Sections 487 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
When a company or a Hindu undivided family commits an offence under the Income-tax Act, 2025, the Act says who else is treated as guilty, and what the prosecution may presume. Sections 487 and 488 fix the liability of the people behind the entity; sections 489 and 490 let the court presume certain facts, subject to a defence.
This explanation is as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026. Under section 1(3) the Act came into force on the 1st April, 2026, save as otherwise provided. Later amendments, rules and notifications should be checked.
Under section 487, a company and every person in charge of, and responsible to, the company for the conduct of its business are deemed guilty of an offence by the company, unless that person proves the offence happened without his knowledge or that he used all due diligence. Section 488 makes the karta of a Hindu undivided family liable in the same way. Section 489 extends the presumptions of section 247(7) to evidence found in a search, and section 490 makes the court presume a culpable mental state, which the accused may rebut by proof beyond reasonable doubt.
Where these sections sit
Sections 487 to 490 belong to Chapter XXII (Offences and prosecution). The offences themselves are in the earlier sections of the Chapter, for example prosecution for not depositing tax deducted at source is dealt with in our note on section 476, wilful attempt to evade tax in section 478 and failure to file a return in section 479. The sections explained here do not create offences; they decide who answers for an offence once it has been committed and how the trial treats the evidence. For the Chapter as a whole see the Chapter XXII guide. The preceding sections, on abetment, second offences and cases where punishment is not imposed, are in our note on sections 484 to 486.
If a notice or a prosecution complaint has reached you, legal dispute resolution support can help you read the sections against the facts.
Section 487: offences by companies
Sub-section (1): the company and the persons in charge
If an offence under the Act has been committed by a company, two classes are deemed guilty and liable to be proceeded against and punished accordingly:
- every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of its business; and
- the company itself.
Both conditions matter for the first class: a person must be in charge of the business and responsible to the company for its conduct. The sub-section names no other class.
Sub-section (2): the defence
Sub-section (1) does not apply to a person who proves either of two things:
- the offence was committed without his knowledge; or
- he had exercised all due diligence to prevent the commission of the offence.
The burden is on that person to prove the fact. Section 490(3), described below, says what "proved" means for the purposes of section 490.
Sub-section (3): directors, managers, secretaries and other officers
Irrespective of sub-sections (1) and (2), where a company has committed an offence and it is proved that the offence was 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, that person is also deemed guilty and may be proceeded against and punished accordingly. Note the opening words: this sub-section works even where the person falls outside sub-section (1) or has a defence under sub-section (2).
Sub-section (4): imprisonment and fine
Where the punishment for the offence is imprisonment and fine, the company is punished with fine. The persons referred to in sub-section (1), and the director, manager, secretary or other officer referred to in sub-section (3), are liable to be proceeded against and punished as per the provisions of the Act. This is stated to be without prejudice to sub-sections (1) and (3).
Sub-section (5): two definitions
For this section, "company" means a body corporate and includes a firm and an association of persons or a body of individuals, whether incorporated or not. "Director" means, for a firm, a partner in the firm, and, for an association of persons or a body of individuals, any member controlling its affairs. So the section reaches partnerships and associations as well as companies in the ordinary sense.
| Entity | Who is treated as "director" (section 487(5)(b)) |
|---|---|
| A firm | A partner in the firm |
| An association of persons or body of individuals | Any member controlling the affairs |
| A body corporate | Not defined in sub-section (5)(b); sub-section (3) names a director, manager, secretary or other officer |
Section 488: offences by a Hindu undivided family
Section 488 follows the same pattern for a Hindu undivided family.
- Sub-section (1): where an offence has been committed by a Hindu undivided family, its karta is deemed guilty and liable to be proceeded against and punished accordingly.
- Sub-section (2): the karta is not liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent it.
- Sub-section (3): irrespective of sub-sections (1) and (2), where it is proved that the offence was committed with the consent or connivance of, or is attributable to any neglect on the part of, any member of the family, that member is also deemed guilty and liable to be proceeded against and punished.
Unlike section 487, there is no separate sub-section on imprisonment and fine for the family; the section is silent on that point.
Section 489: presumption as to assets, books of account and similar material
Section 489 connects the trial to a search. It has two sub-sections.
