SC orders criminal trial of Jayalalitha


Court :
Supreme Court of India

Brief :
The bench comprising of Justice K.S. Radhakrishnan and Justice A.K. Sikri dismissed the discharge plea of Tamil Nadu Chief Minister J. Jayalalitha and her associate S. Sasikalaa and ordered a trial against them for not filing income tax returns for the assessment years of 1991-92, 1992-93 and 1993-94.

Citation :
Citation: Sonarome Chemicals Pvt. Ltd. and others v. Union of India and others (2000) 242 ITR 39 (Kar) Wellington v. Reynold (1962) 40 TC 209 B. Permanand v. Mohan Koikal (2011) 4 SCC 266 Prakash Nath Khanna and another v. Commissioner of Income Tax and another (2004) 9 SCC 686

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.61 OF 2007

Sasi Enterprises … Appellant

Versus

Assistant Commissioner of Income Tax … Respondent

WITH

CRIMINAL APPEAL NOs.62, 63 & 64 OF 2007 

K.S. Radhakrishnan, J.

J U D G M E N T

REPORTABLE

1. We are concerned with four Criminal Appeals No.61 to 64 of 

2007, out of which two Criminal Appeals No.61 of 2007 and 63 of 

2007 relate to M/s Sasi Enterprises, a registered partnership firm, 

of  which  Ms.  J.  Jayalalitha and Mrs.  N.  Sasikala  are  partners, 

which  relate  to  the  assessment  years  1991-92  and  1992-93 

respectively.  Criminal Appeal Nos.62 and 63 of 2007 relate to J. 

Jayalalitha and N. Sasikala respectively for the assessment years 

1993-94.   Proceedings giving rise to these appeals originated from 

the complaints filed by the Assistant Commissioner of Income Tax, 

Chennai,  before  the  Additional  Chief  Metropolitan  Magistrate 

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(Egmore),  Chennai,  for  the  willful  and  deliberate  failure  to  file 

returns  for  the  assessment  years  1991-92,  1992-93 and hence 

committing  offences  punishable  under  Section  276  CC  of  the 

Income Tax Act, 1961 (for short “the Act”).  Complaints were filed 

on 21.8.1997 after getting the sanction from the Commissioner of 

Income  Tax,  Central  II,  Chennai  under  Section  279(1)  of  the 

Income Tax Act.   Appellants  filed two discharge petitions under 

Section  245(2)  Cr.P.C.,  which  were  dismissed  by  the  Chief 

Metropolitan Magistrate  vide  order dated 14.6.2006.  Appellants 

preferred Crl. R.C. Nos.781 to 786 of 2006 before the High Court of 

Madras which were dismissed by the High Court vide its common 

order  dated  2.12.2006,  which  are  the  subject  matters  of  these 

appeals. 

2. M/s Sasikala Enterprises was formed as a partnership firm 

by a deed dated 06.02.1989 with N. Sasikala and T.V. Dinakaran 

as  its  partners,  which  was  later  reconstituted  with  effect  from 

04.05.1990 with J. Jayalalitha and N. Sasikala as partners.  The 

firm  did  the  business  through  two  units,  namely,  M/s  Fax 

Universal  and M/s J.S.  Plan Printers,  which,  inter  alia,  included 

the business in running all kinds of motor cars, dealing in vehicles 

and goods etc.   In the complaint  E.O.C.C.  No.202 of  1997 filed 

before  the  Chief  Metropolitan  Magistrate,  Egmore,  M/s  Sasi 

2

Enterprises was shown as the first accused (A-1) and J. Jayalalitha 

and N.  Sasikala were shown as (A-2) and (A-3) respectively,  who 

were stated to be responsible for the day-to-day business of  the 

firm  during  the  assessment  years  in  question  and  were 

individually,  jointly and severally made responsible and liable for 

all  the activities of  the firm.  Partnership deed dated 04.05.1990 

itself  stated that  the partners,  A-2 and A-3 are responsible and 

empowered to operate bank accounts, have full and equal rights in 

the management of the firm in its business activities, deploy funds 

for the business of  the firm,  appoint staff,  watchman etc. and to 

represent  the  firm  before  income  tax,  sales  tax  and  other 

authorities.  

3. M/s Sasi Enterprises, the firm, did not file any returns for the 

assessment year 1991-92 and 1992-93, for which the firm and its 

partners are being prosecuted under Section 276 CC of the Act.  J. 

