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REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.61 OF 2007

Sasi Enterprises … Appellant

Versus

Assistant Commissioner of Income Tax … Respondent

WITH

CRIMINAL APPEAL NOs.62, 63 & 64 OF 2007  

J U D G M E N T

K.S. Radhakrishnan, J.

1. We are concerned with four Criminal Appeals No.61 to  

64 of 2007, out of which two Criminal Appeals No.61 of 2007  

and 63 of 2007 relate to M/s Sasi Enterprises, a registered  

partnership  firm,  of  which  Ms.  J.  Jayalalitha  and  Mrs.  N.  

Sasikala are partners, which relate to the assessment years  

1991-92 and 1992-93 respectively.  Criminal Appeal Nos.62

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and  63  of  2007  relate  to  J.  Jayalalitha  and  N.  Sasikala  

respectively  for  the  assessment  years  1993-94.  

Proceedings giving rise to these appeals originated from the  

complaints  filed by the Assistant  Commissioner  of  Income  

Tax,  Chennai,  before  the  Additional  Chief  Metropolitan  

Magistrate (Egmore), Chennai, for the willful and deliberate  

failure  to  file  returns  for  the  assessment  years  1991-92,  

1992-93 and hence committing offences punishable  under  

Section 276 CC of the Income Tax Act, 1961 (for short “the  

Act”).  Complaints were filed on 21.8.1997 after getting the  

sanction from the Commissioner of Income Tax, Central II,  

Chennai  under  Section  279(1)  of  the  Income  Tax  Act.  

Appellants filed two discharge petitions under Section 245(2)  

Cr.P.C.,  which  were  dismissed  by  the  Chief  Metropolitan  

Magistrate vide order dated 14.6.2006.  Appellants preferred  

Crl.  R.C. Nos.781 to 786 of 2006 before the High Court of  

Madras  which  were  dismissed  by  the  High  Court  vide  its  

common  order  dated  2.12.2006,  which  are  the  subject  

matters of these appeals.

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2. M/s Sasikala Enterprises was formed as a partnership  

firm by a deed dated 06.02.1989 with N. Sasikala and T.V.  

Dinakaran as its partners, which was later reconstituted with  

effect from 04.05.1990 with J. Jayalalitha and N. Sasikala as  

partners.   The  firm  did  the  business  through  two  units,  

namely, M/s Fax Universal and M/s J.S. Plan Printers, which,  

inter alia, included the business in running all kinds of motor  

cars,  dealing in vehicles and goods etc.   In the complaint  

E.O.C.C. No.202 of 1997 filed before the Chief Metropolitan  

Magistrate, Egmore, M/s Sasi Enterprises was shown as the  

first  accused (A-1)  and J.  Jayalalitha and N.  Sasikala were  

shown as (A-2) and (A-3) respectively, who were stated to be  

responsible for  the day-to-day business of the firm during  

the  assessment  years  in  question  and  were  individually,  

jointly and severally made responsible and liable for all the  

activities  of  the  firm.  Partnership  deed  dated  04.05.1990  

itself stated that the partners, A-2 and A-3 are responsible  

and  empowered  to  operate  bank  accounts,  have  full  and  

equal rights in the management of the firm in its business  

activities, deploy funds for the business of the firm, appoint

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staff, watchman etc. and to represent the firm before income  

tax, sales tax and other authorities.   

3. M/s Sasi Enterprises, the firm, did not file any returns  

for the assessment year 1991-92 and 1992-93, for which the  

firm and its partners are being prosecuted under Section 276  

CC  of  the  Act.   J.  Jayalalitha  and  N.  Sasikala  did  not  file  

returns for the assessment year 1993-94 and hence they are  

being  prosecuted  for  that  breach  (in  their  individual  

capacity) separately but not for the assessment years 1991-

92 or 1992-93 and their returns have been filed as individual  

assessee by  them for  the  assessment  years  1991-92 and  

1992-93,  though belatedly  on  20.11.1994 and 23.02.1994  

respectively.   In  those  returns  it  was  mentioned  that  

accounts of the firm had not been finalized and no returns of  

the firm had been filed.

