OFFENCES AND PROSECUTIONSCentral

Section 487 of Income Tax Act 2025 in hindi

(1)If an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
(2)The provisions of sub-section (1) shall not apply if the person referred therein proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
(3)Irrespective of anything contained in sub-sections (1) and (2), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
(4)If an offence under this Act has been committed by a company and the punishment for such offence is imprisonment and fine, then, without prejudice to the provisions contained in sub-section (1) or (3), such company shall be punished with fine and every person referred to in sub-section (1), or the director, manager, secretary or other officer of the company referred to in sub-section (3), shall be liable to be proceeded against and punished as per the provisions of this Act.
(5)For the purposes of this section,—
1. (a)"company" means a body corporate and includes—
2. (i)a firm; and
3. (ii)an association of persons or a body of individuals, whether incorporated or not; and
4. (b)"director", in relation to—
5. (i)a firm, means a partner in the firm;
6. (ii)any association of persons or a body of individuals, means any member controlling the affairs thereof.

Summary

When a company commits a tax offence, both the company itself and the individuals running it can be held guilty.
Every person who was in charge of and responsible to the company for conducting its business at the time of the offence is deemed guilty.
A responsible person can avoid guilt if they prove they did not know about the offence, or that they exercised all due diligence, meaning proper care and active effort, to prevent it.
If an offence is committed with the consent, connivance (secret approval), or neglect of any director, manager, secretary, or other officer, they are also deemed guilty.
If the offence carries both a fine and imprisonment, the company itself is punished with a fine, while the individuals can face the prison sentence as well.
A "company" under this section includes regular corporations, partnerships (called firms), and associations of persons or bodies of individuals, whether incorporated or not.
A "director" includes a partner in a partnership firm, or any member who controls the affairs of an association of persons or body of individuals.

Practical examples

1In July 2026, Alpha Tech Private Limited committed tax fraud by deliberately under-reporting its profits. Anila, the managing director who was actively in charge of the daily operations, was prosecuted alongside the company under section 487 because she was responsible for running the business.

2In September 2026, a partnership firm called Sunshine Grocers failed to deposit employee tax. Partner Vikram proved that he lived in another state and had no role in tax filings, and that partner Dev handles all accounting. Under section 487(2), Vikram was not punished because he proved it happened without his knowledge.

FAQ

1. Who can be held responsible when a company commits a tax crime under section 487?

The company itself, along with any person who was in charge of and responsible for running its business when the offence happened.

2. Can a company director be punished if they had no idea the crime was happening?

Yes, unless they can prove that the offence occurred without their knowledge, or that they did everything they could to prevent it.

3. What does "due diligence" mean in this section?

It means exercising proper, reasonable care and taking active steps to prevent any tax laws from being broken.

4. How are punishments split between the company and individuals?

For offences involving jail time and a fine, the company is punished with a fine, while the responsible individuals are punished with jail time, a fine, or both.

5. Does this section apply to partnerships and small informal groups?

Yes. The definition of a "company" in this section includes partnerships (firms) and associations or groups of individuals, and "director" includes partners or controlling members.

Test yourself

Q1.Under section 487, what is a partner in a firm considered to be?

Q2.What is the company's punishment if an offence committed by it is punishable by both imprisonment and a fine?

Q3.Which of the following is NOT included in the definition of a "company" under section 487?

Q4.To escape liability under section 487(1), what must a responsible person prove?

Q5.Under section 487(3), whose consent, connivance, or neglect can make them guilty of an offence?

Q6.In an association of persons, who is considered the "director" under section 487?

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