Jayalalitha and N. Sasikala did not file returns for the assessment 

year 1993-94 and hence they are being prosecuted for that breach 

(in their individual capacity) separately but not for the assessment 

years 1991-92 or  1992-93 and their  returns have been filed as 

individual assessee by them for the assessment years 1991-92 and 

1992-93,  though  belatedly  on  20.11.1994  and  23.02.1994 

respectively.  In those returns it was mentioned that accounts of 

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the firm had not been finalized and no returns of the firm had been 

filed.

4. The Assistant Commissioner of Income Tax in his complaint 

stated that  the firm through its  partners ought  to have filed its 

returns under Section 139(1) of  the Act for the assessment year 

1991-92 on or before 31

st

year  1992-93  on  or  before  31

 August, 1991 and for the assessment 

st

 August,  1992  and  A-2  in  her 

individual  capacity also should have filed her return for the year 

1993-94 under  Section 139(1) on or  before 31.08.1993 and A-3 

also ought to have filed her return for the assessment year 1993-

94 on or before 31

st

 August, 1993, as per Section 139(1) of the Act. 

The accused persons, it was pointed out, did not bother to file the 

returns even before the end of the respective assessment years, nor 

had they filed any return at  the outer statutory limit  prescribed 

under  Section 139(4) of  the Act  i.e.  at  the end of  March of  the 

assessment  year.   It  was  also  pointed  out  that  a  survey  was 

conducted  in  respect  of  the  firm  under  Section  133A  on 

25.08.1992 and following  that  a notice  under  Section 148 was 

served on the partnership firm on 15.2.1994 to file the return of  

income tax for the years in question.   Though notice was served 

on 16.2.1994,  no return was filed within the time granted in the 

notice.  Neither return was filed, nor particulars of the income were 

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furnished.   For the assessment year 1991-92,  it was stated that 

pre-assessment  notice  was  served on 18.12.1995,  notice  under 

Section  142(1)(ii)  giving  opportunities  was  also  issued  on 

20.07.1995. The department made the best judgment assessment 

for  the  assessment  year  1991-92 under  Section 144 on a total  

income of Rs.5,84,860/- on 08.02.1996 and tax was determined as 

Rs.3,02,434/- and demand notice for Rs.9,95,388/- was issued as 

tax and interest payable on 08.02.1996.  

5. For  the  assessment  year  1992-93,  the  best  judgment 

assessment under Section 144 was made on 9.2.1996 on the firm 

on  a  total  income  of  Rs.14,87,930/-  and  tax  determined  at 

Rs.8,08,153/-, a demand notice was issued towards the tax and 

interest payable.

6. We may indicate, so far as A-2 is concerned, the due date for 

filing of return of income as per Section 139(1) of the Act for the 

assessment  year  1993-94 was 31.8.1993.  Notice  under Section 

142(1)(i)  was  issued  to  A-2  calling  for  return  of  income  on 

18.1.1994.   The  said  notice  was  served  on  her  on  19.1.1994. 

Reminders were issued on 10.2.1994,  22.8.1994 and 23.8.1995. 

No  return  was  filed  as  required  under  Section  139(4)  before 

31.3.1995.   The Department  on 31.7.1995 issued notice  under 

5

Section 142(1)(ii) calling for particulars of income and other details 

for completion of  assessment.  Neither the return of  income was 

filed nor the particulars of income were furnished. Best judgment 

assessment under Section 144 was made on 9.2.1996 on a total 

income of Rs.1,04,49,153/- and tax determined at Rs.46,68,676/- 

and  demand  of  Rs.96,98,801/-,  inclusive  of  interest  at 

Rs.55,53,882/-  was  raised  after  adjusting  pre-paid  tax  of 

Rs.5,23,756/-.  The Department then issued show-cause notice for 

prosecution under Section 276CC on 14.6.1996.  Later,  sanction 

for prosecution was accorded by the Commissioner of Income Tax 

on 3.10.1996.

7. A-3  also  failed to  file  the  return of  income  as  per  Section 

139(1) for the assessment  year 1993-94 before the due date i.e. 

31.8.1993.  Notice under Section 142(1)(i) was issued to A-3 calling 

for filing of return of income on 8.11.1995.   Further, notice was 

also  issued  under  Section  142(1)(ii)  on  21.7.1995  calling  for 

particulars  of  income  and  other  details  for  completion  of 

assessment.    Neither  the  return  of  income  was  filed  nor  the 

particulars of income were furnished.   Best judgment assessment 

under  Section 144 was made on 8.2.1996 on a total  income of 

Rs.70,28,110/- and tax determined at Rs.26,86,445/-.   The total 

tax payable, inclusive of  interest due was Rs.71,19,527/-.  After 

6

giving effect to the appellate order, the total income was revised by 

Rs.19,25,000/-,  resulting  in  tax  demand  of  Rs.20,23,279/-, 

inclusive  of  interest  levied.   Later,  a  show-cause  notice  for 

prosecution under Section 276CC was issued to A-3 on 7.8.1996. 

