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2025 (2) TMI 237 - HC - Income TaxOffence punishable u/s 276CC - there was a delay on the part of the petitioner assessee in submitting his income tax returns - whether there was a willful and deliberate delay on the part of the petitioner-assessee in submitting the Income Tax Returns? HELD THAT - The power to levy penalty for delayed filing of the income tax returns can be traced under Chapter 21 of the Income Tax Act while Chapter 22 of the Income Tax act provides for offences and prosecutions. A reading of the aforesaid two chapters would make it very clear that delay in filing of the income tax returns would not only result in payment of penalty but it also results in prosecution as provided under Chapter 22 of the Act. Therefore merely for the reason that petitioner has paid the penalty levied by the Competent Authority for the delay in filing of the returns the same does not exonerate the petitioner from being prosecuted as provided under Chapter 22 of the Act of 1961. The explanation sought to be offered on behalf of the petitioner before this Court cannot be accepted and it is for the petitioner to lead evidence and produce necessary material before the learned Magistrate in support of his defence and rebutt the presumption available against him under Section 278E of the Act. In the case of C.P Yogeshwara 2017 (1) TMI 1792 - KARNATAKA HIGH COURT this Court had quashed the proceedings initiated against the assessee for offence punishable under Section 276CC of Act of 1961 for the reason that the assessee had filed his returns as on the date of order of sanction by the Competent Authority which had gone unnoticed. Therefore the Department had erred in initiating proceedings. In the said case this Court has not taken notice of the presumption that was available under section 278E of the Act and therefore the order passed cannot be of any assistance to the petitioners more so in view of the judgment of the Hon ble Supreme Court in the case of Sasi Enterprises. 2014 (2) TMI 19 - SUPREME COURT Thus the petitions lack merit and they are liable to be dismissed with liberty to the petitioner to raise all such grounds before the learned Magistrate in support of his defence. Criminal petitions dismissed.
ISSUES PRESENTED and CONSIDERED
The primary issue considered by the Court was whether the initiation of criminal proceedings against the petitioner for the alleged offense under Section 276CC of the Income Tax Act was justified. Specifically, the Court examined whether the petitioner willfully failed to submit income tax returns in due time for the assessment years 2012-13 to 2015-16 and whether the presumption of culpable mental state under Section 278E of the Income Tax Act could be rebutted by the petitioner. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents Section 276CC of the Income Tax Act deals with the offense of willful failure to furnish returns of income within the prescribed time. The section prescribes penalties, including imprisonment, for such failure. Section 278E introduces a presumption of culpable mental state, placing the burden on the accused to prove the absence of such a mental state. The Court referenced precedents, including the Supreme Court's decisions in Sasi Enterprises and V.P. Punj, which emphasized the presumption of mens rea under Section 278E and the requirement for the accused to rebut this presumption beyond reasonable doubt. Court's Interpretation and Reasoning The Court interpreted Section 276CC as encompassing failures to comply with Section 139(1) or to respond to notices under Sections 142 or 148. The proviso to Section 276CC was noted to apply only to voluntary filings under Section 139(1). The Court highlighted that the payment of penalties for delayed filing does not preclude prosecution under Chapter 22 of the Income Tax Act. The Court emphasized that the presumption under Section 278E requires the accused to prove the absence of a willful default, shifting the burden of proof to the petitioner. Key Evidence and Findings The petitioner admitted to the delay in filing returns for the specified years and the payment of penalties. The respondent argued that the presumption under Section 278E had not been rebutted, and the petitioner had been given an opportunity to object to the sanction order, which was disposed of by a Speaking Order. The Court found no merit in the petitioner's claim of not being heard by the competent authority. Application of Law to Facts The Court applied the legal framework to the facts, determining that the presumption of culpable mental state under Section 278E was applicable. The petitioner had not provided sufficient evidence to rebut this presumption. The Court found that the petitioner's reliance on the case of C.P. Yogeshwara was misplaced, as that decision did not consider the presumption under Section 278E. Treatment of Competing Arguments The petitioner argued that the delay was not willful, citing personal circumstances and the payment of penalties. The respondent countered that the presumption of mens rea had not been rebutted and that the payment of penalties did not preclude criminal prosecution. The Court sided with the respondent, emphasizing the statutory presumption and the need for the petitioner to rebut it before the Magistrate. Conclusions The Court concluded that the petitions lacked merit, as the petitioner failed to rebut the presumption of culpable mental state. The Court dismissed the petitions, allowing the petitioner to raise defenses before the Magistrate. SIGNIFICANT HOLDINGS The Court held that the presumption of culpable mental state under Section 278E of the Income Tax Act requires the accused to prove the absence of such a state beyond reasonable doubt. The Court emphasized that the payment of penalties does not absolve the petitioner from criminal prosecution under Section 276CC. The Court also noted that the petitioner had been given an opportunity to object to the sanction order, which was duly considered by the competent authority. Core Principles Established The judgment reinforced the principle that the presumption of mens rea under Section 278E places the burden on the accused to disprove willful default in filing returns. The Court highlighted that penalties and criminal prosecution are distinct consequences under the Income Tax Act, and one does not negate the other. Final Determinations on Each Issue The Court determined that the initiation of criminal proceedings against the petitioner was justified, given the failure to rebut the presumption under Section 278E. The petitions were dismissed, with the petitioner allowed to present defenses before the Magistrate.
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