Section 276C

Section 276C — the law in short

What the courts have decided on section 276C, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Vijay Krishnaswami v DDIT (Investigation) Supreme CourtHelps taxpayer
  The Settlement Commission accepted my disclosure. Can the department still prosecute me for evasion?
  No. Every order of settlement is conclusive under s.245-I, so where the Commission has recorded full and true disclosure the factual foundation for a wilful attempt to evade under s.276C(1) is gone and continuing the prosecution is an abuse of process. The prosecution was quashed and costs of Rs. 2,00,000 were imposed on the Revenue.
• Radheshyam Kejriwal v State of West Bengal Supreme CourtHelps taxpayer
  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?
  No, on these facts. The Supreme Court divided. Sathasivam J would have dismissed the appeal, holding that adjudication and prosecution under the Foreign Exchange Regulation Act are independent and that the adjudicating officer's exoneration is at most a point for the accused to urge before the Magistrate. Chandramauli Kr. Prasad J, with Bedi J, declined to subscribe to that view, so the majority allowed the appeal and the prosecution could not continue. The majority accepted that the two proceedings are independent and can run together, but treated it as a different question once the adjudication has ended in exoneration on the same allegation.
• Union of India v Dharmendra Textile Processors Supreme CourtHelps department
  Does the department have to prove you meant to conceal?
  No. Penalty under s.271(1)(c) is a civil liability enacted to remedy loss of revenue, and wilful concealment is not an essential ingredient. Prosecution under s.276C, which does need a mental element, stands on a different footing.
• K.C. Builders v ACIT Supreme CourtHelps taxpayer
  The Tribunal cancelled my concealment penalty. Can the 276C prosecution still continue?
  No. Penalty under s.271(1)(c) and prosecution under s.276C rest on the same fact — concealment. Once the Tribunal, as the final fact-finding authority, holds there was no concealment and cancels the penalty, the substratum of the complaint disappears and quashing follows automatically.
• Prem Dass v ITO Supreme CourtHelps taxpayer
  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?
  Yes. The Supreme Court set aside the conviction and acquitted the appellant. Section 276C needs a wilful attempt to evade, which is a positive act that must be proved, and section 277 needs mens rea - that the person knew or believed the verification to be false, or did not believe it true. Neither can be made out from the presumption in section 132(4A) about seized books. The Court also held that the Tribunal's finding that this was a difference of opinion on estimates, not concealment, and the reduction of the penalty, could not be lost sight of, given the legislative intent in section 279(1A).
• P. Jayappan v ITO Supreme CourtHelps department
  The complaint under s.276C and s.277 was filed while my reassessment is still running. Is it premature?
  No. There is no provision that bars a prosecution until reassessment proceedings are completed. The criminal court judges the case on the evidence before it, and an expectation of success in an appeal or reference does not stand in the way of the complaint being instituted.
• Saumya Chaurasia v Union of India High CourtHelps departmentNo later treatment found
  CBDT Circular 24/2019 says prosecution under s.276C(1) is to be launched only after the ITAT confirms the penalty. My appeal is still before the CIT(A). Can the sanction under s.279(1) be quashed on that ground?
  Not where the amount sought to be evaded exceeds Rs.25 lakh. On the Delhi High Court's reading of Circular No.24/2019 dated 09.09.2019 as clarified by Circular No.5/2020 dated 23.01.2020, the requirement of prior administrative approval of a collegium of two CCIT/DGIT rank officers, and the direction that prosecution be launched only after the ITAT confirms the penalty, are addressed to cases at or below the Rs.25 lakh threshold; above it the approval of the sanctioning authority, the Principal Commissioner, suffices and no pre-condition is attached. The challenge to Circular 5/2020 under Article 14 was rejected.
• Nirlon Ltd v Deputy Commissioner of Income Tax High CourtHelps taxpayerNo later treatment found
  They sanctioned prosecution and filed the complaint while my appeal was still pending before the Tribunal. Is the launch itself bad?
  The Bombay High Court held that it was, and quashed the complaint. The CBDT's own guidelines require a case under s.276C(1) to be processed for prosecution where the s.271(1)(c) penalty exceeding Rs 50,000 has been imposed AND confirmed by the Tribunal, and launching prosecution before that confirmation is contrary to instructions that bind the officers of the Revenue.
• Anurag Bagaria v Income Tax Department High CourtHelps taxpayerNo later treatment found
  After a search I filed revised returns giving up a capital gains claim and paid the tax. Can I still be prosecuted under s.276C(1) for wilful evasion?
  Not on those facts. The Karnataka High Court quashed the s.276C(1) prosecution, holding that a claim of deduction which the revenue does not accept is not by itself a wilful evasion of tax — an incorrect or erroneous claim can come from a wrong reading of the law. The department's special leave petition against that order was dismissed.
• S.P. Velayutham v ACIT High CourtHelps taxpayerHigh Courts differ
  I admitted the tax in my return but could not pay it. Can that be prosecuted as a wilful attempt to evade payment under s.276C(2)?
  No, not on default alone. The Madras High Court held that a prosecution under s.276C(2) for wilfully attempting to evade payment of tax cannot be launched against an assessee who has merely defaulted in paying tax on time; without mens rea there is no wilful attempt.
• Forzza Projects Private Limited v Principal Commissioner of Income Tax High CourtHelps taxpayer
  I filed my return but could not pay the self-assessment tax on time; I paid it later with interest in instalments. The Department has launched a prosecution under s.276C(2) and says s.278E presumes a culpable mental state. Is that right?
  On the Kerala High Court's view, no. A mere failure to pay the tax due, later paid with interest, is not a wilful attempt to evade the payment of tax within s.276C(2) where there is no concealment of a source of income, no false particulars and no circumstance created to enable evasion. And s.278E does not fill the gap: the presumption of a culpable mental state is a rule of evidence that comes into play only once the basic ingredients constituting the offence are disclosed, not to supply them.
• Karti P. Chidambaram v Deputy Director of Income Tax (Investigation) High CourtHelps taxpayerUnder appeal
  The Deputy Director (Investigation) has filed a complaint under s.276C(1) and s.277 based on material seized from third parties, with no assessment or reassessment order against me. Can that prosecution stand?
  On this judgment, no. Although the Deputy Director can launch a prosecution under s.279 and although P. Jayappan holds that a prosecution need not await the assessment, the Madras High Court held that this is so where the complaint rests on the assessee's own statements under s.132(4) and incriminating material seized from him; where the material is collected from third parties and the prosecution itself treats it as merely corroborative, the Department must wait for the Assessing Officer's finding, and a complaint launched in the meantime is premature. The revisions were allowed and the prosecution held not maintainable, with liberty to the Department to act after a finding under s.153.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.