Prosecution under income-tax law fails where assessment shows no tax payable and refund is directed

A prosecution complaint under section 276CC read with section 278B was not maintainable where the relevant assessment showed no tax payable and a refund was directed. Although the return for assessment year 1986-87 was filed belatedly, the appellate order assessed income at a negative figure, so the proviso to section 276CC concerning tax payable above the prescribed limit was not attracted. With no assessed tax liability, the foundation for prosecution was absent, and the complaint was liable to be quashed.

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Issues: Whether a complaint for prosecution under section 276CC read with section 278B of the Income-tax Act, 1961 was maintainable when the assessment for the relevant year showed no tax payable and a refund had been directed.

Analysis: The return for assessment year 1986-87 was filed belatedly, but the appellate order assessed the income at a negative figure and directed refund. In these circumstances, the condition contained in the proviso to section 276CC, relating to tax payable not exceeding the prescribed limit, was not attracted against the assessee. The absence of any tax liability on the assessed figures meant that the prosecution foundation was lacking.

Conclusion: The complaint could not have been initiated and was liable to be quashed.

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