Gujarat High Court
Jatinkumar Ravindranath Desai vs State Of Gujarat & on 10 January, 2017
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
R/CR.MA/8205/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 8205 of 2015
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JATINKUMAR RAVINDRANATH DESAI....Applicant(s)
Versus
STATE OF GUJARAT & 1....Respondent(s)
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Appearance:
MR HRIDAY BUCH, ADVOCATE for the Applicant(s) No. 1
MR SUDHIR M MEHTA, ADVOCATE for the Respondent(s) No. 2
MS NISHA THAKORE, APP for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 10/01/2017
ORAL ORDER
1. Rule returnable forthwith. Ms. Nisha Thakore, the learned APP waives service of notice of rule for and on behalf of the respondent No.1 State of Gujarat. Mr. Sudhir Mehta, the learned standing counsel waives service of notice of rule for and on behalf of the respondent No.2 original first informant.
2. By this application under Section 482 of the Code of Criminal Procedure, 1973, the applicantoriginal accused seeks to invoke the inherent powers of this Court praying for quashing of the proceedings Criminal Case No.1130 of 2015 filed before the Court of the learned Judicial Magistrate First Class, Vapi.
3. It all started with a showcause notice dated 27/01/2015 issued by the Commissioner of Income Tax, Valsad to the applicant herein as Page 1 of 35 HC-NIC Page 1 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER regards nonfiling of his return for the Assessment Year 201112. The showcause notice reads as under: ShowCause notice for Prosecutiorn u/s.276CC of the I.T. Act, 1961.
Shri Jatinkumar R Desai, PAN: ABHPD0261E At & Post Balda, Taluka: Pardi
2. Your are assessed to tax with the Assistant Commissioner of Income Tax, Vapi Circle, Vapi. As per the records, it has been found that you have filed your return of income for the A.Y. 20112012 declaring an amount of Rs.74,11,860/. The due date for filing of the return of income for the year A.Y.20112012 is 30.09.2011. But you have filed the return of income on 30.03.2013, which is after the expiry of the assessment year. It is also found that you have filed your return of income for the A.Y.20122013 declaring an amount of Rs.5,99,96,842/ on 27.09.2013 which is after the expiry of the assessment year. It is also observed that you have paid selfassessment tax of Rs.2,17,00,000/.
3. The above facts clearly show that you have not filed your return of income for the assessment year 201112 and A.Y. 201213 within the due date prescribed u/s.139(a) of the I.T. Act. On further verification of your records it is also noticed that you have filed your returns for other years after the due dates as under: A.Y. 20092010 15.03.2011 A.Y. 20102011 01.06.2011 A.Y. 20132014 Not filed A.Y.20142015 Note filed.
Therefore, your case falls under the provisions of section 276CC of the I.T. Act applicable for launching of prosecution for failure to furnish return of income. The section is read as under: Failure to furnish returns of Income.
276CC. If a person willfully fails to furnish in due time the return of fringe benefits which he is required to furnish under subsection (l) of section 115WD or by notice given under subsection (2) of the said section or section 115 WH or the return of income which he is required to furnish under subsection (1) of section 139 or by notice given under clause (i) of subsection (i) of section 142 or section 148 or section 153A, he shall be punishable,
(i) in a case where the amount to tax, which would have been evaded if the failure had not been discovered, exceeds twentyfive Page 2 of 35 HC-NIC Page 2 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER 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 two 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 fringe benefits under subsection (1) of section 115WD or 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 or or after the 1 st 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.
3. In view of the above, you are required to showcause why the necessary proceedings for launching prosecution u/s.276CC of the I.T. Act should not be initiated in your case. You are required to furnish your explanation to reach this office by 10.02.2015 failing which necessary proceedings will be initiated without giving any further opportunity.
4. The applicant herein filed a reply dated 10/02/2015 interalia stating as under: In the instant case, on failure to file the returns by the assessee, the department made a best judgment assessment under Section144 and later showcause notices were issued for initiating prosecution under Section 276CC. Proviso to Section276CC nowhere states that the offence under Section 276CC has not been committed by the categories of assessees 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 tot he proviso, prosecution may not be initiated. An assessee who comes within clause Page 3 of 35 HC-NIC Page 3 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER (II) (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 detention and avail the benefit of the proviso. Proviso cannot control the main section, it only confers some benefit to certain categories of assessees.
In short, the offence under Section 276CC is attracted on failure to comply with the provisions of Section139(1) of failure to respond to the notice issued under Section 142 or Section 148 within the time limit specified therein.
FINANCIAL CIRCUMSTANCES OF TAX PAYER Assistant Director of Income Tax (INV.) Unit 3 Surat has served assessee premise on 20/10/2012. The assessee has to declared income of Rs.10.40 crore in two A.Y. i.e.201213 & 201314 on onmoney received on sale of plot at Retlav Pardi and plot at Balda Pardi. (copy of survey declaration is being attached for your ready reference) The declaration was forcefully obtained by the department presuming all the land has been sold however the fact is as follow:
A. Total Saleable area of Balda Plot 38493.50 Sq.feet Less : Sold in F.Y.201112 31948.00 sq.feet ______________ Stock as on 31.03.2012 6545.50 sq.feet Sold in F.Y.201213 4691.00 sq.feet _____________ Stock as on 31.03.2013 1854.50 sq.feet B. Total Saleable area of Retlav Plot 167952.00 sq.feet Less : Sold in F.Y.201112 NIL ______________ Stock as on 31.03.2012 167952.00 sq.feet Sold in F.Y.201213 118288.00 sq.feet _____________ Stock as on 31.03.2013 49664.00 sq.feet In short the assessee still having stock at Balda Plot i.e. 1854.50 sq.feet & Retlav Plot 49664 sq.feet. The calculation of onmoney of above unsold plot comes to Rs.1.57 crore approx. However the assessee is prepared to pay tax on unsold plot in A.Y.201314 for peace or mind and decided not to confront with the Department. The intention of the assessee is very much clear to pay taxes on declared income. He has paid taxes on regular intervals for A.Y.201213 & 201314. The Page 4 of 35 HC-NIC Page 4 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER amount received from customers has been immediately used to pay taxes. The assessee has even taken loan from State Bank of India to pay the taxes. In last two years the plot sale has come down therefore the delay to pay taxes. The assessee has also approached the banks for mortgage loan on property so as pay to all tax dues before 28.02.2015 and file return accordingly.
In A.Y. 201213 the assessee has offered income of Rs.4.95 crore as per declaration and paid taxes accordingly. Copy of computation is being attached for your ready reference with I.Tax acknowledgment. It shows that assessee intention was clear to pay all taxed as per declaration.