Sub-section (1). Where, during a search under section 247, any money, bullion, jewellery, virtual digit asset or other valuable article or thing (called "the assets"), or any books of account or other documents, or any information in electronic form or on a computer system (or any computer system containing that information), is found in the possession or control of a person, and the prosecution tenders it in evidence against that person, or against that person and the person referred to in section 484, for an offence under the Act, the provisions of section 247(7) apply so far as may be.
Sub-section (2). The same rule applies where such assets, books, documents or information are taken into custody by the officer or authority referred to in section 248(1)(a), (b) or (c) and delivered to the requisitioning officer under section 248(2), and then tendered by the prosecution in evidence.
In plain terms, the presumptions that section 247(7) attaches to material found in a search can be used in the prosecution as well. What section 247(7) itself presumes is explained in our note on section 247; it is not repeated here. The expressions "information in electronic form" and "computer system" are tied to section 261(g) and 261(e).
Section 490: presumption as to culpable mental state
Many offences in the Chapter require a particular state of mind. Section 490 deals with how that is shown.
- Presumption (sub-section (1)). In a prosecution for an offence that requires a culpable mental state on the part of the accused, the court shall presume that the mental state existed. It is a defence for the accused to prove that he had no such mental state with respect to the act charged.
- Meaning (sub-section (2)). "Culpable mental state" includes intention, motive or knowledge of a fact, or belief in, or reason to believe, a fact.
- Standard of proof (sub-section (3)). A fact is "proved" only when the court believes it to exist beyond reasonable doubt, and not merely when its existence is established by a preponderance of probability.
The combined effect is that the accused carries the burden of proving absence of the mental state, and must meet the high standard that sub-section (3) sets. The standard in sub-section (3) is stated for the purposes of section 490; the Act does not say in so many words that it governs the defences in sections 487(2) and 488(2), so read those together with it.
A worked example (amounts and names assumed)
Riverbend Traders Private Limited is alleged to have committed an offence under the Act. Mr. Anand is the managing director and runs the business day to day. Ms. Kavya is a director who attends only board meetings. Mr. Dev is a shareholder with no role in management. (All names and facts are assumed for illustration.)
- The company is deemed guilty under section 487(1).
- Mr. Anand is in charge of, and responsible to, the company for the conduct of its business, so he is deemed guilty unless he proves that the offence occurred without his knowledge or that he used all due diligence to prevent it (section 487(2)).
- Ms. Kavya is not covered by section 487(1) on these facts. She can be held guilty under section 487(3) only if it is proved that the offence was committed with her consent or connivance, or is attributable to her neglect.
- Mr. Dev, as a shareholder with no managerial role, is not named in either sub-section.
- If the punishment prescribed is imprisonment and fine, the company is punished with fine, and Mr. Anand (and Ms. Kavya if section 487(3) is proved) are liable to be punished as the Act provides (section 487(4)).
- If the offence needs knowledge, the court presumes it under section 490(1); Mr. Anand may rebut it by proving, beyond reasonable doubt, that he lacked it.
Need help with an income-tax prosecution or notice?
If you are a director, partner or karta facing a complaint, or a company trying to understand who within it may be exposed, a careful reading of the facts against these sections is the first step. Our team at legal dispute resolution can go through the papers with you and plan the response.
Key takeaways
- Section 487 makes the company and the persons in charge of and responsible for its business deemed guilty of an offence by the company.
- The person in charge escapes only by proving lack of knowledge or all due diligence; directors, managers, secretaries and other officers can be reached separately on proof of consent, connivance or neglect.
- Where imprisonment and fine are the punishment, the company is punished with fine.
- "Company" includes a firm and an association of persons or body of individuals; "director" means a partner or a member controlling the affairs.
- Section 488 treats the karta of a Hindu undivided family in the same manner, and any member on proof of consent, connivance or neglect.
- Section 489 applies section 247(7) to material found in a search or delivered to the requisitioning officer when it is tendered in a prosecution.
- Section 490 requires the court to presume a culpable mental state; the accused must prove its absence beyond reasonable doubt.
Read next
- Sections 484 to 486: abetment, second offences and cases of no punishment
- Sections 491 to 494: sanction for prosecution and related provisions
- Section 470: the reasonable cause defence
- Section 247: search and seizure
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.