High Court Of Karnataka
K.E. Sunil Babu, Assistant Commissioner Of Income Tax vs. Steel Processors & Ors.
Sections 276C, 277, 278
Asst. Year 1986-87
K. Sreedhar Rao, J.
Criminal Appeal No. 1036 of 2000
1st June, 2006
Counsel Appeared : Jeevan J. Neeralgi, for the Appellant : P.V. Gunjal & V.S. Gunjal, for the Respondents
JUDGMENT
K. Sreedhar Rao, J. :
The account books of A1 to A3 disclosed a sum of Rs. 1,00,000 as loan from A4. Accordingly, the returns were filed by A1 to A3 for the assessment period 1986-87. The tax authorities conducted a search of the premises of A4 and found that there is no corresponding entry in the accounts of A4 to corroborate the loan of Rs. 1,00,000 to A1 to A3. A4 was not able to substantiate the source, hence he stated to the IT authority that the entry is a false entry relating to loan from A4 shown by A1 to A3. The IT authority accepted the version of A4. The IT authorities issued notice to A1 to A3 for submitting false return. A1 to A3 filed revised returns under s. 139(5) of the IT Act. The revised return is accepted. Accordingly, the tax liabilities have been recovered. Later on the Department launched prosecution of A1 to A4 for committing offence under ss. 276C, 277 r/w s. 278 of the IT Act.
2. The provisions of s. 139(5) read thus : “139(5) If any person, having furnished a return under sub-s. (1), or in pursuance of a notice issued under sub-s. (1) of s. 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.”
3. The provisions of ss. 276C, 277 and 278 read thus : “276C. Wilful attempt to evade tax, etc.—(1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable,— (i) in a case where the amount sought to be evaded exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine; (ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine. (2) If a person wilfully attempts in any manner whatsoever to evade the payment of any tax, penalty or interest under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and shall, in the discretion of the Court, also be liable to fine. 277. False statement in verification, etc.—If a person makes a statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable,— (i) in a case where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine. 278. Abetment of false return, etc.—If a person abets or induces in any manner another person to make and deliver an account or a statement or declaration relating to any income chargeable to tax which is false and which he either knows to be false or does not believe to be true or to commit an offence under sub-s. (1) of s. 276C, he shall be punishable,— (i) in a case where the amount of tax, penalty or interest which would have been evaded, if the declaration, account or
statement had been accepted as true, or which is wilfully attempted to be evaded, exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine; (ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine.”
4. The assessee is permitted to file a revised return if there is any bona fide mistake in the return filed. The assessing authority upon proof of the bona fide reasons can accept the revised return and pass necessary orders in accordance with law. The revised returns were accepted by the authorities. Yet the Department notwithstanding the acceptance of the revised returns under s. 139 (5) has launched prosecution against the accused for the offences under ss. 276C, 277 and 278.
5. The conscious and wilful attempt to evade tax is the primary ingredient of the offence under the above provisions. When once the IT authorities have accepted the revised returns under s. 139(5) it becomes explicit that the earlier return filed was a bona fide mistake and does not indicate any mens rea element. Therefore, after having accepted the revised return, it is impermissible for the IT authorities to launch prosecution under ss. 276C, 277 and 278 of the Act. In that view of the matter, the order of acquittal granted is sound and proper. The appeal is dismissed.
[Citation : 286 ITR 315]
