THE assesse
appellants are J. Jayalaithaa, N. Sasikala and their partnership firm
Sasikala Enterprises, who have all been prosecuted under Section 276CC
of the Income Tax Act for failure to file Income Tax returns. The
accused appellants had filed discharge petitions with the trial court
which was rejected. On appeal, the High Court also rejected the plea.
The accused appellants are before the Supreme Court, actually in the
second round of litigation.
Appellants' plea:
The senior counsel appearing for the appellants, submitted that the
High Court
did not appreciate the scope of Section 276CC of the Act. He
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. He 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. He
pointed out that in fact, the second accused in her individual return
had disclosed that the firm was doing the business and that 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. He 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 he submitted that, that is the only interpretation that could be
given to Section 276CC. Referring to Section 278E of the Act, the
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.
Revenue Defence:
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.
31st August of the relevant assessment year. The 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. He 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 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. The ASG
also submitted that the scope of proviso to Section 276CC to protect
the 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.
Questions for consideration by the Supreme Court: The Supreme Court formulated the following questions for consideration by the Court.
(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?
At the outset, the Supreme Court observed, “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.”
The
Supreme Court noted that 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.
Non-compliance with a notice under Section 142(1)(i) may attract
prosecution under Section 276CC. The Income Tax Act, 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
per Section 139, 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”. The consequence of non-filing of return on
time has also been stipulated in the Act. Section 148 refers to the
issue of notice where income has escaped assessment. 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 deals with
punishment for failure to file income tax returns.
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.
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.
Held:
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.
Is Pendency of appellate proceedings a factor for not initiating prosecution? The Supreme Court held, "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, is clear so also
the legislative intention. It is trite law that 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."
The appeals are dismis
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