Sec.139, 142 ,144 ,276CC and 278E of the Income Act - Discharge petition under sec. 245(2) Cr.P.C -Criminal prosecution launched for non filing of returns in time and inspite of notice - Best judgment fixing tax - non finalization of accounts are not the good reasons to discharge the accused - burden lies on the accused that due to bonafide reasons , returns not filed - lower court and high court rightly dismissed the discharge petition -
apex court dismissed the appeal =
Notice under Section 142(1)(i)
was issued to A-2 calling for return of income on 18.1.1994. The said
notice was served on her on 19.1.1994. Reminders were issued on
10.2.1994, 22.8.1994 and 23.8.1995. No return was filed as required
under Section 139(4) before 31.3.1995. The Department on 31.7.1995
issued notice under Section 142(1)(ii) calling for particulars of
income and other details for completion of assessment. Neither the
return of income was filed nor the particulars of income were
furnished. Best judgment assessment under Section 144 was made on
9.2.1996 on a total income of Rs.1,04,49,153/- and tax determined at
Rs.46,68,676/- and demand of Rs.96,98,801/-, inclusive of interest at
Rs.55,53,882/- was raised after adjusting pre-paid tax of Rs.5,23,756/-
. The Department then issued show-cause notice for prosecution under
Section 276CC on 14.6.1996. Later, sanction for prosecution was
accorded by the Commissioner of Income Tax on 3.10.1996.
7. A-3 also failed to file the return of income as per Section
139(1) for the assessment year 1993-94 before the due date i.e.
31.8.1993. Notice under Section 142(1)(i) was issued to A-3 calling
for filing of return of income on 8.11.1995. Further, notice was
also issued under Section 142(1)(ii) on 21.7.1995 calling for
particulars of income and other details for completion of assessment.
Neither the return of income was filed nor the particulars of income
were furnished. Best judgment assessment under Section 144 was made
on 8.2.1996 on a total income of Rs.70,28,110/- and tax determined at
Rs.26,86,445/-. The total tax payable, inclusive of interest due was
Rs.71,19,527/-. After giving effect to the appellate order, the total
income was revised by Rs.19,25,000/-, resulting in tax demand of
Rs.20,23,279/-, inclusive of interest levied. Later, a show-cause
notice for prosecution under Section 276CC was issued to A-3 on
7.8.1996. A-3 filed replies on 24.11.1996 and 24.3.1997. The
Commissioner of Income Tax accorded sanction for prosecution on
4.8.1997.=
Proceedings giving
rise to these appeals originated from the complaints filed by the
Assistant Commissioner of Income Tax, Chennai, before the Additional
Chief Metropolitan Magistrate (Egmore), Chennai, for the willful and
deliberate failure to file returns for the assessment years 1991-92,
1992-93 and hence committing offences punishable under Section 276 CC
of the Income Tax Act, 1961 (for short “the Act”). Complaints were
filed on 21.8.1997 after getting the sanction from the Commissioner of
Income Tax, Central II, Chennai under Section 279(1) of the Income Tax
Act. Appellants filed two discharge petitions under Section 245(2)
Cr.P.C., which were dismissed by the Chief Metropolitan Magistrate
vide order dated 14.6.2006. Appellants preferred Crl. R.C. Nos.781 to
786 of 2006 before the High Court of Madras which were dismissed by
the High Court vide its common order dated 2.12.2006, which are the
subject matters of these appeals.=
(1) Whether an assessee has the liability/duty to file a
return under Section 139(1) of the Act within the due date
prescribed therein?
(2) What is the effect of best judgment assessment under
Section 144 of the Act and will it nullify the liability of the
assessee to file its return under Section 139(1) of the Act?
(3) Whether non-filing of return under Section 139(1) of the
Act, as well as non-compliance of the time prescribed under
Sections 142 and 148 of the Act are grounds for invocation of
the provisions of Section 276CC of the Act?
(4) Whether the pendency of the appellate proceedings relating
to assessment or non-attaining finality of the assessment
proceedings is a bar in initiating prosecution proceedings under
Section 276CC due to non-filing of returns?
(5) What is the scope of Section 278E of the Act, and at what
stage the presumption can be drawn by the Court?
The firm is independently required to file the
return and merely because there has been a best judgment assessment
under Section 144 would not nullify the liability of the firm to file
the return as per Section 139(1) of the Act.
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 276CC has to presume the existence of mens rea and it is for
the accused to prove the contrary and that too beyond reasonable
doubt. Resultantly, the appellants have to prove the circumstances
which prevented them from filing the returns as per Section 139(1) or
in response to notices under Sections 142 and 148 of the Act.
31. We, therefore, find no reason to interfere with the order passed
by the High Court. The appeals, therefore, lack merits and the same
are dismissed and the Criminal Court is directed to complete the trial
within four months from the date of receipt of this Judgment.
2014 (January part) judis.nic.in/supremecourt/filename=41190
K.S. RADHAKRISHNAN, A.K. SIKRI
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.61 OF 2007
Sasi Enterprises … Appellant
Versus
Assistant Commissioner of Income Tax … Respondent
WITH
CRIMINAL APPEAL NOs.62, 63 & 64 OF 2007
J U D G M E N T
K.S. Radhakrishnan, J.
1. We are concerned with four Criminal Appeals No.61 to 64 of 2007,
out of which two Criminal Appeals No.61 of 2007 and 63 of 2007 relate
to M/s Sasi Enterprises, a registered partnership firm, of which Ms.
J. Jayalalitha and Mrs. N. Sasikala are partners, which relate to the
assessment years 1991-92 and 1992-93 respectively. Criminal Appeal
Nos.62 and 63 of 2007 relate to J. Jayalalitha and N. Sasikala
respectively for the assessment years 1993-94. Proceedings giving
rise to these appeals originated from the complaints filed by the
Assistant Commissioner of Income Tax, Chennai, before the Additional
Chief Metropolitan Magistrate (Egmore), Chennai, for the willful and
deliberate failure to file returns for the assessment years 1991-92,
1992-93 and hence committing offences punishable under Section 276 CC
of the Income Tax Act, 1961 (for short “the Act”). Complaints were
filed on 21.8.1997 after getting the sanction from the Commissioner of
Income Tax, Central II, Chennai under Section 279(1) of the Income Tax
Act. Appellants filed two discharge petitions under Section 245(2)
Cr.P.C., which were dismissed by the Chief Metropolitan Magistrate
vide order dated 14.6.2006. Appellants preferred Crl. R.C. Nos.781 to
786 of 2006 before the High Court of Madras which were dismissed by
the High Court vide its common order dated 2.12.2006, which are the
subject matters of these appeals.
2. M/s Sasikala Enterprises was formed as a partnership firm by a
deed dated 06.02.1989 with N. Sasikala and T.V. Dinakaran as its
partners, which was later reconstituted with effect from 04.05.1990
with J. Jayalalitha and N. Sasikala as partners. The firm did the
business through two units, namely, M/s Fax Universal and M/s J.S.
Plan Printers, which, inter alia, included the business in running all
kinds of motor cars, dealing in vehicles and goods etc. In the
complaint E.O.C.C. No.202 of 1997 filed before the Chief Metropolitan
Magistrate, Egmore, M/s Sasi Enterprises was shown as the first
accused (A-1) and J. Jayalalitha and N. Sasikala were shown as (A-2)
and (A-3) respectively, who were stated to be responsible for the day-
to-day business of the firm during the assessment years in question
and were individually, jointly and severally made responsible and
liable for all the activities of the firm. Partnership deed dated
04.05.1990 itself stated that the partners, A-2 and A-3 are
responsible and empowered to operate bank accounts, have full and
equal rights in the management of the firm in its business activities,
deploy funds for the business of the firm, appoint staff, watchman
etc. and to represent the firm before income tax, sales tax and other
authorities.
3. M/s Sasi Enterprises, the firm, did not file any returns for the
assessment year 1991-92 and 1992-93, for which the firm and its
partners are being prosecuted under Section 276 CC of the Act. J.