4. The  Assistant  Commissioner  of  Income  Tax  in  his  

complaint stated that the firm through its partners ought to  

have filed its returns under Section 139(1) of the Act for the  

assessment year 1991-92 on or before 31st August, 1991 and

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for the assessment year 1992-93 on or before 31st August,  

1992  and A-2  in  her  individual  capacity  also  should  have  

filed her return for the year 1993-94 under Section 139(1) on  

or before 31.08.1993 and A-3 also ought to have filed her  

return for  the assessment year  1993-94 on or before 31st  

August, 1993, as per Section 139(1) of the Act.  The accused  

persons, it was pointed out, did not bother to file the returns  

even before the end of the respective assessment years, nor  

had  they  filed  any  return  at  the  outer  statutory  limit  

prescribed under Section 139(4) of the Act i.e. at the end of  

March of the assessment year.  It was also pointed out that a  

survey was conducted in respect of the firm under Section  

133A  on  25.08.1992  and  following  that  a  notice  under  

Section 148 was served on the partnership firm on 15.2.1994  

to file the return of income tax for  the years in question.  

Though notice was served on 16.2.1994, no return was filed  

within the time granted in the notice.  Neither return was  

filed, nor particulars of the income were furnished.  For the  

assessment year 1991-92, it was stated that pre-assessment  

notice  was  served  on  18.12.1995,  notice  under  Section

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142(1)(ii)  giving  opportunities  was  also  issued  on  

20.07.1995.  The  department  made  the  best  judgment  

assessment for the assessment year 1991-92 under Section  

144 on a total income of Rs.5,84,860/- on 08.02.1996 and  

tax was determined as Rs.3,02,434/- and demand notice for  

Rs.9,95,388/-  was  issued  as  tax  and  interest  payable  on  

08.02.1996.   

5. For the assessment year 1992-93, the best judgment  

assessment under Section 144 was made on 9.2.1996 on the  

firm on a total income of Rs.14,87,930/- and tax determined  

at Rs.8,08,153/-,  a demand notice was issued towards the  

tax and interest payable.

6. We may indicate, so far as A-2 is concerned, the due  

date for filing of return of income as per Section 139(1) of  

the  Act  for  the  assessment  year  1993-94  was  31.8.1993.  

Notice under Section 142(1)(i) was issued to A-2 calling for  

return of income on 18.1.1994.  The said notice was served  

on her on 19.1.1994.  Reminders were issued on 10.2.1994,  

22.8.1994 and 23.8.1995.   No return was filed as required

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under Section 139(4) before 31.3.1995.   The Department on  

31.7.1995 issued notice under Section 142(1)(ii) calling for  

particulars  of  income  and  other  details  for  completion  of  

assessment.  Neither the return of income was filed nor the  

particulars  of  income  were  furnished.  Best  judgment  

assessment under Section 144 was made on 9.2.1996 on a  

total  income  of  Rs.1,04,49,153/-  and  tax  determined  at  

Rs.46,68,676/-  and demand of  Rs.96,98,801/-,  inclusive  of  

interest at Rs.55,53,882/- was raised after adjusting pre-paid  

tax  of  Rs.5,23,756/-.   The  Department  then  issued  show-

cause  notice  for  prosecution  under  Section  276CC  on  

14.6.1996.  Later, sanction for prosecution was accorded by  

the Commissioner of Income Tax on 3.10.1996.

7. A-3  also  failed  to  file  the  return  of  income  as  per  

Section 139(1) for the assessment year 1993-94 before the  

due date i.e. 31.8.1993.  Notice under Section 142(1)(i) was  

issued  to  A-3  calling  for  filing  of  return  of  income  on  

8.11.1995.   Further, notice was also issued under Section  

142(1)(ii) on 21.7.1995 calling for particulars of income and

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other  details  for  completion  of  assessment.    Neither  the  

return of income was filed nor the particulars of income were  

furnished.   Best judgment assessment under Section 144  

was made on 8.2.1996 on a total income of Rs.70,28,110/-  

and  tax  determined  at  Rs.26,86,445/-.    The  total  tax  

payable, inclusive of interest due was Rs.71,19,527/-.  After  

giving effect  to  the appellate order,  the total  income was  

revised  by  Rs.19,25,000/-,  resulting  in  tax  demand  of  

Rs.20,23,279/-,  inclusive of interest levied.  Later,  a show-

cause  notice  for  prosecution  under  Section  276CC  was  

issued to A-3 on 7.8.1996.   A-3 filed replies on 24.11.1996  

and 24.3.1997.  The Commissioner of Income Tax accorded  

sanction for prosecution on 4.8.1997.