For A.Y. 201314 the assessee has paid tax as undersigned DATE AMOUNT 14.03.2013 1000000.00 15.03.2013 1000000.00 15.03.2013 500000.00 07.01.2014 500000.00 11.03.2014 1000000.00 22.03.2014 500000.00 25.03.2014 500000.00 25.03.2014 500000.00 25.03.2014 500000.00 25.03.2014 500000.00 03.04.2014 500000.00 03.04.2014 500000.00 12.05.2014 500000.00 09.07.2014 227000.00 31.07.2014 500000.00 14.08.2014 500000.00 24.01.2015 3500000.00 09.02.2015 1000000.00 __________ TOTAL 13727000.00 ======== HEALTH CIRCUMSTANCES OF TAX PRAYER The assessee has lot of problem of cardiac attack, B.P., High Sugar, Etc. from last three years. Business of assessee has suffered in these years and income tax returns could not be filled in time due to financial crises. Copy of doctors prescription and reports is being attached for your ready reference.
The assessee has hospitalized on 9th February due to health problem (As mentioned above), therefore he is not able to attend today hearing Page 5 of 35 HC-NIC Page 5 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER also.
I on behalf of the assessee request to your goodself to drop the prosecution proceedings as the assessee has already suffered a lot on survey action and high amount of taxes on declaration made. The assessee wants to pay all taxes in time but because of liquidity problem taxes could not be paid in time. The intention of the assessee is very clear to pay all the taxes as and when amount received from sale of plot or by way of loan from banks.
5. The Commissioner of Income Tax, Valsad, thereafter, passed an order according sanction under Section 279(1) of the Act to launch the prosecution against the applicant for the alleged offence. The sanction order reads as under: ORDER U/S.279(1) OF THE INCOME TAX ACT, 1961 1 Name & address of the assessee Shri Jatinkumar R Desai, At Post Balda, Taluka: Pardi, Dist. Valsad.
2 Permanent Account Number ABHPD0261E 3 Assessment Year 201213
1. The assessee, Shri Jatinkumar Ravindranath Desai, has filed his return of income for the A.Y. 201213 on 27.09.2013, declaring an amount of Rs.5,99,96,842/. The due date for filing of the return of income for the A.Y.201213 is 31.07.2012. Instead of submitting the return of income in due time, the assessee filed his return of income on 27.09.2013, after delay of nearly 14 months. It is also observed that the assessee had defaulted in the payment of its advance tax dues resulting in payment of self assessment tax of Rs.2,17,00,000/.
2. The above facts clearly show that the assessee has failed to file his return of income for the A.Y. 2012 - 13 within the due date prescribed u/s.139(1) of the I.T. Act. It is also observed that the assessee has filed its return of income for A.Y. 2009 - 10 on 15.03.2011 and that for the A.Y. 201011 on 01.06.2011, which is beyond the due date prescribed u/s.139(1) of the I.T. Act. It is further observed that the assessee has not filed its return of income for A.Y. 201314 & 201415, until the date of hearing i.e.10.02.2015. These facts clearly show that the assessee has habitually defaulted in filing its return of income within the due date prescribed u/s.139(1) of the I.T. Act.
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R/CR.MA/8205/2015 ORDER
3. As per the provisions of section 276CC of the I.T. Act, if a person willfully fails to furnish in due time the return of income which he is required to furnish under subsection (1) of section 139 or by notice given under section 142(1)(i) or section 148 or section 153A, he shall be punishable
(i) In a case where the amount to tax, which would have been evaded if the failure had not been discovered, exceeds twentyfive 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 two years and with fine:
Taking into consideration the above legal provision and in view of the specific default on the part of the assessee, as discussed above, the provision of section 276CC of the I.T. Act is clearly attracted for launching prosecution for the failure on the part of the assessee in filing his return of income for the A.Y.201213 within the prescribed due dates.
4. In this regard, the assessee was required to showcause why prosecution u/s.276CC of the I.T. Act should not be initiated. A show cause notice was issued to the assessee, vide this office letter date 27.01.2015, fixing compliance on 10.02.2015. On the said date the assessee along with his authorized representative Shri P.M. Bagrecha, FCA, appeared and furnished his explanation in this regard. The explanations furnished by the assessee have been carefully examined. The submissions made by the assessee confirm the delay in filing of the return. However, no cogent and convincing reasons have been assigned by the assessee for late submission of the return of income for the A.Y. 201213. Further, the amount of tax paid as self assessment tax is also found to be sizable and as such there is total negligence on the part of the assessee to comply with the requirements of the statutory provisions of the Income Tax Act. From the above mentioned facts it can be legally inferred that the assessee has willfully failed to comply with the provisions of 139(1) the I.T. Act for furnishing the return of income within the prescribed due date.
Considering the facts of the case and the explanation of the assessee and on going through the proposal furnished by the Assessing Officer and the Addl. CIR, Vapi, vide letter No.Addl. CIT/Vapi/ Prosecution/201415/1226 dated 23.01.2015, I am satisfied that this is a fit case for launching prosecution u/s.276CC of the I.T. Act.
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Accordingly, I hereby accord necessary sanction in term of section 279(1) of the I.T. Act, 1961, to launch prosecution u/s.276CC of the Income Tax Act in the case of Shri Jatinkumar Ravindranath Desai for the A.Y.201213.
The Assessing Officer, Shri Anirudh Singh, A.C.I.T., Vapi, is accordingly directed to launch prosecution against the assessee in the court of law having jurisdiction over the case.
6. The above ultimately led to the filing of the complaint by the respondent no.2 herein for the offence punishable under Section276CC of the Income Tax Act, 1961 for the Assessment Year 201112. The contents of the complaint are as under:
1. The complainant is the Assistant Commissioner of Income Tax, Vapi Circle, Vapi, under Income Tax Act, 1961, which is referred to hereinafter in the complaint as "The Act". The complainant is also a public servant within the meaning of Section 21 of the Indian Penal Code and he is filing this complaint in his such official capacity and/or as a successor in office of the officer. The complainant is filing this complaint at the instance of Shri S.S. Parida, Commissioner of Income Tax, Valsad who has accorded sanction for this prosecution vide the order dtd.25032015 u/s 279(1) of the Act which is appended to this complaint for perusal of this Hon'ble Court and also for the record of this case vide Annexure "A".
2. The proceedings before Income Tax Department including the Complainant are judicial proceedings as per the Provisions of Income Tax Act, 1961 and the rules framed thereunder. The Complainant is discharging of his duties under the Provisions of Income Tax Act, 1961 and the rules framed thereunder.
