From Structured Enforcement to Procedural Integrity - Completing the Prosecution Framework - Concluding Part 3

Law, like life, evolves. It matures not by becoming weaker, but by becoming wiser. The Finance Bill, 2026, reflects this evolution, a conscious movement from rigidity to reason and from automatic severity to calibrated accountability. In Part 1, we examined the proposed amendments to Sections 473 to 476 of the Income-tax Act, 2025, in which rigid custodial mandates were replaced with a graded sentencing framework aligned with the financial magnitude. In Part 2, we analysed Sections 477 to 479, where criminal consequences were further linked to wilful intent and objective monetary thresholds, ensuring that punishment corresponds to seriousness rather than operating mechanically.

In the present Part, we turn to Sections 480 to 485 and Section 494 of Chapter XXII, amended vide Clauses 100 to 105 of the Finance Bill, 2026. A careful reading of the Bill reveals a deliberate drafting pattern: where broader philosophical realignment was required, the legislature opted for substitution (Sections 480 and 481); where refinement alone sufficed, targeted amendments were introduced (Sections 482 to 485 and 494). While the unamended provisions primarily focused on protecting Government revenue through proportionate prosecution standards, the present group safeguards something equally fundamental, the integrity of verification, the truthfulness of records, and the orderly functioning of tax administration. A tax system rests not merely on assessment and recovery, but on transparency, discipline, and institutional credibility. These provisions, therefore, complete the prosecution framework.

The Income-tax Act, 2025, has not yet been brought into force and is scheduled to take effect on 1 April 2026. Consequently, all the amendments discussed in this three-part series — relating to Sections 473 to 485 and Section 494 — are also proposed to take effect from 1 April 2026.

Having outlined the legislative framework and effective date of implementation, we now proceed to examine the amended provisions section by section, beginning with Section 480

Section 480 - Failure to furnish a return of income setting forth undisclosed income

Section 480, as proposed to be substituted by Clause 100 of the Finance Bill, 2026, reads as follows:

480. If a person wilfully fails to furnish in due time the return of income, setting forth his undisclosed income for the block period, which is required to be furnished by notice given under section 294(1)(a) , he shall be punishable—

(a) with simple imprisonment for a term up to two years, or with fine, or with both, where the amount of tax exceeds fifty lakh rupees; or

(b) with simple imprisonment up to six months, or with fine, or with both, where the amount of tax exceeds ten lakh rupees but does not exceed fifty lakh rupees; or

(c) with fine, in any other case.

 Section 480 provides for prosecution where a person wilfully fails to furnish, within the prescribed time, the return of income setting forth undisclosed income for the block period, as required by notice under Section 294(1)(a). Unlike a regular return under Section 263(1), a block return arises in the context of search or requisition proceedings and relates specifically to income that has escaped normal disclosure. The compliance expectation in such cases is therefore significantly higher.

The offence under this section is narrowly defined. It is not triggered by mere delay or procedural lapse. It applies where a statutory notice has been issued requiring disclosure of undisclosed income for the block period and the person consciously and deliberately fails to comply. The expression “ wilfully fails ” is crucial. Criminal liability arises only where there is a conscious disregard of statutory obligation. Genuine hardship, confusion, or bona fide error would not automatically invite prosecution. The legislative emphasis remains on intention rather than mere default.

The Finance Bill, 2026, substitutes the existing provision and aligns it with the graded punishment structure now introduced across Chapter XXII. Punishment is no longer uniform or rigid. It is linked to the quantum of tax attributable to the undisclosed income.

This graded framework reflects the broader legislative shift visible throughout the amended prosecution provisions. Serious and substantial concealment may attract custodial exposure, while lower-value cases are confined to monetary penalty. The substitution of a rigid sentencing structure with proportional punishment underscores the movement from automatic severity to calibrated accountability.

It is important to distinguish this provision from Section 479. While Section 479 addresses wilful failure to furnish a regular return of income, Section 480 applies in a search-related context in which undisclosed income has already come within the statutory detection mechanism. The expectation of compliance is therefore more stringent, and deliberate silence in such circumstances undermines the integrity of the assessment process.

Illustrative Disclaimer

Illustrative examples used in this discussion are hypothetical in nature and are designed only to explain statutory provisions. They do not refer to any real person, entity, or transaction.

Illustration 11:
Akshay Ltd., upon receiving a notice under Section 294(1)(a), wilfully fails to file the block return disclosing undisclosed income involving tax of Rs 65.40 lakh. Since the tax exceeds Rs 50 lakh, prosecution may be initiated under Section 480, punishable with simple imprisonment up to two years, or fine, or both.