8. We may incidentally also point out, the final  tax liability  

so  far  as  the  firm  is  concerned,  was  determined  as  

Rs.32,63,482/- on giving effect to the order of the Income  

Tax Appellate Tribunal  (B Bench),  Chennai  dated 1.9.2006  

and after giving credit  of  pre-paid tax for  the assessment  

year 1991-92.    For the assessment year 1992-93 for  the

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firm, final tax liability was determined at Rs.52,47,594/- on  

giving  effect  to  the  order  of  the  Income  Tax  Appellate  

Tribunal (B Bench), Chennai dated 1.9.2006 and after giving  

credit of pre-paid tax.  So far as A-2 is concerned, for the  

assessment year 1993-94 final tax liability was determined  

at Rs.12,54,395/- giving effect to the order of Income Tax  

Appellate  Tribunal  (B  Bench),  Chennai  dated  11.10.2008  

after  giving  credit  to  pre-paid  tax.    So  far  as  A-3  is  

concerned,  for  the  assessment  year  1993-94,  final  tax  

liability was determined as Rs.9,81,870/- after giving effect  

to  the  order  of  Income Tax  Appellate  Tribunal  (B  Bench),  

Chennai dated 14.9.2004 and after giving credit to pre-paid  

tax.

9. We have already indicated, for not filing of returns and  

due to non-compliance of the various statutory provisions,  

prosecution  was  initiated  under  Section  276CC of  the  Act  

against  all  the  accused  persons  and  the  complaints  were  

filed on 21.08.1997 before the Chief Metropolitan Magistrate,

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which the High Court by the impugned order has permitted  

to go on.  

10. Shri  Shekhar  Naphade,  learned  senior  counsel  

appearing for the appellants, submitted that the High Court  

did not appreciate the scope of Section 276CC of the Act.  

Learned  senior  counsel  pointed  out  that  once  it  is  

established  that  on  the  date  of  the  complaint  i.e.  on  

21.08.1997  the  assessment  had  not  attained  finality,  the  

complaint  became  pre-mature  as  on  the  date  of  the  

complaint  and  no  offence  had  taken  place  and  all  the  

ingredients of offence under Section 276 of the Act were not  

satisfied.   Learned senior  counsel  pointed out  that  unless  

and until it is shown that failure to file the return was willful  

or deliberate, no prosecution under Section 276CC could be  

initiated.  Learned senior counsel pointed out that in fact, the  

second accused in her individual return had disclosed that  

the firm was doing the business and that it had some income  

and hence, it cannot be said that A-2 had concealed the fact  

that  the  firm  had  any  intention  to  evade  tax  liability.

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Learned  senior  counsel  also  submitted  that  whether  the  

assessee  had  committed  any  offence  or  not  will  depend  

upon  the  final  assessment  of  income  and  tax  liability  

determined  by  the  appropriate  authority  and  not  on  the  

assessment made by the assessing officer.  Placing reliance  

on  the  proviso  to  Section  276CC  learned  senior  counsel  

submitted that, that is the only interpretation that could be  

given to Section 276CC.  In support of his contention reliance  

was placed on the Judgment of this Court in Commissioner  

of  Wealth  Tax,  Gujarat v.  Vimlaben  Vadilal  Mehta  

(Smt.) (1983) 4 SCC 692,  Commissioner of Wealth Tax,  

Gujarat, Ahmedabad v. Vadilal Lallubhai & Ors. (1983)  

4  SCC  697  and  State  of  H.P.  and  others v.  Gujarat  

Ambuja  Cement  Ltd.  and  another (2005)  6  SCC  499.  

