Ignore Special Audit Direction? Know Consequences as per New Finance Bill

The Finance Bill, 2026 has proposed to amend the penal provision with regards to the ignorance of Special Audit directions issued by the tax authorities.

This applies to taxpayers taxpayers who wilfully fail to comply with Special Audit directions issued by the tax authorities. The bill proposed to amend Section 276D of the Income-tax Act, 1961.

The amendment lightens the punishment structure linked specifically to non-compliance with Special Audit directions under Section 142(2A), while also softening the nature and extent of imprisonment compared to the earlier law.

As per the proposed substituted Section 276D, if a person wilfully fails to comply with a direction issued under Section 142(2A), which relates to Special Audit ordered by the Assessing Officer in complex cases such person shall be punishable with simple imprisonment up to six months, or with fine, or with both.

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The Finance Bill proposal separates out the Special Audit direction default and reduces the severity from rigorous imprisonment up to one year to simple imprisonment up to six months, with flexibility to impose fine alone or combined punishment depending on the facts.

Proposed Clause is as follows:

“276D. If a person wilfully fails to comply with a direction issued to him under sub-section (2A) of section 142, he shall be punishable with simple imprisonment for a term up to six months, or with fine, or with both.”.

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