A-3 filed replies on 24.11.1996 and 24.3.1997.  The Commissioner 

of Income Tax accorded sanction for prosecution on 4.8.1997.

8. We may incidentally also point out, the final  tax liability so 

far as the firm is concerned, was determined as Rs.32,63,482/- on 

giving effect to the order of the Income Tax Appellate Tribunal  (B 

Bench), Chennai dated 1.9.2006 and after giving credit of pre-paid 

tax for the assessment year 1991-92.    For the assessment year 

1992-93  for  the  firm,  final  tax  liability  was  determined  at 

Rs.52,47,594/- on giving  effect  to  the  order  of  the  Income  Tax 

Appellate Tribunal  (B Bench),  Chennai  dated 1.9.2006 and after 

giving credit of  pre-paid tax.   So far as A-2 is concerned,  for the 

assessment  year  1993-94  final  tax  liability  was  determined  at 

Rs.12,54,395/- giving effect to the order of  Income Tax Appellate 

Tribunal  (B Bench), Chennai  dated 11.10.2008 after giving credit 

to pre-paid tax.    So far as A-3 is concerned, for the assessment 

year 1993-94, final  tax liability was determined as Rs.9,81,870/- 

after giving effect to the order of Income Tax Appellate Tribunal (B 

7

Bench),  Chennai  dated 14.9.2004 and after giving credit  to pre-

paid tax.

9. We have already indicated, for not filing of returns and due to 

non-compliance  of  the  various  statutory  provisions,  prosecution 

was  initiated  under  Section  276CC  of  the  Act  against  all  the 

accused  persons  and  the  complaints  were  filed  on  21.08.1997 

before the Chief Metropolitan Magistrate, which the High Court by 

the impugned order has permitted to go on. 

10. Shri Shekhar Naphade, learned senior counsel appearing for 

the appellants, submitted that the High Court did not appreciate 

the scope of  Section 276CC of  the Act.   Learned senior  counsel 

pointed out  that  once  it  is  established that  on the  date  of  the 

complaint  i.e.  on 21.08.1997  the  assessment  had  not  attained 

finality,  the complaint  became pre-mature as on the date of  the 

complaint and no offence had taken place and all the ingredients of 

offence under Section 276 of the Act were not satisfied.  Learned 

senior counsel pointed out that unless and until it is shown that 

failure to file the return was willful  or deliberate, no prosecution 

under Section 276CC could be initiated.  Learned senior counsel 

pointed  out  that  in  fact,  the  second  accused  in  her  individual  

return had disclosed that the firm was doing the business and that 

8

it  had some income and hence,  it  cannot  be said  that  A-2 had 

concealed the fact  that  the firm had any intention to  evade tax 

liability.  Learned senior counsel also submitted that whether the 

assessee had committed any offence or not will depend upon the 

final  assessment  of  income  and tax  liability  determined  by  the 

appropriate  authority  and not  on the  assessment  made  by  the 

assessing officer.  Placing reliance on the proviso to Section 276CC 

learned  senior  counsel  submitted  that,  that  is  the  only 

interpretation that could be given to Section 276CC.  In support of 

his contention reliance was placed on the Judgment of this Court 

in  Commissioner of Wealth Tax, Gujarat v.  Vimlaben Vadilal  

Mehta (Smt.) (1983) 4 SCC 692,  Commissioner of Wealth Tax,  

Gujarat, Ahmedabad v. Vadilal Lallubhai & Ors. (1983) 4 SCC 

697 and  State of H.P.  and others v.  Gujarat Ambuja Cement  

Ltd. and another (2005) 6 SCC 499.  Referring to Section 278E of 

the Act, learned senior counsel submitted that till the assessment 

does not  attain finality,  Section 276CC is  not  complete and the 

presumption under Section 278E is not attracted.  Learned senior 

counsel  also submitted that  the High Court has wrongly applied 

the principles laid down by this Court in Prakash Nath Khanna 

and  another v.  Commissioner  of  Income  Tax  and  another 

(2004) 9 SCC 686, in any view, which calls  for  reconsideration.  