Referring to Section 278E of the Act, learned senior counsel  

submitted that till  the assessment does not attain finality,  

Section 276CC is not complete and the presumption under  

Section 278E is not attracted.  Learned senior counsel also  

submitted  that  the  High  Court  has  wrongly  applied  the  

principles laid down by this Court in Prakash Nath Khanna

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and  another v.  Commissioner  of  Income  Tax  and  

another  (2004)  9  SCC  686,  in  any  view,  which  calls  for  

reconsideration.  Learned senior counsel submitted that the  

said Judgment deals with the factum of proviso to Section  

276CC of the Act which lays down that there is no offence if  

the tax amount does not exceed Rs.3,000/-.   

11. Shri  Sidharth  Luthra,  learned  Additional  Solicitor  

General of India,  appearing for the Revenue, on the other  

hand,  submitted  that  Section  139  of  the  Act  placed  a  

statutory  mandate  on every  person  to  file  an income tax  

return in the prescribed form and in the prescribed manner  

before  the  due  date  i.e.  31st August  of  the  relevant  

assessment year.  Learned ASG submitted that on breach of  

Section 139(1) of the Act, cause of action to prosecute the  

assessee  arises  subject  to  other  ingredients  of  Section  

276CC of  the  Act.  Learned  ASG pointed  out  that  what  is  

relevant  in  the  proceedings,  is  not  only  the  due  date  

prescribed  in  Section  139(1)  of  the  Act,  but  also  time  

prescribed under Section 142 and 148 of the Act, by which

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further opportunities have been given to file the return in the  

prescribed time.  In other words, Section 276CC, according  

to the learned ASG, applies to a situation where assessee  

has  failed  to  file  the  return  of  income as  required  under  

Section 139 of the Act or in response to notices issued to the  

assessee  under  Section  142  or  Section  148  of  the  Act.  

Learned ASG also  submitted  that  the  scope  of  proviso  to  

Section 276CC to protect the genuine assessees who either  

file  their  return  belatedly  but  within  the  end  of  the  

assessment year or those who paid substantial  amount of  

their tax dues by pre-paid taxes.  Considerable reliance was  

placed  on  the  Judgment  of  this  Court  in  Prakash  Nath  

Khanna and another (supra).  Reliance was also placed on  

the Judgment of this Court in  Maya Rani Punj (Smt.) v.  

Commissioner of Income Tax, Delhi (1986) 1 SCC 445.   

12. Learned ASG also explained the scope of Section 278E  

by placing reliance on  P.R. Metrani v.  Commissioner of  

Income  Tax,  Bangalore (2007)  1  SCC  789,  Kumar  

Exports v.  Sharma  Carpets (2009)  2  SCC  513,  and

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submitted that pendency of the appellate proceedings is not  

a  relevant  factor  in  relation  to  prosecution  under  Section  

276CC.   Reference was also made to  Ravinder Singh v.  

State  of  Haryana (1975)  3  SCC  742  and  Standard  

Chartered  Bank  and  others  v.  Directorate  of  

Enforcement and others (2006) 4 SCC 278.  Learned ASG  

submitted  that  the  Judgment  in  Prakash  Nath  Khanna  

(supra) calls for no reconsideration, as the same has been  

uniformly applied by this Court as well as by the various High  

Courts.   Learned ASG also pointed out that the appellants  

have  been  indulging  in  litigative  exercises  by  which  they  

could hold up the proceedings for almost two decades and  

that the trial  court  has rightly  rejected the application for  

discharge,  which was affirmed by the High Court  and the  

same calls no interference by this Court.

13. We  may  formulate  the  questions  that  arise  for  our  

consideration, which are as under:

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(1) Whether an assessee has the liability/duty to file a  

return under Section 139(1) of the Act within the due  

date prescribed therein?

(2) What is  the effect  of best  judgment assessment  

under  Section  144  of  the  Act  and  will  it  nullify  the  

liability of the assessee to file its return under Section  

139(1) of the Act?