Section 481- Failure to comply with a direction of special audit or valuation

Section 481, as proposed to be substituted by Clause 100 of the Finance Bill, 2026, reads as follows:

481. If a person wilfully fails to comply with a direction issued to him under section 268 (5), he shall be punishable with simple imprisonment for a term up to six months, or with fine, or with both.

Section 481 provides that if a person wilfully fails to comply with a direction issued under Section 268(5), he shall be punishable with simple imprisonment for a term up to six months, or with fine, or with both.

To appreciate the scope of this provision, it is necessary to understand the statutory safeguards embedded in Section 268(5). A direction for special audit or inventory valuation is not issued mechanically. The Assessing Officer must form an opinion having regard to factors such as the nature and complexity of accounts, volume of transactions, doubts about correctness, multiplicity of entries, or the specialised nature of business activity, and must also consider the interests of the revenue. Further, such direction can be issued only after the assessee has been given a reasonable opportunity to be heard and with the prior approval of the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner.

Section 481 penalises only wilful non-compliance. The element of intention remains central. Mere delay, practical difficulty, or a legally sustainable challenge to the direction would not, by itself, warrant prosecution. However, deliberate refusal to comply with a lawfully issued and duly approved direction undermines the integrity of the assessment process and may invite criminal consequences. Unlike several other amended provisions in Chapter XXII , Section 481 does not introduce a graded punishment structure linked to monetary thresholds . The punishment remains uniform — simple imprisonment up to six months, or fine, or both. This reflects the character of the offence. The misconduct here lies in obstructing a statutory inquiry rather than in quantified tax evasion. The gravity arises from frustrating a legally sanctioned verification process designed to protect revenue.

The substitution of the earlier provision also aligns with the broader legislative shift from rigorous to simple imprisonment, reinforcing proportionality while preserving deterrence. The Finance Bill, 2026, continues to maintain a balance: procedural safeguards precede the direction, and criminal consequences follow only where there is conscious and deliberate defiance.

Illustration 12:

Rohit Industries Ltd. , having been given an opportunity to be heard and approved by the competent authority, is directed under Section 268(5) to undergo a special audit. The company deliberately refuses to comply with the direction. Such wilful non-compliance may attract prosecution under Section 481, punishable with simple imprisonment up to six months, or fine, or both.

Section 482- False statement in verification, etc.

Section 482, as proposed to be amended by Clause 101 of the Finance Bill, 2026, reads as follows:

482. If a person makes a statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable, —

(a) with simple imprisonment for a term up to two years, or with fine, or with both, where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds fifty lakh rupees; or

(b) with simple imprisonment for a term up to six months, or with fine, or with both, where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds ten lakh rupees but does not exceed fifty lakh rupees; or

 (c) with fine, in any other case.

Section 482 provides that if a person makes a statement in any verification under the Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable in accordance with the graded structure prescribed therein.

This provision safeguards the integrity of statutory declarations. Verification under the Act is not a procedural formality; it is a solemn affirmation of truth. When a person signs a return, statement, or report, they certify that the contents are true to the best of their knowledge and belief. A knowingly false verification strikes at the foundation of the self-assessment system.

The offence under Section 482 is clearly anchored in intention. The expressions “knows or believes to be false” and “does not believe to be true” make it evident that criminal liability arises only where there is conscious falsity. An inadvertent computational error, clerical omission, or bona fide interpretational dispute would not automatically attract prosecution. The law targets deliberate misrepresentation.

The Finance Bill, 2026, aligns the punishment framework with the broader graded model introduced across Chapter XXII. The severity of punishment is now linked to the amount of tax that would have been evaded if the false statement or account had been accepted as true. This ensures proportionality while preserving deterrence.

This aligns with the graded sentencing approach consistently adopted across the amended Chapter.

 Illustration 13: Shivay Kapoor knowingly submitted a verified statement that understated taxable income, which, if accepted, would have resulted in tax evasion of Rs 48 lakh. Such conduct may attract prosecution under Section 482, punishable with simple imprisonment up to six months, or fine, or both.

Section 482, therefore, reinforces a fundamental compliance principle: statutory verification carries legal responsibility. By retaining the requirement of conscious falsity and linking punishment to objective monetary thresholds, the Finance Bill, 2026, moderates sentencing without diluting the seriousness of deliberate false declarations.

Section 483- Falsification of books of account or document, etc.

Section 483, as proposed to be amended by Clause 102 of the Finance Bill, 2026, reads as follows:

Section 483 deals with a serious but slightly different kind of offence. It applies where one person deliberately falsifies books of account or documents to help another person evade tax, interest, or penalty. The Finance Bill, 2026, proposes to amend only sub-section (1) by changing the nature of imprisonment from rigorous to simple imprisonment. Sub-section (2) remains unchanged, but it is important for understanding the full scope of the offence.

