Wilful failure to file income-tax returns can trigger penal liability for company directors when default and responsibility are proved.

Wilful failure to file an income-tax return where the company had taxable income was treated as sufficient to attract penal liability when the defence of financial difficulty and business loss was not supported by credible evidence. The court relied on documentary material and witness evidence to hold that the notices and sanction were duly signed and that the company officers were responsible for the conduct of business, thereby fixing liability on the directors. At sentencing, the offence was treated as an economic offence and probation was refused, with custodial sentence and fine imposed.

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Issues: (i) Whether the accused wilfully failed to furnish the return of income for the relevant assessment year and whether the directors were responsible for the default so as to attract penal liability under the Income-tax Act. (ii) Whether the accused were entitled to leniency or the benefit of probation at the stage of sentence.

Issue (i): Whether the accused wilfully failed to furnish the return of income for the relevant assessment year and whether the directors were responsible for the default so as to attract penal liability under the Income-tax Act.

Analysis: The record showed that the company had taxable income for the relevant assessment year, yet no return was filed within time. The audit report, balance sheet, notices, sanction order and other material were relied upon to show that the default was established. The defence of financial difficulty and business loss was not substantiated by cogent evidence and was not successfully put to the complainant witnesses in cross-examination. The court also accepted the evidence that the notices and sanction order were duly signed and that the company officers were in charge of and responsible for the conduct of the business.

Conclusion: The wilful default was proved and the directors' responsibility was established. The finding was against the accused and in favour of the prosecution.

Issue (ii): Whether the accused were entitled to leniency or the benefit of probation at the stage of sentence.

Analysis: The offence was treated as an economic offence and the court noted that it was not the first such default. In those circumstances, the benefit of probation was declined and a minimum custodial sentence and fine were considered sufficient.

Conclusion: The benefit of probation was refused and the sentence was imposed against the accused.

Final Conclusion: The prosecution succeeded in proving the offence, resulting in conviction of the company and its directors with sentence of fine and rigorous imprisonment, as applicable.

Ratio Decidendi: Where a company having taxable income fails to file its return and the defence of non-wilful default is not supported by credible evidence, criminal liability under section 276CC is attracted, and once the default is proved the burden shifts to the accused to rebut wilfulness.

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