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 for 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 and served on 03.01.2012 requiring the respondent to file returns within 20 days. The respondent failed to file returns within the stipulated time. Show cause notices were issued under Section 276CC, followed by further correspondence. The respondent eventually 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, and penalties were imposed. These penalties 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 can be sustained merely on failure to file returns pursuant to a notice under Section 153A, whether setting aside of penalty under Section 271(1)(b) automatically nullifies 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). It was argued that failure to file returns pursuant to Section 153A constitutes a complete offence and subsequent compliance does not obliterate criminal liability. The Revenue submitted that the Appellate Court erred in relying on the quashing of penalty proceedings and misapplied the Supreme Court decision in K.C. Builders. Reliance was also placed on Vinubhai Mohanlal Dobaria to contend that the offence under Section 276CC is complete upon default.

Respondent’s Arguments

The respondent submitted that Section 276CC criminalises only wilful failure to furnish returns and that mens rea is an essential ingredient. It was argued that findings recorded by the Commissioner of Income Tax (Appeals) in penalty proceedings clearly established absence of wilfulness, as the respondent had sought copies of seized documents, appeared before authorities, and faced exceptional circumstances including parallel investigations. It was contended that the statutory presumption under Section 278E stood rebutted.

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 misplaced, as that decision dealt with 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 fail merely because penalty under Section 271(1)(b) is set aside, criminal liability cannot be sustained unless wilful default and mens rea are proved. Independent statutory defaults must still satisfy the threshold of deliberate non-compliance to attract criminal punishment.

Final Outcome

The criminal leave petitions filed by the Revenue were disposed of. The Delhi High Court upheld the acquittal of the respondent, holding that although the Appellate Court’s reasoning was legally flawed, the acquittal was justified on the 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/1769595735_THEPR.COMMISSIONEROFINCOMETAXCENTRAL1VsPRABODHKUMARTIWARI.pdf

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