Mere Filing Of Return During Extended Time Will Not Help Taxpayer Escape From Criminal Prosecution: Madras HC

Madras High Court has upheld the initiation of criminal prosecution under Section 276CC of the Income Tax Act, 1961 due to the failure of the Assessee to file the return of income and pay self-assessment tax within the time stipulated under Section 139(1) of the Act.

"The term 'willfully fails to furnish in due time' as contained in Section 276CC of the Act takes within its fold the due time that has been fixed under Section 139(1) of the Act and not the extended time provided under Section 139(4) of the Act. Therefore, the mere filing of return during the extended time will not come to the aid of the petitioner to escape from the criminal prosecution", added the Court.

While rejecting the Assessee’s contention of initiation of criminal proceedings in the absence of ‘willfulness’ as invalid, the High Court observed that Section 278E brings a statutory presumption about the existence of a culpable mental state and the issue as to whether there was willfulness in not filing the returns timely and not paying tax on time is only a matter of fact which can be ascertained through appreciation of evidence during trial and cannot be decided while exercising jurisdiction under Section 482 of CrPC.

Stating that the term ‘willfully fails to furnish in due time’ as contained in Section 276CC takes within its fold the due time that has been fixed under Section 139(1) and not extended time provided under Section 139(4), a Single Judge Bench of Justice N. Anand Venkatesh observed that mere filing of return during the extended time will not come to the aid of the Assessee to escape from criminal prosecution.

Senior Advocate P. Wilson appeared for the Assessee while Revenue was represented by Senior Public Prosecutor M. Sheela.

The brief facts of the case were that the Assessee-Individual filed a belated return of income under Section 139(4) for Ay 2013-14 declaring income of Rs.3.48 Cr admitting a tax liability (self-assessment tax) of Rs.1.04 Cr which was not paid at the time of filing of belated return of income. Subsequently, AO issued a show cause notice for initiation of proceedings under Section 276CC and Section 276(2) whereafter the Assessee paid self-assessment tax. Later, the AO after obtaining sanction from PCIT filed a complaint before the Judicial Magistrate of First Class, Vellore for initiation of prosecution under Section 276CC.

This was challenged by the Assessee contending that criminal proceedings cannot be initiated due to delay in filing the return or delay in payment of self-assessment tax unless the delay is willful or wanton. The Revenue Department opposed the same and submitted that the term ‘due time’ as stipulated in Section 276CC is relatable only to the time indicated under Section 139(1) and not to the extended time under Section 139(4) and the fact that self-assessment tax was paid only after the receipt of notice from the AO indicates that the willfulness on the part of the Assessee in not furnishing the return and paying the tax on time.

After considering the submission, the Bench referred to the ruling of the Apex Court in the case of Prakash Nath Khanna & Another Vs. CIT & Another [2004 (135) Taxman 327], wherein it was held that the expression ‘failure’ used in Section 276CC is with respect to the submission of assessment as well as the return of income but cannot be equated with the failure to pay the tax in time under Section 276C and filing of return of income within the time allowed under Section 139(4) cannot dilute the infraction in not furnishing return in due time as prescribed under Section 139(1).

The Bench remarked that once onus is shifted to the Assessee by virtue of statutory presumption, it has to be discharged by the Assessee only in the course of evidence and that exercise cannot be carried out in a petition under Section 482 of CrPC.

Finally, noticing that a prima facie case has been made out by the Revenue and accordingly, the statutory presumption under Section 278E comes into operation, the High Court concluded jurisdiction under Section 482 of CrPC cannot disregard the statutory presumption, under such circumstances.

Cause Title: D.M. Kathir Anand v. Principal Commissioner of Income Tax

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