Section 474 of the Income-tax Act, 2025 — Failure to Afford Inspection Facility During Search (Offence & Punishment)

In plain language

What Section 474 actually deals with

Despite the loose label "contravention of order made during search", Section 474 of the Income-tax Act, 2025 has a narrow, specific scope. It punishes one thing: failing to afford the authorised officer the necessary facility to inspect books of account or other documents during an income-tax search, when you were required to do so under Section 247(1)(ii).

In the era of digital records, this "facility to inspect" is not just unlocking a cupboard. Section 247 requires a person found in possession or control of books of account, documents or information kept as electronic records or on a computer system to give the authorised officer reasonable technical and other assistance — including the access code / password — needed to inspect that data. Refusing to hand over a laptop password, encryption key, server login or cloud access during a valid search is exactly the conduct Section 474 targets.

Who it applies to

• Any person subjected to a search under Section 247 — the assessee, and equally any employee, accountant, IT administrator, family member or third party who is found in possession or control of the relevant records or devices.
• Only during an authorised search conducted by an officer with a valid search authorisation. It does not apply to routine survey, assessment or ordinary notices.
• The obligation attaches to the person actually able to give access — so an accountant holding the accounting-software login can be liable even if he is not the assessee.

Punishment — and the Finance Act, 2026 change

As originally enacted, Section 474 carried rigorous imprisonment up to two years and a mandatory fine. The Finance Act, 2026 (effective 1 April 2026), as part of the government's decriminalisation drive, has rationalised this substantially:

• Imprisonment reduced from up to 2 years to up to 6 months.
• "Rigorous" imprisonment changed to "simple" imprisonment.
• Fine made optional — punishment is now imprisonment up to 6 months, or fine, or both.

The rationale: denying an inspection facility is largely procedural obstruction, less grave than destroying records or violating a restraint order, so it deserves a lighter, more flexible penalty. The amount of fine is not fixed in the section and is left to the court's discretion.

How it interacts with related sections

• Section 247 is the source of the duty. Section 474 is only the penal consequence of breaching Section 247(1)(ii).
• Section 473 is the neighbouring — and more serious — offence: contravening an order (such as a restraint/prohibitory order under Section 247) made during search. After the 2026 amendment it still carries simple imprisonment up to 2 years and fine, four times the maximum jail term under 474.
• Section 476 (proof of culpable mental state) lets the court presume intent, shifting the burden to the accused; Section 480 (compounding) may allow the offence to be compounded on payment; and prosecution generally requires sanction of the prescribed authority.

Practical implications for taxpayers

• Cooperate with a valid search. Provide passwords, access codes and reasonable technical help to inspect electronic data — refusal is itself a prosecutable offence, separate from any tax evasion.
• You may still verify the officer's authorisation and record objections politely; genuine inability (e.g., a password held only by an absent third party) is different from wilful refusal.
• Prosecution is separate from tax and penalty. Even if the search finds nothing, obstruction alone can trigger Section 474.
• The lighter 2026 penalty does not make obstruction advisable — refusing access often invites presumptions and adverse inferences that cost far more in tax terms.