Offence U/S 276CC Income Tax Act Is Committed As Soon As There Is Assessee’s Failure In Furnishing Return Within Due Time: SC
The Supreme Court was deciding a Civil Appeal of an assessee, challenging the Judgment of the Gujarat High Court.
The Supreme Court observed that an offence under Section 276CC of the Income Tax Act, 1961 (ITA) is said to have been committed as soon as there is an assessee’s failure in furnishing the return of income within the due time.
The Court was deciding a Civil Appeal filed against the Judgment of the Gujarat High Court by which it rejected a Writ Petition and upheld the Order of the Chief Commissioner of Income Tax (CCIT).
The two-Judge Bench of Justice J.B. Pardiwala and Justice Sanjay Karol enunciated, “… an offence under Section 276CC could be said to have been committed as soon as there is a failure on the part of the assessee in furnishing the return of income within the due time as prescribed under Section 139(1) of the Act. Subsequent furnishing of the return of income by the assessee within the time limit prescribed under sub-section (4) of Section 139 or before prosecution is initiated does not have any bearing upon the fact that an offence under Section 276CC has been committed on the day immediately following the due date for furnishing return of income.”
The Bench agreed with the Appellant’s contention that the point in time when the offence under Section 276CC could be said to be committed is the day immediately following the due date prescribed for filing of return of income under Section 139(1) of the Act, and the actual date of filing of the return of income at a belated stage would not affect in any manner the determination of the date on which the offence under Section 276CC of the Act was committed.
Senior Advocate Tushar Hemani appeared for the Appellant while Advocate Monica Benjamin appeared for the Respondent.
Case Background
The Appellant was an individual earning income by way of salary and also by way of share of profit of partnership firm engaged in the business of chemicals. He filed his Income Tax Returns (ITRs) for the Assessment Years (AY) 2011-12 and 2013-14 respectively declaring his income to be Rs. 49,79,700/- and Rs. 31,87,420/- respectively. The due dates for the filing of ITRs were September 30, 2011 and October 31, 2013 respectively and as such there was delay on the part of the Appellant in filing the same for the said AYs. In 2014, a show cause notice was issued to the Appellant by the Commissioner of Income Tax (CIT) alleging violation of Section 276CC of ITA for the AY 2011-12.
The Application along with an Application for compounding the delay in filing ITR for two other years was allowed by the Respondent-CCIT. Thereafter, the Appellant received another show-cause notice as regards launching of prosecution under Section 276CC of ITA, issued by CIT. In 2017, the Respondent rejected the compounding application of the Appellant. This was challenged before the High Court and the Court rejected his Special Civil Application. Being aggrieved, he was before the Apex Court.
Reasoning
The Supreme Court in view of the facts and circumstances of the case, said, “In the case at hand, the compounding application for the AY 2011-12 was made on 11.11.2014 and thus would be governed by the 2008 guidelines. As the compounding application for the AY 2013-14 was preferred by the appellant on 19.03.2015, hence it would be governed by the 2014 guidelines. Since the present appeal is only concerned with the compounding application for the AY 2013-14, hence we are limiting our discussion to the 2014 guidelines.”
The Court reiterated that when Section 279(2) is read alongside the Explanation, it becomes clear that the Commissioner must follow the instructions given by the Board when exercising discretion under this Section.
“… it can be said without a cavil of doubt that both the offences under Section 276CC of the Act were committed prior to the date of issue of any show cause notice for prosecution”, it noted.
Furthermore, the Court took note of Paragraph 8 of the Guidelines for Compounding of Offence, 2014 which has defined a “first offence” in two different manners –
a. First, all those offences which are committed by the assessee prior to a formal intimation of his liability for being prosecuted by the Department are to be treated as “first offence” and it shall be open to the assessee to pray for the compounding of such offences subject to other requirements being fulfilled.
b. Second, any offence which is voluntarily disclosed by the assessee before its detection by the Department would also be treated as a “first offence”.
“Neither the filing of belated return of income by the assessee nor the making of an application for compounding of offence after a show cause notice has already been issued to the assessee fulfills this underlying idea of saving the Department from the inconvenience of detecting the offence”, observed the Court.
The Court emphasised that even after a belated return of income is filed, the Department is still required to process the return, identify the cases wherein offences have been committed, issue show cause notices to the defaulting assessees and thereafter prosecute the offenders to recover the dues and punish the offenders.
“A voluntary disclosure by the assessee before the stage of detection by the Department besides being economically viable also saves time and efforts on part of the Department and also ensures that the dues are recovered promptly”, it added.
The Court also remarked that when an assessee voluntarily discloses the commission of an offence, he cannot be said to have the intention of evading payment of taxes.
“A plain reading of the 2014 guidelines reveals that while it is mandatory that the eligibility conditions prescribed under Paragraph 7 are to be satisfied, the restrictions laid down in Paragraph 8 have to be read along with Paragraph 4 of the Act which provides that the exercise of discretion by the competent authority is to be guided by the facts and circumstances of each case, the conduct of the appellant and nature and magnitude of offence”, it noted.
The Court was of the opinion that the restrictions laid down in Paragraph 8 of the Guidelines are although required to be generally followed, the same do not exclude the possibility that in a peculiar case where the facts and circumstances so require, the competent authority cannot make an exception and allow the compounding application.
“… there is a clear shift in the policy of the Department when it comes to the compounding of offences under Section 276CC in particular and in making the compounding regime more flexible and liberal in particular. … The offence as alleged to have been committed by the appellant under Section 276CC of the Act for the AY 2013-14 is, without a doubt, covered by the expression “first offence” as defined under the 2014 guidelines and thus the compounding application preferred by the appellant could not have been rejected by Respondent no. 1 on this ground alone”, it concluded.
Accordingly, the Apex Court disposed of the Appeal, set aside the impugned Order, and stayed the proceedings pending before the Trial Court.
Cause Title- Vinubhai Mohanlal Dobaria v. Chief Commissioner of Income Tax (Neutral Citation: 2025 INSC 155)
Appearance:
Appellant: Senior Advocate Tushar Hemani, AOR Khushboo Aakash Sheth, Advocates Dharita Purvish Malkan, Alok Kumar, Kush Goel, and Suraj Pandey.
Respondent: AOR Raj Bahadur Yadav, Advocates Monica Benjamin, Udai Khanna, Shashank Bajpai, V C Bharathi, A K Kaul, and Prahlad Singh.
