Section 277

Section 277 — the law in short

What the courts have decided on section 277, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• 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.
• Uttam Chand v ITO Supreme CourtHelps taxpayerValidity unconfirmed
  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.
• Sashi Bhusan Prasad Bhuian v State of Jharkhand High CourtHelps departmentValidity unconfirmed
  My clerk filed the return and I am illiterate. Is that a defence to a 277 prosecution?
  No. Under s.278E the court must presume a culpable mental state and it is for the accused to prove he had none. Pleading illiteracy or blaming an office clerk does not discharge that burden, and a conviction and six-month sentence for a refund claim built on a forged TDS certificate and a non-existent housing loan were upheld.
• Anurag Dalmia v Income Tax Office High CourtHelps taxpayerValidity unconfirmed
  The Tribunal has deleted the additions and the penalty has been cancelled. The criminal complaint is still pending on exactly the same allegations. Does it survive?
  No, where the complaint rests on the same material. The Delhi High Court quashed complaints under s.276C(1)(i), s.277(1) and s.276D, holding that once the Tribunal had set aside the additions on merits and the penalty had been cancelled, no offence survived and quashing of the prosecution followed automatically. It also held that the presumption of a guilty mind under s.278E arises only if a prima facie case is disclosed in the complaint.
• Nirlon Ltd v Deputy Commissioner of Income Tax High CourtHelps taxpayerValidity unconfirmed
  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.
• Vishwanath C. Tarali v State of Karnataka High CourtHelps taxpayerValidity unconfirmed
  The Income-tax Officer lodged a police complaint about false returns claiming refunds, the police filed a charge-sheet, and the Magistrate took cognizance of IPC offences. Can that be done without sanction under s.279 and a complaint by an authorised authority?
  No, on this decision. Reading s.279 with s.280B together, an offence under Chapter XXII can be taken cognizance of only on a complaint made by an authority authorised in that behalf under the Act, after the previous sanction of the competent authority. A Magistrate cannot take cognizance on the basis of a final report submitted by the police, and cognizance so taken is without authority of law, so that continuation of the proceeding is an abuse of process.
• 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.
• Manian Transports v S. Krishna Moorthy, Income-Tax Officer High CourtCuts both waysValidity unconfirmed
  I filed revised returns voluntarily after the officer raised a query, they were accepted, and the reassessments were completed on that basis. Does that end the s.277 prosecution for the original returns?
  Not at the quashing stage. The Madras High Court held that the argument that the revised returns were filed after a discussion with the Income-tax Officer and were accepted, so no prosecution would arise, 'has to be necessarily negatived at this stage, for it will relate to the realm of appreciation of evidence to be brought on record'. It also held that s.277 is independent and not interlinked with s.276C, so the s.277 prosecution of the person who made the verification survives even where the s.276C charge falls away.

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.