TaxTMI 
TaxTMI 
2021 (7) TMI 314
X X X X Extracts X X X X
X X X X Extracts X X X X
....s well as the order issuing summons dated 13.6.2019. 3. It is contended by the petitioners that they are independent and non-executive Directors of the Company named Sumeet Industries Limited. They had joined the Company on 28.6.2014, 13.2.2017 and 11.4.2017 respectively. It is submitted by the petitioners that they have no role to play in the day to day affairs of the Company and they have tendered their resignation on 30.11.2018, 19.11.2018 and 3.11.2018 respectively, the said resignation is also reflected in Form DIR-12 maintained with the Ministry of Corporate AffaiRs. 3.1 The petitioners state that since they have resigned from the Company, are not aware about the functioning of the Company but from the information gathered from the sources and averment made in the complaint, it is stated by the Petitioners that the Company- accused No.1 was having the Tax liability of Rs. 13,90,27,650/- out of which prior to the filing of the complaint, Rs. 11,12,00,439/- was already paid. The accused- Company has responded to the show-cause Notice dated 25.1.2019, the Company had informed Respondent No.2 of having already paid Rs. 7,28,45,394/- and further Rs. 3,83,55,045/- was due from the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the Assessment Year 2017-18. Self-assessment has been accepted by the department. As per the record, he stated that 80% of the tax amount was paid prior to the complaint. The petitioners explained the circumstances of delay in the payment of taxes in the reply towards Notice and after the filing of the complaint, remaining amount were also paid. Thus, he stated that there was no wilful attempt to evade payment of tax. 4.1 Mr. Pahwa further submitted that, even if the Assessee deposits part of tax due subsequent to Notice with a prayer for extension of time for the balance amount to be paid then too it could not be said that there is any wilful attempt on the part of the assessee under Section 276C to evade payment of tax and, therefore, that fact was required to be considered by the department prior to the launching of prosecution. Even in case where assessee deposits/ paid self- assessment tax dues belatedly, after steps taken by the department, there cannot be inference that there was a wilful attempt on the part of the assessee to delay payment in terms of Section 276C. Mr. Pahwa submitted that 'wilful failure' brings into consideration the element of guilty mind. He ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....come Tax, reported in (2013) 352 ITR 161 (Patna) to submit that every tax has to be paid in due time and there is no condonation of such infraction, for the prosecution of offence under the Income Tax Act. There is a presumption of culpable mental state in accordance to Section 278E of the Income Tax Act. 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. He submitted that the contention of tax evasion has been made on substantive evidence. Referring to the reply to the notice by the Department, Mr. Bhatt submitted that there is no averment to the effect that petitioners are not incharge of day to day affairs of the Company, thus the petitioners as partners of the Assessee Firm are equally responsible for the act and omission of the said Firm. 7. The Income Tax Department states that the Company accused No.1 M/s. Sumeet Industries Ltd. by the return of income declared the total income to be Rs. 12,50,49,940/- and the said Income Tax Return were signed by accused No.2 on 31.3.2018. The total tax payable has been Rs. 13,90,27,650/- [Rs. 14,12,32,322/- - 22,04,669/- (TDS and TCS)]. It is contended tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tax by the accused under Section 140A of the Act would not have been detected by Income Tax Department, the accused would have left from discharging tax liability. The accused having failed to comply with the requirements of the Act, violated Section 140A of Income Tax Act, 1961 and became assessee in default for non-payment of tax etc. and thereby the accused has failed to comply with the statutory provision. The accused have also withheld the Government dues and this act on the part of the accused caused circumstance which enabled the accused to willfully evade the payment of tax though they had full knowledge that such self-assessment tax was required to be paid on or before filing of Return of Income. Non-payment of remaining admitted tax liability of Rs. 13,90,27,650/- at the time of filing of Return of Income reflects the intention/ motive to evade the payment of tax under clear culpable mental state within the meaning of Section 276C(2) read with Section 278E of the Act and therefore, all the accused are required to be punished under Section 276C(2) of the Act. 10. Section 276C of the Income Tax Act is extracted hereinbelow: "276C. Wiful attempt to evade tax, etc. (1) If ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y provision and the accused thereby has caused such circumstances which enable the accused to evade payment of taxes though they were in the knowledge that the self-assessment was required to be paid on or before Return of Income. 