TaxTMI 
TaxTMI 
2025 (7) TMI 1382
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.... 378(2)(b) and 378(3) of the Code of Criminal Procedure, 1973, assails the orders of acquittal passed by the Appellate Court of Sessions Judge. The impugned orders arise from a common factual matrix, i.e., the Respondent's failure to file returns across multiple assessment years. The contentions raised in these orders by the Appellant and the Respondent involve identical legal questions and substantially similar grounds. Accordingly, it is considered appropriate to decide these appeals through a single, consolidated order. 5. The essential background facts relevant for deciding the present appeals are summarised as follows: 5.1. In March 2011, acting on allegations of tax evasion and banking fraud, a search was conducted under Section 132 of the Income Tax Act, 1961, ["the Act"] at the premises M/s Century Communication Group (a part of the M/s Mahuaa Media Group), where the Respondent served as a director. During the course of this operation, various documents were recovered and seized from the Respondent's premises. Consequently, a notice under Section 153A of the Act was issued and duly served upon the Respondent on 03rd January, 2012 [Separate notices were issued under th....
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.... (i) A bank account in Citibank with INR 64,70,000/- deposited; and (ii) a flat in Mumbai bought in July 2004 for INR 78,20,000/-, along with additional INR 9,97,000/- for extra amenities. Further, despite multiple reminders dated 14th February 2013, and 12th March, 2013 sent to the Respondent seeking his appearance qua the questionnaires, the Respondent failed to comply with the same. 5.5. The Respondent also filed an application dated 12th February, 2013 seeking compounding of the offence under Section 153A and expressed his willingness to comply with the directions issued by the Income Tax Department. In response, the Department, by communication dated 18th February, 2013, informed the Respondent that his application for compounding could not be entertained as it was premature at that stage of the proceedings. 5.6. On 25th February, 2013, given the continued failure on the Respondent's part to file his returns within the permissible time frame despite the notice under Section 153A of the Act, the Revenue filed separate complaints initiating criminal proceedings against the Respondent under the Section 276CC before the Court of Additional Chief Metropolita....
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....s: 6.1. The Appellate Court gravely erred in setting aside the conviction under Section276CC of the Act merely on the basis that the penalty proceedings under Section 271(1)(b) had been quashed by the CIT(A). 6.2. This reasoning in the impugned order is fundamentally flawed. The failure to file a return pursuant to a notice under Section 153A, which constitutes the basis for prosecution under Section 276CC, is distinct and independent from the non-compliance with notices issued under Section 142(1), which forms the basis for penalty under Section 271(1)(b). The prosecution under Section 276CC is premised on the Respondent's failure to furnish the return within the prescribed time in response to the notice under Section 153A, which is unaffected by the setting aside of penalty under Section 271(1)(b). 6.3. Without prejudice to the above, it is urged the Appellate Court failed to appreciate that the order passed by the CIT(A) was not accepted by the revenue on merits. The only reason for not filing an appeal before the Income Tax Appellate Tribunal was the low tax effect, in adherence to the monetary limits prescribed under the CBDT's circular. Consequently, the observation ....
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....framework governing prosecution under Section 276CC of the Act. Section 276CC provides for criminal prosecution where a taxpayer wilfully fails to furnish his income tax return in due time, including in response to notices under Sections 139(1), 142(1), 148, or 153A, and prescribes rigorous imprisonment and/or fine. On the other hand, Section 271(1)(b) allows the Assessing Officer to impose a monetary penalty (Rs.10,000 per default) for failure to comply with notices under Section 142(1), unless the taxpayer can show reasonable cause. Crucially, prosecution under Section 276CC for failing to file returns pursuant to a Section 153A notice is a distinct cause of action and is independent from penalties under Section 271(1)(b) for non-compliance with a Section 142(1) notice. 9. Indeed, while it is true that penalty proceedings may, in certain circumstances, bear upon the sustainability of prosecution under Section 276CC of the Income Tax Act, such an effect arises only where both proceedings emanate from the same cause of action and rest on identical factual foundations. In the present case, the penalty proceedings initiated under Section 271(1)(b), for non-compliance with a notice....