9

Learned senior  counsel  submitted that  the said Judgment  deals 

with the factum of proviso to Section 276CC of the Act which lays 

down that there is no offence if  the tax amount does not exceed 

Rs.3,000/-.  

11. Shri Sidharth Luthra, learned Additional  Solicitor General of 

India,  appearing for  the Revenue,  on the other  hand, submitted 

that Section 139 of  the Act placed a statutory mandate on every 

person to file an income tax return in the prescribed form and in 

the prescribed manner before the due date i.e. 31

st

 August of the 

relevant assessment year.  Learned ASG submitted that on breach 

of  Section  139(1)  of  the  Act,  cause  of  action  to  prosecute  the 

assessee arises subject  to other ingredients of  Section 276CC of 

the  Act.  Learned ASG pointed out  that  what  is  relevant  in  the 

proceedings, is not only the due date prescribed in Section 139(1) 

of the Act, but also time prescribed under Section 142 and 148 of  

the Act, by which further opportunities have been given to file the 

return in  the prescribed time.   In other  words,  Section 276CC, 

according to the learned ASG, applies to a situation where assessee 

has failed to file the return of  income as required under Section 

139 of  the Act or  in response to notices issued to the assessee 

under Section 142 or Section 148 of  the Act.  Learned ASG also 

submitted that the scope of proviso to Section 276CC to protect the 

10

genuine assessees who either file their return belatedly but within 

the  end of  the  assessment  year  or  those  who  paid  substantial 

amount of their tax dues by pre-paid taxes.  Considerable reliance 

was  placed  on  the  Judgment  of  this  Court  in  Prakash Nath 

Khanna and another (supra).   Reliance was also placed on the 

Judgment  of  this  Court  in  Maya  Rani  Punj  (Smt.) v. 

Commissioner of Income Tax, Delhi (1986) 1 SCC 445.  

12. Learned ASG also  explained the  scope of  Section 278E by 

placing  reliance  on  P.R.  Metrani v.  Commissioner  of  Income 

Tax,  Bangalore (2007) 1 SCC 789,  Kumar Exports v.  Sharma 

Carpets (2009) 2 SCC 513,  and submitted that  pendency of  the 

appellate  proceedings  is  not  a  relevant  factor  in  relation  to 

prosecution under  Section 276CC.   Reference was also made to 

Ravinder  Singh v.  State  of  Haryana (1975)  3 SCC 742 and 

Standard  Chartered  Bank  and  others  v.  Directorate  of  

Enforcement  and  others  (2006)  4  SCC  278.   Learned  ASG 

submitted that the Judgment in  Prakash Nath Khanna (supra) 

calls  for  no  reconsideration,  as  the  same  has  been  uniformly 

applied  by  this  Court  as  well  as  by  the  various  High  Courts. 

Learned  ASG  also  pointed  out  that  the  appellants  have  been 

indulging in litigative exercises by which they could hold up the 

11

proceedings for almost two decades and that  the trial  court  has 

rightly rejected the application for discharge,  which was affirmed 

by the High Court and the same calls no interference by this Court.

13. We  may  formulate  the  questions  that  arise  for  our 

consideration, which are as under:

(1) Whether  an  assessee  has  the  liability/duty  to  file  a 

return under Section 139(1) of  the Act within the due date 

prescribed therein?

(2) What  is the effect of  best judgment assessment under 

Section 144 of  the Act and will it nullify the liability of  the 

assessee to file its return under Section 139(1) of the Act?

(3) Whether non-filing of return under Section 139(1) of the 

Act, as well as non-compliance of the time prescribed under 

Sections 142 and 148 of the Act are grounds for invocation of 

the provisions of Section 276CC of the Act?

(4) Whether  the  pendency  of  the  appellate  proceedings 

relating  to  assessment  or  non-attaining  finality  of  the 

assessment  proceedings  is  a  bar  in  initiating  prosecution 

proceedings  under  Section  276CC  due  to  non-filing  of 

returns?

(5) What  is the scope of  Section 278E of  the Act, and at 

what stage the presumption can be drawn by the Court?

12

14. We may, at the outset, point out that the appellants had earlier 

approached this Court and filed SLP(C) Nos.3655-3658 of 2005 which 

were disposed of by this Court directing the trial court to dispose of the 

petition for discharge within a period of two months by its order dated 

03.03.2006.   Learned  Chief  Metropolitan  Magistrate  rejected  the 

petitions  vide  its  order  dated  14.06.2006.   Though the  High Court 

affirmed  the  said  order  vide  its  judgment  dated  02.12.2006,  these 

appeals  were kept  pending before this  Court  over  six  years for  one 

reason or another.  

