2004 (2) TMI 3 - SC - Income Tax

Judgment upholds CJM proceedings under s.276CC; 'due time' applies only to s.139(1)-(2), s.139(4) for assessment

Prakash Nath Khanna And Another Versus Commissioner of Income-Tax And Another

SC upheld CJM proceedings under s.276CC, holding 'due time' refers only to s.139(1) and (2), not s.139(4); permits filing under s.139(4) for assessment ... Scope & ambit of 'due time' in Section 276CC - statutory presumption - existence of such mental state - legality of the proceedings pending in the Court of the Chief Judicial Magistrate, Shimla ('CJM'). - Asst. CIT, filed a complaint in terms of s. 276CC in the Court of the Chief Judicial Magistrate who had issued process of taking cognizance of offence - held that:- The term of imprisonment is higher when the amount of tax which would have been evaded but for the discovery of the failure to furnish the return exceeds one hundred thousand rupees. If the plea of the appellants is accepted it would mean that in a given case where there is infraction and where a return has not been furnished in terms of sub-section (1) of section 139 or even in response to a notice issued in terms of sub-section (2), the consequences flowing from non-furnishing of the return would get obliterated. At the relevant point of time section 139(4)(a) permitted filing of return where return has not been filed within sub-section (1) and sub-section (2). The time limit was provided in clause (b). Section 276CC refers to 'due time' in relation to sub-sections (1) and (2) of section 139 and not to sub-section (4). Had the Legislature intended to cover sub-section (4) also, use of the expression 'section 139' alone would have sufficed. It cannot be said that the Legislature without any purpose or intent specified only the sub-sections (1) and (2) and the conspicuous omission of sub-section (4) has no meaning or purpose behind it. Sub-section (4) 'of section 139 cannot by any stretch of imagination control the operation of sub-section (1) wherein a fixed period for furnishing the return is stipulated. The mere fact that for the purposes of assessment and carrying forward and to set off losses it is treated as one filed within subsection (1) or (2) cannot be pressed into service to claim it to be actually one such, though it is factually and really not by extending it beyond its legitimate purpose. There is a statutory presumption prescribed in section 278E. The court has to presume the existence of culpable mental state, and absence of such mental state can be pleaded by an accused as a defence in respect of the act charged as an offence in the prosecution. Therefore, the factual aspects highlighted by the appellants were rightly not dealt with by the High Court. This is a matter for trial. It is certainly open to the appellants to plead absence of culpable mental state when the matter is taken up for trial. Looked at from any angle the appeals are without merit and are dismissed. Issues Involved:1. Interpretation of 'due time' in Section 276CC of the Income-tax Act, 1961.2. Applicability of Section 276CC to regular assessees who voluntarily submit returns.3. Conditions under which Section 276CC applies concerning tax evasion exceeding Rs. 1,00,000.4. Consideration of unavoidable delay in submission of returns.5. Requirement of contumacious conduct and mens rea for prosecution under Section 276CC.6. Double jeopardy concerning interest and penalty levied under Sections 139(8) and 271(1)(a) of the Act.Detailed Analysis:1. Interpretation of 'due time' in Section 276CC:The core issue revolves around the interpretation of 'due time' in Section 276CC. The appellants argued that a return filed under Section 139(4) should be considered as filed within the 'due time' as per Section 139(1). However, the court clarified that the term 'in due time' specifically refers to the time stipulated in Section 139(1) and not Section 139(4). The court emphasized that accepting the appellants' interpretation would render the term 'in due time' meaningless, as it would allow returns filed much later under Section 139(4) to be considered timely, which is not the legislative intent.2. Applicability of Section 276CC to regular assessees:The appellants contended that Section 276CC should not apply to regular assessees who voluntarily submit their returns without any notice from the Assessing Officer. The court rejected this argument, stating that the provisions of Section 276CC are clear and unambiguous, and there is no basis to exclude regular assessees from its purview. The court noted that the marginal heading and explanatory memo cannot control the clear language of the statute.3. Conditions under which Section 276CC applies concerning tax evasion exceeding Rs. 1,00,000:The appellants argued that Section 276CC applies only when there is a discovery of failure involving tax evasion exceeding Rs. 1,00,000. The court clarified that Section 276CC has two parts: the first part deals with the infraction of not filing returns in due time, and the second part specifies the punishment, which varies based on the amount of tax evaded. The court emphasized that the provision applies to all cases of failure to file returns in due time, and the severity of punishment depends on the extent of tax evasion.4. Consideration of unavoidable delay in submission of returns:The appellants claimed that the delay in filing returns was unavoidable due to the managing partner's failure to communicate their share of profit. The court held that whether there was a willful failure to furnish the return is a factual matter to be adjudicated during the trial. The court noted that Section 278E prescribes a statutory presumption of culpable mental state, which the accused can rebut during the trial.5. Requirement of contumacious conduct and mens rea for prosecution under Section 276CC:The appellants argued that mere delay in filing returns without contumacious conduct and mens rea should not result in prosecution. The court reiterated that the existence of a culpable mental state is presumed under Section 278E, and it is the accused's responsibility to prove the absence of such a mental state during the trial. The court emphasized that this issue is a matter for trial and not for determination at the writ petition stage.6. Double jeopardy concerning interest and penalty levied under Sections 139(8) and 271(1)(a):The appellants contended that they could not be prosecuted under Section 276CC after being subjected to interest and penalty under Sections 139(8) and 271(1)(a). The court rejected this argument, stating that the imposition of interest and penalty does not preclude prosecution under Section 276CC. The court emphasized that the legislative intent is to ensure compliance with the statutory requirements, and prosecution is an additional measure to enforce this compliance.Conclusion:The appeals were dismissed, with the court affirming that Section 276CC applies to all cases of failure to file returns in due time as stipulated in Section 139(1). The court clarified that the presumption of culpable mental state under Section 278E must be rebutted during the trial, and the factual aspects raised by the appellants are matters for trial. The court emphasized the clear and unambiguous language of Section 276CC and rejected the appellants' interpretation that would dilute the statutory requirements.