Section 455 — Penalty for furnishing inaccurate statement of financial transaction or reportable account. Successor to s.271FAA of the 1961 Act.
Section 455 is in Chapter XXI — Penalties, which runs from section 439 to section 472.
Sub-section (1) lets the prescribed income-tax authority under section 508 direct a person required to furnish a statement under section 508(1) to pay a penalty of Rs. 50,000 where he provides inaccurate information in the statement, fails to furnish correct information within the period specified in section 508(8), or fails to comply with the due diligence requirement in section 508(9). Sub-section (2) requires that authority to direct a reporting financial institution under section 508(1)(k) to pay a further Rs. 5,000 for every inaccurate reportable account, in addition to any sub-section (1) penalty, where the inaccuracy in the statement is due to false or inaccurate information given by the account holder. Sub-section (3) then lets the institution recover that amount from the account holder, or retain an equivalent sum out of moneys of the holder in its possession or coming to it.
The reporting regime depends on accurate statements, so inaccuracy and failed due diligence carry a flat penalty on the reporting person. Where the fault lies with the account holder rather than the institution, sub-sections (2) and (3) pass the per-account charge down to the holder who supplied the false information.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Penalty for inaccurate information, failure to correct, or failure of due diligence | Rs. 50,000 | A fixed amount; the authority 'may direct' payment, for a person required to furnish a statement under section 508(1) | Sub-section (1) |
| Additional penalty per inaccurate reportable account | Rs. 5,000 | For every inaccurate reportable account, and only where the inaccuracy is due to false or inaccurate information furnished by the account holder; the authority 'shall direct' this | Sub-section (2) |
Correcting the information within the section 508(8) window is what avoids the Rs. 50,000 charge; due diligence failures under section 508(9) attract it independently of any inaccuracy. For a reporting financial institution, the per-account charge is not a loss to absorb — sub-section (3) expressly allows it to recover the sum from the account holder or to retain it out of the holder's money in its hands. Note the difference in tone between the two limbs: sub-section (1) is discretionary, while sub-section (2) says the authority shall direct the additional payment once its conditions are met.
A reporting financial institution furnishes its statement under section 508(1) with wrong balances in twelve reportable accounts, and the prescribed income-tax authority may direct it to pay Rs. 50,000 under sub-section (1) for providing inaccurate information. If the inaccuracies came from false information the account holders themselves supplied, sub-section (2) requires — not merely permits — a further Rs. 5,000 for every inaccurate account, Rs. 60,000 here, and that is in addition to the Rs. 50,000, not instead of it. The institution is not left carrying that: sub-section (3) lets it recover the Rs. 60,000 from those holders, or retain an equal amount out of their money in its possession. The Rs. 50,000 can fall even where nothing in the statement is inaccurate, if the due diligence required by section 508(9) was not carried out.
In a penalty direction from the prescribed income-tax authority referred to in section 508, addressed to the person required to furnish the statement of financial transaction or reportable account. An account holder meets it only indirectly — as a recovery by his financial institution, or as an amount retained out of his money under sub-section (3).
The prescribed income-tax authority referred to in section 508 may direct that a person required to furnish a statement under sub-section (1) of the said section shall pay penalty of Rs. 50000
See the full 1961 to 2025 concordance.