2021 (9) TMI 1558 - HC - Income Tax

Action u/s 276-CC - assessee had filed his return belatedly by 19 months - HELD THAT - Use of words in due time is a significant term used in Section 276-CC and relates to non-furnishing of return within the time in terms of sub-Section (1) or indicated in the notice given under sub-Section (2) of Section 139. There is no provision for condonation of the said infraction, even if, a return is filed in terms of sub-Sections (4) of Section 139 because due time as prescribed under sub-Section (1) or (2) of Section 139 will not get diluted by filing return under Section 139(4) much later as it is against the legislative intent. Contention of applicant s counsel that return was filed prior to issuance of any notice by the department is to be examined in terms of the use of word or under sub-Sections (1) or (2) of Section 139. Word or is normally disjunctive and and is normally conjunctive as has been held in case of Hyderabad Asbestos Cement Products and others 1999 (12) TMI 63 - SUPREME COURT wherein, it is held that or in its natural sense denotes an alternative and is not read as substitutive . In case of Union of India (UOI) and Ors. vs. Ind- Swift Laboratories Ltd. 2011 (2) TMI 6 - SUPREME COURT it is held that where provision is clear and unambigous the word or cannot be read as and by applying the principle of reading down. Thus, when examined in light of said legal position, then the argument that applicant had already furnished his return in terms of Section 139 (4) will not take away the liability of filing the return in due time as mentioned in Section 276-CC, merely because no notice was issued prior to filing of the return. As in the light of the law laid down by Supreme Court in case of Prakash Nath Khanna and another 2004 (2) TMI 3 - SUPREME COURT the ratio being that, though, plea of lack of culpable mental state may be evoked by an accused in defense, but that cannot be seen at the time of filing of the complaint or at the stage of taking of the cognizance in terms of the provisions contained in Section 278-E(1) of the Income Tax Act, 1961, which deals with presumption of existence of such mental state being a matter of trial and, therefore, the petition/Application deserves to be dismissed and is dismissed.

Issues Involved:
1. Quashing of summoning order and non-bailable warrants.
2. Applicability of Circular No.24 of 2019.
3. Interpretation of "in due time" under Section 276-CC of the Income Tax Act.
4. Relevance of mens rea in delayed filing of tax returns.
5. Retrospective application of beneficial circulars.

Detailed Analysis:

1. Quashing of Summoning Order and Non-Bailable Warrants:
The application under Section 482 Cr.P.C. seeks to quash the summoning order dated 16.01.2018 and non-bailable warrants issued on 11.12.2019 in Complaint Case No.28 of 2018, under Section 276-CC of the Income Tax Act. The applicant contends that he had filed his income tax return belatedly on 31.03.2017 for the assessment year 2015-16 and paid the due tax along with interest. He argues that since he had complied with the tax requirements, albeit late, there was no mens rea, and hence, no prosecution should be initiated under Section 276-CC.

2. Applicability of Circular No.24 of 2019:
The applicant relies on Circular No.24 of 2019, which states that cases where the tax evaded is Rs. 25 lakhs or below shall not be processed for prosecution without prior administrative approval. The applicant argues that since his tax liability was less than Rs. 25 lakhs, no action should be taken against him. However, the court notes that this circular has no retrospective application as it applies only to pending cases where a complaint is yet to be filed. Since the complaint was filed on 16.01.2018, before the circular came into force, the circular does not benefit the applicant.

3. Interpretation of "In Due Time" Under Section 276-CC:
The court emphasizes the significance of the term "in due time" used in Section 276-CC, which relates to the non-furnishing of returns within the time specified under sub-Section (1) or as indicated in the notice given under sub-Section (2) of Section 139. Filing a return under sub-Section (4) of Section 139 does not condone the infraction of not furnishing the return within the due time. The court refers to the Supreme Court judgment in Prakash Nath Khanna and others Vs. Commissioner of Income Tax, which underscores that the legislative intent is not to dilute the requirement of filing returns within the specified time.

4. Relevance of Mens Rea in Delayed Filing of Tax Returns:
The applicant argues that there was no mens rea as he had filed the return and paid the tax, albeit late. The court, however, refers to Section 278-E of the Income Tax Act, which presumes the existence of a culpable mental state unless the accused proves otherwise. The court states that the absence of a culpable mental state can be pleaded as a defense during the trial, not at the stage of filing the complaint or taking cognizance.

5. Retrospective Application of Beneficial Circulars:
The applicant cites various judgments to argue that beneficial circulars should be applied retrospectively. However, the court notes that the language of Circular No.24 of 2019 explicitly states that it applies to pending cases where a complaint is yet to be filed. The court also refers to the Supreme Court judgment in M/S. Jai Fibres Ltd. Vs. Commissioner of Central Excise, which held that the word "henceforth" indicates prospective application only.

Conclusion:
The court concludes that the arguments presented by the applicant do not hold merit in light of the legal provisions and precedents. The application is dismissed, and the summoning order and non-bailable warrants remain in effect. The court emphasizes that the issue of mens rea and the culpable mental state will be determined during the trial.

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