Jayalalitha and N. Sasikala did not file returns for the assessment
year 1993-94 and hence they are being prosecuted for that breach (in
their individual capacity) separately but not for the assessment years
1991-92 or 1992-93 and their returns have been filed as individual
assessee by them for the assessment years 1991-92 and 1992-93, though
belatedly on 20.11.1994 and 23.02.1994 respectively. In those returns
it was mentioned that accounts of the firm had not been finalized and
no returns of the firm had been filed.
4. The Assistant Commissioner of Income Tax in his complaint stated
that the firm through its partners ought to have filed its returns
under Section 139(1) of the Act for the assessment year 1991-92 on or
before 31st August, 1991 and for the assessment year 1992-93 on or
before 31st August, 1992 and A-2 in her individual capacity also
should have filed her return for the year 1993-94 under Section 139(1)
on or before 31.08.1993 and A-3 also ought to have filed her return
for the assessment year 1993-94 on or before 31st August, 1993, as per
Section 139(1) of the Act. The accused persons, it was pointed out,
did not bother to file the returns even before the end of the
respective assessment years, nor had they filed any return at the
outer statutory limit prescribed under Section 139(4) of the Act i.e.
at the end of March of the assessment year. It was also pointed out
that a survey was conducted in respect of the firm under Section 133A
on 25.08.1992 and following that a notice under Section 148 was served
on the partnership firm on 15.2.1994 to file the return of income tax
for the years in question. Though notice was served on 16.2.1994, no
return was filed within the time granted in the notice. Neither
return was filed, nor particulars of the income were furnished. For
the assessment year 1991-92, it was stated that pre-assessment notice
was served on 18.12.1995, notice under Section 142(1)(ii) giving
opportunities was also issued on 20.07.1995. The department made the
best judgment assessment for the assessment year 1991-92 under Section
144 on a total income of Rs.5,84,860/- on 08.02.1996 and tax was
determined as Rs.3,02,434/- and demand notice for Rs.9,95,388/- was
issued as tax and interest payable on 08.02.1996.
5. For the assessment year 1992-93, the best judgment assessment
under Section 144 was made on 9.2.1996 on the firm on a total income
of Rs.14,87,930/- and tax determined at Rs.8,08,153/-, a demand notice
was issued towards the tax and interest payable.
6. We may indicate, so far as A-2 is concerned, the due date for
filing of return of income as per Section 139(1) of the Act for the
assessment year 1993-94 was 31.8.1993. Notice under Section 142(1)(i)
was issued to A-2 calling for return of income on 18.1.1994. The said
notice was served on her on 19.1.1994. Reminders were issued on
10.2.1994, 22.8.1994 and 23.8.1995. No return was filed as required
under Section 139(4) before 31.3.1995. The Department on 31.7.1995
issued notice under Section 142(1)(ii) calling for particulars of
income and other details for completion of assessment. Neither the
return of income was filed nor the particulars of income were
furnished. Best judgment assessment under Section 144 was made on
9.2.1996 on a total income of Rs.1,04,49,153/- and tax determined at
Rs.46,68,676/- and demand of Rs.96,98,801/-, inclusive of interest at
Rs.55,53,882/- was raised after adjusting pre-paid tax of Rs.5,23,756/-
. The Department then issued show-cause notice for prosecution under
Section 276CC on 14.6.1996. Later, sanction for prosecution was
accorded by the Commissioner of Income Tax on 3.10.1996.
7. A-3 also failed to file the return of income as per Section
139(1) for the assessment year 1993-94 before the due date i.e.
31.8.1993. Notice under Section 142(1)(i) was issued to A-3 calling
for filing of return of income on 8.11.1995. Further, notice was
also issued under Section 142(1)(ii) on 21.7.1995 calling for
particulars of income and other details for completion of assessment.
Neither the return of income was filed nor the particulars of income
were furnished. Best judgment assessment under Section 144 was made
on 8.2.1996 on a total income of Rs.70,28,110/- and tax determined at
Rs.26,86,445/-. The total tax payable, inclusive of interest due was
Rs.71,19,527/-. After giving effect to the appellate order, the total
income was revised by Rs.19,25,000/-, resulting in tax demand of
Rs.20,23,279/-, inclusive of interest levied. Later, a show-cause
notice for prosecution under Section 276CC was issued to A-3 on
7.8.1996. A-3 filed replies on 24.11.1996 and 24.3.1997. The
Commissioner of Income Tax accorded sanction for prosecution on
4.8.1997.
8. We may incidentally also point out, the final tax liability so
far as the firm is concerned, was determined as Rs.32,63,482/- on
giving effect to the order of the Income Tax Appellate Tribunal (B
Bench), Chennai dated 1.9.2006 and after giving credit of pre-paid tax
for the assessment year 1991-92. For the assessment year 1992-93 for
the firm, final tax liability was determined at Rs.52,47,594/- on
giving effect to the order of the Income Tax Appellate Tribunal (B
Bench), Chennai dated 1.9.2006 and after giving credit of pre-paid
tax. So far as A-2 is concerned, for the assessment year 1993-94
final tax liability was determined at Rs.12,54,395/- giving effect to
the order of Income Tax Appellate Tribunal (B Bench), Chennai dated
11.10.2008 after giving credit to pre-paid tax. So far as A-3 is
concerned, for the assessment year 1993-94, final tax liability was
determined as Rs.9,81,870/- after giving effect to the order of Income
Tax Appellate Tribunal (B Bench), Chennai dated 14.9.2004 and after
giving credit to pre-paid tax.
9. We have already indicated, for not filing of returns and due to
non-compliance of the various statutory provisions, prosecution was
initiated under Section 276CC of the Act against all the accused
persons and the complaints were filed on 21.08.1997 before the Chief
Metropolitan Magistrate, which the High Court by the impugned order
has permitted to go on.
10. Shri Shekhar Naphade, learned senior counsel appearing for the
appellants, submitted that the High Court did not appreciate the scope
of Section 276CC of the Act. Learned senior counsel pointed out that
once it is established that on the date of the complaint i.e. on
21.08.1997 the assessment had not attained finality, the complaint
became pre-mature as on the date of the complaint and no offence had
taken place and all the ingredients of offence under Section 276 of
the Act were not satisfied. Learned senior counsel pointed out that
unless and until it is shown that failure to file the return was
willful or deliberate, no prosecution under Section 276CC could be
initiated. Learned senior counsel pointed out that in fact, the
second accused in her individual return had disclosed that the firm
was doing the business and that it had some income and hence, it
cannot be said that A-2 had concealed the fact that the firm had any
intention to evade tax liability. Learned senior counsel also
submitted that whether the assessee had committed any offence or not
will depend upon the final assessment of income and tax liability
determined by the appropriate authority and not on the assessment made
by the assessing officer. Placing reliance on the proviso to Section
276CC learned senior counsel submitted that, that is the only
interpretation that could be given to Section 276CC. In support of
his contention reliance was placed on the Judgment of this Court in
Commissioner of Wealth Tax, Gujarat v. Vimlaben Vadilal Mehta (Smt.)
(1983) 4 SCC 692, Commissioner of Wealth Tax, Gujarat, Ahmedabad v.
Vadilal Lallubhai & Ors. (1983) 4 SCC 697 and State of H.P. and others
v. Gujarat Ambuja Cement Ltd. and another (2005) 6 SCC 499. Referring
to Section 278E of the Act, learned senior counsel submitted that till
the assessment does not attain finality, Section 276CC is not complete
and the presumption under Section 278E is not attracted. Learned
senior counsel also submitted that the High Court has wrongly applied
the principles laid down by this Court in Prakash Nath Khanna and
another v. Commissioner of Income Tax and another (2004) 9 SCC 686, in
any view, which calls for reconsideration. Learned senior counsel
submitted that the said Judgment deals with the factum of proviso to
Section 276CC of the Act which lays down that there is no offence if
the tax amount does not exceed Rs.3,000/-.
