2006 (6) TMI 85 - HC - Income Tax

Order of acquittal - submission of false return - revised return - Yet the Department notwithstanding the acceptance of the revised returns under section 139(5) has launched prosecution against the accused for the offences under sections 276C, 277 and 278 - When once the income-tax authorities have accepted the revised returns under section 139(5) it becomes explicit that the earlier return filed was a bona fide mistake and does not indicate any mens rea element. Therefore, after having accepted the revised return, it is impermissible for the income-tax authorities to launch prosecution under sections 276C, 277 and 278 - In that view of the matter, the order of acquittal granted is sound and proper. The revenue s appeal is dismissed.

Summary

Issues:
Prosecution for filing false return under Income-tax Act despite acceptance of revised returns under section 139(5).

Analysis:
The case involved a situation where A1 to A3 had shown a loan of Rs. 1,00,000 from A4 in their account books and filed returns for the assessment period 1986-87. However, upon conducting a search, the tax authorities found no corresponding entry in A4's accounts to support this loan. A4 admitted to the income-tax authority that the entry was false. Subsequently, A1 to A3 filed revised returns under section 139(5) of the Income-tax Act, which were accepted, and the tax liabilities were settled. Despite this, the Department initiated prosecution against A1 to A4 under sections 276C, 277, and 278 of the Act.

The provisions of section 139(5) allow a person to file a revised return upon discovering any omission or wrong statement in the original return. The assessing authority can accept the revised return if there are genuine reasons provided. In this case, the revised returns filed by A1 to A3 were accepted by the authorities, indicating that the initial filing was a bona fide mistake without any intention to evade tax. The acceptance of the revised returns under section 139(5) signifies the absence of mens rea, i.e., a conscious and wilful attempt to evade tax.

The primary element for the offences under sections 276C, 277, and 278 is the intentional evasion of tax. Since the income-tax authorities had acknowledged the revised returns as genuine mistakes and accepted them, it was held that there was no basis for prosecution under the mentioned sections. The judgment emphasized that once revised returns are accepted, it is impermissible for the authorities to pursue prosecution for the same offence.

Therefore, the court concluded that the order of acquittal was appropriate, as the acceptance of revised returns under section 139(5) indicated the absence of any deliberate attempt to evade tax. Consequently, the appeal was dismissed, affirming the decision that prosecution after accepting revised returns was unwarranted under the circumstances.