Union Budget 2023: Govt to Decriminalise section 276A of Income Tax Act [Read Finance Bill]

In the 2023 Union Budget Speech Mrs Nirmala Sitharaman proposed to decriminalise section 276A of the Income Tax Act.

The proposal has been made by the Central Government to amend Section 276A by providing a sunset clause with effect from 31.03.2023 on the Section.The proposal has brought the change that no fresh prosecution shall be launched on or after 1^st April, 2023. The earlier prosecutions will however continue to take place and the proposed amendment will take effect from 1^st April, 2023.

Section 276A makes provision for prosecution with rigorous imprisonment up to two years in the case of a person, being a liquidator who fails to give notice in accordance with subsection (1) of section 178, or fails to set aside the amount as required by sub- section (3) of the said section or parts with any of the assets of the company or the properties in contravention of the provisions of the section.

Section 276A provides for prosecution of liquidators for non-compliance with section 178. Section also imposes personal liability on such liquidators for the same non-compliance.

When the Insolvency and Bankruptcy Code, 2016 (IBC) came into force the waterfall mechanism for payment of dues is now in place for companies under liquidation and sub-section (6) of section 178 (the parent section) provides that this section shall not have effect when provisions of the IBC are in contrary. Moreover, the liquidator is now working under the oversight of this specific law.

A sunset clause or provision is a clause or provision in a legislation, rule, or legislation that states, the law will expire after a certain date unless it is renewed by legislative action. The law/statute is also referred to as ‘periodic review’.

In the Union Budget 2023 almost 3,400 legal provisions have been decriminalised to ensure ‘Ease of doing Business’.

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