3. That under the express provision of the Act, and the rules framed thereunder, the accused is legally bound and under legal obligation to maintain the books of accounts correctly, truly and accurately and to furnish true, accurate and correct information and particulars in any proceedings under the Act and also in the Return of Income and declare and disclose in the return of income true accurate and correct particulars.
4. The Return of Income for A.Y. 201112 was due to be filed by the accused u/s.139(1) of The Act on or before 31072011. But the accused did not file the Return of Income in due time. The Return of Income for the Asstt. Year 201112 declaring the total income of Page 8 of 35 HC-NIC Page 8 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER Rs.74,11,860/ vide Ack. No.605356130300313 was submitted by e filing on 3032013. The accused did not file the Return of Income on or before 31032012. Thus, there is a delay of near about 20 months in submitting the Return of Income for the Asstt. Year 201112. The tax payable has been worked out Rs.7,80,394/ as shown in the Return of Income. On the basis of the Return of Income, submitted by efiling method, the accused was bound to pay the total tax of Rs.31,42,836/. By giving credit of Rs.3,00,755/ by way of TDS and Rs.1,25,000/ by way of Advance Tax Payment, the balance remaining payable on the basis of Return of Income was Rs.27,17,081/. The accused paid the said amount by self assessment on 30032013 in two installments i.e. Rs.26,63,040/ on 28032013 and Rs.2,570/ on 28 082014. As per the computation u/s.143(1), the amount of tax payable for the said Asstt. Year came to Rs.31,42,836/.
Consisting of Income Tax Rs.22,27,002/
+ Interest u/s.234A Rs. 3,60,240/
+ Interest u/s.234B Rs. 4,86,324/
+ Interest u/s.234C Rs. 69,270/
Rs.31,42,836/
Giving credit of Rs.3,00,755/ of TDS and Rs.1,25,000/ being the amount of advance tax payment, there was further amount due Rs.27,17,080/. Out of the said amount, the accused paid Rs.26,63,040/ on 28032013 and Rs.2,570/ on 28082014. And as such, the amount of Rs.51,470/ is still due and not paid by the accused yet. It is thus very much clear that the accused willfully failed to furnish the
7. Mr. Hriday Buch, the learned counsel appearing for the applicant vehemently submitted that one of the basic ingredients to attract the provisions of Section276CC of the Act is willful failure to submit the return and presence of mensrea. He would submit that the mere failure in filing the return does not constitute an offence. The failure should be willful by clear, cogent and reliable evidence beyond any reasonable doubt. He would submit that the willfulness contemplates some element of evil motive and want of justification. He submitted that in the case at hand, the applicant could not file his return within the prescribed period i.e. on or before 30/01/2011 for the Assessment Year 201112. The applicant filed return on 20/03/2013. According to him, Section 139(4) Page 9 of 35 HC-NIC Page 9 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER of the Act permits the assessee to file a belated return.
8. The other grounds raised in the memo of the application seeking quashing of the criminal complaint are as under:
(b) The basic ingredient to invoke the provision under section 276CC of the Act is that an assessee has willfully failed to furnish the Return of Income within the prescribed time. As there is no willful failure on the part of the petitioner to file the Return and pay the tax, the complaint may kindly be quashed.
(c) The basic fallacy in the case of the prosecution is that the order of rectification dated 18.6.2014 issued by the Centralized Processing Centre of the Income Tax Department has not been considered. All throughout the Department proceeds on the basis that an amount of Rs.51,470/ has remained outstanding. However, even for the said amount, there is no demand which has even been raised. No proceedings for adjudication and recovery of the said amount have ever been initiated. Even on this ground, the complaint may kindly be quashed.
(d) That the complaint is also an abuse of process in view of clause
(b) of (ii) of Proviso to Section 276CC. An amount of Rs.2,566/ remained outstanding after the rectification that has been paid on or about 27.8.2014. Hence, no proceedings could have been initiated against the petitioner.
(e) That the allegation that the petitioner wrongly filed the Return on 30.3.2013, is also false. Subsection (4) of section 139 of the Act specifically permits that a Return can be filed by an assessee at a belated stage within a period of one year after the completion of the relevant assessment year. Accordingly, the Return filed by the petitioner on the aforesaid date along with the interest cannot be said to be belated. Moreover, it is covered u/s.139(4) of Income Tax Act.
(f) That the Department has not issued any notice to file Return for Assessment Year 201112 and the petitioner has filed his Return on his own under section 139(4) of the Act. The situation could have been entirely different if the Returns are filed after the same are detected and the notice is issued by the Department. In the present case, the Returns are filed voluntarily. Therefore, the benefit of proviso has to be given to the petitioner. Despite such a fact being pointed out, a mechanical approach is adopted.
(g) Even otherwise, the complaint is nothing but an abuse of
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process of law and has lodged with an ulterior motive by adopting a pick and choose method.
9. On the otherhand, this application has been vehemently opposed by Mr. Sudhir Mehta, the learned standing counsel appearing for the Department. Mr. Mehta submits that there is no merit in the present application seeking quashing of the criminal complaint in view of the two decisions of the Supreme Court. (1) in the case of Sasi Enterprises Vs. Assistant Commissioner of Income Tax; (2014) 5 SCC 139; and the another (2) in the case of Prakash Nath Khanna Vs. Commissioner of Income Tax; [2004] 266 ITR 1 (SC).
10. Mr. Mehta has placed reliance on the following avements made in the affidavitinreply filed on behalf of the Department.
6. With reference to Para 3, it is respectfully submitted that the allegation put forth by the petitioner/applicant/assessee is incorrect. A show cause notice has been issued by this office on 12.09.2014 and for which the applicant/assessee vide letter 25.09.2014 submitted a reply citing that the applicant/ assessee has filed the return without any formal notice from the Department and therefore, there was no intentions to evade the taxes. However, this reply was not accepted by the Department as it is mandatory for every citizens of India to the file their respective returns whose income exceeds the taxable income within the due dates prescribed by the CBDT. Hence, the applicant/ assessee's claim that he had filed return suo motto is not a matter of obligation but it was his responsibility and the Department does not always issue notice for such cases.
6.1 A further show cause notice was issued by the AO on 09.12.2014 requesting the applicant/assessee to furnish the reason for delay in furnishing the return of income and also to justify the "willful" intention to attend this office or represent the matter as to why the prosecution proceedings should not be initiated. Against this the applicant/assessee gave a reply on 16.12.2014 stating that due to illness and financial crisis he could not file the return in time.
