Section 458 — Penalty for failure to furnish information or document under section 506. Successor to s.271GA of the 1961 Act.
Section 458 is in Chapter XXI — Penalties, which runs from section 439 to section 472.
The section penalises an Indian concern that is required to furnish information or a document under section 506 and fails to do so. The prescribed income-tax authority under that section may direct it to pay, by way of penalty, 2% of the value of the transaction in respect of which the failure took place where that transaction had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern, and Rs. 5,00,000 in any other case.
Section 506 obliges an Indian concern to disclose transactions bearing on it that the Department cannot otherwise reach. The penalty is graded to match what was withheld: a proportionate charge on the transaction value where management or control actually moved, and a flat sum in every other case.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Penalty where management or control moved | 2% of the value of the transaction | The transaction in respect of which the failure took place had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern | Clause (a) |
| Penalty in any other case | Rs. 5,00,000 | Any failure under section 506 outside clause (a); a flat sum unrelated to the value of the transaction | Clause (b) |
Which limb applies turns on the effect of the transaction, not on the size of the failure: if the right of management or control in relation to the Indian concern moved, directly or indirectly, the penalty is proportionate at 2% of the transaction value and can be very large; otherwise it is a fixed Rs. 5,00,000 however valuable the transaction was. The 2% is computed on the value of the transaction itself, not on any Indian share of it or any gain arising, and it is the prescribed income-tax authority under section 506, not the Assessing Officer, who may direct it.
An Indian concern fails to furnish information required under section 506 about an offshore transfer of shares worth Rs. 400 crore which had the effect of indirectly transferring the right of management in relation to it. Clause (a) applies and the penalty is 2% of Rs. 400 crore, that is Rs. 8 crore. Had the same failure related to a transaction with no effect on management or control, clause (b) would have fixed the penalty at Rs. 5,00,000 regardless of the transaction's value.
An Indian concern meets this section as a penalty direction from the prescribed income-tax authority under section 506, following its failure to supply information or a document that authority had called for.
2% of the value of the transaction in respect of which such failure has taken place, if such transaction had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern
Rs. 500000, in any other case
See the full 1961 to 2025 concordance.