11. Shri Sidharth Luthra, learned Additional Solicitor General of
India, appearing for the Revenue, on the other hand, submitted that
Section 139 of the Act placed a statutory mandate on every person to
file an income tax return in the prescribed form and in the prescribed
manner before the due date i.e. 31st August of the relevant assessment
year. Learned ASG submitted that on breach of Section 139(1) of the
Act, cause of action to prosecute the assessee arises subject to other
ingredients of Section 276CC of the Act. Learned ASG pointed out that
what is relevant in the proceedings, is not only the due date
prescribed in Section 139(1) of the Act, but also time prescribed
under Section 142 and 148 of the Act, by which further opportunities
have been given to file the return in the prescribed time. In other
words, Section 276CC, according to the learned ASG, applies to a
situation where assessee has failed to file the return of income as
required under Section 139 of the Act or in response to notices issued
to the assessee under Section 142 or Section 148 of the Act. Learned
ASG also submitted that the scope of proviso to Section 276CC to
protect the genuine assessees who either file their return belatedly
but within the end of the assessment year or those who paid
substantial amount of their tax dues by pre-paid taxes. Considerable
reliance was placed on the Judgment of this Court in Prakash Nath
Khanna and another (supra). Reliance was also placed on the Judgment
of this Court in Maya Rani Punj (Smt.) v. Commissioner of Income Tax,
Delhi (1986) 1 SCC 445.
12. Learned ASG also explained the scope of Section 278E by placing
reliance on P.R. Metrani v. Commissioner of Income Tax, Bangalore
(2007) 1 SCC 789, Kumar Exports v. Sharma Carpets (2009) 2 SCC 513,
and submitted that pendency of the appellate proceedings is not a
relevant factor in relation to prosecution under Section 276CC.
Reference was also made to Ravinder Singh v. State of Haryana (1975) 3
SCC 742 and Standard Chartered Bank and others v. Directorate of
Enforcement and others (2006) 4 SCC 278. Learned ASG submitted that
the Judgment in Prakash Nath Khanna (supra) calls for no
reconsideration, as the same has been uniformly applied by this Court
as well as by the various High Courts. Learned ASG also pointed out
that the appellants have been indulging in litigative exercises by
which they could hold up the proceedings for almost two decades and
that the trial court has rightly rejected the application for
discharge, which was affirmed by the High Court and the same calls no
interference by this Court.
13. We may formulate the questions that arise for our consideration,
which are as under:
(1) Whether an assessee has the liability/duty to file a
return under Section 139(1) of the Act within the due date
prescribed therein?
(2) What is the effect of best judgment assessment under
Section 144 of the Act and will it nullify the liability of the
assessee to file its return under Section 139(1) of the Act?
(3) Whether non-filing of return under Section 139(1) of the
Act, as well as non-compliance of the time prescribed under
Sections 142 and 148 of the Act are grounds for invocation of
the provisions of Section 276CC of the Act?
(4) Whether the pendency of the appellate proceedings relating
to assessment or non-attaining finality of the assessment
proceedings is a bar in initiating prosecution proceedings under
Section 276CC due to non-filing of returns?
(5) What is the scope of Section 278E of the Act, and at what
stage the presumption can be drawn by the Court?
14. We may, at the outset, point out that the appellants had earlier
approached this Court and filed SLP(C) Nos.3655-3658 of 2005 which
were disposed of by this Court directing the trial court to dispose of
the petition for discharge within a period of two months by its order
dated 03.03.2006. Learned Chief Metropolitan Magistrate rejected the
petitions vide its order dated 14.06.2006. Though the High Court
affirmed the said order vide its judgment dated 02.12.2006, these
appeals were kept pending before this Court over six years for one
reason or another.
15. We are, in these appeals, concerned with the question of non-
filing of returns by the appellants for the assessment year 1991-92,
1992-93 and 1993-94. Each and every order passed by the revenue as
well as by the Courts were taken up before the higher courts, either
through appeals, revisions or writ petitions. The details of the
various proceedings in respect of these appeals are given in paragraph
30 of the written submissions filed by the revenue, which reveals the
dilatory tactics adopted in these cases. Courts, we caution, be
guarded against those persons who prefer to see it as a medium for
stalling all legal processes. We do not propose to delve into those
issues further since at this stage we are concerned with answering the
questions which have been framed by us.
16. Section 139 of the Act prior to 1989-90 and after, placed a
statutory mandate on every person to file an income tax return in the
prescribed form and in the prescribed manner. The Direct Tax Laws
(Amendment) Act, 1987 with effect from 01.04.1989 made various
amendments to the Income Tax Act, by which the assessing officer has
no power to extend the time for filing a return of income under
Section 139(1) and to extend the time for filing under Section 139(3),
a return of loss intended to be carried forward. The time prescribed
for filing a belated return under Section 139(4) or a revised return
under Section 139(5) was reduced to one year from the end of the
relevant assessment year. The provision of Section 139(2) stood
incorporated in Section 142(1)(i). The notice under Section 142(1)(i)
to furnish a return of income cannot be issued in the course of the
assessment year itself and need not give the person concerned a
minimum period of 30 days for furnishing the return. When a return is
furnished pursuant to a notice under Section 142(1)(i), the assessment
may be made under Section 143 without recourse to Section 147.
Further, with the deletion of Section 271(1)(a), a penalty for failure
to furnish in due time a return of income under Section 139(1), is
abolished. Levy of punitive interest under Section 234A made
mandatory and the discretion of the assessing officer to reduce or
waive the interest was taken away. Non-compliance with a notice under
Section 142(1)(i) may attract prosecution under Section 276CC.
17. The Income Tax Act, therefore, had stipulated both the penalty
under Section 271(1)(a) and prosecution under Section 276CC, the
former for depriving taxes due to the exchequer and later for the
offence/infraction committed. As already indicated by the Taxation
Laws (Amendment) Act, 1989, penalty provision under Section 271(1)(a)
had been deleted w.e.f. 01.04.1989 and a provision for levy of
mandatory/compulsory interest under Section 234A of the Act was
introduced. But, legislature has never waived or relaxed its
prosecuting provisions under Section 276CC of the Act for the
infraction or non-furnishing of return of income.
18. Section 139 of the Act, as it stood at the relevant time, reads
as under:
“139. (1) Every person, if his total income or the total income
of any other person in respect of which he is assessable under
this Act during the previous year exceeded the maximum amount
which is not chargeable to income-tax, shall, on or before the
due date, furnish a return of his income or the income of such
other person during the previous year, in the prescribed form
and verified in the prescribed manner and setting forth such
other particulars as may be prescribed.
Explanation: In this sub-section, “due date” means-
(a) where the assessee is a company, the 30th day of November
of the assessment year;
(b) where the assessee is a person, other than a company.-
(i) in a case where the accounts of the assessee are required
under this Act or nay other law to be audited, or where the
report of any accountant is required to be furnished under
section 80HHC or Section 80HHD or in the case of a co-operative
society, the 31st day of October of the assessment year:
(ii) in a case where the total income referred to in this sub-
section includes any income from business or profession, not
being a case falling under sub-clause (i), the 31st day of
August of the assessment year :
(iii) in any other case, the 30th day of June of the
assessment year.
xxx xxx xxx
xxx xxx xxx
(3) If any person who has sustained a loss in any previous year
under the head “Profits and gains of business or profession” or
under the head “Capital gains” and claims that the loss or any
part thereof should be carried forward under sub-section (1) of
section 72, or sub-section (2) of section 73, or sub-section (1)
or sub-section (3) of section 74, or sub-section (3) of section
74A, he may furnish, within the time allowed under sub-section
(1), a return of loss in the prescribed form and verified in the
prescribed manner and containing such other particulars as may
be prescribed, and all the provisions of this Act shall apply as
if it were a return under sub-section (1).
(4) Any person who has not furnished a return within the time
allowed to him under sub-section (1), or within the time allowed
under a notice issued under sub-section (1) of section 142, may
furnish the return for any previous year at any time before the
expiry of one year from the end of the relevant assessment year
or before the completion of the assessment, whichever is
earlier:
xxx xxx xxx
xxx xxx xxx”
19. A plain reading of the above provisions indicates that it is
mandatory on the part of the assessee to file the return before the
due date. Explanation (a) to the said section defines the term “due
date”, which is 30th November of the assessment year. The consequence
of non-filing of return on time has also been stipulated in the Act.