6.2 All the procedures have been followed by the office and there has been no malacious intention for harassment as claimed by the applicant/assessee.
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7. With reference to para 4.1, it is respectfully submitted that the claim made by the applicant/ assessee is incorrect. The applicant/assessee has filed he return of income for the A.Y.201112 belately. The due date for filing the return of income for AY201112 by the applicant/ assessee u/s.139(A) of the Act was on or before 31.07.2011. But the applicant/ assessee filed the return on 30.03.2013. Thus, there is a delay of near about 20 months.
8. With reference to para 4.2, it is respectfully submitted that firstly the return for AY201112 should have been filed within or on 31.07.2011 by the applicant/ assessee instead of 31.07.2012 as stated by the applicant/ assessee which is altogether wrong. Secondly, the provisions of section 139(4) are different from the section 276 (CC) of the Income Tax Act. The section 276(CC) is entirely an independent provision and not overriden by the provisions of section 139(4) of the Act. Though the statutory extended limit is provided as per section 139(4) of the act, however the prosecution proceedings can be initiated after verification and launched in the cases even where the returns are filed within the ambit of provisions of 139(4) of the Act. In the instant case, the applicant/ assessee firm could not establish that it did not have any willful intention for delay in filing the return.
9. With reference to para 4.3, it is respectfully submitted that the AnnexureC is not found enclosed with the application of the applicant/ assessee. The difference in the computation and credit for prepaid taxes as filed in the ITR by the Tax payer and that possessed by the Department arises due to technical fault or problem with the system. Since the applicant/ assessee has efiled his return, the same was processed u/s.143(1) by the CPC Banglore and whatever is reflected in the system the same is accepted and processed.
12.1 Further the Commissioner of Income Tax issued show cause notice for prosecution u/s.276CC of the Income Tax Act on 27.01.2015. In view of the same, the applicant/ assessee gave a reply on 10.02.2015. However, the applicant/assessee's reply was not found satisfactory by the CIT, Valsad and therefore prosecution have been launched in view of the sanction vide order u/s.279(1) of the Income Tax Act by the Commissioner of Income Tax, Valsad and the same has been accorded.
13. With reference to para 4.7, it is respectfully submitted that the Commissioner of Income Tax, Valsad heard the case of applicant/ assessee on the appointed date given in the notice and who after hearing the applicant/ assessee's explanation did not found it satisfactory. Thus, CIT, Valsad who is empowered accorded sanction under the provisions of section 279(1) of the Income Tax Act, 1961 for Page 12 of 35 HC-NIC Page 12 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER initiating the proceedings. All the procedural directions have been followed and there has been no lapse as such.
14. With reference to para 4.8, it is respectfully submitted that as stated in the reply to para4.7, the Commissioner of Income Tax, Valsad who after hearing the applicant/ assessee did not found it satisfactory and is empowered accorded sanction under the provisions of section279(1) of the Income Tax Act, 1961 for initiating the proceedings. All the procedural directions have been followed and there has been no lapse as such.
16. With reference to para 5.a, it is respectfully submitted that the accusation made by the applicant/assessee is incorrect. The applicant/ assessee has come under the ambit of prosecution proceedings due to the delay in filing return of income after the due date. The provisions of section 276(CC) of the Income Tax Act envisages the obligation to prosecute the defaulter if found to be valid. The applicant/ assessee has been given opportunity of being herd and has also been served show cause notice for the same. It is only after following all the procedural verification and examination that the Department has launched the prosecution proceedings and not with any mala fide interest or abuse of process of law.
17. With reference to para 5.b, it is respectfully submitted that the applicant/ assessee has stated the reason for late filing of return due to health problems and financial circumstances for which he could not pay the taxes in time and thereby leading to late filing of return. The medical health report submitted by the applicant/ assessee is verified.
20. With reference to para 5.e, it is respectfully submitted that the allegation made by the applicant/ assessee is incorrect. The provisins of section 139(4) are different from the section 276(CC) of the Income Tax Act. The section276(CC) is entirely an independent provision and not overridden by the provisions of section 139(4) of the Act. Though the statutory extended limit is provided as per section 139(4) of the Act. However, the prosecution proceedings can be initiated after verification and launched in the cases even where the return are filed within the ambit of provisions of 139(4) of the Act. In the instant case, the applicant/ assessee firm could not establish that it did not have any willful intention for delay in filing the return and willful deferment of taxes.
21. With reference to para 5.f, it is respectfully submitted that it is mandatofy for every person in India to file his/her return of income if their Net income exceeds the taxable limit. The applicant/ assessee was also bound to file it s return within the time frame as per the Income Tax Rules. the provisions of section 139(4) are provided to that Page 13 of 35 HC-NIC Page 13 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER applicant/ assessee who could not file their return within the respective end of financial year for some genuine bonafide reasons. also the fact that no notice was issued by the Department to the applicant/ assessee for filing the Return of Income will not absolve the applicant/ assessee for being prosecuted. In the case of the applicant/ assessee, the precedence of filing of return by the applicant/ assessee was verified.
11. Having heard the learned counsel appearing for the parties and having considered the materials on record, the only question that falls for my consideration is whether the complaint should be quashed.
12. On 07/08/2015, the following order was passed by a coordinate bench of this Court: The learned advocate for the applicant has moved a draft amendment. The same is granted and may be carried out, within a week.
Heard Mr.Hriday Buch, learned advocate for the applicant.
It is submitted that the prosecution against the applicant that has been launched under Section276CC of the IncomeTax Act, 1961 (the Act, for short), would lie only if the return is not filed before 31.03.2013. In the present case, the applicant has filed the return on 30.03.2013.
It is next submitted that in any case the applicant is covered under both the provisos to Section276CC, therefore, the prosecution under said provision of law is not maintainable against the applicant.
It is contended that the opening words of Section276CC speaks of willful default. The applicant has never defaulted in the payment of income tax for the past eighteen years. Even before the notice under Section142 of the Act was issued and the default was detected, the applicant has filed his return voluntarily.
In support of his submissions, the learned advocate for the applicant has placed reliance upon the judgment of the Supreme Court in Sasi Enterprises Vs. CIT, reported in (2014) 5 SCC 139.
Having heard the learned advocate for the applicant and upon perusal of the material on record as well as the relevant provisions of law and the judgment of the Supreme Court, it transpires that the learned advocate for the applicant has succeeded in making out a primafacie case for the grant of interim relief.
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Hence, issue Notice returnable on 10.09.2015.
