The Tribunal has found that my firm was genuine. The department is still prosecuting me for filing false returns on the footing that it was not. Can the Supreme Court stop that?
Yes. On a finding by the Income-tax Appellate Tribunal that, on an appraisal of the entire material on record, the disputed person was a partner of the assessee firm and the firm was a genuine firm, the Supreme Court said it did not see how the assessee could be prosecuted for filing false returns, and quashed the prosecution.
Decided by the Supreme Court (Y.V. Chandrachud CJ, V.D. Tulzapurkar J and A.P. Sen J) on 1979-03-05, reported as [1982] 133 ITR 909 (SC); (1982) 2 SCC 543. It bears on section 277 of the Income Tax Act 1961, in Prosecution and Evidence & Burden of Proof matters.
This is the earliest and shortest statement of a principle that still decides cases: a conclusive finding of fact by the Tribunal in the assessee's favour, on the very matter alleged to be false, knocks the foundation out of a prosecution for a false return. Its value is as the fountainhead — later authority did the work of explaining when it applies and when it does not. The qualification matters as much as the rule. A prosecution is not automatically suspended or displaced by an assessment or appeal going the assessee's way on some other point, or on a technicality, or where the appellate authority never decided the allegation that founds the complaint. The reader should treat this decision as establishing the principle and then look to the later cases for its boundaries: K.C. Builders v. ACIT and P. Jayappan v. ITO in the library, and the Delhi High Court's 2025 application of the same principle in Anurag Dalmia v. Income Tax Office, where the Tribunal had held the alleged foreign accounts not established and the penalty had been cancelled. Be candid with a client about the size of this judgment: it is two paragraphs, it names no section, and it records almost no facts, so it will rarely carry an argument on its own.
Binding on every court and authority in India.
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The facts appear only from the single operative sentence of the judgment. The assessee was a firm whose genuineness had been in issue, one Shrimati Janak Rani being said not to be a partner. The Income-tax Appellate Tribunal recorded a finding that, on the appraisal of the entire material on the record, it was clear that Shrimati Janak Rani was a partner of the assessee firm and that the firm was a genuine firm. Notwithstanding that finding a prosecution for filing false returns was on foot against the assessee. The Court heard counsel, granted special leave and allowed the appeal in the same order. No further facts, no procedural history and no arguments are recorded in the report.
Special leave was granted, the appeal was allowed and the prosecution was quashed, with no order as to costs. In view of the Tribunal's finding that the firm was genuine and that the disputed person was a partner, the Court did not see how the assessee could be prosecuted for filing false returns.
The Court gave no reasoning beyond the single sentence in which it stated its conclusion. It rested entirely on the Tribunal's finding of fact — recorded, as the Court noted, on the appraisal of the entire material on the record — that Shrimati Janak Rani was a partner of the assessee firm and that the firm was genuine, and treated that finding as leaving no room for a prosecution founded on the returns being false.
In view of the finding recorded by the Income-tax Appellate Tribunal that it was clear on the appraisal of the entire material on the record that Shrimati Janak Rani was a partner of the assessee firm and that the firm was a genuine firm, we do not see how the assessee can be prosecuted for filing false returns.
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Handle my notice → Ask a CA on WhatsAppYes. On a finding by the Income-tax Appellate Tribunal that, on an appraisal of the entire material on record, the disputed person was a partner of the assessee firm and the firm was a genuine firm, the Supreme Court said it did not see how the assessee could be prosecuted for filing false returns, and quashed the prosecution. This was decided by the Supreme Court (Y.V. Chandrachud CJ, V.D. Tulzapurkar J and A.P. Sen J) and bears on section 277 of the Income Tax Act 1961. It is reported as [1982] 133 ITR 909 (SC); (1982) 2 SCC 543. This is the earliest and shortest statement of a principle that still decides cases: a conclusive finding of fact by the Tribunal in the assessee's favour, on the very matter alleged to be false, knocks the foundation out of a prosecution for a false return. Its value is as the fountainhead — later authority did the work of explaining when it applies and when it does not. The qualification matters as much as the rule. A prosecution is not automatically suspended or displaced by an assessment or appeal going the assessee's way on some other point, or on a technicality, or where the appellate authority never decided the allegation that founds the complaint. The reader should treat this decision as establishing the principle and then look to the later cases for its boundaries: K.C. Builders v. ACIT and P. Jayappan v. ITO in the library, and the Delhi High Court's 2025 application of the same principle in Anurag Dalmia v. Income Tax Office, where the Tribunal had held the alleged foreign accounts not established and the penalty had been cancelled. Be candid with a client about the size of this judgment: it is two paragraphs, it names no section, and it records almost no facts, so it will rarely carry an argument on its own. If it applies to you, the first step is this: Identify the precise factual allegation in the complaint and then find the appellate finding that contradicts it; the two must be about the same thing.
