s.276CC punishes a wilful failure to furnish the return in due time under s.139(1) or in answer to a notice under s.142(1)(i), s.148 or s.153A. The punishment was rewritten by the Finance Act 2026: for an offence committed on or after 1 March 2026 it is simple imprisonment, there is no minimum sentence, and the maximum is graded on the tax that would have been evaded - up to two years above Rs 50 lakh, up to six months between Rs 10 lakh and Rs 50 lakh, and fine only below that. The proviso keeps a person out of the section in two situations only: the return was furnished before the expiry of the assessment year, or the tax payable on the total income determined on regular assessment, as reduced by the prepaid taxes, does not exceed ten thousand rupees. Wilfulness is presumed by s.278E, and that presumption has now been held rebutted on documentary material.
The section punishes a person who 'wilfully fails to furnish in due time' the return of income 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.
**The punishment has been rewritten, and the old slabs are gone.** The structure practitioners have used for over a decade - rigorous imprisonment of not less than six months extending to seven years where the tax that would have been evaded exceeds twenty-five lakh rupees, and imprisonment of not less than three months extending to two years in any other case - was repealed by the Finance Act 2026, which rewrote the whole of Chapter XXII. In s.276CC of the 1961 Act the substitution takes effect from 1 March 2026, and in the successor provision, s.479 of the Income-tax Act 2025, from 1 April 2026. Three things changed together. Rigorous imprisonment is replaced by simple imprisonment throughout the Chapter. Every minimum sentence is gone. And the punishment is graded on the amount of tax that would have been evaded: where it exceeds fifty lakh rupees, simple imprisonment up to two years or fine or both; where it exceeds ten lakh rupees but not fifty lakh, simple imprisonment up to six months or fine or both; and in any other case, fine only. So the first thing to fix on a show cause notice is the date the offence was committed, because an offence committed before commencement carries the old structure and one committed on or after it carries the new. No slab now carries a sentence above two years.
**'In due time'.** The expression refers to the period prescribed by s.139(1), not to the extended window in s.139(4) - so a belated return does not undo the offence, which is complete the day after the due date passes. That is settled at the level of the Supreme Court and this library carries it at the entry on Vinubhai Mohanlal Dobaria, which also matters for compounding because it fixes the date on which each year's offence is committed. The Delhi High Court has since applied the same reasoning to the s.153A limb: the offence crystallises on expiry of the period the notice allowed, irrespective of subsequent compliance.
**The proviso, and the figure.** The proviso is the real protection, and it is a computation rather than a plea. A person shall not be proceeded against under the section for failure to furnish the return under s.139(1) if the return is furnished before the expiry of the assessment year, or the tax payable on the total income determined on regular assessment, as reduced by the prepaid taxes, does not exceed the figure in limb (b). That figure is ten thousand rupees, not three thousand: the Finance (No. 2) Act 2019 raised it with effect from assessment year 2020-21 and added self-assessment tax paid before the end of the assessment year and tax collected at source to the credits that come off, and the Madras High Court quotes the proviso in those terms - 'does not exceed ten thousand Rupees'. A departmental section page still printing three thousand rupees is a stale snapshot. The library's separate note on the proviso works the computation year by year.
Two further points on the proviso. Limb (a) is absolute and easy to apply: a return for AY 2024-25 filed on or before 31 March 2025 is outside the section, however late it is against the s.139(1) date. Limb (b) is measured on the total income determined on regular assessment, not on the returned income, which is why the Supreme Court in Sasi Enterprises, held here, said the pendency of the assessment does not make the prosecution premature: the assessment supplies the measure. And the proviso protects only against a failure to furnish the return under s.139(1); a failure to answer a notice under s.142(1)(i) or s.148 is not within it.
**On wilfulness, s.278E does the work for the prosecution - but it is rebuttable in fact.** The court presumes the culpable mental state and it is for the accused to prove he had none, to the s.278E(2) standard of beyond reasonable doubt. In Sasi Enterprises the Court applied that at the discharge stage: a partner's statement in his own return that the firm's accounts were unfinalised did not absolve the firm, and the presumption was not displaced by the assertion. The presumption has now been held displaced on evidence. In Principal CIT v. Prabodh Kumar Tiwari [2025] 176 taxmann.com 831/[2026] 485 ITR 196 (Delhi), 9 July 2025, the Delhi High Court held at para 25 that the presumption stood rebutted, on material that was entirely documentary and contemporaneous: the assessee had written asking for copies of the documents seized in the search so that he could prepare the returns called for by the s.153A notice, those documents were supplied only after the compliance period had expired, he had been appearing before the Assessing Officer, and the group was under CBI investigation (para 23). Late filing was read as evidence of bona fide intent to comply rather than as an aggravating fact (para 24).
**Two procedural checks are worth as much as the merits.** First, sanction: no person may be proceeded against for these offences except at the instance of the authority named in s.279(1), and a sanction naming the company does not support a complaint against a director - the Delhi High Court in Vipul Aggarwal, held here. A Madras Bench has gone further and held a prosecution bad where the complaint was filed by an officer other than the one who was the Assessing Officer, with no order of transfer under s.127 and no intimation under s.129, so that the sanction was given without application of mind to jurisdiction. Second, compounding under s.279(2), now governed by the Board's guidelines of 17 October 2024, which the library carries separately.
The offence is committed by the passage of a date, which makes it the easiest prosecution for the department to launch and the hardest to argue about on the facts. The defences that work are the ones built on documents: the date the return went in, the computation under the proviso, and the sanction order.
I paid advance tax for the year but had not filed my return when the search took place. Can the department still call that income undisclosed?
The only thing behind my reopening notice is the Valuation Officer's report. Is that enough?
My return was only processed under 143(1). Does that stop the department reopening it later?
The order under section 148A(d) rejects everything I said and the section 148 notice has followed. Can I take it straight to the High Court?
I made unexplained investments after the close of my accounting year. Which year can the officer tax them in, and can he reopen an earlier year to do it?
My land was notified and an award was made under the Land Acquisition Act, but I thought the award was too low, negotiated a higher figure and executed a sale deed. The Assessing Officer now says that was a voluntary sale and denies s.10(37). Is he right?
How much am I actually required to disclose — and can they reopen because the officer drew the wrong conclusion?
The sanctioning authority just wrote 'yes' and signed. Is that a sanction?
Every page in this library links to what it was written from, so you can check it rather than take our word for it.