Mr.L.B.Dabhi, learned Additional Public Prosecutor waives service of notice for respondent No.1.
Adinterim relief in terms of paragraph8(C) is granted, till then.
In addition to the normal mode of service, Direct Service for respondent No.2, is also permitted.
13. The principal argument of Mr. Buch as regards the Section139(4) of the Act deserves to be outright rejected in view of the decision of the Supreme Court in the case of Prakash Nath Khanna (Supra). The Supreme Court in the said decision considered the following submissions canvassed on behalf of the assessee.
1. The expression "to furnish in due time" occurring in Section 276CC means to furnish within the time permissible under the Act. The return furnished under Section 139(4) at any time before the assessment is made has to be regarded as a return furnished under Section 139(1). This was so held by this Court in Commissioner of Income Tax Punjab v. Kullu Valley Transport Co. Pvt.Ltd. (1970 (77) ITR 518) in the context of Sections 22(1) and 22(3) of the Indian Income Tax Act, 1922 (in short the 'Old Act') which are in parimateria of Section 139(1) and Section 139(4) of the Act. It follows that return was furnished in "the due time" and consequently Section 276CC is not attracted.
2. The provisions of Section 276CC(i) are not intended to apply to the cases of assessees who have been regularly assessed to income tax and have voluntarily submitted their returns of income without issue of any notice to do so by the Assessing Officer in that behalf, within the time permissible to furnish the return under the Act. This interpretation gets support from the marginal heading and explanatory memo laid before Parliament when the Section was introduced.
3(i) The provision only applies where the amount of tax which would have been evaded if the failure had not been discovered exceeds Rs,1,00,000/. There has been no discovery of the failure in this case from the point of view of evasion of tax. The assessee has submitted return voluntarily, paid advance tax and self assessment tax. 3(ii) There has been no concealment of income in this case, and no penalty has been or can be imposed. The allegation made in the Page 15 of 35 HC-NIC Page 15 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER complaint that there has been evasion of tax to the extent of Rs.5,68,039/ is based on no evidence and is contrary to the materials on record.
4. The petitioners in reply to show cause notice issued pleaded that the delay in submission of returns was unavoidable, because their share of profit from the firm in which they were partners had not been communicated by the Managing Partner of the firm who was responsible for the accounts. They had no guilty mind.
5. Mere delay in filing a return without contumacious conduct and mens rea being established could not make the petitioner liable for prosecution.
6. Petitioner having been subjected to levy of interest under Section 139(1) and also to penalty proceedings under Section 271(1)(a) of the Act, could not further be prosecuted for the same defaults.
14. In Para4, the Supreme Court noted the submission canvassed on behalf of the Department. Para4 reads as under:
4. Per contra, learned counsel appearing for the respondents submitted that the High Court was justified in its conclusions in dismissing the writ petitions. The decision in CIT Vs. Kullu Valley Transport Co. (P.) Ltd. [1070] 77 ITR 518 has no application to the facts of the present case and in fact it was rendered in a different set up. Subsections (1) and (4) of Section 139 deal with different situations and it cannot be said that a return filed in terms of Section 139(4) would mean compliance with the requirements indicated in subsection (1) of Section 139. It is further submitted that Section 278E raises a presumption which is a rebutable one and the factual aspects raised by the appellants can be placed for consideration in the proceedings before the learned CJM.
15 . The Court, thereafter, proceeded to answer the submissions canvassed on either side:
5. Since the fate of the appeals revolves round the scope and ambit of Section 276CC in the background of subsections (1) and (4) of Section 139, it would be appropriate to quote the aforesaid provisions, as they stood at the relevant point of time:
"Section 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 subsection (1) of Section 139 or by notice Page 16 of 35 HC-NIC Page 16 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER given under subsection (2) of Section 139 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 Ist day of April, 1975; or
(ii)for any assessment year commencing on or after the Ist day of April, 1975, if
(a)the return is furnished by him before the expiry of the assessment year; or
(b)the tax payable by him on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source, does not exceed three thousand rupees".
Section 139: Return of income (1) Every person, if his total income or the total income of any other person exceeded the maximum amount which is not chargeable to income tax, shall 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.
(a) in the case of every person whose total income, or the total income of any other person in respect of which he is assessable under this Act, includes any income from business or profession, before the expiry of four months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or before the 30th day of June of the assessment year, whichever is later;
(b) in the case of every other person, before the 30th day of June of Page 17 of 35 HC-NIC Page 17 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER the assessment year:
Provided that, on an application made in the prescribed manner, the Assessing Officer may, in his discretion, extend the date for furnishing the return, and, notwithstanding that the date is so extended, interest shall be chargeable in accordance with he provisions of subsection (8).
(IA) Notwithstanding anything contained in subsection (1), no person need to furnish under that subsection a return of his income or the income of any other person in respect of whose total income he is assessable under this Act, if his income or, as the case may be, the income of such other person during the previous year consisted only of income chargeable under the head "Salaries" or of income chargeable under that head and also income of the nature referred to in any one or more of clause (i) to (ix) of subsection (1) of Section 80L and the following conditions are fulfilled, namely:
(a) where he or such other person was employed during the previous year by a company, he or such other person was at no time during the previous year a director of the company or a beneficial owner of shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) carrying not less than twenty per cent of the voting power;
(b) his income or the income of such other person under the head "Salaries", exclusive of the value of all benefits or amenities not provided for by way of monetary payment, does not exceed twenty four thousand rupees;
(c) the amount of income of the nature referred to in clause (i) to (ix) of subsection (1) of Section 80L, if any does not, in the aggregate, exceed the maximum amount allowable as deduction in his case under that section; and
(d) the tax deductible at source under section 192 from the income chargeable under the head "Salaries" has been deducted from that income.
(2) In the case of any person who, in the Assessing Officer's opinion, is assessable under this Act, whether on his own total income or on the total income of any other person during the previous year, the Assessing Officer may, before the end of the relevant assessment year, issue a notice to him and serve the same upon him requiring him to furnish, within 30 days from the date of service of the notice, 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 Page 18 of 35 HC-NIC Page 18 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER setting forth such other particulars as may be prescribed:
Provided that, on an application made in the prescribed manner, the Assessing Officer may, in his discretion, extend the date for furnishing the return, and, notwithstanding that the date is so extended, interest shall be chargeable in accordance with the provisions of subsection (8).
(3) If any person who has not been served with a notice under sub section (2), 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 subsection (1) of Section 72, or subsection (2) of Section 73, or subsection (1) or sub section (3) of Section 74, or sub section (3) of Section 74A, he may furnish within the time allowed under subsection (1) or by the thirty first day of July of the assessment year relevant to the previous year during which the loss was sustained, 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 subsection (1).
