Sub-section (1) requires a court, in any prosecution for an offence under the Act that needs a culpable mental state, to presume that the accused had that mental state, while allowing the accused the defence of proving that he had no such mental state with respect to the act charged. Sub-section (2) defines culpable mental state to include intention, motive, knowledge of a fact, and belief in or reason to believe a fact. Sub-section (3) fixes the standard for that defence: a fact is proved only when the court believes it to exist beyond reasonable doubt, and not merely when its existence is established on a preponderance of probability.
Why it is there
Proving what a taxpayer intended or knew is difficult for the prosecution, so the section shifts that element to the accused. Sub-section (3) makes the shift a real one by requiring the accused to displace the presumption to the criminal standard rather than the civil one.
Who it applies to
A person prosecuted for an offence under the Act requiring a culpable mental state
The court trying the prosecution
What this means in practice
In a prosecution under the Act where mental state is an ingredient, the prosecution does not have to prove intention, motive, knowledge or belief — the court starts by presuming it. The burden of showing the absence of that mental state is on the accused, and it must be discharged beyond reasonable doubt, not merely on the balance of probabilities. Because sub-section (2) sweeps in "reason to believe" alongside actual knowledge, the presumption covers more than deliberate intent.
An example
Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.
An individual is prosecuted for an offence under the Act that requires a culpable mental state. The prosecution does not have to prove that he intended anything: sub-section (1) requires the court to presume the mental state, and leaves it to him to prove that he had none with respect to the act charged. He leads evidence making it more likely than not that he acted on his accountant's advice — and that is where sub-section (3) bites, because a fact is proved only when the court believes it to exist beyond reasonable doubt and expressly not when its existence is established on a preponderance of probability, so the presumption survives. Sub-section (2) also makes the presumption wider than deliberate intent, sweeping in motive, knowledge of a fact and even reason to believe a fact.
Where you meet this section
Only in a criminal prosecution under the Act, before the court trying it — never in a return, notice, assessment or appeal. A taxpayer facing the equivalent question outside prosecution meets it in penalty proceedings under Chapter XXI instead, where this presumption does not apply.
The words themselves
a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability
Section 490(3), Income-tax Act, 2025.
What people get wrong
Assuming the accused only needs to raise a doubt. Sub-section (3) requires the fact relied on to be proved beyond reasonable doubt, expressly excluding the preponderance of probability standard.
Reading culpable mental state as intention alone. Sub-section (2) includes motive, knowledge of a fact, and belief in or reason to believe a fact.
Treating the presumption as conclusive. Sub-section (1) expressly preserves the defence of proving that the accused had no such mental state with respect to the act charged.
What this replaced
The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.
Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 490. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.
Sasi Enterprises v ACITSupreme CourtHelps departmenttagged s.278E The firm never filed its returns and the assessments were made under s.144. Can we get the s.276CC complaint discharged because the assessment was…
Dr. Manoj Khanna v ITOHigh CourtHelps departmenttagged s.278E You have now paid the TDS. Does that end the prosecution under s.276B?
ITO v MKY Constructions P LtdHigh CourtHelps taxpayertagged s.278E We paid the whole TDS default with interest before the complaint was filed. Can we still be prosecuted under s.276B?
Jai Singh Goel v CCITHigh CourtHelps taxpayertagged s.278E The Commissioner has refused to compound my s.276CC offence. Can I take that refusal to the High Court?
PCIT v Prabodh Kumar TiwariHigh CourtHelps taxpayertagged s.278E The department says the section 278E presumption means I must face the whole trial. Has any court actually held the presumption rebutted, and on what…
Vipul Aggarwal v ITOHigh CourtHelps taxpayertagged s.278E The sanction for prosecution names the company as the assessee. Can the complaint proceed against me as its director?
s.276CC: prosecution for not filing the returntagged s.278E A s.276CC notice has come for a year where the return went in late. What actually has to be shown, and does the proviso save me?
s.278E: the court presumes you meant ittagged s.278E The department says wilfulness is presumed under s.278E. Is that right, and what does it take to rebut?
What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.