Only Criterion for Initiation of Prosecution u/s 276CC of Income Tax Act is wilful failure to Furnish Returns: Madras HC [Read Order]

In a recent decision, the Madras High Court observed that the only criterion for initiation of prosecution under Section 276CC of the Income Tax Act, 1961 is wilful failure to furnish returns.

During the Financial Year 2013-2014 ( Assessment Year 2014-2015 ), the respondent detected that the petitioner had earned income/made investment. Despite having earned substantial income, the petitioner failed to file his returns for Assessment Year 2014-2015. The petitioner was bound to file the returns on or before 31/07/2014 as per Section 139(1) of the Income Tax Act.

Hence, show cause notice was issued to the petitioner to show cause as to why prosecution under Section 276CC should not be launched against the petitioner for failing to file the return of income for the Assessment Year 2014-2015.

The counsel for the petitioner submitted that the respondent issued a notice under Section 148 of the Income Tax Act after a very long time and an assessment order was also passed under Section 147 of the Income Tax Act. The petitioner has also filed an appeal before the Appellate authority against the assessment order and the same is pending. In view of the same, it was contended that a criminal prosecution was not warranted in this case and accordingly, sought for quashing the proceedings.

The Special Public Prosecutor for income tax submitted that the petitioner has committed a wilful act of non-filing of the return of income as per Section 139(1) of the Income Tax Act. The notice under Section 148 of the Income Tax Act is issued to give a chance to the assessee to report any income that has originally escaped from assessment.

Therefore, the return of income filed after issuance of notice under Section 148 of the Income Tax Act is not the original return of income. Therefore, the petitioner cannot be allowed to take a stand that the notice under Section 148 of the Income Tax Act was issued with a delay and more particularly, when 6 years’ time was given to the department to issue a notice under Section 148 of the Income Tax Act.

A Single Bench of Justice N Anand Venkatesh observed that “This Court has consistently held that the only criterion for initiation of prosecution is that there must be a wilful failure to furnish returns as required under Section 139(1) of the Income Tax Act and once that requisite is fulfilled, the statutory presumption under Section 278E starts operating and this provision brings in a statutory presumption with regard to the existence of a culpable mental state.”

To Read the full text of the Order CLICK HERE

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