Under sub-section (1), three essential elements must exist:

1. A false entry or statement is made in books of account or relevant documents.
2. The person making the entry knows it is false or does not believe it to be true.
3. The falsification is done with the intention of enabling another person to evade tax liability.

Thus, this provision does not deal with accidental mistakes. It deals with deliberate manipulation of records. Further, the falsification must be done to help someone else evade tax. It is therefore aimed at collusive conduct — where one person assists another by corrupting documentary evidence.

The Finance Bill, 2026, has not altered the structure of the offence. It has only modified the punishment. The amended provision now prescribes simple imprisonment for a term of up to two years and a fine. Unlike some other sections in Chapter XXII, there is no graded punishment based on monetary thresholds. The seriousness here lies in the deliberate tampering of the records themselves, regardless of the exact quantum involved.

Sub-section (2), which remains unchanged, makes an important clarification . It is not necessary to prove that the second person actually succeeded in evading tax. The offence is complete once the false entry is made with the intention of enabling evasion. In other words, even if the tax authorities detect the manipulation in time and no loss occurs, the deliberate falsification still attracts prosecution.This ensures that the law protects the integrity of accounting records. The offence focuses on intention and falsification, not merely on the final financial result.

Illustration 14: Utkarsh, the accountant of Atlas Ltd., deliberately entered fictitious expenses in the company’s books to reduce its taxable income. Even if the manipulation is detected before any actual tax loss, the intentional falsification of records to facilitate tax evasion is prosecutable.

Being responsible for maintaining the books, his conduct falls under Section 483(1), punishable with simple imprisonment up to two years and fine.

Section 483 therefore sends a clear message: books of account must reflect truth. Deliberate *manipulation of records to assist another in evading tax is a serious offence , and the Finance Bill, 2026 retains strong deterrence while aligning punishment with the broader policy of proportionate enforcement.

Section 484 - Abetment of false return, etc

484. If a person abets or induces in any manner another person––

 (a) to make and deliver an account or a statement or declaration relating to any income chargeable to tax which is false and which he either knows to be false or does not believe to be true; or

 (b) to commit an offence under section 478(1)

he shall be punishable —

 (i) with simple imprisonment for a term up to two years, or with fine, or with both, where the amount of tax, penalty or interest which would have been evaded, if the declaration, account or statement had been accepted as true, or which is wilfully attempted to be evaded, exceeds fifty lakh rupees; or

 (ii) with simple imprisonment for a term up to six months, or with fine, or with both, where the amount of tax, penalty or interest which would have been evaded, if the declaration, account or statement had been accepted as true, or which is wilfully attempted to be evaded, exceeds ten lakh rupees but does not exceed fifty lakh rupees; or

 (iii) with fine, in any other case.

Section 484 applies where a person abets or induces another person to file a false return, statement, or declaration, or to commit an offence under Section 478(1). The Finance Bill, 2026, has not altered the structure of this offence. The section continues to focus on intentional abetment, while prescribing graded punishment depending upon the monetary impact involved.

Under this section, the following essential elements must exist:

1. A person abets or induces another person in any manner.
2. The abetment relates either to:
• making or delivering a false account, statement, or declaration relating to taxable income; or
• committing an offence under Section 478(1) (wilful attempt to evade tax).
3. The person abetting knows that the account or statement is false, or does not believe it to be true.

As in Section 482, the offence requires conscious knowledge of falsity; professional negligence, interpretational difference, or inadvertent advice would not attract prosecution.

This section provides graded punishment based on the amount of tax, penalty, or interest that would have been evaded if the false declaration had been accepted as true, or that is wilfully attempted to be evaded.

This structure aligns with the broader legislative philosophy of proportionate enforcement: the greater the attempted evasion, the greater the potential imprisonment.An important feature of this section is that actual evasion need not be successfully completed. It is sufficient if the abetment relates to an attempt, or to a false declaration which, if accepted, would have resulted in evasion.

Illustration 15:

Rohit Chadha, a tax consultant, knowingly advises his client to inflate purchase expenses and prepares a computation based on fabricated figures. The client files the return accordingly. Even if the tax authorities detect the discrepancy during assessment and prevent any actual revenue loss, Rohit Chadha’s deliberate inducement to file a false declaration relating to taxable income attracts Section 484. The applicable punishment depends on the amount of tax sought to be evaded, as shown in the table above.

