Prosecution under section 276B

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Yogesh Kumar (Querist)
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13 January 2011 In the income tax return we claim the income as agricultural income but in the assessment AO deny the such exemption and taxed the whole income and also issue a show cause notice under section 276B, 277 & 278 (i.e. prosecution proceedings)

Now the question is
whether AO action is justified?

if no what are the arguments that we can make and if possible mention some case laws also?

Please don't answer like AO is justified
IT REALY URGENT..

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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14 January 2011 The assessing officer has power to invoke those sections. But as far as section 277 is concerned, the department has to unconditionally establish that the assessee has harboured mens rea to sustain prosecution. J.M Shah Vs. ITO (1996) 218 ITR 38 (Mad) may be referred. Also the department should convincingly establish that the accused knew that the return made was false to his knowledge otherwise prosecution will fail as per judgement of MP high court in the case of ITO V. Kaluram (1985) 156 ITR 748.

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Yogesh Kumar

Yogesh Kumar (Querist)
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14 January 2011 thanks for your reply.
but i didn't find the case laws u mention, so can you please send me the links.

can you also refer some arguments that we can make in the reply to notice?

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