2023 (12) TMI 225 - HC - Income Tax

Petitioner fails to quash prosecution under Section 276CC for not filing income tax returns despite search timing arguments

The Madras HC dismissed a petition seeking to quash prosecution under Section 276CC for failure to file income tax returns for AY 2013-14. The petitioner ... Criminal liability for wilful failure to furnish return under Section 276CC - Obligation to file return under Section 139(1) is mandatory and time bound - 153A does not supplant mandatory filing under 139(1) - Independence of adjudication proceedings and criminal prosecution - Presumption as to culpable mental state under Section 278E to be rebutted at trialCriminal liability for wilful failure to furnish return under Section 276CC - Presumption as to culpable mental state under Section 278E to be rebutted at trial - Validity of initiation of prosecution under Section 276CC against the petitioner for non furnishing of return for assessment year 2013-2014 - HELD THAT: - The Court found that the petitioner did not file the return for assessment year 2013-2014 within the statutory time (on or before 30.09.2013) and also failed to file within the period provided in the notice under Section 153A. Reliance was placed on precedents establishing that failure to file within the mandatory period attracts Section 276CC and that subsequent filing does not necessarily protect against prosecution. The Court held that the question of wilfulness is essentially a matter of fact and that a presumption as to culpable mental state can arise and must be rebutted by the accused at trial; accordingly such factual determinations cannot be resolved under Section 482. In view of these findings, there was no ground to quash the prosecution initiated under Section 276CC. [Paras 7, 10]Prosecution under Section 276CC was validly initiated and will not be quashed on the present record.Obligation to file return under Section 139(1) is mandatory and time bound - 153A does not supplant mandatory filing under 139(1) - Whether the search under Section 132 and notice under Section 153A excused or supplanted the petitioner's statutory duty to file the return under Section 139(1) - HELD THAT: - The Court held that the obligation to file a return under Section 139(1) is mandatory and a search under Section 132 or a notice under Section 153A does not relieve an assessee of that duty. The judgment distinguished the scope of Section 153A (which expands the assessing officer's jurisdiction post search) from the separate, time bound obligation under Section 139(1). The Court observed that the mere conduct of a search prior to the due date did not preclude filing the return by the statutory due date and that the petitioner's asserted practical difficulties did not negate the mandatory nature of filing within the prescribed time. [Paras 10, 11, 12, 13]Search under Section 132 and notice under Section 153A do not excuse failure to file the return within the time mandated by Section 139(1).Independence of adjudication proceedings and criminal prosecution - Decision in adjudication proceeding is not necessary before initiating criminal prosecution - Whether pendency of assessment or appeal (adjudication proceedings) precludes initiation of criminal prosecution for failure to furnish return - HELD THAT: - Relying upon Supreme Court authorities, the Court reiterated that adjudication proceedings and criminal prosecution are independent; initiation of criminal proceedings is not contingent upon the completion or outcome of assessment or appeal. The Court noted that adjudicatory outcomes may have bearing only insofar as an exoneration on merits could preclude prosecution, but mere pendency of assessment or appeal, or expectation of success therein, does not bar prosecution. Thus the pendency of the petitioner's appeal or assessment proceedings did not warrant quashing of the criminal complaint. [Paras 6, 7, 14]Pendency of assessment/appeal does not bar initiation or continuation of criminal prosecution in the present case.Final Conclusion: The petition to quash criminal proceedings in EOCC.No.23 of 2019 was dismissed; the Court found no ground to interfere with initiation of prosecution under Section 276CC in respect of assessment year 2013-2014. Issues Involved:1. Non-filing of income tax return within the stipulated time.2. Validity of prosecution under Section 276CC of the Income Tax Act.3. Impact of pending appeal on prosecution proceedings.Issue 1: Non-filing of Income Tax Return within the Stipulated TimeThe petitioner failed to file his return of income for the assessment year 2013-2014 by the due date of 30.09.2013, as required under Section 139 of the Income Tax Act. A search was conducted on 03.09.2013, and a notice under Section 153A was issued, requiring the petitioner to file his return within 30 days. Despite reminders, the petitioner filed his return only on 19.07.2016, with a delay of over 15 months, declaring an income of Rs. 2,32,48,580/-. The assessment was completed on 12.08.2016, determining a total income of Rs. 3,98,72,510/-. Penalty proceedings under Section 271F were initiated due to the delay.Issue 2: Validity of Prosecution under Section 276CC of the Income Tax ActSanction for prosecution under Section 276CC was granted after the petitioner failed to provide valid reasons for the delay. The petitioner argued that the delay was due to a change in auditors, obtaining copies of seized documents, and approaching the settlement commission. However, the court noted that the petitioner had substantial income and was required to file returns under Section 139(1). The court emphasized that the non-filing of returns within the stipulated time attracts the offence under Section 276CC, and subsequent filing does not protect from prosecution. The Supreme Court rulings in P.Jayappan and Kejriwal cases were cited, affirming that adjudication and prosecution proceedings are independent, and prosecution can proceed regardless of pending adjudication.Issue 3: Impact of Pending Appeal on Prosecution ProceedingsThe petitioner contended that the prosecution was premature due to a pending appeal against the assessment order. However, the court held that the pendency of an appeal does not bar prosecution. The Supreme Court in Prakash Nath Khanna and Sasi Enterprises cases clarified that failure to file returns within the due time completes the offence under Section 276CC, and subsequent compliance does not negate the offence. The court also distinguished the present case from the Abhisar Buildwell case, noting that the prosecution under Section 276CC is independent of the assessment process under Section 153A.ConclusionThe court dismissed the petition to quash the prosecution, holding that the petitioner failed to file returns within the mandated time, and the prosecution under Section 276CC was valid. The court emphasized that the issue of wilfulness and mens rea can only be determined during the trial.