Income Tax Law | Offences and Prosecution

Section 278C of Income Tax Act 1961 - Offences by Hindu Undivided Families

Section 278C explains when the karta and other members of a Hindu undivided family (HUF) can be held criminally liable for income-tax offences. The corresponding provision under the Income-tax Act, 2025 is Section 488.

Law update (October 2026): The Income-tax Act, 2025 came into force on 1 April 2026. Section 488 carries forward the substance of former Section 278C. For earlier matters, the applicable law and the repeal-and-savings provisions must be considered.

Meaning of Hindu Undivided Family and Karta

A Hindu undivided family (HUF) is a family unit recognised under applicable Hindu law and treated as a distinct person for income-tax purposes. Its karta is the person managing the affairs of the HUF. Section 278C concerns criminal responsibility when an offence under the Income-tax Act is committed by the HUF; it does not make every member automatically guilty.

Section 278C of the Income-tax Act, 1961

Sub-section (1): Liability of the karta

Where an offence under the 1961 Act was committed by a Hindu undivided family, its karta was deemed guilty and could be prosecuted and punished. The proviso protected the karta from punishment if the karta proved either that the offence occurred without the karta's knowledge or that the karta had exercised all due diligence to prevent it.

Sub-section (2): Liability of other members

Another HUF member could also be deemed guilty if the offence was proved to have been committed with that member's consent or connivance, or was attributable to that member's neglect. Mere membership of an HUF does not, by itself, establish liability under this subsection.

Section 488 of the Income-tax Act, 2025

Section 488, headed Offences by Hindu undivided family, restates the rules in three separate subsections:

Section 488(1): The karta is deemed guilty when an HUF commits an offence under the Act and is liable to prosecution and punishment.
Section 488(2): The karta is not liable to punishment if the karta proves lack of knowledge or all due diligence to prevent the offence.
Section 488(3): A member is also deemed guilty if the offence is proved to have involved that member's consent, connivance or neglect.

The provision substantially preserves the earlier rule, while presenting the karta's defence in a standalone subsection. The applicable offence provision determines the punishment; Section 488 itself does not prescribe a separate universal term of imprisonment or fine.

Issue	1961 Act: Section 278C	2025 Act: Section 488
HUF karta	Deemed guilty under subsection (1)	Deemed guilty under subsection (1)
Karta's defence	Proviso to subsection (1)	Express subsection (2)
Other HUF members	Consent, connivance or neglect under subsection (2)	Same substantive rule under subsection (3)

How the Karta Can Establish a Defence

The statutory defence requires proof that the offence was committed without the karta's knowledge or that all due diligence was exercised to prevent it. Relevant evidence may include accounting supervision records, tax-return review procedures, professional correspondence, compliance calendars, reconciliations and documented corrective action. Whether the defence succeeds depends on the facts and evidence of the particular prosecution.

For another HUF member, the prosecution must establish the statutory connection through consent, connivance or neglect. Liability should not be assumed merely because a person is a coparcener or beneficiary of the HUF.

Practical Compliance for HUFs

Maintain accurate books, bank records and supporting documentation for HUF income and expenditure.
Review income-tax returns, tax payments and relevant withholding obligations before statutory deadlines.
Keep written records of decisions made by the karta and any authorised persons handling tax compliance.
Investigate and correct discrepancies promptly, retaining evidence of review and remedial steps.
Where prosecution is contemplated, identify the exact alleged offence, the applicable statute and period, and the evidence relevant to each person's role.

Frequently Asked Questions

Is a karta automatically punishable for every HUF tax offence?

No. The provision deems the karta guilty when the HUF commits an offence, but expressly permits the karta to avoid punishment by proving lack of knowledge or all due diligence.

Can an ordinary HUF member be prosecuted?

Yes, if the statutory conditions are proved: consent, connivance or neglect attributable to that member in relation to the offence.

What is the equivalent of Section 278C under the new Act?

Section 488 of the Income-tax Act, 2025 is the corresponding provision.

Official Statutory References

This article is a general explanation of the statutory provisions, not a substitute for advice on a particular prosecution. Read the relevant offence, transitional provisions and amendments applicable to the facts.