OFFENCES AND PROSECUTIONS UNDER INCOME TAX ACT, 1961

[Mr. M. GOVINDARAJAN]

Apart from penalty for various defaults, the Income-tax Act, 1961 (‘Act’ for short)  also contains provisions for launching prosecution proceedings against the taxpayers for various offences.

Contravention of section 132

Section 132 of the Act gives powers to the proper officers to enter into any building or premises and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept.  Even they break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers where the keys thereof are not available.

Section 132 (3) provides that the authorized officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, for reasons other than those mentioned in the second proviso to sub-section (1), serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub-section.

Section 275A provides that whoever contravenes any order referred to in the second proviso to sub-section (1) or sub-section (3) of section 132 shall be punishable with rigorous imprisonment which may extend to two years and shall also be liable to fine.

Inspection of books

Section 132(1)(iib) of the Act provides that the authorized officer may require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000, to afford the authorized officer the necessary facility to inspect such books of account or other documents.

Section 275B provides that failure to afford such facility to the authorized officer, he shall be punishable with rigorous imprisonment for a term which may extend to two years and shall also be liable to fine.

Removal of property

Section 276 of the Act provides that whoever fraudulently removes, conceals, transfers or delivers to any person, any property or any interest therein, intending thereby to prevent that property or interest therein from being taken in execution of a certificate under the provisions of the Second Schedule (procedure for recovery of tax) shall be punishable with rigorous imprisonment for a term which may extend to two years and shall also be liable to fine.

Failure of liquidator

Section 178(1) of the Act provides that a person who has been appointed as liquidator or receiver of any assets of the company, he shall within 30 days shall intimate the Assessing Officer, having jurisdiction over the company, of his appointment. 

Section 178(3) of the Act provides that the liquidator shall not, without the leave of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, part with any of the assets of the company or the properties in his hands until he has been notified by the Assessing Officer and  on being so notified, shall set aside an amount, equal to the amount notified and, until he so sets aside such amount, shall not part with any of the assets of the company or the properties in his hands.

Section 276A of the Act provides that if a person-

• fails to give the notice in accordance with sub-section (1) of section 178; or
• fails to set aside the amount as required by sub-section (3) of that section; or
• parts with any of the assets of the company or the properties in his hands in contravention of the provisions of the aforesaid sub-section,

he shall be punishable with rigorous imprisonment for a term which may extend to two years.

In the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for less than six months.

Purchase by Central Government of immovable properties

Section 269UC of the Act provides that no transfer of any immovable property in such area and of such value exceeding ₹ 5 lakhs, as may be prescribed, shall be effected except after an agreement for transfer is entered into between the person who intends transferring the immovable property and the person to whom it is proposed to be transferred at least four months before the intended date of transfer.

Section 269UE of the Act provides that where an order under sub-section (1) of section 269UD is made by the appropriate authority in respect of an immovable property referred to in sub-clause (i) of clause (d) of section 269UA, such property shall, on the date of such order, vest in the Central Government in terms of the agreement for transfer referred to in sub-section (1) of section 269UC.  The transferor or any other person who may be in possession of the immovable property, in respect of which an order is made, shall surrender or deliver possession thereof to the appropriate authority or any other person duly authorized by the appropriate authority in this behalf within fifteen days of the service of such order on him.

Section 269UL(1) of the Act provides that no registering officer appointed under the Registration Act, 1908 shall register any document which purports to transfer immovable property exceeding the value prescribed under section 269UC unless a certificate from the appropriate authority that it has no objection to the transfer of such property for an amount equal to the apparent consideration therefor as stated in the agreement for transfer of the immovable property in respect of which it has received a statement under sub-section (3) of section 269UC, is furnished along with such document.  Section 296UL (2) provides that no person shall do anything or omit to do anything which will have the effect of transfer of any immovable property unless the appropriate authority certifies that it has no objection to the transfer of such property for an amount equal to the apparent consideration therefore as stated in the agreement for transfer of the immovable property in respect of which it has received a statement under section 269UC

Section 276AB of the Act provides that whoever fails to comply with the provisions of section 269UC or fails to surrender or deliver possession of the property under sub-section (2) of section 269UE or contravenes the provisions of sub-section (2) of section 269UL shall be punishable with rigorous imprisonment for a term which may extend to two years and shall also be liable to fine.    In the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for less than six months.

Failure to pay tax

Section 276B of the Act provides that if a person fails to pay to the credit of the Central Government,-

• the tax deducted at source by him as required by or under the provisions of Chapter XVII-B; or
• the tax payable by him, as required by or under-

• sub-section (2) of section 115-O (Tax on distributed profits of domestic companies); or
• the second proviso to section 194B (winnings from lottery or crossword puzzle),

he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.

Section 276BB of the Act provides that if a person fails to pay to the credit of the Central Government, the tax collected by him as required under the provisions of section 206C, he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.

