Facts of the Case

The Revenue filed multiple criminal leave petitions under Sections 378(2)(b) and 378(3) of the Code of Criminal Procedure challenging a common order of acquittal passed by the Appellate Court in respect of Assessment Years 2005–06 to 2011–12. A search under Section 132 of the Income-tax Act, 1961 was conducted in March 2011 in the Mahuaa Media Group, where the respondent, Prabodh Kumar Tiwari, was a director. Consequent to the search, notices under Section 153A were issued on 03.01.2012 requiring the respondent to file returns within 20 days.

The respondent failed to file returns within the stipulated time, leading to issuance of show cause notices under Section 276CC and initiation of criminal prosecution. The respondent ultimately filed returns belatedly on 24.01.2013. Parallel penalty proceedings under Section 271(1)(b) for non-compliance with notices under Section 142(1) were initiated, which were later set aside by the Commissioner of Income Tax (Appeals). The Trial Court convicted the respondent under Section 276CC; however, the Appellate Court set aside the conviction and acquitted the respondent.

Issues Involved

Whether prosecution under Section 276CC could be sustained solely on failure to file returns pursuant to a notice under Section 153A despite subsequent filing, whether quashing of penalty under Section 271(1)(b) automatically nullified prosecution under Section 276CC, and whether the element of wilful default and mens rea stood established to justify criminal conviction.

Petitioner’s Arguments

The Revenue contended that prosecution under Section 276CC is independent of penalty proceedings under Section 271(1)(b), and that failure to file returns pursuant to Section 153A constitutes a complete offence irrespective of subsequent compliance. It was argued that the Appellate Court erred in relying on the quashing of penalty proceedings and misapplied the Supreme Court decision in K.C. Builders. The Revenue further relied on Vinubhai Mohanlal Dobaria to assert that the offence under Section 276CC is complete upon default and does not get obliterated by later compliance.

Respondent’s Arguments

The respondent submitted that Section 276CC criminalises only wilful failure to file returns and that mens rea is an essential ingredient. It was contended that the findings of the Commissioner of Income Tax (Appeals) in penalty proceedings demonstrated absence of wilfulness, as the respondent had sought copies of seized documents, appeared before authorities, and was prevented from timely compliance due to exceptional circumstances including parallel investigations and non-supply of records. It was argued that the statutory presumption under Section 278E stood rebutted on facts.

Court Order / Findings

The Delhi High Court held that prosecution under Section 276CC is independent of penalty proceedings under Section 271(1)(b), and mere setting aside of penalty does not automatically invalidate prosecution. The Court clarified that reliance placed by the Appellate Court on K.C. Builders was legally erroneous, as that judgment concerned concealment penalties under Section 271(1)(c) and prosecution under Section 276C, which operate on a common factual foundation.

However, the Court emphasised that wilfulness is a mandatory ingredient under Section 276CC. Relying on Sasi Enterprises and Gujarat Travancore Agency, the Court reiterated that mens rea must be established for sustaining conviction. While Section 278E raises a presumption of culpable mental state, the accused is entitled to rebut the same.

On facts, the Court found that the respondent had demonstrated bona fide efforts to comply, had sought seized documents in time, appeared before authorities, and ultimately filed returns. The findings of the CIT(A) indicated that non-compliance was not deliberate but arose due to circumstances beyond the respondent’s control. The Court held that the presumption under Section 278E stood successfully rebutted and absence of wilful default was established beyond reasonable doubt.

Important Clarification

The Court clarified that while prosecution under Section 276CC does not automatically fail upon quashing of penalty under Section 271(1)(b), criminal liability cannot be sustained unless wilful default and mens rea are established. Independent statutory defaults must still satisfy the threshold of deliberate non-compliance for criminal conviction.

Final Outcome

The criminal leave petitions filed by the Revenue were disposed of. The Delhi High Court upheld the acquittal of the respondent, not on the ground relied upon by the Appellate Court, but on the distinct and substantive ground that absence of wilful default and mens rea vitiated the prosecution under Section 276CC of the Income-tax Act, 1961.

 

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769595676_THEPR.COMMISSIONEROFINCOMETAXVsPRABODHKUMARTIWARI.pdf

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