Failure to get accounts audited
[Section-446 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
If any person fails to get his accounts audited for any tax year or years or furnish the audit report as required under section 63, the Assessing Officer may impose a penalty on such person, which shall be the lesser of––
- (a) 0.5% of the total sales, turnover, or gross receipts in business, or the gross receipts in profession for such tax year or years; or
- (b) one lakh fifty thousand rupees.
FAQs on Section 446 of Income Tax Act 2025
What is the penalty under Section 446 for failing to get accounts audited?
The penalty is the lesser of 0.5% of the total sales, turnover, or gross receipts in business or gross receipts in profession for such tax year(s), or ₹1,50,000.
From which date is Section 446 applicable?
Section 446 is applicable from 1st April, 2026.
Who can impose the penalty under Section 446?
The Assessing Officer is empowered to impose the penalty.
Which section mandates the requirement to get accounts audited?
The requirement to get accounts audited is prescribed under Section 63 of the Income Tax Act, 2025.
Does the penalty apply for failure to furnish the audit report also?
Yes, the penalty applies both for failure to get the accounts audited and for failure to furnish the audit report as required under Section 63.
Is the penalty under Section 446 applicable for a single tax year or multiple tax years?
The penalty can be imposed for any tax year or years in which the failure occurred.
Can a person be penalized under Section 446 even if they got the accounts audited but failed to furnish the report?
Yes, penalty applies for both failure to get accounts audited and failure to furnish the audit report.
What is the maximum penalty that can be imposed under Section 446?
The maximum penalty is ₹1,50,000.
Is the 0.5% penalty calculated on turnover or profit?
The 0.5% is calculated on total sales, turnover, or gross receipts in business or gross receipts in profession, not on profit.
Can relief from penalty under Section 446 be sought?
The Act does not explicitly provide for automatic relief, but general principles of reasonable cause and appeal provisions may apply depending on the circumstances and discretion of the authorities.
Is Section 446 applicable to professionals also?
Yes, it applies to persons engaged in profession as well, where gross receipts in profession are considered for the penalty computation.
Will penalty under Section 446 be imposed automatically?
No, the Assessing Officer has the discretion to impose the penalty after evaluating the facts of the case.
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