Evading tax

Section 276C(1) of the Act provides that if a person willfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable, or under reports his income, 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,-

• in a case where the amount sought to be evaded or tax on under-reported income exceeds twenty-five 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;
• in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and with fine.

Section 276C (2) of the Act provides that if a person willfully 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 two years and shall, in the discretion of the court, also be liable to fine.

Willful attempt

For the purposes of section 276C(2) , a willful attempt to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof shall include a case where any person-

• has in his possession or control any books of account or other documents (being books of account or other documents relevant to any proceeding under this Act) containing a false entry or statement; or
• makes or causes to be made any false entry or statement in such books of account or other documents; or
• wilfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents; or
• causes any other circumstance to exist which will have the effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof.

Failure to furnish returns

Section 276 CC of the Act provides that if a person willfully fails to furnish in due time the return of fringe benefits which he is required to furnish under section 115WD (1) [Return of fringe benefits) or by notice given under sub-section (2) of the said section or section 115WH or the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under clause (i) of sub-section (1) of section 142 or section 148 or section 153A, he shall be punishable,-

• in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds ₹ 25,000/-, with rigorous imprisonment for a term which shall not be less than 6 months but which may extend to 7 years and with fine;
• in any other case, with imprisonment for a term which shall not be less than 3 months but which may extend to 2 years and with fine.

A person shall not be proceeded against under this section for failure to furnish in due time the return of fringe benefits under sub-section (1) of section 115WD or return of income under sub-section (1) of section 139-

•  for any assessment year commencing prior to the 1st day of April, 1975; or
• for any assessment year commencing on or after the 01.04.1975, if-

•  the return is furnished by him before the expiry of the assessment year; or
•  the tax payable by such person, not being a company, on the total income determined on regular assessment, as reduced by the advance tax or self-assessment tax, if any, paid before the expiry of the assessment year, and any tax deducted or collected at source, does not exceed ten thousand rupees.

Section 276CCC of the Act provides that if a person willfully fails to furnish in due time the return of total income which he is required to furnish by notice given under clause (a) of section 158BC, he shall be punishable with imprisonment for a term which shall not be less than three months but which may extend to three years and with fine.   No person shall be punishable for any failure under this section in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995 but before the 1st day of January, 1997.

Failure to produce accounts and documents

Section 276D of the Act provides that if a person willfully fails to produce, or cause to be produced, on or before the date specified in any notice served on him under sub-section (1) of section 142, such accounts and documents as are referred to in the notice or willfully fails to comply with a direction issued to him under sub-section (2A) of that section, he shall be punishable with rigorous imprisonment for a term which may extend to one year and with fine.

False Statement

Section 277 of the Act provides that if a person makes a statement in any verification under this Act or under any rule made there under, 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,-

• in a case where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds twenty-five 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;
• in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and with fine.

Falsification of books of account/documents

Section 277A of the Act provides that if any person willfully and with intent to enable any other person to evade any tax or interest or penalty chargeable and imposable under this Act, makes or causes to be made any entry or statement which is false and which the first person either knows to be false or does not believe to be true, in any books of account or other document relevant to or useful in any proceedings against the first person or the second person, under this Act, the first person shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and with fine.    For the purposes of establishing the charge under this section, it shall not be necessary to prove that the second person has actually evaded any tax, penalty or interest chargeable or imposable under this Act.

Abetment

Section 278 provides that 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 ²[or any fringe benefits] 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-section (1) of section 276C, he shall be punishable-

• 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 twenty-five 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;
• in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and with fine.

Punishment for second and subsequent offences

Section 278A of the Act provides that  if any person convicted of an offence under section 276B or sub-section (1) of section 276C or section 276CC or section 276DD or section 276E or section 277 or section 278 is again convicted of an offence under any of the aforesaid provisions, he shall be punishable for the second and for every subsequent offence with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine.

Section 278AA of the Act provides that notwithstanding anything contained in the provisions of section 276A, section 276AB, or section 276B, no person shall be punishable for any failure referred to in the said provisions if he proves that there was reasonable cause for such failure.

Offences by companies

As per section 278B, where an offence under the Act has been committed by a company, then every person who, at the time the offence was committed was in charge of and was responsible to the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. However if such person proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence then he shall not be deemed to be guilty of the offence.

Where an offence under the Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Where an offence under the Income-tax Act has been committed by a person, being a company, such company shall be punished with fine and every person referred to above or the director, manager, secretary or other officer of the company referred to above, shall be liable to be proceeded against and punished in accordance with the provisions of the Act.

Offences by HUF

As per section 278C, where an offence under the Act has been committed by a Hindu Undivided Family, the karta shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. However, the karta shall not be liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

Immunity from prosecution

Section 278AB provides that a person may apply to the Principal Commissioner or Commissioner for granting immunity from prosecution, if he has applied for settlement under section 245C and the proceedings have abated under section 245HA. However, the application for immunity shall not be made after institution of prosecution proceedings.