15. We are,  in these appeals,  concerned with the question of  non-

filing of  returns by the appellants for the assessment  year 1991-92, 

1992-93 and 1993-94.  Each and every order passed by the revenue as 

well  as by the Courts were taken up before the higher courts, either 

through appeals, revisions or writ petitions. The details of the various 

proceedings in respect of  these appeals are given in paragraph 30 of 

the written submissions filed by the revenue, which reveals the dilatory 

tactics  adopted  in  these  cases.    Courts,  we  caution,  be  guarded 

against those persons who prefer to see it as a medium for stalling all 

legal processes.  We do not propose to delve into those issues further 

since  at  this  stage we are  concerned with answering the  questions 

which have been framed by us.

13

16. Section  139  of  the  Act  prior  to  1989-90  and  after,  placed  a 

statutory mandate on every person to file an income tax return in the 

prescribed form and in the prescribed manner.  The Direct Tax Laws 

(Amendment)  Act,  1987  with  effect  from 01.04.1989  made  various 

amendments to the Income Tax Act, by which the assessing officer has 

no power to extend the time for filing a return of income under Section 

139(1) and to extend the time for filing under Section 139(3), a return 

of loss intended to be carried forward.  The time prescribed for filing a 

belated return under Section 139(4) or a revised return under Section 

139(5)  was  reduced  to  one  year  from  the  end  of  the  relevant 

assessment year. The provision of Section 139(2) stood incorporated in 

Section 142(1)(i).  The notice under Section 142(1)(i) to furnish a return 

of income cannot be issued in the course of the assessment year itself  

and need not give the person concerned a minimum period of 30 days 

for furnishing the return.  When a return is furnished pursuant to a 

notice  under  Section 142(1)(i),  the  assessment  may be made under 

Section  143  without  recourse  to  Section  147.   Further,  with  the 

deletion of Section 271(1)(a), a penalty for failure to furnish in due time 

a return of income under Section 139(1), is abolished.  Levy of punitive 

interest under Section 234A made mandatory and the discretion of the 

assessing officer to reduce or waive the interest was taken away.  Non-

14

compliance  with  a  notice  under  Section  142(1)(i)  may  attract 

prosecution under Section 276CC.

17. The Income Tax Act, therefore, had stipulated both the penalty 

under  Section 271(1)(a)  and prosecution under  Section 276CC,  the 

former  for  depriving  taxes  due  to  the  exchequer  and  later  for  the 

offence/infraction committed.   As already indicated by the  Taxation 

Laws (Amendment) Act, 1989, penalty provision under Section 271(1)

(a)  had  been deleted  w.e.f.  01.04.1989  and  a  provision for  levy  of 

mandatory/compulsory  interest  under  Section 234A of  the  Act  was 

introduced.   But,  legislature  has  never  waived  or  relaxed  its 

prosecuting  provisions  under  Section  276CC  of  the  Act  for  the 

infraction or non-furnishing of return of income.

18. Section 139 of the Act, as it stood at the relevant time, reads as 

under:

“139.  (1)  Every  person,  if  his  total  income  or  the  total

income  of  any  other  person  in  respect  of  which  he  is

assessable  under  this  Act  during  the  previous  year

exceeded the maximum amount which is not chargeable to

income-tax,  shall,  on or  before  the  due  date,  furnish  a

return of  his income or the income of  such other person

during  the  previous  year,  in  the  prescribed  form and

verified in the prescribed manner and setting forth such

other particulars as may be prescribed.

Explanation:  In this sub-section, “due date” means(a)

   where  the  assessee is  a company,  the  30

 day of

November of the assessment year;

(b)    where  the  assessee  is  a  person,  other  than  a

company.-

th

15

(i)     in  a case where the accounts  of  the  assessee are

required under this Act or nay other law to be audited, or

where  the  report  of  any  accountant  is  required  to  be

furnished under section 80HHC or  Section 80HHD or  in

the case of a co-operative society, the 31

st

 day of October of

the assessment year:

(ii)    in a case where the total  income referred to in this

sub-section  includes  any  income  from  business  or

profession,  not  being a case falling under  sub-clause (i),

the 31

st

 day of August of the assessment year :

(iii)    in  any  other  case,  the  30

th

 day  of  June  of  the

assessment year.

xxx xxx xxx

xxx xxx xxx

(3)  If any person who has sustained a loss in any previous

year  under  the  head  “Profits  and  gains  of  business  or

profession” or under the head “Capital  gains” and claims

that the loss or any part thereof should be carried forward

under sub-section (1) of  section 72,  or sub-section (2) of

section 73, or sub-section (1) or sub-section (3) of section

74,  or  sub-section  (3)  of  section  74A,  he  may  furnish,

within the time allowed under sub-section (1), a return of

loss in the prescribed form and verified in the prescribed

manner and containing such other particulars as may be

prescribed, and all the provisions of this Act shall apply as

if it were a return under sub-section (1).

