-tax Act 1961. The amended provision of section 278B is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 278B of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962 as provided by Ministry of Law and Justice, Government of India.
Section-278B: Offences by companies
Section 278B(1) of Income Tax Act
Where 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:
Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he 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 278B(2) of Income Tax Act
Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed 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, 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 278B(3) of Income Tax Act
Where an offence under this Act has been committed by a person, being a company, and the punishment for such offence is imprisonment and fine, then, without prejudice to the provisions contained in sub-section (1) or sub-section (2), 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 (2), shall be liable to be proceeded against and punished in accordance with the provisions of this Act.
Explanation: For the purposes of this section,—
(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
(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.