(4)(a) Any person who has not furnished a return within the time allowed to him under subsection (1) or subsection (2) may, before the assessment is made, furnish the return for any previous year at any time before the end of the period specified in clause (b), and the provisions of subsection (8) shall apply in every such case.
(b)The period referred to in clause (a) shall be
(i)where the return relates to a previous year relevant to any assessment year commencing on or before the Ist day of April, 1967 four years from the end of such assessment year;
(ii)where the return relates to a previous year relevant to the assessment year commencing on the Ist day of April, 1968 three years from the end of the assessment year;
(iii)where the return relates to a previous year relevant to any other assessment year, two years from the end of such assessment year.
(4A) Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in subclause (iia) of clause (24) of section 2 shall, if the total income in respect of which he is assessable as a representative assessee(the total income for this purpose being Page 19 of 35 HC-NIC Page 19 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable of income tax furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under subsection (1).
(4B) The Chief Executive Officer (whether such Chief Executive Officer) is known as Secretary or by any other designation) of every political party shall, if the total income in respect of which the political party is assessable (the total income for this purpose being computed without giving effect to the provisions of section 13A) exceeds the maximum amount which is not chargeable of income tax furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under subsection (1).
(5)If any person having furnished a return under subsection (1) or sub section (2), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the assessment is made.
Kullu Valley's case (supra ) was rendered in the background of Section 22 of the Old Act. Great emphasis is laid on the observation by this Court that subsection (3) of Section 22 of the Old Act was in the nature of a proviso to sub section (1) thereof. It is to be noted that the decision was rendered in a totally different context. The question related to the treatment of a return of loss filed beyond the time provided under subsection (1) of Section 22. The observation on which reliance is placed cannot be read out of context.
6. In Kullu valley's Transport Op. (P.) Ltd.'s case (supra) the majority view was that Section 22(3) of the Old Act (corresponding to Section 139(4) of the Act) is merely a proviso to Section 22(1) (Section 139(1)) respectively, and if Section 22(3) is complied with, Section 22(1) must be held to have been complied with and that if compliance has been made with Section 22(3), the requirement of Section 22(2A) (corresponding to Section 139(3) of the Act) would stand satisfied. It was thus, held that the ascertained losses could be carried forward to the subsequent years and set off, even though suo motu return is not filed within time prescribed under Section 22(1) of the Old Act.
7. The decision was rendered in a conceptually different situation, Page 20 of 35 HC-NIC Page 20 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER and has no relevance so far as the present dispute is concerned.
8. The basic issue in Kullu Valley's case (supra) was determination of loss on the basis of return filed under Section 22(1) or 22(3) of the Old Act. In the Act, Section 80 deals specifically with the situation.
9. The original Section 80 in the Act reads as under:
"Submission of return for losses. Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed under Section 139, shall be carried forward and set off under subsection (1) of Section 72 or sub section (2) of Section 73 or sub section (1) of Section 74".
By the Taxation Laws (Amendment) Act, 1984 with effect from Ist April, 1985, the words "under Section 139" (underlined for emphasis) were substituted by the words "within the time allowed under sub section (1) of Section 139 or within such further time as may be allowed by the Income Tax Officer". (underlined for emphasis)
10. As a result of the amendment of Section 139(3) by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 the power of the Income tax Officer to extend time for furnishing return was taken away w.e.f. Ist April, 1987.
11. Yet again, by the Direct Tax Laws (Amendment Act), 1987 w.e.f. Ist April, 1989 the words "within the time allowed under sub section (1) of Section 139 or within such further time as may be allowed by the Income tax Officer" were substituted by the words "in accordance with the provisions of subsection (3) of Section 139".
12. It is well settled principle in law that the Court cannot read anything into a statutory provision which is plain and unambiguous. A statute is an edict of the legislature. The language employed in a statute is the determinative factor of legislative intent. The first and primary rule of construction is that the intention of the legislation must be found in the words used by the legislature itself. The question is not what may be supposed and has been intended but what has been said. "Statutes should be construed, not as theorems of Euclid", Judge Learned Hand said, "but words must be construed with some imagination of the purposes which lie behind them". (See Lenigh Valley Coal Co. v. Yensavage (218 FR 547). The view was re iterated in Union of India v. Filip Tiago De Gama of Vedem Vasco De Gama (AIR 1990 SC 981), and Padma Sundara Rao (dead) and Ors. V. State of Tamil Nadu and Ors. (2002 (3) SCC 533).
13. In D.R. Venkatchalam v Dy. Transport Commissioner (1977 Page 21 of 35 HC-NIC Page 21 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER (2) SCC 273) it was observed that courts must avoid the danger of a priori determination of the meaning of a provision based on their own preconceived notions of ideological structure or scheme into which the provision to be interpreted is somewhat fitted. They are not entitled to usurp legislative function under the disguise of interpretation.
14. While interpreting a provision the court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of process of law, it is for the legislature to amend, modify or repeal it, if deemed necessary. (See Rishabh Agro Industries Ltd. V. P.N.B. Capital Services Ltd. (2000 (5) SCC 515). The legislative casus omissus cannot be supplied by judicial interpretative process.
15. Two principles of construction one relating to casus omissus and the other in regard to reading the statute as a whole appear to be well settled. Under the first principle a casus omissus cannot be supplied by the court except in the case of clear necessity and when reason for it is found in the four corners of the statute itself but at the same time a casus omissus should not be readily inferred and for that purpose all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the legislature. "An intention to produce an unreasonable result", said Danckwerts, L.J., in Artemiou v. Procopiou (1966 (1) QB 878), "is not to be imputed to a statute if there is some other construction available". Where to apply words literally would "defeat the obvious intention of the legislation and produce a wholly unreasonable result", we must "do some violence to the words" and so achieve that obvious intention and produce a rational construction. (Per Lord Reid in Luke v. IRC {1963 AC 557} where at AC p.577 he also observed: "This is not a new problem, though our standard of drafting is such that it rarely emerges".)
