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 argued that a search conducted on 03.09.2013 was premature since the filing deadline was 30.09.2013. The HC held that the search did not prevent filing returns by the statutory deadline. Filing returns under Section 139(1) is mandatory, and non-compliance creates a presumption of mens rea under Section 278E. The court ruled that search under Section 132 and subsequent notice under Section 153A are distinct from the mandatory filing requirement under Section 139(1). The petitioner failed to file returns even after receiving notice under Section 153A, justifying the prosecution.

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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 Time

The 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 Act

Sanction 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 Proceedings

The 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.

Conclusion

The 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.

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