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....he subject matter of all the seven cases Inspite of service of the notice u/s 153 (A) and service of the notice u/s 142 (1) Income Tax Act within the stipulated time and by doing so he committed offence punishable u/s 276 CC Income Tax Act. 13. In the order dated 17.10.2014 of Commissioner of Income Tax (Appeals) the penalty imposed u/s 271 (1) (b) were held not legally sustainable and were cancelled. These penalties are the basis of the criminal prosecution of the appellant in all the complaint cases. In view of the fact that no further appeal has been preferred by the Department of the Income Tax against this order of the Appellate Authority of Income Tax, the same attains finality. As a result if the penalty does not survive the criminal prosecution for the same also cannot be sustained. 14. In view of this position and also taking into account the legal position as enunciated in K.C. Builders (Supra), the appeal No. 9/2015 to 15/2015 are allowed and order of conviction and sentence is recalled and set aside. 15. Copy of this order be also kept in all the six other appeals bearing no.10/2015 to 15/2015. 16. TCR along with order and copy thereof in each....
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....trix of the present case. 13. Counsel for the Revenue, Mr. Gaurav Gupta, has rightly drawn attention to the decision of the Supreme Court in Vinubhai Mohanlal Dobaria v. Chief Commissioner of Income-tax [2025] 2 S.C.R. 476., to emphasise he statutory imperative of filing income tax returns within the time prescribed under law. The Court in that case reiterated that the offence under Section 276CC is complete at the moment the assessee fails to furnish the return of income within the due date as stipulated under Section 139(1). It was categorically held that subsequent compliance, whether under Section 139(4) or prior to the initiation of prosecution, does not obliterate the offence already committed. The judgment reinforces the proposition that the obligation to file returns within the statutory timeframe is not directory but mandatory. A breach of this obligation, in the absence of reasonable cause, invites penal consequences, including prosecution under Section 276CC. 14. Although the Supreme Court in Vinubhai arose in the context of default under Section 139(1), the underlying rationale of the decision is equally applicable to cases of non-filing of returns in response to ....
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....has been annulled is well-founded in law. Accordingly, the acquittal order passed by the Appellate Court cannot be upheld on this aground. 18. However, this does not conclude the present inquiry. A critical aspect which remains to be considered is whether the Respondent's non-compliance with the Section 153A notice was "wilful", a necessary ingredient to attract criminal culpability under Section 276CC. This element of wilfulness merits careful examination, as it goes to the very root of criminal intent, which distinguishes mere technical or procedural lapses from punishable defaults. 19. In this regard, it is first necessary to note that "wilfulness" of the default is indeed a critical statutory requirement under Section 276CC of the Act, which is extracted below: If a person wilfully fails to furnish in due time the return of fringe benefits which he is required to furnish under sub-section (1) of section 115WD or by notice given under sub-section (2) of the said section or section 115WH or the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under clause (i) of sub-section (1) of section 142 or section 148 or....
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....his section mandates that the Court shall presume the existence of a culpable mental state, including the element of mens rea, on the part of the accused. The Supreme Court in Sasi Enterprises v. ACIT, has categorically held that once the statutory presumption under Section 278E is triggered, the burden shifts to the accused to disprove the existence of a wilful default. In other words, the onus lies on the assessee to establish, beyond reasonable doubt, that the failure to file returns within the prescribed period was not intentional. The relevant portion is extracted as follows: 32. Section 278E deals with the presumption as to culpable mental state, which was inserted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986. The question is on whom the burden lies, either on the prosecution or the assessee, under Section 278E to prove whether the assessee has or has not committed willful default in filing the returns. Court in a prosecution of offence, like Section 276(CC) has to presume the existence of mens rea and it is for the accused to prove the contrary and that too beyond reasonable doubt. (Emphasis Supplied) 23. Nonetheless, in the pr....