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Section 447 Income Tax Act 2025: Is the Rs. 1 Lakh Penalty Still Applicable?

Section 447 originally imposed a fixed penalty for failure to furnish an accountant's report under Section 172. The Finance Act, 2026 omitted Section 447 with effect from 1 April 2026. This guide explains the current legal position, the former rule, and what the omission means for compliance.

Current law as at 12 November 2026: Section 447 is omitted. The Rs. 1,00,000 penalty formerly stated in this section is not an operative penalty under Section 447 of the Income-tax Act, 2025. Other reporting obligations and applicable provisions must be examined independently.

Is Section 447 still in force?

No. Section 447 was omitted by section 102 of the Finance Act, 2026, with effect from 1 April 2026. In the Income-tax Act, 2025 as amended by the Finance Act, 2026, the provision is shown as omitted. Consequently, no fresh penalty can be imposed under Section 447 itself for a default governed by the current text of the 2025 Act.

Section 447 is located in Chapter XXI (Penalties), between Section 446 concerning crypto-asset transaction reporting and Section 448 concerning failure to deduct tax at source.

What was the former penalty under Section 447?

Before omission, Section 447 authorised the Assessing Officer to impose a penalty of Rs. 1,00,000 if a person failed to furnish a report from an accountant required by Section 172. This is a description of the superseded provision, not a statement of the present law.

Earlier law: The former Section 447 broadly corresponded to Section 271BA of the Income-tax Act, 1961, which dealt with failure to furnish a transfer pricing accountant's report under Section 92E. The legal position for an earlier assessment year must be considered under the law and transitional provisions applicable to that year.

Relevant statutory terms and provisions

Accountant's report: A report prepared or certified by an accountant in the form and manner required under the applicable statutory provision and rules. Section 172 addresses reporting in connection with international transactions and specified domestic transactions.

Assessing Officer: The income-tax authority exercising assessment-related functions under the Act. The former Section 447 empowered the Assessing Officer to impose the specified penalty.

International transaction: A transaction falling within the transfer pricing provisions of the Act, generally involving associated enterprises and the statutory cross-border or deemed international transaction conditions.

Specified domestic transaction: A domestic transaction falling within the categories and conditions laid down by the transfer pricing provisions.

Omission: A legislative removal of a statutory provision. An omitted penalty provision cannot be treated as continuing to prescribe that penalty for defaults under the amended law merely because an older version remains available online.

Does omission of Section 447 remove the reporting obligation?

Not necessarily. Removing a penalty provision is different from repealing the underlying reporting requirement. A person subject to Section 172 should still verify the obligation to obtain and furnish the prescribed accountant's report, the applicable filing deadline, and any other consequences under the Act or rules.

The Finance Act, 2026 also made consequential amendments, including removal of the reference to Section 447 from Section 470. This supports reading the current penalty scheme in its amended form rather than relying on superseded extracts.

Can an older-year penalty dispute be affected?

Potentially, but the answer depends on the tax year, the date and nature of the alleged default, commencement and savings provisions, and the precise statutory basis of the proceedings. Omission does not, by itself, establish that every previously accrued liability or pending proceeding is extinguished. A case-specific review is necessary.

Practical examples

Example 1: Current-year accountant report default

A company required to furnish an accountant's report under Section 172 does not file it for a tax year governed by the amended 2025 Act. The Department cannot impose the former Rs. 1,00,000 penalty under omitted Section 447. The company should nevertheless address the filing obligation and assess any other applicable statutory consequences.

Example 2: Proceedings concerning an earlier year

A taxpayer receives a notice relating to failure to furnish a report for an assessment year governed by the Income-tax Act, 1961. The taxpayer should examine Section 271BA of that Act, relevant procedural requirements, limitation, available defences, and the applicable transitional provisions. The omission of Section 447 should not be assumed to dispose of that notice automatically.

Frequently asked questions

Is there a Rs. 1 lakh penalty under Section 447 in 2026?

No. Section 447 was omitted with effect from 1 April 2026. The Rs. 1,00,000 amount describes its earlier text.

Which law removed Section 447?

Section 102 of the Finance Act, 2026 omitted Section 447 of the Income-tax Act, 2025.

Is Section 172 also omitted?

The omission of Section 447 does not itself omit Section 172. The accountant's reporting obligation must be assessed separately under the applicable provisions.

What was the equivalent provision in the Income-tax Act, 1961?

The former Section 447 broadly corresponded to Section 271BA, concerning failure to furnish the accountant's report required by Section 92E.

Does the omission cancel an old penalty demand?

Not automatically. Earlier-year demands and pending proceedings require examination of the governing law, transitional provisions and facts.

Official statutory references

Income-tax Act 2025 as amended in 2026 Finance Act 2026 - Official Gazette

Last reviewed: 12 November 2026. This article is general legal information. For an existing notice, penalty or appeal, verify the applicable year and statutory text.