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Issues: Whether criminal proceedings for wilful failure to furnish income tax returns under section 276CC of the Income-tax Act, 1961 could be quashed on the ground that the returns were eventually filed, penalty for delay was paid, and the sanctioning authority allegedly did not grant an opportunity of hearing.
Analysis: The delay in filing the returns for the relevant assessment years was undisputed. The offence under section 276CC is attracted when there is failure to furnish the return within the prescribed time, and the proviso was held to protect only voluntary filing under section 139(1) before detection or before notice under section 142 or section 148. Payment of penalty for delayed filing does not wipe out criminal liability, because penalty and prosecution operate in different fields. The Court also held that section 278E raises a presumption of culpable mental state in prosecutions under the Act, and it is for the accused to rebut that presumption before the trial court. The challenge based on lack of opportunity before sanction was rejected on the record, as a show-cause notice had been issued and objections were considered by a speaking order.
Conclusion: The petitioners were not entitled to quashing of the criminal proceedings. The presumption under section 278E had to be rebutted in trial, and the prosecution was allowed to continue.
Ratio Decidendi: In a prosecution under section 276CC of the Income-tax Act, 1961, belated filing and payment of penalty do not by themselves bar prosecution, and section 278E casts a rebuttable presumption of culpable mental state on the accused.
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