Section 484, therefore, reinforces a fundamental compliance principle: tax evasion is not only the responsibility of the person who files the return. Those who instigate, guide, or facilitate such misconduct are equally accountable.

Section 485- Punishment for second and subsequent offences

485. If any person convicted of an offence under sections 476, 477, 478(1), 479, 480, 482 or 484 is again convicted of an offence under any of the said sections, he shall be punishable for the second and for every subsequent offence with simple imprisonment for a term which shall not be less than six months but which may extend to three years and with fine.

 Section 485 deals with repeat offenders. While the earlier sections prescribe punishment for specific tax offences, this provision applies when a person, having been convicted once, commits another serious offence under the same group of provisions.

This section applies where a person has already been convicted under any of the following sections and is again convicted under any of those very sections :

Section 476 (Failure to furnish return of income) ;
Section 477 (Failure to produce accounts and documents as required) ;
Section 478(1) (Wilful attempt to evade tax, penalty or interest) ;
Section 479 (Failure to pay tax collected or deducted at source) ;
Section 480 (Failure to comply with provisions relating to search, seizure or requisition) ;
Section 482 (False statement in verification or delivering false account) ; or
Section 484 (Abetment of false return or inducement to commit tax offence) .

These sections collectively cover serious compliance failures ranging from non-filing to wilful evasion and abetment.The essential condition is that there must be a prior conviction, followed by a second or subsequent conviction under any of these specified sections. Mere initiation of proceedings is not sufficient; there must have been an earlier actual conviction.

Under the amended provision, the punishment for the second and every subsequent offence is simple imprisonment for a term of not less than six months but not exceeding three years, and a fine. The minimum imprisonment of six months is mandatory. However, unlike the unamended version, the maximum term is now capped at three years and the imprisonment is simple, not rigorous.

Section 494 - Disclosure of particulars by public servants

494. (1) A public servant, who furnishes any information or produces any document in contravention of the provisions of section 258(3), shall be punishable with simple imprisonment up to one month, or with fine, or with both.

 (2) No prosecution shall be instituted under this section except with the previous sanction of the Central Government.

Section 494 deals with unauthorised disclosure of information by public servants. While most of the provisions in this Chapter address offences committed by taxpayers or their associates, this section serves a different purpose. It safeguards the confidentiality of information obtained by the tax administration.Only sub-section (1) has been amended by Clause 105 of the Finance Bill, 2026. Sub-section (2) remains unchanged.

Under sub-section (1), a public servant who furnishes any information or produces any document in contravention of Section 258(3) (which restricts disclosure of information obtained or production of document obtained under the Act except in permitted circumstances) is liable to punishment. In simple terms, if a public servant unlawfully discloses confidential taxpayer information or produces documents in violation of statutory restrictions, he commits an offence.

Tax authorities have access to sensitive financial information, which is legally protected to preserve privacy, commercial confidence, and public trust. Therefore, the section imposes criminal liability for breaches of confidentiality obligations.

As amended, the punishment under sub-section (1) is simple imprisonment for a term which may extend to one month, or fine, or both. The imprisonment is short, indicating that the offence concerns a breach of confidentiality rather than tax evasion. However, the existence of criminal liability underscores the seriousness attached to safeguarding taxpayer information.

Sub-section (2), which remains unchanged, provides an important procedural safeguard. No prosecution under this section can be instituted except with the previous sanction of the Central Government. This requirement ensures that prosecution of a public servant is not launched casually or vindictively.

Section 494, therefore, reinforces an essential compliance principle: confidentiality is as important as enforcement. While taxpayers are expected to make full and truthful disclosures, the administration is equally bound to protect the information so obtained.

Wearing the Armour of Knowledge - Confidence Through Conscious Updating

The amendments discussed in this Part — covering repeat offences, institutional accountability, and protection of confidentiality — complete an important layer of the compliance framework. Together, they demonstrate that modern tax enforcement is no longer merely punitive; it is structured, proportionate, and responsibility-driven. The law now expects not only obedience, but awareness; not only disclosure, but discipline.

There is a simple life lesson hidden within this legislative evolution. Whenever we dress well for an important occasion, our confidence rises. Our posture improves. Our presence commands respect. In the same way, when we intellectually wear the “dress” of the latest tax amendments — when we consciously equip ourselves with updated knowledge — our professional confidence strengthens, our clarity sharpens, and our productivity improves.

In a dynamic statutory environment shaped by the Finance Bill, 2026, knowledge is not merely information — it is professional armour. It protects us from error, enhances our credibility, and elevates our professional standing. When we choose to remain informed, we do not merely comply with the law — we embody the true spirit of conscious compliance.