Further a reference to Sections 142 and 148 is also necessary to
properly understand the scope of Section 276CC. Relevant portion of
Section 142, as it stood at the relevant time, is quoted below:
“142. Inquiry before assessment.- (1) For the purpose of making
an assessment under this Act, the Assessing Officer may serve on
any person who has made a return under section 139 or in whose
case the time allowed under sub- section (1) of that section for
furnishing the return has expired] a notice requiring him, on a
date to be therein specified,-
(i) where such person has not made a return within the time
allowed under sub-section (1) of section 139, to furnish a
return of his income or the income of any other person in
respect of which he is assessable under this Act, in the
prescribed form and verified in the prescribed manner and
setting forth such other particulars as may be prescribed, or
xxx xxx xxx
xxx xxx xxx”
20. Section 148 refers to the issue of notice where income has
escaped assessment. Relevant portion of the same is also extracted
hereinbelow for ready reference:
“148. (1) Before making the assessment, reassessment or
recomputation under section 147, the Assessing Officer shall
serve on the assessee a notice requiring him to furnish within
such period, not being less than thirty days, as may be
specified in the notice, a return of his income or the income of
any other person in respect of which he is assessable under this
Act during the previous year corresponding to the relevant
assessment year, in the prescribed form and verified in the
prescribed manner and setting forth such other particulars as
may be prescribed; and the provisions of this Act shall, so far
as may be, apply accordingly as if such return were a return
required to be furnished under section 139.
(2) The Assessing Officer shall, before issuing any notice under
this section, record his reasons for doing so.”
21. Sub-section (1) of Section 139, clause (i) sub-section (1) of
Section 142 and Section 148 are mentioned in Section 276CC of the Act.
Section 276CC is extracted as under:
“276CC. Failure to furnish returns of income. If a person
wilfully fails to furnish in due time 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, he shall be punishable,-
(i) in a case where the amount of tax, which would have been
evaded if the failure had not been discovered, exceeds one
hundred thousand rupees, with rigorous imprisonment for a term
which shall not be less than six months but which may extend to
seven years and with fine;
(ii) in any other case, with imprisonment for a term which
shall not be less than three months but which may extend to
three years and with fine:
Provided that a person shall not 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 1st day of
April, 1975 ; or
(ii) for any assessment year commencing on or after the 1st 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.”
22. The constitutional validity of Section 276CC, was upheld by the
Karnataka High Court in Sonarome Chemicals Pvt. Ltd. and others v.
Union of India and others (2000) 242 ITR 39 (Kar) holding that it
does not violate Article 14 of 21 of the Constitution. Section
punishes the person who “willfully fails to furnish the return of
income in time”. The explanation willful default, as observed by
Wilber Force J. in Wellington v. Reynold (1962) 40 TC 209 is “some
deliberate or intentional failure to do what the tax payer ought to
have done, knowing that to omit to do so was wrong”. The assessee is
bound to file the return under Section 139(1) of the Act on or before
the due date. The outer limit is fixed for filing of return as 31st
August of the assessment year, over and above, in the present case,
not only return was not filed within the due date prescribed under
Section 139(1) of the Act, but also the time prescribed under Section
142 and 148 of the Act and the further opportunity given to file the
return in the prescribed time was also not availed of.
23. Section 276CC applies to situations where an assessee has failed
to file a return of income as required under Section 139 of the Act or
in response to notices issued to the assessee under Section 142 or
Section 148 of the Act. The proviso to Section 276CC gives some
relief to genuine assesses. The proviso to Section 276CC gives
further time till the end of the assessment year to furnish return to
avoid prosecution. In other words, even though the due date would be
31st August of the assessment year as per Section 139(1) of the Act,
an assessee gets further seven months’ time to complete and file the
return and such a return though belated, may not attract prosecution
of the assessee. Similarly, the proviso in clause ii(b) to Section
276CC also provides that if the tax payable determined by regular
assessment has reduced by advance tax paid and tax deducted at source
does not exceed Rs.3,000/-, such an assessee shall not be prosecuted
for not furnishing the return 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.
25. We may in this respect also refer to sub-section (4) to Section
139 wherein the legislature has used an expression “whichever is
earlier”. Both Section 139(1) and Sub-Section (1) of Section 142 are
referred to in sub-section (4) to Section 139, which specify time
limit. Therefore, the expression “whichever is earlier” has to be
read with the time if allowed under sub-section (1) to Section 139 or
within the time allowed under notice issued under sub-section (1) of
Section 142, whichever is earlier. So far as the present case is
concerned, it is already noticed that the assessee had not filed the
return either within the time allowed under sub-section (1) to Section
139 or within the time allowed under notices issued under sub-section
(1) to Section 142.
26. We have indicated that on failure to file the returns by the
appellants, income tax department made a best judgment assessment
under Section 144 of the Act and later show cause notices were issued
for initiating prosecution under Section 276CC of the Act. Proviso to
Section 276CC nowhere states that the offence under Section 276CC has
not been committed by the categories of assesses who fall within the
scope of that proviso, but it is stated that such a person shall not
be proceeded against. In other words, it only provides that under
specific circumstances subject to the proviso, prosecution may not be
initiated. An assessee who comes within clause 2(b) to the proviso,
no doubt has also committed the offence under Section 276CC, but is
exempted from prosecution since the tax falls below Rs.3,000/-. Such
an assessee may file belated return before the detection and avail the
benefit of the proviso. Proviso cannot control the main section, it
only confers some benefit to certain categories of assesses. In
short, the offence under Section 276CC is attracted on failure to
comply with the provisions of Section 139(1) or failure to respond to
the notice issued under Section 142 or Section 148 of the Act within
the time limit specified therein.
27. We may indicate that the above reasoning has the support of the
Judgment of this Court in Prakash Nath Khanna (supra). When we apply
the above principles to the facts of the case in hand, the contention
of the learned senior counsel for the appellant that there has not
been any willful failure to file their return cannot be accepted and
on facts, offence under Section 276CC of the Act has been made out in
all these appeals and the rejection of the application for the
discharge calls for no interference by this Court.
28. We also find no basis in the contention of the learned senior
counsel for the appellant that pendency of the appellate proceedings
is a relevant factor for not initiating prosecution proceedings under
Section 276CC of the Act. Section 276CC contemplates that an offence
is committed on the non-filing of the return and it is totally
unrelated to the pendency of assessment proceedings except for second
part of the offence for determination of the sentence of the offence,
the department may resort to best judgment assessment or otherwise to
past years to determine the extent of the breach. The language of
Section 276CC, in our view, is clear so also the legislative
intention. It is trite law that as already held by this Court in B.
Permanand v. Mohan Koikal (2011) 4 SCC 266 that “the language employed
in a statute is the determinative factor of the legislative intent.
It is well settled principle of law that a court cannot read anything
into a statutory provision which is plain and unambiguous”. If it was
the intention of the legislature to hold up the prosecution
proceedings till the assessment proceedings are completed by way of
appeal or otherwise the same would have been provided in Section 276CC
itself. Therefore, the contention of the learned senior counsel for
the appellant that no prosecution could be initiated till the
culmination of assessment proceedings, especially in a case where the
appellant had not filed the return as per Section 139(1) of the Act or
following the notices issued under Section 142 or Section 148 does not
arise.
29. We are also of the view that the declaration or statement made
in the individual returns by partners that the accounts of the firm
are not finalized, hence no return has been filed by the firm, will
not absolve the firm in filing the ‘statutory return under section
139(1) of the Act. The firm is independently required to file the
return and merely because there has been a best judgment assessment
under Section 144 would not nullify the liability of the firm to file
the return as per Section 139(1) of the Act. Appellants’ contention
that since they had in their individual returns indicated that the
firm’s accounts had not been finalized, hence no returns were filed,
would mean that failure to file return was not willful, cannot be
accepted.
30. 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 276CC has to presume the existence of mens rea and it is for
the accused to prove the contrary and that too beyond reasonable
doubt. Resultantly, the appellants have to prove the circumstances
which prevented them from filing the returns as per Section 139(1) or
in response to notices under Sections 142 and 148 of the Act.
31. We, therefore, find no reason to interfere with the order passed
by the High Court. The appeals, therefore, lack merits and the same
are dismissed and the Criminal Court is directed to complete the trial
within four months from the date of receipt of this Judgment.
…….………………………J.
(K.S. Radhakrishnan)
…………………………….J.
