2024 (9) TMI 1527 - HC - Income Tax

Assessee cannot claim Rs. 3,000 exemption under Section 276CC proviso without regular assessment being framed

The Madras HC dismissed a petition seeking to quash prosecution proceedings under Section 276CC of the Income Tax Act for non-filing of returns. The ... Complaint u/s 276CC - Prosecution Proceedings - Assessee not filed returns - as argued petitioner though failed to file his returns within the time stipulated during the said assessment year, he had no taxable income and that has been accepted by the Department by their own proceedings - In case, the returns if the tax payable by him on the total income determined on regular assessment after reducing the advanced tax, if any paid does not exceed Rs. 3,000/- - HELD THAT:- The sanction to prosecute, issued by the Principal Commissioner of Income Tax has dealt this issue and explained that the embargo of Rs. 3000/- in proviso B of Section 276CC of the Income Tax Act applies only in cases where a regular assessment has been framed. However, in the instant case, no regular assessment has been framed for the year in question and therefore relying upon the judgment of Anil Kumar Sinha Vs. Union of India [2013 (6) TMI 284 - PATNA HIGH COURT] This Court following the Judgements of Patna High Court rendered in Anil Kumar Sinha Vs. Union of India [SUPRA] and the judgment of CIT Vs. Kerala Chemicals and Proteins Limited [2010 (1) TMI 263 - KERALA HIGH COURT] which has clearly dealt with the issue which is now subject matter for consideration holds that the assessee does not fall within the meaning and scope of a regular assessment to get the protection to the proviso to 278 CC of the Income Tax Act. Hence, he has to face the prosecution. Records reveals that the trial in this case has already commenced and the complainant has been examined in chief by P.W.1 and cross examination is deferred at the request of the petitioner. In the said circumstances, it is appropriate for the petitioner herein to face the trial and put forth his defence in the course of trial and seek remedy. Hence, the matter is not fit for quash for the reasons stated above. Issues:Prosecution for failure to file Income Tax return for the year 2014-2015, Interpretation of Section 276 CC of the Income Tax Act, Application of proviso to Section 276 CC, Legal acceptability of explanations for not filing returns, Prosecution without regular assessment, Immunity from Settlement Commission, Scope of regular assessment for protection under proviso to Section 276 CC.Analysis:The petitioner faced prosecution by the Income Tax Department for not filing his Income Tax return for the year 2014-2015, despite having taxable income from house property and other sources. The petitioner argued that since he had no taxable income during the assessment year and the tax payable was nil, the Department could not prosecute him under Section 279(1) of the Income Tax Act. The Department's complaint highlighted the petitioner's failure to file returns within the stipulated time under Section 139(1) of the Income Tax Act, including income from the sale of ancestral agricultural land. The petitioner contended that the prosecution was impermissible as per the provisions of the Income Tax Act unless the tax payable exceeded Rs. 3,000.The Court examined the interpretation of Section 276 CC of the Income Tax Act, which deals with willful failure to furnish returns in due time. The Court referenced a judgment from the Patna High Court regarding immunity from prosecution granted by the Settlement Commission and distinguished the present case from the Settlement Commission's proceedings. The Court emphasized that the proviso of Rs. 3,000 limitation applies to cases of regular assessment, which was not applicable in the petitioner's situation. The Court also referred to a judgment from the Kerala High Court to support its decision that the petitioner did not fall within the scope of a regular assessment for protection under the proviso to Section 276 CC.It was noted that the trial had already commenced, with the complainant examined in chief, and the cross-examination deferred at the petitioner's request. The Court concluded that the petitioner should face the trial, present his defense, and seek remedy during the trial proceedings, thereby dismissing the petition and closing the connected miscellaneous petition. The judgment highlighted the importance of facing the trial to address the prosecution for failure to file Income Tax returns, emphasizing the need for the petitioner to participate in the legal process to seek resolution.