16. The heading of the Section or the marginal note may be relied upon to clear any doubt or ambiguity in the interpretation of the provision and to discern the legislative intent. In C.I.T. v. Ahmedbhai Umarbhai and Co. (AIR 1950 SC 134) after referring to the view expressed by Lord Machnaghten in Balraj Kunwar v. Jagatpal Singh (ILR 26 All. 393 (PC), it was held that marginal notes in an Indian Statute, as in an Act of Parliament cannot be referred to for the purpose of construing the statute. Similar view was expressed in Board of Muslim Wakfs, Rajasthan v. Radha Kishan and Ors. (1979(2) SCC
468), and Kalawatibai v. Soiryabai and Ors. (AIR 1991 SC 1581). Marginal note certainly cannot control the meaning of the body of the Page 22 of 35 HC-NIC Page 22 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER Section if the language employed there is clear. (See Smt. Nandini Satpathy v. P.L. Dani and Anr. (AIR 1978 SC 1025) In the present case as noted above, the provisions of Section 276CC are in clear terms. There is no scope for trying to clear any doubt or ambiguity as urged by learned counsel for the appellants. Interpretation sought to be put on Section 276CC to the effect that if a return is filed under sub section (4) of section 139 it means that the requirements of subsection (1) of Section 139 cannot be accepted for more reasons than one.
17. One of the significant terms used in Section 276CC is 'in due time'. The time within which the return is to be furnished is indicated only in subsection (1) of Section 139 and not in sub section (4) of Section 139. That being so, even if a return is filed in terms of sub section (4) of Section 139 that would not dilute the infraction in not furnishing the return in due time as prescribed under subsection (1) of Section 139. Otherwise, the use of the expression "in due time" would loose its relevance and it cannot be said that the said expression was used without any purpose. Before substitution of the expression "clause
(i) of subsection (1) of section 142" by Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1.4.1989 the expression used was "subsection (2) of section 139". At the relevant point of time the assessing officer was empowered to issue a notice requiring furnishing of a return within the time indicated therein. That means the infractions which are covered by Section 276-CC relate to nonfurnishing of return within the time in terms of subsection (1) or indicated in the notice given under sub section (2) of Section 139. There is no condonation of the said infraction, even if a return is filed in terms of subsection (4). Accepting such a plea would mean that a person who has not filed a return within the due time as prescribed under subsections (1) or (2) of Section 139 would get benefit by filing the return under Section 139(4) much later. This cannot certainly be the legislative intent.
18. Another plea which was urged with some amount of vehemence was that the provisions of Section 276-CC are applicable only when there is discovery of the failure regarding evasion of tax. It was submitted that since the return under subsection (4) of Section 139 was filed before the discovery of any evasion, the provision has no application. The case at hand cannot be covered by the expression "in any other case". This argument though attractive has no substance.
19. The provision consists of two parts. First relates to the infractions warranting penal consequences and the second, measure of punishment. The second part in turn envisages two situations. The first situation is where there is discovery of the failure involving the evasion of tax of a particular amount. For the said infraction stringent penal consequences have been provided. Second situation covers all cases except the first situation elaborated above.
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20. The term of imprisonment is higher when the amount of tax which would have been evaded but for the discovery of the failure to furnish the return exceeds one hundred thousand rupees. If the plea of the appellants is accepted it would mean that in a given case where there is infraction and where a return has not been furnished in terms of subsection (1) of Section 139 or even in response to a notice issued in terms of subsection (2), the consequences flowing from non furnishing of return would get obliterated. At the relevant point of time Section 139(4)(a) permitted filing of return where return has not been filed within sub section (1) and subsection (2). The time limit was provided in clause (b). Section 276-CC refers to "due time" in relation to subsections (1) and (2) of Section 139 and not to subsection (4). Had the Legislature intended to cover sub section (4) also, use of expression "Section 139" alone would have sufficed. It cannot be said that Legislature without any purpose or intent specified only the sub sections (1) and (2) and the conspicuous omission of subsection (4) has no meaning or purpose behind it. Sub section (4) of Section 139 cannot by any stretch of imagination control operation of subsection (1) wherein a fixed period for furnishing the return is stipulated. The mere fact that for purposes of assessment and carrying forward and to set off losses it is treated as one filed within subsections (1) or (2) cannot be pressed into service to claim it to be actually one such, though it is factually and really not by extending it beyond its legitimate purpose.
21. Whether there was wilful failure to furnish the return is a matter which is to be adjudicated factually by the Court which deals with the prosecution case. Section 278-E is relevant for this purpose and the same reads as follows:
"278E: Presumption as to culpable mental state (1) In any prosecution for any offence under this Act which requires a culpable mental state on the part of the accused, the court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution.
Explanation: In this subsection, "culpable mental state" includes intention, motive or knowledge of a fact or belief in, or reason to believe, a fact.
(2) For the purposes of this section, a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability".
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22. There is a statutory presumption prescribed in Section 278-E. The Court has to presume the existence of culpable mental state, and absence of such mental state can be pleaded by an accused as a defence in respect to the act charged as an offence in the prosecution. Therefore, the factual aspects highlighted by the appellants were rightly not dealt with by the High Court. This is a matter for trial. It is certainly open to the appellants to plead absence of culpable mental state when the matter is taken up for trial.
16. Thus, what is discernible from the above noted decision of the Supreme Court is that whether there was willful failure to furnish the return is a matter, which can be adjudicated by the trial Court on the basis of the evidence that may be led. This issue cannot be gone into by the High Court in exercise of its inherent powers under Section482 of the C.P.C. In view of the statutory presumption prescribed in Section 278E of the Act, the Court has to presume the existence of culpable mental state. The second principle explained by the Supreme Court is that even if the return is filed under the terms of Section 139(4) that would not dilute the infraction in not furnishing the return in due time as prescribed under Subsection(1) of the Section139 of the Act. There is no condonation of the said infraction, even if a return is filed in terms of Subsection (4).
17. At this stage, let me look in the decision of the Supreme Court in the case of Sasi Enterprise (Supra). In this case also, the Supreme Court considered the scope of Section276CC of the Act. The Supreme Court formulated the following question for its consideration.
15.1 Whether an assessee has the liability/duty to file a return under Section 139(1) of the Act within the due date prescribed therein?
15.2 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?
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15.3 Whether nonfiling of return under Section 139(1) of the Act, as well as noncompliance of the time prescribed under Section 142 and 148 of the Act are grounds for invocation of the provisions of Section 276CC of the Act?
15.4 Whether the pendency of the appellate proceedings relating to assessment or nonattaining finality of the assessment proceedings is a bar in initiating prosecution proceedings under Section 276CC due to nonfiling of the returns?
15.5 What is the scope of Section 278E of the Act, and at what stage the presumption can be drawn by the Court?
18. The Supreme Court, thereafter, proceed to answer those questions observed as under:
18. Section 139 of the Act prior to 198990 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. Noncompliance with a notice under Section 142(1)(i) may attract prosecution under Section 276CC.