(A.K. Sikri)
New Delhi,
January 30, 2014.
apex court dismissed the appeal =
Notice under Section 142(1)(i)
was issued to A-2 calling for return of income on 18.1.1994. The said
notice was served on her on 19.1.1994. Reminders were issued on
10.2.1994, 22.8.1994 and 23.8.1995. No return was filed as required
under Section 139(4) before 31.3.1995. The Department on 31.7.1995
issued notice under Section 142(1)(ii) calling for particulars of
income and other details for completion of assessment. Neither the
return of income was filed nor the particulars of income were
furnished. Best judgment assessment under Section 144 was made on
9.2.1996 on a total income of Rs.1,04,49,153/- and tax determined at
Rs.46,68,676/- and demand of Rs.96,98,801/-, inclusive of interest at
Rs.55,53,882/- was raised after adjusting pre-paid tax of Rs.5,23,756/-
. The Department then issued show-cause notice for prosecution under
Section 276CC on 14.6.1996. Later, sanction for prosecution was
accorded by the Commissioner of Income Tax on 3.10.1996.
7. A-3 also failed to file the return of income as per Section
139(1) for the assessment year 1993-94 before the due date i.e.
31.8.1993. Notice under Section 142(1)(i) was issued to A-3 calling
for filing of return of income on 8.11.1995. Further, notice was
also issued under Section 142(1)(ii) on 21.7.1995 calling for
particulars of income and other details for completion of assessment.
Neither the return of income was filed nor the particulars of income
were furnished. Best judgment assessment under Section 144 was made
on 8.2.1996 on a total income of Rs.70,28,110/- and tax determined at
Rs.26,86,445/-. The total tax payable, inclusive of interest due was
Rs.71,19,527/-. After giving effect to the appellate order, the total
income was revised by Rs.19,25,000/-, resulting in tax demand of
Rs.20,23,279/-, inclusive of interest levied. Later, a show-cause
notice for prosecution under Section 276CC was issued to A-3 on
7.8.1996. A-3 filed replies on 24.11.1996 and 24.3.1997. The
Commissioner of Income Tax accorded sanction for prosecution on
4.8.1997.=
Proceedings giving
rise to these appeals originated from the complaints filed by the
Assistant Commissioner of Income Tax, Chennai, before the Additional
Chief Metropolitan Magistrate (Egmore), Chennai, for the willful and
deliberate failure to file returns for the assessment years 1991-92,
1992-93 and hence committing offences punishable under Section 276 CC
of the Income Tax Act, 1961 (for short “the Act”). Complaints were
filed on 21.8.1997 after getting the sanction from the Commissioner of
Income Tax, Central II, Chennai under Section 279(1) of the Income Tax
Act. Appellants filed two discharge petitions under Section 245(2)
Cr.P.C., which were dismissed by the Chief Metropolitan Magistrate
vide order dated 14.6.2006. Appellants preferred Crl. R.C. Nos.781 to
786 of 2006 before the High Court of Madras which were dismissed by
the High Court vide its common order dated 2.12.2006, which are the
subject matters of these appeals.=
(1) Whether an assessee has the liability/duty to file a
return under Section 139(1) of the Act within the due date
prescribed therein?
(2) What is the effect of best judgment assessment under
Section 144 of the Act and will it nullify the liability of the
assessee to file its return under Section 139(1) of the Act?
(3) Whether non-filing of return under Section 139(1) of the
Act, as well as non-compliance of the time prescribed under
Sections 142 and 148 of the Act are grounds for invocation of
the provisions of Section 276CC of the Act?
(4) Whether the pendency of the appellate proceedings relating
to assessment or non-attaining finality of the assessment
proceedings is a bar in initiating prosecution proceedings under
Section 276CC due to non-filing of returns?
(5) What is the scope of Section 278E of the Act, and at what
stage the presumption can be drawn by the Court?
The firm is independently required to file the
return and merely because there has been a best judgment assessment
under Section 144 would not nullify the liability of the firm to file
the return as per Section 139(1) of the Act.
Appellants’ contention
that since they had in their individual returns indicated that the
firm’s accounts had not been finalized, hence no returns were filed,
would mean that failure to file return was not willful, cannot be
accepted.
that since they had in their individual returns indicated that the
firm’s accounts had not been finalized, hence no returns were filed,
would mean that failure to file return was not willful, cannot be
accepted.
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 276CC has to presume the existence of mens rea and it is for
the accused to prove the contrary and that too beyond reasonable
doubt. Resultantly, the appellants have to prove the circumstances
which prevented them from filing the returns as per Section 139(1) or
in response to notices under Sections 142 and 148 of the Act.
31. We, therefore, find no reason to interfere with the order passed
by the High Court. The appeals, therefore, lack merits and the same
are dismissed and the Criminal Court is directed to complete the trial
within four months from the date of receipt of this Judgment.
K.S. RADHAKRISHNAN, A.K. SIKRI
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.61 OF 2007
Sasi Enterprises … Appellant
Versus
Assistant Commissioner of Income Tax … Respondent
WITH
CRIMINAL APPEAL NOs.62, 63 & 64 OF 2007
J U D G M E N T
K.S. Radhakrishnan, J.
1. We are concerned with four Criminal Appeals No.61 to 64 of 2007,
out of which two Criminal Appeals No.61 of 2007 and 63 of 2007 relate
to M/s Sasi Enterprises, a registered partnership firm, of which Ms.
J. Jayalalitha and Mrs. N. Sasikala are partners, which relate to the
assessment years 1991-92 and 1992-93 respectively. Criminal Appeal
Nos.62 and 63 of 2007 relate to J. Jayalalitha and N. Sasikala
respectively for the assessment years 1993-94. Proceedings giving
rise to these appeals originated from the complaints filed by the
Assistant Commissioner of Income Tax, Chennai, before the Additional
Chief Metropolitan Magistrate (Egmore), Chennai, for the willful and
deliberate failure to file returns for the assessment years 1991-92,
1992-93 and hence committing offences punishable under Section 276 CC
of the Income Tax Act, 1961 (for short “the Act”). Complaints were
filed on 21.8.1997 after getting the sanction from the Commissioner of
Income Tax, Central II, Chennai under Section 279(1) of the Income Tax
Act. Appellants filed two discharge petitions under Section 245(2)
Cr.P.C., which were dismissed by the Chief Metropolitan Magistrate
vide order dated 14.6.2006. Appellants preferred Crl. R.C. Nos.781 to
786 of 2006 before the High Court of Madras which were dismissed by
the High Court vide its common order dated 2.12.2006, which are the
subject matters of these appeals.
2. M/s Sasikala Enterprises was formed as a partnership firm by a
deed dated 06.02.1989 with N. Sasikala and T.V. Dinakaran as its
partners, which was later reconstituted with effect from 04.05.1990
with J. Jayalalitha and N. Sasikala as partners. The firm did the
business through two units, namely, M/s Fax Universal and M/s J.S.
Plan Printers, which, inter alia, included the business in running all
kinds of motor cars, dealing in vehicles and goods etc. In the
complaint E.O.C.C. No.202 of 1997 filed before the Chief Metropolitan
Magistrate, Egmore, M/s Sasi Enterprises was shown as the first
accused (A-1) and J. Jayalalitha and N. Sasikala were shown as (A-2)
and (A-3) respectively, who were stated to be responsible for the day-
to-day business of the firm during the assessment years in question
and were individually, jointly and severally made responsible and
liable for all the activities of the firm. Partnership deed dated
04.05.1990 itself stated that the partners, A-2 and A-3 are
responsible and empowered to operate bank accounts, have full and
equal rights in the management of the firm in its business activities,
deploy funds for the business of the firm, appoint staff, watchman
etc. and to represent the firm before income tax, sales tax and other
authorities.
3. M/s Sasi Enterprises, the firm, did not file any returns for the
assessment year 1991-92 and 1992-93, for which the firm and its
partners are being prosecuted under Section 276 CC of the Act. J.
Jayalalitha and N. Sasikala did not file returns for the assessment
year 1993-94 and hence they are being prosecuted for that breach (in
their individual capacity) separately but not for the assessment years
1991-92 or 1992-93 and their returns have been filed as individual
assessee by them for the assessment years 1991-92 and 1992-93, though
belatedly on 20.11.1994 and 23.02.1994 respectively. In those returns
it was mentioned that accounts of the firm had not been finalized and
no returns of the firm had been filed.
