2023 (8) TMI 88 - HC - Income Tax

Prosecution Proceedings u/s 276CC and 276C(2) - non furnishing the return and paying the tax on time - Presumption as to culpable mental state - petitioner, even at the time of filing the return with delay u/s 139(4) of the Act, did not pay the self assessment tax along with the return and rather, it was paid only on 14.3.2016 after receipt of the notice from the AO - HELD THAT - Section 139(4) of the Act cannot, by any stretch, control the operation of Section 139(1) of the Act, which actually fixes the period for furnishing the returns. The term 'wilfully fails to furnish in due time' as contained in Section 276CC of the Act takes within its fold the due time that has been fixed under Section 139(1) of the Act and not the extended time provided under Section 139(4) of the Act. Therefore, the mere filing of return during the extended time will not come to the aid of the petitioner to escape from the criminal prosecution. Whether there is wilfulness on the part of the petitioner in filing the returns with delay ? - The issue as to whether there was wilfulness in not filing the returns on time and not paying the tax on time, is only a matter of fact, which can be ascertained only through appreciation of evidence. In the light of this provision, this Court, exercising its jurisdiction under Section 482 of the Code, cannot presume innocence or absence of wilfulness on the part of the petitioner. On the other hand, what can be presumed is only culpable mental status and the onus is upon the petitioner to prove the contrary and that can be done only at the time of trial. On the facts alleged in the complaint, the offences have been prima facie made out. In view of the same, the statutory presumption under Section 278E of the Act comes into operation. Under such circumstances, this Court, in exercise of its jurisdiction under Section 482 of the Code, cannot disregard the statutory presumption. This Court also cannot go into the facts of the case nor the defence taken by the petitioner to discharge the onus since it will be beyond the jurisdiction under Section 482 of the Code. This exercise can be carried out only in the course of trial since the determination of culpable state of mind is primarily a determination of fact, which requires appreciation of evidence. This Court does not find any ground to interfere with the proceedings pending before the Court below. It is made clear that it will be left open to the petitioner to raise all the grounds before the Court below and the same will be considered on their own merits and in accordance with law. Any observations made in this order will not have a bearing on the Court below while deciding the case on merits..

Issues Involved:
1. Challenge to the sanction order dated 28.6.2016.
2. Challenge to the subsequent proceedings initiated in C.C.No.499 of 2016.
3. Alleged offences under Sections 276CC and 276C(2) of the Income Tax Act, 1961.
4. Wilfulness in delay of filing returns and paying taxes.
5. Application of Section 278E of the Income Tax Act regarding culpable mental state.

Summary:

1. Challenge to the Sanction Order and Subsequent Proceedings:
The petitioner challenged the sanction order dated 28.6.2016 and the subsequent proceedings initiated by the first respondent in C.C.No.499 of 2016. The petitioner argued that the delay in filing the return and paying the self-assessment tax cannot be grounds for criminal prosecution unless the delay is wilful and wanton. The petitioner contended that the entire tax was paid before the sanction was accorded, making the prosecution an abuse of process.

2. Alleged Offences under Sections 276CC and 276C(2) of the Income Tax Act:
The Income Tax Department filed a criminal complaint against the petitioner for not furnishing the return of income for the assessment year 2013-14 on time and for delayed payment of self-assessment tax. The petitioner filed the return on 29.3.2015 but paid the tax only on 14.3.2016 after receiving a notice from the Assessing Officer. The department argued that filing the return under Section 139(4) does not mitigate the infraction of not filing within the due time under Section 139(1).

3. Wilfulness in Delay of Filing Returns and Paying Taxes:
The core issue was whether the delay in filing returns and paying taxes was wilful. The court referred to the Supreme Court judgment in Prakash Nath Khanna & Another Vs. CIT & Another, which clarified that Section 139(4) does not control the operation of Section 139(1). The term "wilfully fails to furnish in due time" pertains to the due time fixed under Section 139(1). The court held that the mere filing of a return during the extended time does not exempt the petitioner from criminal prosecution.

4. Application of Section 278E of the Income Tax Act:
Section 278E provides a statutory presumption of culpable mental state. The court emphasized that the existence of wilfulness is a factual matter to be determined through evidence. The statutory presumption under Section 278E shifts the burden to the petitioner to prove the absence of wilfulness, which can only be done during the trial. The court cannot presume innocence or absence of wilfulness in a petition under Section 482 of the Criminal Procedure Code.

Conclusion:
The court found that the foundational facts alleged in the complaint prima facie made out the offences. The statutory presumption under Section 278E comes into play, and the determination of culpable mental state requires a trial. Consequently, the court dismissed the criminal original petition, allowing the petitioner to raise all grounds before the trial court. The observations in this order will not affect the merits of the case in the trial court.

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