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If you have not filed your return at all or by the end of the assessment year, be prepared to get handcuffed because the Income Tax Department can slap you a notice of prosecution u/s.276CC of the Act which provides for a rigorous imprisonment upto 7 years and with fine.

As per the provisions of sec 139(1) of The Income Tax Act, 1961, any person under the Act, whose total income for the previous year exceeds the maximum amount which is not chargeable to tax, is required to file Return of Income, within the prescribed statutory due date relevant for the assessment year which is Jul 31 or Sep 30 of the said assessment year, as the case may be.

Many a times, assesses having taxable income during the previous year, avoid timely filing of return of income, which may be either on genuine grounds or may be willingly to refrain from the payment of income tax and thus engages self in evasion of the tax liability.

Prosecution u/s.276CC for non-filing of ITR

Is Interest u/s 234A only penalty to be paid for late filing of ITR?

For a layman, the penalty imposed under the Act for late filing of return is mainly, the Interest u/s 234A of the Act, wherein if an assessee does not submit the return in time, is liable to pay simple interest @1% per month. However, the Act also provides for levy of financial penalty and prosecution proceedings in case of late filing of income tax return.

What if Penalty u/s 271F?

If the assessee fails to furnish return of income as mandated u/s 139(1) and proviso to the same by the end of the relevant assessment year, the Assessing Officer could impose financial penalty of Rs.5,000/- on the assessee for contravening the provisions of the Act.

Provisions for Prosecution Proceedings u/s 276CC

The main crux of this article is to bring to the knowledge of the defaulters, the provisions of section 276CC of the Act, which lays down the parameters, for initiating harsh and draconian prosecution proceedings against the defaulting assessee, punishment under which is extended upto imprisonment along with levy of fine.

Sec 276CC

“If a person willfully fails to furnish in due time [the return of fringe benefits which he is required to furnish under sub-section (1) of section 115WD or by notice given under sub-section (2) of the said section or section 115WH or] the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under [clause (i) of sub-section (1) of section 142] or section 148 [or section 153A], he shall be punishable,—

(i) in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds twenty five hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine;

(ii) in any other case, with imprisonment for a term which shall not be less than three months but which may extend to three years and with fine”

When can prosecution u/s 276CC be initiated?

From the bare reading of the provision itself it could be held that the main crux of this provision is to penalize the assessee defaulting in furnishing timely return of income, where such default is willful and deliberate, without any regards to the amount of tax so evaded by way of non-filing of ITR.

Which elements substantiate the validity of imposing the penal provisions u/s 276CC?

Thus, the simultaneous presence of the following two elements constitute the validity of prosecution proceedings u/s 276CC;

(1) Willful delay in furnishing return of income

(2) Intention of the assessee to evade tax

Is willful delay in filing return of income mandatory?

There is no ambiguity in the provisions of sec 276CC which speaks of willful and deliberate intention on part of the assessee, not to offer any income and to shun self from any liability under the Act.

Thus, while initiating the prosecution proceedings under this section, it is mandatory on the part of the Income Tax Department to pass a speaking order of prosecution clearly establishing the will / intention on part of the assessee to evade tax by way of non-filing of ITR.

How the intention of the assessee to avoid timely filing of return and payment of taxes to be proved?

The willful intention on part of the assessee to contravene the provisions must be substantiated with convincing, sound and reliable evidences, corroborating the fact that there failed to exist any ground, which could be held genuine in late furnishing of ITR and establishing innocence on part of the assessee, of his intention to evade taxes.

It is required to consider the judgment as given by Hon’ble High Court of Madhya Pradesh in case of Bhavecha Machinery v/s Union Of India [2010] 320 ITR 263 (MP), which specifies the parameters for initiating prosecution proceedings under this section, which reads as:

“It is not merely failure to file the return in time, which constitutes the offence under section 276CC. The failure to file the return in time must be proved by clear, cogent and reliable evidence to be ‘willful’ and there should be no plausible doubt of its being ‘willful’. It must be intentional, deliberate, calculated and conscious with full knowledge of the legal consequences flowing from them”

Can Assessing Officer initiate the prosecution proceedings solely on the basis of his presumption?

Mere presumption on part of the Assessing Officer, without the existence of any evidence, information, documents, attesting the desire of the assessee to evade taxes, cannot be held as valid reason for initiating the prosecution proceedings under this section.