4. The Assistant Commissioner of Income Tax in his complaint stated
that the firm through its partners ought to have filed its returns
under Section 139(1) of the Act for the assessment year 1991-92 on or
before 31st August, 1991 and for the assessment year 1992-93 on or
before 31st August, 1992 and A-2 in her individual capacity also
should have filed her return for the year 1993-94 under Section 139(1)
on or before 31.08.1993 and A-3 also ought to have filed her return
for the assessment year 1993-94 on or before 31st August, 1993, as per
Section 139(1) of the Act. The accused persons, it was pointed out,
did not bother to file the returns even before the end of the
respective assessment years, nor had they filed any return at the
outer statutory limit prescribed under Section 139(4) of the Act i.e.
at the end of March of the assessment year. It was also pointed out
that a survey was conducted in respect of the firm under Section 133A
on 25.08.1992 and following that a notice under Section 148 was served
on the partnership firm on 15.2.1994 to file the return of income tax
for the years in question. Though notice was served on 16.2.1994, no
return was filed within the time granted in the notice. Neither
return was filed, nor particulars of the income were furnished. For
the assessment year 1991-92, it was stated that pre-assessment notice
was served on 18.12.1995, notice under Section 142(1)(ii) giving
opportunities was also issued on 20.07.1995. The department made the
best judgment assessment for the assessment year 1991-92 under Section
144 on a total income of Rs.5,84,860/- on 08.02.1996 and tax was
determined as Rs.3,02,434/- and demand notice for Rs.9,95,388/- was
issued as tax and interest payable on 08.02.1996.
5. For the assessment year 1992-93, the best judgment assessment
under Section 144 was made on 9.2.1996 on the firm on a total income
of Rs.14,87,930/- and tax determined at Rs.8,08,153/-, a demand notice
was issued towards the tax and interest payable.
6. We may indicate, so far as A-2 is concerned, the due date for
filing of return of income as per Section 139(1) of the Act for the
assessment year 1993-94 was 31.8.1993. Notice under Section 142(1)(i)
was issued to A-2 calling for return of income on 18.1.1994. The said
notice was served on her on 19.1.1994. Reminders were issued on
10.2.1994, 22.8.1994 and 23.8.1995. No return was filed as required
under Section 139(4) before 31.3.1995. The Department on 31.7.1995
issued notice under Section 142(1)(ii) calling for particulars of
income and other details for completion of assessment. Neither the
return of income was filed nor the particulars of income were
furnished. Best judgment assessment under Section 144 was made on
9.2.1996 on a total income of Rs.1,04,49,153/- and tax determined at
Rs.46,68,676/- and demand of Rs.96,98,801/-, inclusive of interest at
Rs.55,53,882/- was raised after adjusting pre-paid tax of Rs.5,23,756/-
. The Department then issued show-cause notice for prosecution under
Section 276CC on 14.6.1996. Later, sanction for prosecution was
accorded by the Commissioner of Income Tax on 3.10.1996.
7. A-3 also failed to file the return of income as per Section
139(1) for the assessment year 1993-94 before the due date i.e.
31.8.1993. Notice under Section 142(1)(i) was issued to A-3 calling
for filing of return of income on 8.11.1995. Further, notice was
also issued under Section 142(1)(ii) on 21.7.1995 calling for
particulars of income and other details for completion of assessment.
Neither the return of income was filed nor the particulars of income
were furnished. Best judgment assessment under Section 144 was made
on 8.2.1996 on a total income of Rs.70,28,110/- and tax determined at
Rs.26,86,445/-. The total tax payable, inclusive of interest due was
Rs.71,19,527/-. After giving effect to the appellate order, the total
income was revised by Rs.19,25,000/-, resulting in tax demand of
Rs.20,23,279/-, inclusive of interest levied. Later, a show-cause
notice for prosecution under Section 276CC was issued to A-3 on
7.8.1996. A-3 filed replies on 24.11.1996 and 24.3.1997. The
Commissioner of Income Tax accorded sanction for prosecution on
4.8.1997.
8. We may incidentally also point out, the final tax liability so
far as the firm is concerned, was determined as Rs.32,63,482/- on
giving effect to the order of the Income Tax Appellate Tribunal (B
Bench), Chennai dated 1.9.2006 and after giving credit of pre-paid tax
for the assessment year 1991-92. For the assessment year 1992-93 for
the firm, final tax liability was determined at Rs.52,47,594/- on
giving effect to the order of the Income Tax Appellate Tribunal (B
Bench), Chennai dated 1.9.2006 and after giving credit of pre-paid
tax. So far as A-2 is concerned, for the assessment year 1993-94
final tax liability was determined at Rs.12,54,395/- giving effect to
the order of Income Tax Appellate Tribunal (B Bench), Chennai dated
11.10.2008 after giving credit to pre-paid tax. So far as A-3 is
concerned, for the assessment year 1993-94, final tax liability was
determined as Rs.9,81,870/- after giving effect to the order of Income
Tax Appellate Tribunal (B Bench), Chennai dated 14.9.2004 and after
giving credit to pre-paid tax.
9. We have already indicated, for not filing of returns and due to
non-compliance of the various statutory provisions, prosecution was
initiated under Section 276CC of the Act against all the accused
persons and the complaints were filed on 21.08.1997 before the Chief
Metropolitan Magistrate, which the High Court by the impugned order
has permitted to go on.
10. Shri Shekhar Naphade, learned senior counsel appearing for the
appellants, submitted that the High Court did not appreciate the scope
of Section 276CC of the Act. Learned senior counsel pointed out that
once it is established that on the date of the complaint i.e. on
21.08.1997 the assessment had not attained finality, the complaint
became pre-mature as on the date of the complaint and no offence had
taken place and all the ingredients of offence under Section 276 of
the Act were not satisfied. Learned senior counsel pointed out that
unless and until it is shown that failure to file the return was
willful or deliberate, no prosecution under Section 276CC could be
initiated. Learned senior counsel pointed out that in fact, the
second accused in her individual return had disclosed that the firm
was doing the business and that it had some income and hence, it
cannot be said that A-2 had concealed the fact that the firm had any
intention to evade tax liability. Learned senior counsel also
submitted that whether the assessee had committed any offence or not
will depend upon the final assessment of income and tax liability
determined by the appropriate authority and not on the assessment made
by the assessing officer. Placing reliance on the proviso to Section
276CC learned senior counsel submitted that, that is the only
interpretation that could be given to Section 276CC. In support of
his contention reliance was placed on the Judgment of this Court in
Commissioner of Wealth Tax, Gujarat v. Vimlaben Vadilal Mehta (Smt.)
(1983) 4 SCC 692, Commissioner of Wealth Tax, Gujarat, Ahmedabad v.
Vadilal Lallubhai & Ors. (1983) 4 SCC 697 and State of H.P. and others
v. Gujarat Ambuja Cement Ltd. and another (2005) 6 SCC 499. Referring
to Section 278E of the Act, learned senior counsel submitted that till
the assessment does not attain finality, Section 276CC is not complete
and the presumption under Section 278E is not attracted. Learned
senior counsel also submitted that the High Court has wrongly applied
the principles laid down by this Court in Prakash Nath Khanna and
another v. Commissioner of Income Tax and another (2004) 9 SCC 686, in
any view, which calls for reconsideration. Learned senior counsel
submitted that the said Judgment deals with the factum of proviso to
Section 276CC of the Act which lays down that there is no offence if
the tax amount does not exceed Rs.3,000/-.
