2017 (1) TMI 1792 - HC - Income Tax

Violation of Section 276 CC - complaint is filed under Section 200 of the Code of Criminal Procedure after obtaining prior sanction from the Commissioner of Income Tax in accordance with the provisions of Section 279 of the Income Tax Act - notice came to be issued to the petitioner under Section 153 of the IT Act calling upon him to file his return and in spite of the notice, the accused had not filed his return in response thereto - HELD THAT - The fact that the petitioner had already filed his return of income as on the date of the order of sanction, which had gone unnoticed, is not in dispute and the learned counsel for the respondent would endorse the same. The tenor of Section 276 CC of the IT Act contemplates that if a person has failed to furnish the return of income in time, it is then that the rigour of the section would be attracted. For, if the return of income had been filed belatedly or otherwise, the section cannot apply at all and therefore, the prosecution ranged against the petitioner is vitiated. Consequently, the petition would have to be allowed. It is also to be noticed that the section certainly reads that if the returns are not filed in due time, the rigour would be attracted. But, the fact remains that in the present case on hand, the returns are accepted and assessments are carried out, which would not be the same as holding that the returns filed belatedly have been held to have been nonest and therefore, the authorities have proceeded thereupon. This would make a difference to the situation and therefore, the contention that the section which prescribes that if the assessee fails to file the return within the time due, the rigour would be attracted, would stand diluted by virtue of the returns having been accepted and assessments having been carried out therein. Consequently, the prosecution initiated against the petitioners in terms of Section 276 CC of the IT Act cannot be sustained. The entire proceedings quashed.

Summary

Issues Involved:
1. Correctness of the order dated 27.02.2012 in C.C.No.36/2012 passed by the Special Court (Economic Offences), Bangalore.
2. Alleged violation of Section 276 CC of the Income Tax Act, 1961.
3. Granting of sanction by the Commissioner of Income Tax.
4. Filing of return of income by the petitioner.
5. Interpretation of Section 276 CC of the Income Tax Act.
6. Prosecution initiated against the petitioner.

Analysis:
1. The petition challenges the order passed by the Special Court (Economic Offences) taking cognizance of the alleged offences. The complaint was filed under Section 200 of the Code of Criminal Procedure, 1973, with prior sanction from the Commissioner of Income Tax under Section 279 of the Income Tax Act, 1961, for violation of Section 276 CC of the IT Act by the petitioner. The petitioner was issued a notice under Section 153 of the IT Act to file a return, which was not done despite the notice. The Commissioner of Income Tax granted sanction based on the presumption that no return had been filed, leading to the filing of the complaint.

2. The petitioner's counsel argued that the Commissioner's presumption was incorrect as the return of income was filed by the petitioner, albeit after a delay. The counsel contended that the section applies only if the return is not filed in time, and since the return was filed eventually, the prosecution against the petitioner is flawed. It was acknowledged by the respondent's counsel that the return was indeed filed before the sanction, which should have precluded the application of Section 276 CC.

3. The court noted that the acceptance of returns and subsequent assessments indicated that the returns, even if filed belatedly, were not considered nonexistent. This distinction was crucial in diluting the strict application of Section 276 CC, which mandates consequences for failing to file returns on time. The court emphasized that since the returns were accepted and assessments conducted, the prosecution under Section 276 CC could not be sustained, leading to the quashing of the proceedings in C.C.36/2012.

4. In conclusion, the court allowed the petition, stating that the prosecution initiated against the petitioner under Section 276 CC of the IT Act was untenable due to the petitioner having filed the return of income before the sanction was granted. The judgment highlighted the importance of timely filing of returns but also recognized the significance of acceptance and assessment of belatedly filed returns in determining the applicability of penal provisions.