What if the delay resulted on the basis of the situation which was beyond the control of the assessee?

Section 276CC does not speak of any delay in filing return of income, where such delay is coupled with a situation, which ought to be beyond the control of the assessee and the occurrence of such event, rendered complete inability on part of the assessee to file ITR within prescribed due date. In such a scenario, no prosecution proceedings could be initiated against the assessee, as it was not the intention / of the assessee to avoid payment of taxes by non-filing of ITR.

Reliance could be placed on the decision of Hon’ble High Court of Patna as held in the case of Lal Saraf v/s State of Bihar [1999] 235 ITR 116 (PAT.). wherein the High Court observed that;

“Section 276CC, read with section 139 of the Income-tax Act, 1961 – Offences and prosecution – Failure to furnish return of income – Assessment year 1982-83 - Whether where books of account of assessee were lying seized with income tax authorities and permission to take extracts of same were given by authorities after expiry of due date for filing return failure to file return by due date could not be said to be willful on part of assessee and, therefore, prosecution launched against him under section 276CC was liable to be quashed – Held, yes”

In the above case, the High Court correctly appreciated the fact that it was not the intention of the assessee not to file return of income, but due to non-availability of books of accounts which are inevitable for offering the income, before a reasonable time period from the due date of offering return of income, the assessee failed to furnish return of income and no prosecution proceedings for such non-deliberate failure could be initiated under sec 276CC.

Mere delay in filing return but no Intention on part of the assessee to evade taxes could be held as valid ground for imposing penalty u/s 276CC?

The second parameter to initiate the prosecution proceedings u/s 276CC is the existence of the intention of the assessee to evade the payment of taxes.

The penalty has been determined considering the evasion of the taxes undertaken by the assessee by way of non-filing of ITR. Thus, if the assessee fails to timely furnish ITR, but later on subsequently, suo moto offers income for charging to tax and makes the payment of tax liability alongwith the necessary amount of penalty interest as provided under the Act, for non-furnishing the return of income, it could not be inferred that it was the contention of the assessee to avoid the payment of taxes and thus, no penal provisions could be imposed upon the assessee.

As held by High Court of Andhra Pradesh, in the case of ITO v/s Autofil, [1990] 52 TAXMAN 343 (AP), that in absence of mens rea, a bad motive  and guilty mind on part of the assessee to evade the taxes, no prosecution could be initiated u/s 276CC.

The relevant extract of the said judgment can be read as under:

“In the instant case, there was no dispute that advance tax was paid and, thus, there was no evasion in payment of tax. Further, the assessee had paid penalty for delayed filing of return apart from penal interest on the differential amount between the tax assessed and the tax paid. Conviction under section 276CC is an extreme and exceptional resort and gets warranted only when willfulness in failure to submit the return in time is established beyond all reasonable doubts and there should be present mens rea, a bad motive and guilty mind. In the absence of this, no conviction shall follow the prosecution under section 276CC. In the instant case, there was a clear explanation given by the partners that they were not conversant with the preparation of profit and loss account and the balance sheet and that their clerk happened to fall ill. Even if for any reason the explanation did not receive acceptance, the conduct of the assessee in paying the advance tax, the penal interest and penalty and want of mens rea absolved it from criminal liability. The department's appeal was, accordingly, dismissed.”


"No penalty could be imposed upon the assessee under this section, provided the assessee fails to furnish the return u/ s 115WD (1) or u/s 139(1) for the assessment year commencing:

(i) Prior to the 1st day of April, 1975;

(ii) After the 1st day of April 1975 if:

(a) Return of income has been filed before the expiry of assessment year

(b) Amount of Tax Payable determined on regular assessment, a reduced by the amount of Advance Tax paid and TDS deducted, does not exceed Rs.3,000/-"

So far, the instances of prosecution have not been observed to be opted for by the Income Tax Department, however, that in no manner could mean that the Income Tax Department shall not go for prosecution in the future as well. It is strongly advised to file the return of income within the statutory due date or latest by the end of the assessment year to rest all possibilities of invocation of provisions of section 276CC of the Act.


Published by

KCJM and Associates
(Chartered Accountants Firm)
Category Income Tax   Report

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