19. 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 Page 26 of 35 HC-NIC Page 26 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER 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 nonfurnishing of return of income.
20. 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 incometax, 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 subsection, "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 cooperative 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 subclause (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 subsection (1) of section 72, or subsection (2) of section 73, or subsection (1) or subsection (3) of section 74, or subsection (3) of section 74A, Page 27 of 35 HC-NIC Page 27 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER he may furnish, within the time allowed under subsection (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 subsection (1).
(4) Any person who has not furnished a return within the time allowed to him under subsection (1), or within the time allowed under a notice issued under subsection (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"
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 nonfiling of return on time has also been stipulated in the Act.
21. 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 subsection (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
22. 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. ISSUE of notice where income has escaped assessment. (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 Page 28 of 35 HC-NIC Page 28 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER 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."
23. Subsection (1) of Section 139, clause (i) subsection (1) ofSection 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 subsection (1) of section 139 or by notice given under clause (i) of subsection (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 subsection (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."Page 29 of 35
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24. 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 31 st 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.
25. 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.
26. Section 276CC, it may be noted, takes in subsection (1) of Section 139, Section 142(1)(i) and Section 148. But, the proviso to Section 276CC takes in only subsection (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 Page 30 of 35 HC-NIC Page 30 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER 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.
27. We may in this respect also refer to subsection (4) to Section 139 wherein the legislature has used an expression "whichever is earlier". Both Section 139(1) and SubSection (1) of Section 142 are referred to in subsection (4) to Section 139, which specify time limit. Therefore, the expression "whichever is earlier" has to be read with the time if allowed under subsection (1) to Section 139 or within the time allowed under notice issued under subsection (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 subsection (1) to Section 139 or within the time allowed under notices issued under subsection(1) to Section
142.
28. 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.
29. 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.
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R/CR.MA/8205/2015 ORDER
30. 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 nonfiling 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:
"19. It is well settled principle of law that a court cannot read anything into a statutory provision which is plain and unambiguous. The language employed in a statute is the determinative factor of the legislative intent."
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.
31. 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.
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 276CC has to presume the existence of mens rea and it is for Page 32 of 35 HC-NIC Page 32 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER 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.
19. In my view, no case is made out at this stage for quashing of the proceedings of the Criminal Case in exercise of my inherent powers under Section482 of the Cr.P.C.
20. Mere filing of the return under Section139(4) of the Act would not save the situation.
21. The proposition of law, pertaining to quashing of criminal proceedings, initiated against an accused under Section 482 of the Code of Criminal Procedure has been dealt with by the Supreme Court in Rajiv Thapar & Ors. V/s. Madan Lal Kapoor (Criminal Appeal No....of 2013, arising out of SLP (Crl.) no.4883 of 2008, decided on 23.1.2013) wherein the Supreme Court interalia held as under:
22. The issue being examined in the instant case is the jurisdiction of the High Court under Section 482 of the Cr.P.C., if it chooses to quash the initiation of the prosecution against an accused, at the stage of issuing process, or at the stage of committal, or even at the stage of framing of charges. These are all stages before the commencement of the actual trial. The same parameters would naturally be available for later stages as well. The power vested in the High Court under Section 482 of the Cr.P.C., at the stages referred to hereinabove, would have far reaching consequences, inasmuch as, it would negate the prosecution's/complainant's case without allowing the prosecution/complainant to lead evidence. Such a determination must always be rendered with caution, care and circumspection. To invoke its inherent jurisdiction under Section 482 of the Cr.P.C. the High Court has to be fully satisfied, that the material produced by the accused is such, that would lead to the conclusion, that his/their defence is based on sound, reasonable, and indubitable facts; the material produced is such, aswould rule out and displace the assertions contained in the charges levelled against the accused; and the material produced is such, as would clearly reject and overrule the veracity of the Page 33 of 35 HC-NIC Page 33 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER allegations contained in the accusations levelled by the prosecution/complainant. It should be sufficient to rule out, reject and discard the accusations levelled by the prosecution/complainant, without the necessity of recording any evidence. For this the material relied upon by the defence should not have been refuted, or alternatively, cannot be justifiably refuted, being material of sterling and impeccable quality. The material relied upon by the accused should be such, as would persuade a reasonable person to dismiss and condemn the actual basis of the accusations as false. In such a situation, the judicial conscience of the High Court would persuade it to exercise its power under Section 482 of the Cr.P.c. to quash such criminal proceedings, for that would prevent abuse of process of the court, and secure the ends of justice.
23. Based on the factors canvassed in the foregoing paragraphs, we would delineate the following steps to determine the veracity of a prayer for quashing, raised by an accused by invoking the power vested in the High Court under Section 482 of the Cr.P.C.:
(i)Step one, whether the material relied upon by the accused is sound, reasonable, and indubitable, i.e., the materials is of sterling and impeccable quality?
(ii) Step two, whether the material relied upon by the accused, would rule out the assertions contained in the charges levelled against the accused, i.e., the material is sufficient to reject and overrule the factual assertions contained in the complaint, i.e., the material is such, as would persuade a reasonable person to dismiss and condemn the factual basis of the accusations as false.
(iii) Step three, whether the material relied upon by the accused, has not been refuted by the prosecution/complainant; and/or the material is such, that it cannot be justifiably refuted by the prosecution/complainant?
(iv) Step four, whether proceeding with the trial would result in an abuse of process of the court, and would not serve the ends of justice?
If the answer to all the steps is in the affirmative, judicial conscience of the High Court should persuade it to quash such criminal proceedings, in exercise of power vested in it under Section 482 of the Cr.P.C. Such exercise of power, besides doing justice to the accused, would save precious court time, which would otherwise be wasted in holding such a trial (as well as, proceedings arising therefrom) specially when, it is clear that the Page 34 of 35 HC-NIC Page 34 of 35 Created On Sat Aug 12 05:13:18 IST 2017 R/CR.MA/8205/2015 ORDER same would not conclude in the conviction of the accused."
22. For the forgoing reasons, this application fails and is hereby rejected. Rule is discharged.
It is needless to clarify that the guilt or the innocence of the accused shall be decided strictly on the basis of the evidence that may be led by the parties in the course of the trial without being influenced in any manner by any of the observations made by this Court in this order. Any observations on merit are purely for the purpose of deciding the question whether the complaint should be quashed at this stage and shall not be construed as an expression of the final opinion in the main matter.
(J.B.PARDIWALA, J.) aruna Page 35 of 35 HC-NIC Page 35 of 35 Created On Sat Aug 12 05:13:18 IST 2017