12. What requires to be noticed herein is that the Notice was issued for the Assessment Year 2016-17 and 2017-18 while the prosecution has been launched for admitted tax liability of Rs. 13,90,27,650/- for the Assessment Year 2017-18. In reply to the show-cause notice for launching of prosecution under Section 276C of the Income Tax Act, Company had informed the Income Tax Department that they had file the Return of Income for the Assessment Year 2016-17 by computing tax payable at Rs. 7,87,39,870/- and that they have received order under Section 139(9) of the Act dated 16.1.2019 with the communication reference No. CPC/1617/G5/1800922674 wherein it was mentioned that the return of income filed by the Company on 31.3.2018 vide acknowledgment No. 580767721310318 is treated as invalid return and thus to that understanding the Company was in no position to even file revised return as the date of filing revised return for Assessment Year 2016-17 had elapsed,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t be proceeded against under this section for failure to furnish in due time the return of income under sub- section (1) of Section 139- (i) for any assessment year commencing prior to the Ist day of April, 1975; or (ii) for any assessment year commencing on or after the Ist day of April, 1975, if- (a)the return is furnished by him before the expiry of the assessment year; or (b)the tax payable by him on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source, does not exceed three thousand rupees". 16. Section 276C is in context with wilful attempt to evade taxes etc while Section 276CC is provided for the failure to furnish Return of Income. 17. In Prakash Nath Khanna v. Commissioner of Income Tax (Supra), the Hon'ble Apex Court, reading Section 276CC with Section 139 of the Income Tax Act has explained significance of the term 'in due time', used in Section 276CC, and in case of Sasi Enterprises v. Assistant Commissioner of Income Tax (Supra), it has been laid down that in a prosecution for offence like Section 276CC, the Court has to presume existence of mens rea in terms of provis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rn under Section 139(1) of the Act. Resultantly, the proviso under Section 276CC takes care of genuine assesses who either file the returns belatedly but within the end of the assessment year or those who have paid substantial amounts of their tax dues by pre-paid taxes, from the rigor of the prosecution under Section 276CC of the Act. 24. Section 276CC, it may be noted, takes in sub-section (1) of Section 139, Section 142(1)(i) and Section 148. But, the proviso to Section 276CC takes in only sub-section (1) of Section 139 of the Act and the provisions of Section 142(1)(i) or 148 are conspicuously absent. Consequently, the benefit of proviso is available only to voluntary filing of return as required under Section 139(1) of the Act. In other words, the proviso would not apply after detection of the failure to file the return and after a notice under Section 142(1)(i) or 148 of the Act is issued calling for filing of the return of income. Proviso, therefore, envisages the filing of even belated return before the detection or discovery of the failure and issuance of notices under Section 142 or 148 of the Act. 18.3 Dealing with Section 278E, it has been laid down in Para-30 as un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s the emphasis on evasion of tax, penalty or interest, etc. before charging or imposition or under- reporting of income. In other words, all the acts done by assessee whereby the income is not offered to tax either due to falsification of books of account or non-reporting of income or under reporting of income, etc would be punishable under Section 276C(1) of the Act. While provisions under Section 276C(2) would operate when payment of tax, penalty or interest is due and attempt is made to evade such payment. 21. The basic difference between applicability of sub-section (1) and (2) is the stage at which the offence is committed. If an offence is committed before the stage of filing of return of income, it shall be covered by sub-section (1). Any offence committed on or after the stage of filing of return of income will be covered by sub-section (2). It may in certain circumstances appears to be overlapping between the applicability of sub-section (1) and sub-section (2). 22. Under both the sub-sections of Section 276C, the first requirement is that the attempt to evade should be 'wilful'. This term 'wilful' has not be defined under the Act. Under common parlance t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fault in complying with the provisions of the Income Tax Act is to prevent evasion of tax. But in each and every case, without looking into gravity of the offence and without considering the attending circumstances, no prosecution should be launched. Unless there is wilful default in filing the return, no prosecution can be launched". Here in this case, the tax demand of the department has been paid by the company. In the reply given to the Income Tax Department to the notice of demand, the Company has stated that they have already paid 80% of the tax demand and addressing the crisis situation of the market, the Company assured the payment of remaining tax demand for the Assessment Year 2017-18 of Rs. 2,78,27,211/- at the earliest. It has been submitted at bar by the learned advocate for the petitioners that all the due amount has been paid to the department. The prosecution has been launched for the non-payment of the tax of Rs. 13,90,27,650/- on the Return of Income. To that the Company had contended in the Reply that for the Assessment Year 2017-18 for computing tax payable at Rs. 13,90,27,650/-, they could manage to pay Rs. 7,28,45,394/- and further balance of Rs. 3,83,55,045/....