11. Shri Sidharth Luthra, learned Additional Solicitor General of
India, appearing for the Revenue, on the other hand, submitted that
Section 139 of the Act placed a statutory mandate on every person to
file an income tax return in the prescribed form and in the prescribed
manner before the due date i.e. 31st August of the relevant assessment
year. Learned ASG submitted that on breach of Section 139(1) of the
Act, cause of action to prosecute the assessee arises subject to other
ingredients of Section 276CC of the Act. Learned ASG pointed out that
what is relevant in the proceedings, is not only the due date
prescribed in Section 139(1) of the Act, but also time prescribed
under Section 142 and 148 of the Act, by which further opportunities
have been given to file the return in the prescribed time. In other
words, Section 276CC, according to the learned ASG, applies to a
situation where assessee has failed to file the return of income as
required under Section 139 of the Act or in response to notices issued
to the assessee under Section 142 or Section 148 of the Act. Learned
ASG also submitted that the scope of proviso to Section 276CC to
protect the genuine assessees who either file their return belatedly
but within the end of the assessment year or those who paid
substantial amount of their tax dues by pre-paid taxes. Considerable
reliance was placed on the Judgment of this Court in Prakash Nath
Khanna and another (supra). Reliance was also placed on the Judgment
of this Court in Maya Rani Punj (Smt.) v. Commissioner of Income Tax,
Delhi (1986) 1 SCC 445.
12. Learned ASG also explained the scope of Section 278E by placing
reliance on P.R. Metrani v. Commissioner of Income Tax, Bangalore
(2007) 1 SCC 789, Kumar Exports v. Sharma Carpets (2009) 2 SCC 513,
and submitted that pendency of the appellate proceedings is not a
relevant factor in relation to prosecution under Section 276CC.
Reference was also made to Ravinder Singh v. State of Haryana (1975) 3
SCC 742 and Standard Chartered Bank and others v. Directorate of
Enforcement and others (2006) 4 SCC 278. Learned ASG submitted that
the Judgment in Prakash Nath Khanna (supra) calls for no
reconsideration, as the same has been uniformly applied by this Court
as well as by the various High Courts. Learned ASG also pointed out
that the appellants have been indulging in litigative exercises by
which they could hold up the proceedings for almost two decades and
that the trial court has rightly rejected the application for
discharge, which was affirmed by the High Court and the same calls no
interference by this Court.
13. We may formulate the questions that arise for our consideration,
which are as under:
(1) Whether an assessee has the liability/duty to file a
return under Section 139(1) of the Act within the due date
prescribed therein?
(2) What is the effect of best judgment assessment under
Section 144 of the Act and will it nullify the liability of the
assessee to file its return under Section 139(1) of the Act?
(3) Whether non-filing of return under Section 139(1) of the
Act, as well as non-compliance of the time prescribed under
Sections 142 and 148 of the Act are grounds for invocation of
the provisions of Section 276CC of the Act?
(4) Whether the pendency of the appellate proceedings relating
to assessment or non-attaining finality of the assessment
proceedings is a bar in initiating prosecution proceedings under
Section 276CC due to non-filing of returns?
(5) What is the scope of Section 278E of the Act, and at what
stage the presumption can be drawn by the Court?
14. We may, at the outset, point out that the appellants had earlier
approached this Court and filed SLP(C) Nos.3655-3658 of 2005 which
were disposed of by this Court directing the trial court to dispose of
the petition for discharge within a period of two months by its order
dated 03.03.2006. Learned Chief Metropolitan Magistrate rejected the
petitions vide its order dated 14.06.2006. Though the High Court
affirmed the said order vide its judgment dated 02.12.2006, these
appeals were kept pending before this Court over six years for one
reason or another.
15. We are, in these appeals, concerned with the question of non-
filing of returns by the appellants for the assessment year 1991-92,
1992-93 and 1993-94. Each and every order passed by the revenue as
well as by the Courts were taken up before the higher courts, either
through appeals, revisions or writ petitions. The details of the
various proceedings in respect of these appeals are given in paragraph
30 of the written submissions filed by the revenue, which reveals the
dilatory tactics adopted in these cases. Courts, we caution, be
guarded against those persons who prefer to see it as a medium for
stalling all legal processes. We do not propose to delve into those
issues further since at this stage we are concerned with answering the
questions which have been framed by us.
16. Section 139 of the Act prior to 1989-90 and after, placed a
statutory mandate on every person to file an income tax return in the
prescribed form and in the prescribed manner. The Direct Tax Laws
(Amendment) Act, 1987 with effect from 01.04.1989 made various
amendments to the Income Tax Act, by which the assessing officer has
no power to extend the time for filing a return of income under
Section 139(1) and to extend the time for filing under Section 139(3),
a return of loss intended to be carried forward. The time prescribed
for filing a belated return under Section 139(4) or a revised return
under Section 139(5) was reduced to one year from the end of the
relevant assessment year. The provision of Section 139(2) stood
incorporated in Section 142(1)(i). The notice under Section 142(1)(i)
to furnish a return of income cannot be issued in the course of the
assessment year itself and need not give the person concerned a
minimum period of 30 days for furnishing the return. When a return is
furnished pursuant to a notice under Section 142(1)(i), the assessment
may be made under Section 143 without recourse to Section 147.
Further, with the deletion of Section 271(1)(a), a penalty for failure
to furnish in due time a return of income under Section 139(1), is
abolished. Levy of punitive interest under Section 234A made
mandatory and the discretion of the assessing officer to reduce or
waive the interest was taken away. Non-compliance with a notice under
Section 142(1)(i) may attract prosecution under Section 276CC.
17. The Income Tax Act, therefore, had stipulated both the penalty
under Section 271(1)(a) and prosecution under Section 276CC, the
former for depriving taxes due to the exchequer and later for the
offence/infraction committed. As already indicated by the Taxation
Laws (Amendment) Act, 1989, penalty provision under Section 271(1)(a)
had been deleted w.e.f. 01.04.1989 and a provision for levy of
mandatory/compulsory interest under Section 234A of the Act was
introduced. But, legislature has never waived or relaxed its
prosecuting provisions under Section 276CC of the Act for the
infraction or non-furnishing of return of income.
18. Section 139 of the Act, as it stood at the relevant time, reads
as under:
“139. (1) Every person, if his total income or the total income
of any other person in respect of which he is assessable under
this Act during the previous year exceeded the maximum amount
which is not chargeable to income-tax, shall, on or before the
due date, furnish a return of his income or the income of such
other person during the previous year, in the prescribed form
and verified in the prescribed manner and setting forth such
other particulars as may be prescribed.
Explanation: In this sub-section, “due date” means-
(a) where the assessee is a company, the 30th day of November
of the assessment year;
(b) where the assessee is a person, other than a company.-
(i) in a case where the accounts of the assessee are required
under this Act or nay other law to be audited, or where the
report of any accountant is required to be furnished under
section 80HHC or Section 80HHD or in the case of a co-operative
society, the 31st day of October of the assessment year:
(ii) in a case where the total income referred to in this sub-
section includes any income from business or profession, not
being a case falling under sub-clause (i), the 31st day of
August of the assessment year :
(iii) in any other case, the 30th day of June of the
assessment year.
xxx xxx xxx
xxx xxx xxx
(3) If any person who has sustained a loss in any previous year
under the head “Profits and gains of business or profession” or
under the head “Capital gains” and claims that the loss or any
part thereof should be carried forward under sub-section (1) of
section 72, or sub-section (2) of section 73, or sub-section (1)
or sub-section (3) of section 74, or sub-section (3) of section
74A, he may furnish, within the time allowed under sub-section
(1), a return of loss in the prescribed form and verified in the
prescribed manner and containing such other particulars as may
be prescribed, and all the provisions of this Act shall apply as
if it were a return under sub-section (1).
(4) Any person who has not furnished a return within the time
allowed to him under sub-section (1), or within the time allowed
under a notice issued under sub-section (1) of section 142, may
furnish the return for any previous year at any time before the
expiry of one year from the end of the relevant assessment year
or before the completion of the assessment, whichever is
earlier:
xxx xxx xxx
xxx xxx xxx”
19. A plain reading of the above provisions indicates that it is
mandatory on the part of the assessee to file the return before the
due date. Explanation (a) to the said section defines the term “due
date”, which is 30th November of the assessment year. The consequence
of non-filing of return on time has also been stipulated in the Act.
