1996 (11) TMI 50 - HC - Income Tax

Assessment Order, Best Judgment Assessment, Delay In Filing Return, Due Time, Failure To File Return, Offences And Prosecution

Summary

Issues Involved:
1. Validity of criminal complaints under Section 276CC of the Income-tax Act, 1961.
2. Interpretation of "before the assessment is made" in Section 139(4) of the Act.
3. Applicability of the expression "if the failure had not been discovered" in Section 276CC.
4. Consideration of replies to show-cause notices before authorizing prosecution.
5. Whether the ingredients of the offence under Section 276CC are made out from the complaint.

Issue-wise Detailed Analysis:

1. Validity of Criminal Complaints under Section 276CC of the Income-tax Act, 1961:
The petitioners challenged the criminal complaints and proceedings pending against them under Section 276CC of the Income-tax Act, 1961, for their failure to file income tax returns within the stipulated time. The court found that each petitioner failed to submit their returns by July 31, 1988, as required under Section 139(1) of the Act, and instead filed them on March 20, 1991. Consequently, penalty proceedings were initiated, and penalties were imposed under Section 271(1)(a) of the Act. Despite the petitioners' arguments, the court upheld the validity of the criminal complaints, noting that the ingredients of the offence under Section 276CC were met, as the petitioners wilfully failed to furnish returns in due time.

2. Interpretation of "before the assessment is made" in Section 139(4) of the Act:
The petitioners argued that their returns filed before the assessment on August 26, 1991, were within due time under Section 139(4) of the Act. However, the court rejected this interpretation, stating that the time for filing returns under Section 139(1) or (2) is not extended until the assessment order is passed. The court clarified that Section 139(4) allows for the filing of returns before the assessment is made, but this does not extend the statutory period for furnishing returns as prescribed under Section 139(1). Therefore, the returns filed by the petitioners were beyond the due time.

3. Applicability of the Expression "if the failure had not been discovered" in Section 276CC:
The petitioners contended that there was no discovery of their failure to file returns, as no notice under Section 139(2) or Section 142(1) or Section 148 was issued, and no best judgment assessment under Section 144 was completed. The court disagreed, stating that the expression "if the failure had not been discovered" does not govern both clauses (i) and (ii) of Section 276CC. Even without such discovery, the petitioners' case falls under "any other case," making them liable for punishment under clause (ii) of Section 276CC, which prescribes imprisonment and fine for failure to furnish returns in due time.

4. Consideration of Replies to Show-Cause Notices Before Authorizing Prosecution:
The petitioners argued that their replies to the show-cause notices, explaining the delay in filing returns due to the managing partner's failure to provide necessary information, were not considered by the Commissioner of Income-tax before authorizing prosecution. The court found that the partnership deed allowed partners full access to the firm's books of account, and the accounts were to be closed and audited annually. Therefore, the explanation provided by the petitioners did not warrant halting the prosecution. The court emphasized that the petitioners could present their reasonable cause during the trial.

5. Whether the Ingredients of the Offence under Section 276CC are Made Out from the Complaint:
The petitioners claimed that the complaints did not disclose the offence under Section 276CC, thus deserving quashing. The court reviewed the complaints and found that they contained sufficient averments to constitute an offence under Section 276CC. The court reiterated that criminal proceedings could only be quashed if no offence is made out on the face of the complaint. The court cited precedents establishing that proceedings should not be quashed at the initial stage if the complaint prima facie constitutes an offence.

Conclusion:
The court dismissed the writ petitions, finding no merit in the arguments presented by the petitioners. The observations made in the judgment were clarified to have no effect on the merits of the case during the trial.