(3) Whether non-filing of return under Section 139(1)  

of  the  Act,  as  well  as  non-compliance  of  the  time  

prescribed under Sections 142 and 148 of the Act are  

grounds  for  invocation  of  the  provisions  of  Section  

276CC of the Act?

(4) Whether  the  pendency  of  the  appellate  

proceedings  relating  to  assessment  or  non-attaining  

finality  of  the  assessment  proceedings  is  a  bar  in  

initiating prosecution proceedings under Section 276CC  

due to non-filing of returns?

(5) What is the scope of Section 278E of the Act, and  

at  what stage the presumption can be drawn by the  

Court?

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14. We may, at  the outset,  point  out  that  the appellants  

had earlier approached this Court and filed SLP(C) Nos.3655-

3658 of 2005 which were disposed of by this Court directing  

the trial court to dispose of the petition for discharge within  

a  period  of  two  months  by  its  order  dated  03.03.2006.  

Learned Chief Metropolitan Magistrate rejected the petitions  

vide  its  order  dated  14.06.2006.   Though  the  High  Court  

affirmed the said order vide its judgment dated 02.12.2006,  

these appeals were kept pending before this Court over six  

years for one reason or another.   

15. We are, in these appeals, concerned with the question  

of non-filing of returns by the appellants for the assessment  

year 1991-92, 1992-93 and 1993-94.  Each and every order  

passed by the revenue as well as by the Courts were taken  

up  before  the  higher  courts,  either  through  appeals,  

revisions  or  writ  petitions.  The  details  of  the  various  

proceedings  in  respect  of  these  appeals  are  given  in  

paragraph  30  of  the  written  submissions  filed  by  the  

revenue, which reveals the dilatory tactics adopted in these

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cases.    Courts,  we  caution,  be  guarded  against  those  

persons who prefer to see it as a medium for stalling all legal  

processes.   We do not propose to delve into those issues  

further since at this stage we are concerned with answering  

the questions which have been framed by us.

16. Section  139  of  the  Act  prior  to  1989-90  and  after,  

placed  a  statutory  mandate  on  every  person  to  file  an  

income  tax  return  in  the  prescribed  form  and  in  the  

prescribed manner.  The Direct Tax Laws (Amendment) Act,  

1987  with  effect  from  01.04.1989  made  various  

amendments to the Income Tax Act, by which the assessing  

officer has no power to extend the time for filing a return of  

income under  Section  139(1)  and  to  extend  the  time  for  

filing under Section 139(3), a return of loss intended to be  

carried  forward.   The  time  prescribed  for  filing  a  belated  

return  under  Section  139(4)  or  a  revised  return  under  

Section 139(5) was reduced to one year from the end of the  

relevant assessment year.  The provision of Section 139(2)  

stood incorporated in  Section 142(1)(i).   The notice under

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Section 142(1)(i)  to  furnish  a  return  of  income cannot  be  

issued in the course of the assessment year itself and need  

not give the person concerned a minimum period of 30 days  

for  furnishing  the  return.   When  a  return  is  furnished  

pursuant to a notice under Section 142(1)(i), the assessment  

may be made under Section 143 without recourse to Section  

147.   Further,  with  the  deletion  of  Section  271(1)(a),  a  

penalty for failure to furnish in due time a return of income  

under Section 139(1), is abolished.  Levy of punitive interest  

under Section 234A made mandatory and the discretion of  

the  assessing  officer  to  reduce or  waive  the  interest  was  

taken away.   Non-compliance with a notice under Section  

142(1)(i) may attract prosecution under Section 276CC.

17. The Income Tax Act, therefore, had stipulated both the  

penalty  under  Section  271(1)(a)  and  prosecution  under  

Section 276CC,  the former  for  depriving taxes due to  the  

exchequer and later for the offence/infraction committed.  As  

already indicated by the Taxation Laws (Amendment) Act,  

1989,  penalty provision under Section 271(1)(a)  had been

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deleted  w.e.f.  01.04.1989  and  a  provision  for  levy  of  

mandatory/compulsory  interest  under  Section  234A of  the  

Act  was introduced.   But,  legislature has never  waived or  

relaxed its  prosecuting provisions  under Section 276CC of  

the  Act  for  the  infraction  or  non-furnishing  of  return  of  

income.

