Offences and Prosecutions under Income-Tax

Objectives & Agenda :

Chapter XXII of the Income-tax Act, 1961 discusses various Offences under the Income-tax Act and the applicable Prosecutions for such offences. These provisions act as a tool for enabling the Income-tax Officers to effectively enforce Income-tax laws, to deter tax avoidance and evasion and to punish wilful defaulters.

Sections Covered: 275A - 280D

1. Offences and Prosecutions under Income-tax CA Jugal Gala

2. Credits and Acknowledgments V Thirumal

3. Legends used in the Presentation AO Assessing Officer AOP Association of Persons AY Assessment Year BOI Body of Individuals DDT Dividend Distribution Tax DGIT Director General of Income-tax CCIT Chief Commissioner of Income-tax CIT Commissioner of Income-tax HUF Hindu Undivided Family PCIT Principal Commissioner of Income-tax TDS Tax Deducted at Source TCS Tax Collected at Source

4. Presentation Schema

5. Introduction

6. Offences and Prosecutions Section Offence Prosecution 275A Contravention of Order during Search and Seizure [Order not to tamper with any asset, books etc. without permission of Authorised officer] Rigorous Imprisonment upto 2 years Liable to Fine [No limit specified] 275B Failure to afford the Authorized officer the necessary facility to inspect the books of account or other documents during Search and Seizure Rigorous Imprisonment upto 2 years Liable to Fine [No limit specified] 276 Removal, concealment, transfer or delivery of property to prevent from being taken in execution of certificate under Recovery Proceedings Rigorous Imprisonment upto 2 years Liable to Fine [No limit specified] 276A Failure by Liquidator of Company: To intimate the AO within 30 days of appointment To set aside amount notified by AO By parting with any assets without setting aside Rigorous Imprisonment upto 2 years Minimum of 6 months - (Rigorous imprisonment means imprisonment along with hard and unproductive labour work)

7. Offences and Prosecutions Section Offence Prosecution 276AB Failure to enter into written agreement of transfer of Immovable property or to furnish statement as per Sec 269UC Failure to surrender or deliver possession of the property to appropriate authority under Sec 269UE Failure to comply with restrictions of registration of transfer of immovable property under Sec 269UL Rigorous Imprisonment upto 2 years Minimum of 6 months Liable to Fine [No limit specified] 276B Failure to pay taxes deducted at source, DDT or taxes when lottery winnings are received in kind to the Central Government Rigorous Imprisonment of 3 months to 7 years Liable to Fine [No limit specified] 276BB Failure to pay taxes collected at source Rigorous Imprisonment of 3 months to 7 years Liable to Fine [No limit specified]

8. Offences and Prosecutions Section Offence Prosecution 276C(1) Wilful attempt to evade tax, penalty or interest chargeable or imposable or under reports his income Amount sought to be evaded or tax on underreported income exceeds Rs 25 lakh Rigorous Imprisonment 6 months to 7 years Liable to Fine [No limit specified] Other cases Rigorous imprisonment – 3 months to 2 years 276C(2) Wilful attempt to evade payment of tax, penalty or interest Rigorous Imprisonment 3 months to 2 years Liable to Fine [No limit specified] 276CC Wilful failure to furnish return of income on due date or pursuant to enquiry notice or under income escaping assessment or under Search and seizure Tax would have been evaded exceeds Rs 25 lakh Rigorous Imprisonment 6 months to 7 years Liable to Fine [No limit specified] Other cases Imprisonment of 3 months to 2 years No prosecution if return is filed before end of AY or the tax payable by the assessee (not being a company) after adjusting advance tax, self-assessment tax paid before end of AY, TDS or TCS does not exceed Rs 10,000

9. Offences and Prosecutions Section Offence Prosecution 276CCC Failure to furnish return of income pursuant to order for Block Assessment Rigorous Imprisonment 3 months to 3 years Liable to Fine [No limit specified] 276D Failure to produce accounts and documents pursuant to Inquiry Notice before assessment or for audit during assessment Rigorous Imprisonment upto 1 year Liable to Fine [No limit specified] 277 Intentional false statements in verification under the Act or any rule Tax would have been evaded exceeds Rs 25 lakh Rigorous Imprisonment 6 months to 7 years Liable to Fine [No limit specified] Other cases Imprisonment of 3 months to 2 years 277A Falsification of books of account or document to evade tax, interest or penalty Rigorous Imprisonment 3 months to 2 years Liable to Fine [No limit specified]