The facts appear only from the single operative sentence of the judgment. The assessee was a firm whose genuineness had been in issue, one Shrimati Janak Rani being said not to be a partner. The Income-tax Appellate Tribunal recorded a finding that, on the appraisal of the entire material on the record, it was clear that Shrimati Janak Rani was a partner of the assessee firm and that the firm was a genuine firm. Notwithstanding that finding a prosecution for filing false returns was on foot against the assessee. The Court heard counsel, granted special leave and allowed the appeal in the same order. No further facts, no procedural history and no arguments are recorded in the report. The matter was decided on 1979-03-05 by the Supreme Court (Y.V. Chandrachud CJ, V.D. Tulzapurkar J and A.P. Sen J). On those facts the Supreme Court held as follows. Special leave was granted, the appeal was allowed and the prosecution was quashed, with no order as to costs. In view of the Tribunal's finding that the firm was genuine and that the disputed person was a partner, the Court did not see how the assessee could be prosecuted for filing false returns.
The Court gave no reasoning beyond the single sentence in which it stated its conclusion. It rested entirely on the Tribunal's finding of fact — recorded, as the Court noted, on the appraisal of the entire material on the record — that Shrimati Janak Rani was a partner of the assessee firm and that the firm was genuine, and treated that finding as leaving no room for a prosecution founded on the returns being false. In the words reproduced by the source cited on this page: "In view of the finding recorded by the Income-tax Appellate Tribunal that it was clear on the appraisal of the entire material on the record that Shrimati Janak Rani was a partner of the assessee firm and that the firm was a genuine firm, we do not see how the assessee can be prosecuted for filing false returns."
It was decided by the Supreme Court on 1979-03-05 and is reported as [1982] 133 ITR 909 (SC); (1982) 2 SCC 543. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 277, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. Special leave was granted, the appeal was allowed and the prosecution was quashed, with no order as to costs. In view of the Tribunal's finding that the firm was genuine and that the disputed person was a partner, the Court did not see how the assessee could be prosecuted for filing false returns. It arises in Prosecution and Evidence & Burden of Proof matters, on section 277 of the Income Tax Act 1961, and was decided by Y.V. Chandrachud CJ, V.D. Tulzapurkar J and A.P. Sen J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Check that the finding is one recorded on an appraisal of the material on record and not a conclusion on limitation, jurisdiction or another technical ground. Where the finding is squarely against the complaint, move to quash rather than defending at trial, and put the Tribunal's order at the front of the petition. Cite this decision for the principle but argue the case on the later authorities, which contain the reasoning a court will want. If the assessment or penalty appeal is still pending, understand that the prosecution is not automatically stayed by it; this decision speaks to a finding already recorded.
Validity check could not be completed. Validity check could not be completed, and this must not be read as a clean statement of current law. I attempted to read P. Jayappan v. S.K. Perumal (Supreme Court, 17 August 1984) at indiankanoon /doc/812449/ specifically to see how it treats this decision, and the document returned HTTP 403 on two attempts; the check therefore was not done. Both P. Jayappan and K.C. Builders v. ACIT, which are the two decisions that define the limits of this principle, are already in the library and neither was read in this pass. What was read is the Delhi High Court's judgment in Anurag Dalmia v. Income Tax Office (21 July 2025), which applies the same principle through K.C. Builders and G.L. Didwania and records the qualification, drawn from P. Jayappan and Radheshyam Kejriwal, that an adjudication in favour of the assessee aids the defence only where all the issues raised in the complaint are discussed and decided on merits. Treat this entry as the origin of the rule and the later cases as its statement. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The report is two paragraphs long and the reader should be told so. It names no section of the Income-tax Act; 'prosecuted for filing false returns' has been taken to correspond to s.277, but the judgment does not cite it, and the sections field reflects that inference rather than the text. It records no facts beyond the Tribunal's finding, no arguments, and no reasoning; special leave was granted and the appeal allowed in the same order. There is a genuine date conflict which has not been resolved: the indiankanoon header dates the judgment 5 March 1979, while the equivalent citations given on the same page are [1982] 133 ITR 909 (SC) and (1982) 2 SCC 543. decided_on records the date on the report that was read. A later pass should settle the date against the Supreme Court's own record. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Special leave was granted, the appeal was allowed and the prosecution was quashed, with no order as to costs. In view of the Tribunal's finding that the firm was genuine and that the disputed person was a partner, the Court did not see how the assessee could be prosecuted for filing false returns.
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