Case Law:
Whether pendency of appellate proceedings relating to an assessment was a bar for initiation of prosecution proceedings under section 276CC of the Income Tax Act, 1961 (“I.T Act”) ?
The Hon’ble Supreme Court in the matter of Sasi Enterprises v/s. Assistant CIT has upheld the order passed by the Hon’ble Madras High Court. As Per section 276CC of the I.T Act, once a taxpayer has committed a default in filing a Return of income (ROI) by the due date, prosecution proceedings under section 276CC of the Act could be initiated, and pendency of appellate proceedings was no bar for initiation of the prosecution proceedings.
Facts of the Case
1. The taxpayer Sasi Enterprises, a registered partnership firm, did not file its ROI for Assessment Year (AY) 1991-92 and AY 1992-93 by the relevant due dates under section 139(1) of the Act, nor did it file a belated ROI under section 139(4) of the Act within the prescribed time limit.
2. A survey was conducted on the taxpayer, and consequently a notice under section 148 of the Act was served on the taxpayer directing it to file its ROI. The taxpayer still did not file its ROI in response to this notice. Therefore, the Tax Officer (TO) concluded a best judgement assessment under section 144 of the Act, and determined the tax demand for both the above AYs.
3. The partners in their individual ROIs for AY 1991-92 and 1992-93 had disclosed the fact that the accounts of the taxpayer were not finalised and its ROIs not filed.
4. Similarly, the two partners of the taxpayer-firm did not file their individual ROIs for AY 1993-94 under sections 139(1) and (4) of the Act or even in response to a notice under section 142(1)(i) of the Act, and, accordingly, the TO concluded a best judgement assessment under section 144 of the Act, and determined the tax demand for the said AY.
5. The taxpayer and its partners litigated the best judgement assessments and the matters were finally settled at the Income-tax Appellate Tribunal (Tribunal) in the years 2004 to 2008.
6. In the meantime, prosecution proceedings under section 276CC of the Act were initiated against the taxpayer and its partners in the year 1997, the continuance of which was upheld by the High Court.
7. Consequently, the taxpayer and its partners took up these matters before the Supreme Court.
Judgment
On the taxpayer’s primary contention that initiation of prosecution proceedings under section 276CC of the Act were ex facie without jurisdiction, the Supreme Court held that prosecution proceedings under section 276CC of Act may be initiated where an taxpayer had failed to file an ROI by the due date as required under sections 139(1), 142(1)(i) or 148 of the Act.
The language of section 276CC of the Act was clear once a taxpayer has committed a default in filing an ROI by the due date, prosecution proceedings under section 276CC of the Act could be initiated, and pendency of appellate proceedings was no bar for initiation of the prosecution proceedings.
Further, disclosure by the partners in their individual ROIs of the fact that the taxpayer was carrying on business and had income but had not filed its ROI pending finalisation of accounts did not obliterate the default in filing ROI so as to create a bar for initiation of prosecution proceedings under section 276CC of the Act. Section 276CC applies to situations where an assessee has failed to file a return of income as required under Section 139 of the Act or in response to notices issued to the assessee under Section 142 or Section 148 of the Act. The proviso to Section 276CC gives some relief to genuine assesses. The proviso to Section 276CC gives further time till the end of the assessment year to furnish return to avoid prosecution.
Conclusion
Benefit of proviso is available only to voluntary filing of return as required under Section 139(1) and would not apply after detection of the failure to file the return and after a notice under Section 142(1) (i) or 148 is issued calling for filing of the return of income and therefore, envisages the filing of even belated return before the detection or discovery of the failure and issuance of notices under Section 142 or 148. Offence under Section 276CC is attracted on failure to comply with the provisions of Section 139(1) or failure to respond to the notice issued under Section 142 or Section 148 of the Act within the time limit specified therein.
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