(4) Any person who has not furnished a return within the

time allowed to him under sub-section (1),  or within the

time allowed under a notice issued under sub-section (1) of

section 142, may furnish the return for any previous year

at any time before the expiry of one year from the end of

the relevant assessment year or before the completion of

the assessment, whichever is earlier:

xxx xxx xxx

xxx xxx xxx”


19. A plain reading of  the above provisions indicates that  it  is 

mandatory on the part of the assessee to file the return before the 

due date.   Explanation (a)  to the said  section defines the term 

“due date”, which is 30

th

 November of the assessment year.  The 

16

consequence  of  non-filing  of  return  on  time  has  also  been 

stipulated in the Act.  Further a reference to Sections 142 and 148 

is  also  necessary  to  properly  understand  the  scope  of  Section 

276CC.   Relevant  portion  of  Section  142,  as  it  stood  at  the 

relevant time, is quoted below:

“142.  Inquiry  before  assessment.-   (1)  For  the

purpose of making an assessment under this Act, the

Assessing Officer may serve on any person who has

made a return under section 139 or in whose case the

time allowed under sub- section (1) of that section for

furnishing the return has expired] a notice requiring

him, on a date to be therein specified,- 

(i)    where such person has not made a return within

the time allowed under sub-section (1) of section 139,

to furnish a return of his income or the income of any

other  person  in  respect  of  which  he  is  assessable

under this Act, in the prescribed form and verified in

the prescribed manner and setting forth such other

particulars as may be prescribed, or


xxx xxx xxx

xxx xxx xxx”


20. Section 148 refers to the issue of  notice where income has 

escaped  assessment.   Relevant  portion  of  the  same  is  also 

extracted hereinbelow for ready reference:

“148.  (1)  Before  making  the  assessment,

reassessment  or  recomputation under  section 147,

the Assessing Officer shall  serve on the assessee a

notice requiring him to furnish within such period,

not being less than thirty days, as may be specified

in the notice, a return of his income or the income of

any other person in respect of which he is assessable

under  this  Act  during  the  previous  year

corresponding to the relevant assessment year, in the 

17

prescribed  form  and  verified  in  the  prescribed

manner and setting forth such other particulars as

may  be  prescribed;  and the  provisions  of  this  Act

shall, so far as may be, apply accordingly as if such

return were a return required to be furnished under

section 139. 

(2)  The  Assessing  Officer  shall,  before  issuing  any

notice  under  this  section,  record  his  reasons  for

doing so.”

21. Sub-section (1) of  Section 139, clause (i)  sub-section (1) of 

Section 142 and Section 148 are mentioned in Section 276CC of 

the Act.  Section 276CC is extracted as under:

“276CC. Failure to furnish returns of income.   If

a  person wilfully  fails  to  furnish  in  due  time  the

return  of  income  which  he  is  required  to  furnish

under  sub-section  (1)  of  section  139  or  by  notice

given  under  clause  (i)  of  sub-section (1)  of  section

142 or section 148, he shall be punishable,- 

(i)    in a case where the amount of tax, which would

have  been  evaded  if  the  failure  had  not  been

discovered,  exceeds one hundred thousand rupees,

with rigorous imprisonment  for  a term which shall

not be less than six months but which may extend to

seven years and with fine; 

(ii)   in any other case, with imprisonment for a term

which shall not be less than three months but which

may extend to three years and with fine: 

Provided that  a  person  shall  not  be  proceeded

against  under this  section for  failure to  furnish  in

due time the return of income under sub-section (1)

of section 139-


(i)   for any assessment year commencing prior to the

1st day of April, 1975 ; or

(ii)  for any assessment year commencing on or after

the 1st day of April, 1975 , if- 

18

(a)  the return is furnished by him before the expiry

of the assessment year; or 

(b)    the  tax  payable  by  him on the  total  income

determined on regular assessment, as reduced by the

advance tax,  if  any,  paid, and any tax deducted at

source, does not exceed three thousand rupees.”


22. The constitutional  validity of Section 276CC, was upheld by 

the Karnataka High Court in Sonarome Chemicals Pvt. Ltd. and 

others v.  Union of India and others  (2000) 242 ITR 39 (Kar) 

holding that it does not violate Article 14 of 21 of the Constitution. 

