Broadly right. In any prosecution for an offence under the Act requiring a culpable mental state, the court shall presume that state exists; it is a defence for the accused to prove he had none. Sub-section (2) then sets the standard: a fact is proved only when the court believes it to exist beyond reasonable doubt, not on preponderance of probability. So the burden shifts, and it shifts at the criminal standard.
The section reads, as the department prints it: '(1) In any prosecution for any offence under this Act which requires a culpable mental state on the part of the accused, the court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution.' The Explanation says that culpable mental state 'includes intention, motive or knowledge of a fact or belief in, or reason to believe, a fact'. Sub-section (2) provides: 'For the purposes of this section, 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.'
Three consequences follow, and practitioners regularly get each of them wrong.
First, the presumption is not a presumption of guilt. It attaches only to the mental element. Every other ingredient of the offence still has to be proved by the prosecution in the ordinary way — that the return was not filed by the due date, that the entry was false, that the tax was deducted and not paid. An officer who says s.278E relieves him of proof generally is overstating it.
Second, the presumption operates from the start of the prosecution, not only after evidence is led. In Sasi Enterprises, held in this library, the Supreme Court applied it at the discharge stage: the accused could not obtain discharge by asserting that the failure was not wilful, because the court had to presume that it was, and the assertion did not displace the presumption. So a discharge petition built purely on the absence of mens rea will usually fail; the rebuttal belongs at trial.
Third, sub-section (2) raises the bar on the defence — the accused must satisfy the court beyond reasonable doubt that he had no such mental state, which is an unusual burden in a criminal trial. What discharges it, in practice, is documentary: books seized and not returned, a professional's advice on record, a bank's failure, an illness or a death, correspondence showing the assessee was chasing the very thing he is charged with not doing. Assertions and cross-examination alone rarely do.
The limits of the presumption are as important as its content. It does not convert a lawful act into an offence: if the conduct alleged is not a wilful attempt to evade within the meaning of the section, there is nothing for the presumption to operate on. That is why the Karnataka High Court in Anurag Bagaria, held here, could quash a s.276C(1) prosecution notwithstanding s.278E — the material showed a claim the revenue disliked, not an attempt to evade, and the presumption cannot supply the act. The same is true of the Madras High Court's reasoning on s.276C(2) in S.P. Velayutham: a default in payment is not an attempt to evade payment, and the presumption does not turn it into one.
Where the accused is a director rather than the assessee, s.278E works alongside s.278B, and the proviso to s.278B gives a further and separate defence — that the offence was committed without his knowledge or that he exercised all due diligence to prevent it.
It decides where the fight happens. Because the presumption operates from the outset and is only rebuttable at the criminal standard, the useful work is done by attacking the actus reus — no failure, no false entry, no attempt — and by assembling documentary proof of the absence of intent for trial, rather than by arguing mens rea at the discharge stage.
The Tribunal cancelled my concealment penalty. Can the 276C prosecution still continue?
The complaint under s.276C and s.277 was filed while my reassessment is still running. Is it premature?
I missed the due date but I did file the return under s.139(4) before the assessment. Doesn't that mean I filed 'in due time' and cannot be prosecuted under s.276CC?
The Tribunal cancelled my concealment penalty, but the prosecution under section 276C is still running. Does the penalty finding help me in the criminal court?
My penalty proceedings were dropped and a refund was ordered, but the section 276CC prosecution is still running. Is there Supreme Court authority to have it quashed?
The department dropped the penalty proceedings against me after finding the charge not made out. Can it still run the criminal prosecution on exactly the same allegation?
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 still being fought?
Does the department have to prove you meant to conceal?
Every page in this library links to what it was written from, so you can check it rather than take our word for it.
