Prosecution for non filing of Income Tax Return
Prosecution proceedings are going to witness a hefty rise in years to come. Taxpayers may note that the income tax provides for Prosecution for non filing of Income Tax Return. Section 276CC provides that if any person willfully fails to furnish the ITR then the prosecution proceeding can be initiated.
Recently, Madras HC has held that the Burden lies on Assessee to prove no willful intention not to file Income Tax Return.
Let us read section 276CC before coming to the observation of the Madras High Court on the issue of prosecution launched by the Department.
Section 276CC of the Income Tax Act – 1961 reads as under:
Failure to furnish returns of income.
276CC. If a person wilfully fails to furnish in due time the return of fringe benefits which he is required to furnish under sub-section (1) of section 115WD or by notice given under sub-section (2) of the said section or section 115WH or the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under clause (i) of sub-section (1) of section 142 or section 148 or section 153A, 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 twenty-five 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 of fringe benefits under sub-section (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 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 a return is furnished by him under sub-section (8A) of section 139 within the time provided in that sub-section; or
(b) the tax payable by such person, not being a company, on the total income determined on regular assessment, as reduced by the advance tax or self-assessment tax, if any, paid before the expiry of the assessment year, and any tax deducted or collected at source, does not exceed ten thousand rupees.
Here was an interesting case before Madras HC in this issue.
The Madras High Court while directing the trial held that the burden lies on the assessee to Prove no wilful intention not to file Income Tax Return. The petitioner, Raman Krishna Kumar who had taxable income for the Financial Year 2012 – 2013 / Assessment Year 2013 – 2014, had not filed the Annual Return as mandated under Section 139 of the Act, 1961, nor under the extended time under Section 139 of the said Act. It had been stated that the petitioner herein had received substantial income in the form of salary amounting to Rs.68,71,731/- and had also indulged in high end transactions with respect to purchase and sale of mutual funds and with respect to credit card transactions.
The respondent contended that owing to non-filing of the Income Tax Returns, suspicions had arisen over the source of funds for such transactions. It had also been contended that several Show Cause Notices had been issued, but there was no reply by the petitioner herein. Finally, the petitioner had condescended to give a reply on 02.05.2016 for the Show Cause Notice dated 26.04.2016. The respondent contended that the petitioner had deliberately not filed the Income Tax Returns within the stipulated period and therefore, the respondent was not able to assess the income for the escaped assessment, for which the Return should have been submitted.
Mr.Naveen Kumar Murthi, learned counsel for the petitioner pointed out that the petitioner was not able to file the Returns owing to the fact that the petitioner was under the bona fide impression that his erstwhile employer, namely, ITW India Limited, where he was working as General Manager [Automotive Group] during the years 2012-2014, would have filed the Tax Returns in the normal course. Learned counsel stated that the income of the petitioner for the Financial Year 2012 – 2013 was Rs.45,07,595/-, but, there had been a mistake in Form 26AS filed by the Company on behalf of the petitioner wherein the income was entered as Rs.68,71,731/-. It was also stated by the counsel that the petitioner had paid tax amounting to Rs.10,21,101/-. It was also pointed out that the petitioner had, thereafter left the said Company and he was not aware of the mistake which had crept in Form 26AS and only when notices had been issued, did the petitioner come to know about this particular mismatch between the information contained in Form 16 and Form 26AS. Thereafter, the petitioner had sent a reply on 02.05.2016 for the Show Cause Notice dated 26.04.2016
The single judge bench of Justice C.V.Karthekeyan held that the Court cannot presume that the petitioner herein is innocent of any of the offences complained. It is for the petitioner to establish such innocence. The platform for establishing such innocence is the Court where the trial is to be conducted and in the present case, that particular Court is the Court of the Additional Chief Metropolitan Magistrate/EO-I, Egmore, Chennai. “A direction is given to the learned Additional Chief Metropolitan Magistrate/EO-I, Egmore, Chennai, to commence trial and to complete the same on or before 31.01.2022. The petitioner is directed to cooperate in the trial process,” the court said.