Section punishes  the  person who  “willfully  fails  to  furnish  the 

return of  income  in  time”.   The  explanation  willful  default,  as 

observed by Wilber Force J. in  Wellington v.  Reynold  (1962) 40 

TC 209 is “some deliberate or intentional failure to do what the tax 

payer  ought  to  have  done,  knowing  that  to  omit  to  do so  was 

wrong”.   The assessee is bound to file  the return under Section 

139(1) of the Act on or before the due date.  The outer limit is fixed 

for filing of return as 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.

19

23. Section 276CC applies to situations where an assessee has 

failed to file a return of income as required under Section 139 of 

the  Act  or  in  response to  notices issued to  the  assessee under 

Section 142 or  Section 148 of  the  Act.   The proviso  to  Section 

276CC gives  some  relief  to  genuine  assesses.   The  proviso  to 

Section 276CC gives further time till  the end of  the assessment 

year to furnish return to avoid prosecution.  In other words, even 

though the due date would be 31

st

 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.

20

24. Section 276CC,  it may be noted, takes in sub-section (1) of 

Section 139, Section 142(1)(i) and Section 148.  But, the proviso to 

Section 276CC takes in only sub-section (1) of Section 139 of the 

Act  and  the  provisions  of  Section  142(1)(i)  or  148  are 

conspicuously  absent.   Consequently,  the  benefit  of  proviso  is 

available  only  to  voluntary  filing  of  return  as  required  under 

Section 139(1) of the Act.  In other words, the proviso would not 

apply after detection of  the failure to file  the return and after a 

notice under Section 142(1)(i) or 148 of the Act is issued calling for 

filing of  the return of  income.   Proviso,  therefore,  envisages the 

filing of even belated return before the detection or discovery of the 

failure and issuance of  notices under Section 142 or 148 of  the 

Act.

25. We may in this respect also refer to sub-section (4) to Section 

139 wherein the legislature has used an expression “whichever is 

earlier”.  Both Section 139(1) and Sub-Section (1) of  Section 142 

are referred to in sub-section (4) to Section 139, which specify time 

limit.   Therefore, the expression “whichever is earlier”  has to be 

read with the time if allowed under sub-section (1) to Section 139 

or within the time allowed under notice issued under sub-section 

(1) of Section 142, whichever is earlier.  So far as the present case 

is concerned, it is already noticed that the assessee had not filed 

21

the return either within the time allowed under sub-section (1) to 

Section 139 or within the time allowed under notices issued under 

sub-section (1) to Section 142.

26. We have indicated that  on failure to file the returns by the 

appellants,  income  tax  department  made  a  best  judgment 

assessment  under  Section 144 of  the Act  and later  show cause 

notices were issued for initiating prosecution under Section 276CC 

of  the  Act.   Proviso  to  Section 276CC nowhere  states  that  the 

offence  under  Section  276CC has  not  been  committed  by  the 

categories of assesses who fall within the scope of that proviso, but 

it is stated that such a person shall not be proceeded against.   In 

other  words,  it  only  provides that  under specific  circumstances 

subject  to  the  proviso,  prosecution  may  not  be  initiated.   An 

assessee who comes within clause 2(b) to the proviso,  no doubt 

has  also  committed  the  offence  under  Section  276CC,  but  is 

exempted from prosecution since the tax falls  below Rs.3,000/-. 

Such an assessee may file belated return before the detection and 

avail  the benefit of  the proviso.  Proviso cannot control  the main 

section,  it  only  confers  some  benefit  to  certain  categories  of 

assesses.  In short, the offence under Section 276CC is attracted 

on failure to comply with the provisions of Section 139(1) or failure 

22

to respond to the notice issued under Section 142 or Section 148 

of the Act within the time limit specified therein.  

27. We may indicate that the above reasoning has the support of 

the Judgment  of  this  Court  in  Prakash Nath Khanna  (supra). 

When we apply the above principles to  the facts of  the case in 

hand,  the  contention  of  the  learned  senior  counsel  for  the 

appellant  that  there has not  been any willful  failure to file their 

return cannot  be  accepted  and on facts,  offence  under  Section 

276CC of the Act has been made out in all these appeals and the 

rejection  of  the  application  for  the  discharge  calls  for  no 

interference by this Court.