Further a reference to Sections 142 and 148 is also necessary to
properly understand the scope of Section 276CC. Relevant portion of
Section 142, as it stood at the relevant time, is quoted below:
“142. Inquiry before assessment.- (1) For the purpose of making
an assessment under this Act, the Assessing Officer may serve on
any person who has made a return under section 139 or in whose
case the time allowed under sub- section (1) of that section for
furnishing the return has expired] a notice requiring him, on a
date to be therein specified,-
(i) where such person has not made a return within the time
allowed under sub-section (1) of section 139, to furnish a
return of his income or the income of any other person in
respect of which he is assessable under this Act, in the
prescribed form and verified in the prescribed manner and
setting forth such other particulars as may be prescribed, or
xxx xxx xxx
xxx xxx xxx”
20. Section 148 refers to the issue of notice where income has
escaped assessment. Relevant portion of the same is also extracted
hereinbelow for ready reference:
“148. (1) Before making the assessment, reassessment or
recomputation under section 147, the Assessing Officer shall
serve on the assessee a notice requiring him to furnish within
such period, not being less than thirty days, as may be
specified in the notice, a return of his income or the income of
any other person in respect of which he is assessable under this
Act during the previous year corresponding to the relevant
assessment year, in the prescribed form and verified in the
prescribed manner and setting forth such other particulars as
may be prescribed; and the provisions of this Act shall, so far
as may be, apply accordingly as if such return were a return
required to be furnished under section 139.
(2) The Assessing Officer shall, before issuing any notice under
this section, record his reasons for doing so.”
21. Sub-section (1) of Section 139, clause (i) sub-section (1) of
Section 142 and Section 148 are mentioned in Section 276CC of the Act.
Section 276CC is extracted as under:
“276CC. Failure to furnish returns of income. If a person
wilfully fails to furnish in due time 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, he shall be punishable,-
(i) in a case where the amount of tax, which would have been
evaded if the failure had not been discovered, exceeds one
hundred thousand rupees, with rigorous imprisonment for a term
which shall not be less than six months but which may extend to
seven years and with fine;
(ii) in any other case, with imprisonment for a term which
shall not be less than three months but which may extend to
three years and with fine:
Provided that a person shall not 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 1st day of
April, 1975 ; or
(ii) for any assessment year commencing on or after the 1st 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.”
22. The constitutional validity of Section 276CC, was upheld by the
Karnataka High Court in Sonarome Chemicals Pvt. Ltd. and others v.
Union of India and others (2000) 242 ITR 39 (Kar) holding that it
does not violate Article 14 of 21 of the Constitution. Section
punishes the person who “willfully fails to furnish the return of
income in time”. The explanation willful default, as observed by
Wilber Force J. in Wellington v. Reynold (1962) 40 TC 209 is “some
deliberate or intentional failure to do what the tax payer ought to
have done, knowing that to omit to do so was wrong”. The assessee is
bound to file the return under Section 139(1) of the Act on or before
the due date. The outer limit is fixed for filing of return as 31st
August of the assessment year, over and above, in the present case,
not only return was not filed within the due date prescribed under
Section 139(1) of the Act, but also the time prescribed under Section
142 and 148 of the Act and the further opportunity given to file the
return in the prescribed time was also not availed of.
23. Section 276CC applies to situations where an assessee has failed
to file a return of income as required under Section 139 of the Act or
in response to notices issued to the assessee under Section 142 or
Section 148 of the Act. The proviso to Section 276CC gives some
relief to genuine assesses. The proviso to Section 276CC gives
further time till the end of the assessment year to furnish return to
avoid prosecution. In other words, even though the due date would be
31st August of the assessment year as per Section 139(1) of the Act,
an assessee gets further seven months’ time to complete and file the
return and such a return though belated, may not attract prosecution
of the assessee. Similarly, the proviso in clause ii(b) to Section
276CC also provides that if the tax payable determined by regular
assessment has reduced by advance tax paid and tax deducted at source
does not exceed Rs.3,000/-, such an assessee shall not be prosecuted
for not furnishing the return 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.
25. We may in this respect also refer to sub-section (4) to Section
139 wherein the legislature has used an expression “whichever is
earlier”. Both Section 139(1) and Sub-Section (1) of Section 142 are
referred to in sub-section (4) to Section 139, which specify time
limit. Therefore, the expression “whichever is earlier” has to be
read with the time if allowed under sub-section (1) to Section 139 or
within the time allowed under notice issued under sub-section (1) of
Section 142, whichever is earlier. So far as the present case is
concerned, it is already noticed that the assessee had not filed the
return either within the time allowed under sub-section (1) to Section
139 or within the time allowed under notices issued under sub-section
(1) to Section 142.
26. We have indicated that on failure to file the returns by the
appellants, income tax department made a best judgment assessment
under Section 144 of the Act and later show cause notices were issued
for initiating prosecution under Section 276CC of the Act. Proviso to
Section 276CC nowhere states that the offence under Section 276CC has
not been committed by the categories of assesses who fall within the
scope of that proviso, but it is stated that such a person shall not
be proceeded against. In other words, it only provides that under
specific circumstances subject to the proviso, prosecution may not be
initiated. An assessee who comes within clause 2(b) to the proviso,
no doubt has also committed the offence under Section 276CC, but is
exempted from prosecution since the tax falls below Rs.3,000/-. Such
an assessee may file belated return before the detection and avail the
benefit of the proviso. Proviso cannot control the main section, it
only confers some benefit to certain categories of assesses. In
short, the offence under Section 276CC is attracted on failure to
comply with the provisions of Section 139(1) or failure to respond to
the notice issued under Section 142 or Section 148 of the Act within
the time limit specified therein.
27. We may indicate that the above reasoning has the support of the
Judgment of this Court in Prakash Nath Khanna (supra). When we apply
the above principles to the facts of the case in hand, the contention
of the learned senior counsel for the appellant that there has not
been any willful failure to file their return cannot be accepted and
on facts, offence under Section 276CC of the Act has been made out in
all these appeals and the rejection of the application for the
discharge calls for no interference by this Court.
28. We also find no basis in the contention of the learned senior
counsel for the appellant that pendency of the appellate proceedings
is a relevant factor for not initiating prosecution proceedings under
Section 276CC of the Act. Section 276CC contemplates that an offence
is committed on the non-filing of the return and it is totally
unrelated to the pendency of assessment proceedings except for second
part of the offence for determination of the sentence of the offence,
the department may resort to best judgment assessment or otherwise to
past years to determine the extent of the breach. The language of
Section 276CC, in our view, is clear so also the legislative
intention. It is trite law that as already held by this Court in B.
Permanand v. Mohan Koikal (2011) 4 SCC 266 that “the language employed
in a statute is the determinative factor of the legislative intent.
It is well settled principle of law that a court cannot read anything
into a statutory provision which is plain and unambiguous”. If it was
the intention of the legislature to hold up the prosecution
proceedings till the assessment proceedings are completed by way of
appeal or otherwise the same would have been provided in Section 276CC
itself. Therefore, the contention of the learned senior counsel for
the appellant that no prosecution could be initiated till the
culmination of assessment proceedings, especially in a case where the
appellant had not filed the return as per Section 139(1) of the Act or
following the notices issued under Section 142 or Section 148 does not
arise.
29. We are also of the view that the declaration or statement made
in the individual returns by partners that the accounts of the firm
are not finalized, hence no return has been filed by the firm, will
not absolve the firm in filing the ‘statutory return under section
139(1) of the Act. The firm is independently required to file the
return and merely because there has been a best judgment assessment
under Section 144 would not nullify the liability of the firm to file
the return as per Section 139(1) of the Act. Appellants’ contention
that since they had in their individual returns indicated that the
firm’s accounts had not been finalized, hence no returns were filed,
would mean that failure to file return was not willful, cannot be
accepted.
30. 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 276CC has to presume the existence of mens rea and it is for
the accused to prove the contrary and that too beyond reasonable
doubt. Resultantly, the appellants have to prove the circumstances
which prevented them from filing the returns as per Section 139(1) or
in response to notices under Sections 142 and 148 of the Act.
31. We, therefore, find no reason to interfere with the order passed
by the High Court. The appeals, therefore, lack merits and the same
are dismissed and the Criminal Court is directed to complete the trial
within four months from the date of receipt of this Judgment.
…….………………………J.
(K.S. Radhakrishnan)
…………………………….J.
(A.K. Sikri)
New Delhi,
January 30, 2014.