10. Offences and Prosecutions Section Offence Prosecution 278 Abetting or inducing to file false returns or to evade tax Tax would have been evaded exceeds Rs 25 lakh Rigorous Imprisonment 6 months to 7 years Liable to Fine [No limit specified] Other cases Imprisonment of 3 months to 2 years 278A Second and subsequent offences under 276B, 276C, 276CC, 277, 278 Rigorous Imprisonment of 6 months to 7 years for every such offence Liable to Fine [No limit specified] 280 Wrongful disclosure of assessee’s information by a public servant Imprisonment upto 6 months Liable to Fine [No limit specified] Prior permission of Central Government is to be obtained Sec 278AA – In case of Sec 276A(Failure of Liquidator), 276AB(Transfer of immovable property) and 276B(failure to pay TDS, DDT etc.) Punishment not to be imposed if proven there was a reasonable cause for such failure

11. Persons Liable in Specified Cases Sec Assessee Person liable for Prosecution 278B Company Every person in charge of affairs; Director, Manager, Secretary and every officer (with whose consent or connivance or due to whose neglect the offence was committed) Company shall be liable for fine and the person punishable with Imprisonment Firm Partner AOP/BOI Members controlling the affairs 278C HUF Karta A member with whose consent or connivance or due to whose neglect the offence was committed Shall not be punishable if proven that offence was committed without their knowledge or such person carried out proper due diligence to prevent such offence

12. Power of PCIT or CIT to Grant Immunity – Sec 278AB Eligibility PCIT or CIT may grant immunity from Prosecution on Application made by Assessee Assessee has made application for settlement of case (under 245HC) and the proceedings have abated before the Settlement Commission (under 245HA) Time Limit Application can be made before Initiation of prosecution after abatement or for any proceedings initiated during pendency of settlement proceedings Conditions After abatement, has cooperated with the authorities Has made full and true disclosure of his income and its sources Withdrawal Fails to comply with condition on which immunity was granted After abatement, has concealed income or falsified evidence Consequence of Withdrawal Prosecution for the case for which immunity was granted And shall be tried for other offences during the proceedings

13. Presumption as to Assets, Books of Account – Sec 278D Such Presumption would be made for assets or books of account are obtained by way of Requisition(Sec 132A) as well It shall be on the assessee to rebut such presumption with appropriate and reliable evidence

14. Presumption as to Culpable Mental State – Sec 278E Culpable Mental State refers to the state of mind of an individual while committing a crime Culpable mental state includes intention, motive or knowledge of a fact or belief in, or reason to believe, a fact A fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability It shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution

15. Prosecution to be at the Instance of Specified Authorities – Sec 279

16. Certain Offences to be Non-Cognizable – Sec 279A 276B – Failure to pay TDS, DDT 276C – Wilful attempt to evade tax 276CC – Failure to furnish return of Income 277 – False statement in verification 278 – Abetment of false return Cognizable offence means an offence for which arrest can be made without a warrant Offences punishable under Sec: shall be deemed to be non-cognizable offences

17. Proof of Entries in Records or Documents of Income-tax Authorities – Sec 279B Entries in the records or other documents in the custody of an income-tax authority shall be admitted as evidence in any prosecution proceedings Such entries may be proved by Production of such records or other documents Or by producing a copy of the records certified by the authority with custody of the original

18. Special Courts – Sec 280A A Special Court, while trying an offence punishable under the Act, shall also try any other offence with which the accused may be charged, under the Code of Criminal Procedure, 1973

19. Offences Triable by Special Court – Sec 280B

20. Trial of Offences as Summons Case – Sec 280C Summons case has been defined, in a negative sense Under Section 2(w) of the Code of Criminal Procedure as “a case relating to an offence not being a warrant case” Whereas, a “warrant case” means a case relating to an offence punishable with death, imprisonment for life or imprisonment for a term exceeding two years.

21. Application of Code of Criminal Procedure to Proceedings before Special Court – Sec 280D

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