Section 470 of the Income-tax Act, 2025 provides that no penalty shall be imposed under the listed sections, including 441, 446, 448, 450 and 453, if the person proves that there was reasonable cause for the failure.
What section 470 does
Section 470 is the general penalty defence — the successor to section 273B of the Income-tax Act, 1961. It is a single sentence, and it is the first thing to check when any penalty notice arrives.
The rule: irrespective of anything in the listed provisions, no penalty shall be imposed on a person or assessee for any failure referred to in them, if he proves that there was reasonable cause for the failure. The burden of proof is on the taxpayer, and the defence is available only for the sections named.
The list is long and specific: sections 441, 442, 446, 447, 448, 449, 450, 451, 452, 453, 454, 455, 456, 457, 458, 459, 460, 461, 462, 463, 465(1)(c), 465(1)(d), 465(2), 466, 467 and 468. What is not on the list matters just as much — most notably section 439, the under-reporting and misreporting penalty.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 273B | Reasonable cause defence for listed penalties | 470 |
| 271A | Failure to keep books | 441 |
| 271B | Failure to get accounts audited | 446 |
| 271C | Failure to deduct tax at source | 448 |
| 271D | Breach of the cash loan rule | 450 |
| 271E | Breach of the cash repayment rule | 453 |
| 270A | Under-reporting — NOT covered by the defence | 439 |
Section 470 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
The rule and where the burden lies
No penalty shall be imposed for a failure referred to in the listed provisions if he proves that there was reasonable cause for the said failure. The words if he proves place the burden squarely on the person facing the penalty. A bare assertion will not do; the cause must be established on evidence.
Which penalties are covered
The listed sections include the ones most taxpayers encounter: 441 (failure to keep books), 446 (failure to get accounts audited), 448 and 449 (failure to deduct or collect tax at source), 450 to 453 (the cash transaction breaches under sections 185 to 188), 461 (failure to furnish statements) and the reporting penalties in sections 454 to 460 and 462 to 468.
What is not covered — and why it matters
Section 439, the under-reporting and misreporting penalty, is absent from the list. So is section 445. A taxpayer facing a section 439 penalty cannot invoke section 470; the route there is to show the case does not fall within the deeming provisions of section 439(2), or to apply for immunity under section 440.
What amounts to reasonable cause
The Act does not define it, and it is necessarily fact-specific. What the section requires is a cause that a reasonable person would accept as preventing compliance — illness, seizure of records, a genuine and documented misunderstanding of applicability, the death of the person responsible, or circumstances outside the taxpayer's control. Cash-flow difficulty, without more, is rarely accepted for a deposit failure.
How to use it
Raise section 470 in the reply to the penalty show cause, not for the first time in appeal. Support it with contemporaneous evidence — medical records, seizure memos, correspondence, board minutes. Because the section says no penalty shall be imposed, a successful reasonable cause plea is a complete answer, not a plea in mitigation.
Worked example
Four penalty notices for tax year 2026-27.
| Penalty | Section | Is section 470 available? |
|---|---|---|
| Failure to get accounts audited | 446 | Yes — listed |
| Failure to deduct tax at source | 448 | Yes — listed |
| Accepting a cash loan above ₹20,000 | 450 | Yes — listed |
| Under-reporting of income | 439 | No — not in the list; consider immunity under section 440 instead |
Take the third row concretely. A business accepts ₹3,00,000 in cash from a customer whose bank was inaccessible during a natural disaster, and deposits it the same day with full documentation. The penalty under section 450 would be ₹3,00,000 — but section 470 permits the taxpayer to prove reasonable cause and escape it entirely.
Contrast the fourth row. However sympathetic the circumstances, section 470 cannot be invoked against a section 439 penalty, because that section is not on the list. The defence there has to be built on section 439 itself.
Compliance checklist and due dates
- Check whether the penalty section is on the section 470 list before building a reasonable cause defence.
- Raise the plea in the reply to the show cause, with contemporaneous evidence.
- Remember the burden is on the taxpayer — the section says if he proves.
- For a section 439 penalty, use section 439(2) and (3) or an immunity application under section 440 instead.
- Where the penalty relates to a cash transaction under sections 185 to 188, document why banking channels were not used.
- Note the limitation for imposing penalties in section 472, which may itself answer the notice.
Common mistakes
- Invoking section 470 against a section 439 under-reporting penalty, which is not covered.
- Asserting reasonable cause without documentary support.
- Raising the plea for the first time in appeal rather than in the penalty proceedings.
- Treating financial difficulty alone as reasonable cause for failing to deposit deducted tax.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.