28. We also find no basis in the contention of the learned senior 

counsel  for  the  appellant  that  pendency  of  the  appellate 

proceedings  is  a  relevant  factor  for  not  initiating  prosecution 

proceedings  under  Section  276CC of  the  Act.   Section  276CC 

contemplates that an offence is committed on the non-filing of the 

return and it  is totally  unrelated to the pendency of  assessment 

proceedings except for second part of the offence for determination 

of the sentence of the offence, the department may resort to best 

judgment assessment or otherwise to past years to determine the 

extent of the breach.  The language of Section 276CC, in our view, 

23

is  clear  so also  the legislative intention.   It  is  trite  law that  as 

already held by this  Court  in  B.  Permanand  v.  Mohan Koikal 

(2011) 4 SCC 266 that “the language employed in a statute is the 

determinative  factor  of  the  legislative  intent.   It  is  well  settled 

principle of law that a court cannot read anything into a statutory 

provision which is plain and unambiguous”.  If it was the intention 

of  the legislature to hold up the prosecution proceedings till  the 

assessment  proceedings  are  completed  by  way  of  appeal  or 

otherwise the same would have been provided in Section 276CC 

itself.  Therefore, the contention of the learned senior counsel for 

the  appellant  that  no  prosecution  could  be  initiated  till  the 

culmination of assessment proceedings, especially in a case where 

the appellant had not filed the return as per Section 139(1) of the 

Act or following the notices issued under Section 142 or Section 

148 does not arise.  

29. We  are  also  of  the  view  that  the  declaration or  statement 

made in the individual returns by partners that the accounts of the 

firm are not finalized, hence no return has been filed by the firm, 

will  not  absolve  the  firm in  filing  the  ‘statutory  return  under 

section 139(1) of the Act.  The firm is independently required to file 

the return and merely because there has been a best judgment 

assessment under Section 144 would not nullify the liability of the 

24

firm to file the return as per Section 139(1) of the Act.  Appellants’ 

contention that since they had in their individual returns indicated 

that the firm’s accounts had not been finalized, hence no returns 

were filed, would mean that failure to file return was not willful, 

cannot be accepted.  

30. Section  278E  deals  with  the  presumption  as  to  culpable 

mental  state,  which  was  inserted  by  the  Taxation  Laws 

(Amendment  and  Miscellaneous  Provisions)  Act,  1986.   The 

question is on whom the burden lies, either on the prosecution or 

the assessee, under Section 278E to prove whether the assessee 

has or has not committed willful default in filing the returns. Court 

in a prosecution of offence, like Section 276CC has to presume the 

existence  of  mens  rea and  it  is  for  the  accused  to  prove  the 

contrary and that too beyond reasonable doubt.  Resultantly, the 

appellants have to prove the circumstances which prevented them 

from filing  the  returns  as  per Section 139(1)  or  in  response  to 

notices under Sections 142 and 148 of the Act.

31. We,  therefore,  find  no  reason  to  interfere  with  the  order 

passed by the High Court.  The appeals, therefore, lack merits and 

the  same  are  dismissed  and  the  Criminal  Court  is  directed to 

25

complete the trial  within four months from the date of  receipt of 

this Judgment.

New Delhi,

January 30, 2014.

…….………………………J.

  (K.S. Radhakrishnan)

…………………………….J.

  (A.K. Sikri)

26

ITEM NO.1-B                COURT NO.7             SECTION IIA

            S U P R E M E   C O U R T   O F   I N D I A

                         RECORD OF PROCEEDINGS

CRIMINAL APPEAL NO(s). 61 OF 2007

SASI ENTERPRISES                                  Appellant (s)

                 VERSUS

ASSISTANT COMMISSIONER OF INCOME TAX              Respondent(s)

WITH

CRIMINAL APPEAL NO. 62 OF 2007

CRIMINAL APPEAL NO. 63 OF 2007

CRIMINAL APPEAL NO. 64 OF 2007

Date: 30/01/2014  These Appeals were called on for pronouncement of

   Judgment today.

For Appellant(s)

Mr. Pranab Kumar Mullick, Adv.

For Respondent(s)

Mr. Arijit Prasad, Adv.

Mr. Rajab Mathur, Adv.

for Mr. B.V. Balaram Das, Adv.

Hon'ble  Mr.  Justice  K.S.  Radhakrishnan  pronounced

the  judgment  of  the  Bench  comprising  His  Lordship  and

Hon'ble Mr. Justice A.K. Sikri.

The appeals are dismissed.

(N.S.K. Kamesh)

Court Master

(Usha Sharma)

Court Master

(signed reportable judgment is placed on the file)

27

 

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on 30 January 2014
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