Section 56 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.
Section 56 says who answers when an offence under the Act is committed by a company. The company and every person in charge of and responsible for its business at the time are deemed guilty, subject to a defence of no knowledge or due diligence, and directors, managers, secretaries and other officers are caught where the offence is with their consent or connivance or due to their neglect. Sub-section (5) gives a wide meaning to "company" and "director".
As per the Act as enacted and published in the Gazette of India on 27 May 2015, where a company commits an offence, the company and every person in charge of and responsible for its business at that time are deemed guilty (sub-section (1)), unless the person proves the offence was committed without his knowledge or that he exercised all due diligence (sub-section (2)). A director, manager, secretary or other officer is also guilty where the offence is with his consent or connivance or attributable to his neglect (sub-section (3)). For this section, "company" includes an unincorporated body and a Hindu undivided family.
Sub-section (1): the company and the person in charge
Where an offence under the 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.
Two tests apply to the individual: being in charge of the business and being responsible to the company for its conduct. Both words are in the text. Holding a title, such as director, is not by itself the test under sub-section (1); the question is the role at the time of the offence. Sub-section (3) deals with titled officers separately.
Sub-section (2): the defence
Nothing in sub-section (1) renders any such person 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 the commission of the offence.
The words "if he proves" place the burden on the person who relies on the defence. The Act as enacted does not say what counts as due diligence, and it prints no list of steps. What you would want to show, in practice, is that you had proper systems and followed them, but that is a practical observation and not a statement of the Act. The mental-state presumption in section 54 is separate and is explained in our article on sections 54, 55 and 57.
If you are, or were, in charge of a company that holds foreign assets, our legal consultation team can help you review your position and records.
Sub-section (3): consent, connivance or neglect
Notwithstanding anything in sub-section (1), where an offence 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.
Notice the word "proved". Sub-section (3) reaches titled officers on proof of consent, connivance or neglect, whether or not they were "in charge". It applies "notwithstanding" sub-section (1).
Sub-section (4): punishments that are imprisonment and fine
Where an offence has been committed by a person, being a company, and the punishment for the offence is imprisonment and fine, then, without prejudice to sub-sections (1) and (3), the company shall be punished with fine, and every person referred to in sub-section (1), or the director, manager, secretary or other officer referred to in sub-section (3), shall be liable to be proceeded against and punished in accordance with the provisions of the Act.
A company cannot be imprisoned. The sub-section puts the company's liability in the form of fine and leaves imprisonment and fine for the individuals. The offences in sections 49 to 53 carry imprisonment and fine; they are in our articles on sections 48 and 49, section 50, section 51 and sections 52, 53 and 58.
Sub-section (5): the definitions
In section 56:
- (a) "company" means a body corporate, and includes (i) an unincorporated body and (ii) a Hindu undivided family;
- (b) "director", in relation to (i) an unincorporated body, means a participant in the body; (ii) a Hindu undivided family, means an adult member of the family; and (iii) a company, means a whole-time director, or where there is no such director, any other director or manager or officer, who is in charge of the affairs of the company.
So the section does not apply only to a registered company. A partnership or association that is an unincorporated body, and a Hindu undivided family, fall within "company" for this section. "Participant" is defined in section 2 of the Act, and our article on section 2 explains the defined terms.
Section 56 at a glance
| Sub-section | Who is reached (as enacted) | Condition |
|---|---|---|
| (1) | The company, and every person in charge of and responsible to it for its business at the time | Offence committed by the company |
| (2) | Defence for such a person | He proves no knowledge, or all due diligence |
| (3) | Director, manager, secretary or other officer | Proved consent, connivance or attributable neglect |
| (4) | Company punished with fine; individuals proceeded against | Where punishment is imprisonment and fine |
| (5)(a) | "Company" | Body corporate, including an unincorporated body and a Hindu undivided family |
| (5)(b) | "Director" | Participant (unincorporated body); adult member (HUF); whole-time director or, failing one, the director, manager or officer in charge (company) |
A worked example
Orion Textiles Private Limited holds shares in an overseas subsidiary and, for the relevant previous year, files its return without information about those shares. Suppose the omission is wilful and amounts to an offence under section 50, with the offence being by the company. The company is deemed guilty and is punished with fine under sub-section (4). Mr. Ramesh Iyer, the whole-time director in charge of the affairs of the company, is deemed guilty under sub-section (1) unless he proves that the offence was committed without his knowledge or that he exercised all due diligence. Ms. Leela Sharma, the company secretary, was not in charge of the business but, on proof that she consented to the omission, can be reached under sub-section (3). A non-executive director who joined after the filing and had no part in it would rely on sub-section (2) and on the point that the person must be one who "at the time the offence was committed" was in charge.
Points the printed text leaves open
The Act as enacted does not say whether the company must first be convicted before an individual is proceeded against. It does not define "consent", "connivance" or "neglect". It does not say how an unincorporated body or a Hindu undivided family is to pay a fine as a "company", other than treating it as one for the section. This article does not answer those questions. Section 55 sanction, where it applies to the offence, is explained in our article on sections 54, 55 and 57.
References and what to check
The section is read as enacted, and later Finance Act amendments to section 56 should be checked before acting. References to the Income-tax Act are to the Income-tax Act, 1961 as printed in 2015; the corresponding provision of the current income-tax law should be checked. For companies and groups with overseas holdings, our guide on foreign asset reporting in the return covers the income-tax side.
Need help as a director or officer?
If your company has overseas assets, or a notice mentions an offence by the company, our legal consultation team can walk through the roles, the records and the provisions with you and plan how to respond.
Key takeaways
- The company and each person in charge of and responsible for its business at the time are deemed guilty.
- A person is protected if he proves no knowledge or all due diligence.
- A director, manager, secretary or other officer is also reached on proof of consent, connivance or neglect.
- A company is punished with fine where the offence carries imprisonment and fine.
- "Company" includes an unincorporated body and a Hindu undivided family.
- Check later Finance Act amendments before acting.
Read next
- Section 51: punishment for wilful attempt to evade tax
- Sections 52, 53 and 58: false verification, abetment and repeat offences
- Sections 54, 55 and 57: culpable mental state, sanction and proof of records
- Prosecution under section 276C: tax evasion
Disclaimer: Based on the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 as enacted and published in the Gazette of India on 27 May 2015, and on the Rules of 2015 as notified on 2 July 2015, as consulted on 2 October 2026. Later Finance Act amendments, amendment rules and the current income-tax law should be checked. This article is general information, not legal advice; check the official text before acting.