2017 (1) TMI 848 - HC - Income Tax

Prosecution initiated against the petitioners in terms of Section 276 CC - Failure to furnish returns of income - 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. 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.

Summary

Issues involved:
1. Correctness of the order taking cognizance of alleged offences under Section 276 CC of the Income Tax Act.
2. Interpretation of Section 276 CC regarding the filing of returns within due time.

Analysis:
1. The judgment in question deals with a petition challenging the order passed by the Special Court (Economic Offences), Bangalore, taking cognizance of offences alleged under Section 276 CC of the Income Tax Act. The complaint was filed under Section 200 of the Code of Criminal Procedure, 1973, after obtaining prior sanction from the Commissioner of Income Tax. The petitioner was alleged to have violated Section 276 CC by failing to file the return of income within the stipulated time. However, it was argued that the Commissioner of Income Tax had incorrectly presumed that the return had not been filed at the time of granting sanction, whereas, in reality, the return had been filed albeit with a delay. The petitioner contended that since the return was eventually filed, the prosecution initiated against them was not sustainable.

2. The interpretation of Section 276 CC of the Income Tax Act was crucial in this judgment. The section imposes penalties if a person fails to furnish the return of income within the specified time. However, in this case, it was highlighted that the returns were eventually accepted, and assessments were carried out, indicating that the returns filed belatedly were not considered nonexistent. This distinction was crucial in determining the applicability of the section. The court emphasized that the rigour of the section would be attracted only if the return of income had not been filed within the due time. Since the returns were accepted and assessments were conducted, the prosecution against the petitioner under Section 276 CC was deemed unsustainable. Consequently, the court quashed the proceedings initiated against the petitioners in C.C. No. 37/2012, thereby allowing the petition in favor of the petitioner.