18. Section 139 of the Act, as it stood at the relevant time,  

reads as under:

“139.  (1) Every person, if his total income or the  total  income  of  any  other  person  in  respect  of  which he is assessable under this Act during the  previous  year  exceeded  the  maximum  amount  which is not chargeable to income-tax, shall, on or  before the due date, furnish a return of his income  or  the  income  of  such  other  person  during  the  previous year, in the prescribed form and verified  in  the prescribed manner  and setting forth  such  other particulars as may be prescribed.

Explanation:   In  this  sub-section,  “due  date”  means-

(a)   where the assessee is a company, the 30th day  of November of the assessment year; (b)   where the assessee is a person, other than a  company.- (i)    in a case where the accounts of the assessee  are required under this Act or nay other law to be

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audited, or where the report of any accountant is  required to be furnished under section 80HHC or  Section  80HHD or  in  the  case  of  a  co-operative  society, the 31st day of October of the assessment  year: (ii)   in a case where the total income referred to in  this sub-section includes any income from business  or profession, not being a case falling under sub- clause (i), the 31st day of August of the assessment  year : (iii)   in any other case, the 30th day of June of the  assessment year.

xxx xxx xxx

xxx xxx xxx

(3)  If any person who has sustained a loss in any  previous year under the head “Profits and gains of  business or profession” or under the head “Capital  gains” and claims that the loss or any part thereof  should be carried forward under sub-section (1) of  section 72, or sub-section (2) of section 73, or sub- section (1) or sub-section (3) of section 74, or sub- section (3) of section 74A, he may furnish, within  the time allowed under sub-section (1), a return of  loss  in  the  prescribed  form  and  verified  in  the  prescribed  manner  and  containing  such  other  particulars  as  may  be  prescribed,  and  all  the  provisions  of  this  Act  shall  apply  as  if  it  were  a  return under sub-section (1).

(4) Any  person  who has  not  furnished a  return  within the time allowed to him under sub-section  (1),  or  within  the  time  allowed  under  a  notice  issued under sub-section (1) of section 142, may

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furnish the return for any previous year 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:

xxx xxx xxx

xxx xxx xxx”

 19. A plain reading of the above provisions indicates that it  

is mandatory on the part of the assessee to file the return  

before  the  due  date.   Explanation  (a)  to  the  said  section  

defines the term “due date”, which is 30th November of the  

assessment year.  The consequence of non-filing of return on  

time has also been stipulated in the Act.  Further a reference  

to  Sections  142  and  148  is  also  necessary  to  properly  

understand the scope of Section 276CC.  Relevant portion of  

Section  142,  as  it  stood  at  the  relevant  time,  is  quoted  

below:

“142. Inquiry before assessment.-  (1) For  the purpose of making an assessment under  this Act, the Assessing Officer may serve on  any  person  who  has  made  a  return  under  section 139 or in whose case the time allowed  under  sub-  section  (1)  of  that  section  for  furnishing  the  return  has  expired]  a  notice  requiring  him,  on  a  date  to  be  therein  specified,-

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(i)    where such person has not made a return  within the time allowed under sub-section (1)  of  section  139,  to  furnish  a  return  of  his  income or the income of any other person in  respect of which he is assessable under this  Act, in the prescribed form and verified in the  prescribed  manner  and  setting  forth  such  other particulars as may be prescribed, or

 xxx xxx xxx

xxx xxx xxx”

 20. Section 148 refers to the issue of notice where income  

has escaped assessment.  Relevant portion of the same is  

also extracted hereinbelow for ready reference:

“148.  (1)  Before  making  the  assessment,  reassessment or recomputation under section  147, the Assessing Officer shall serve on the  assessee  a  notice  requiring  him  to  furnish  within such period, not being less than thirty  days,  as  may  be  specified  in  the  notice,  a  return  of  his  income or  the  income of  any  other  person  in  respect  of  which  he  is  assessable under this Act during the previous  year  corresponding  to  the  relevant  assessment year, in the prescribed form and  verified in the prescribed manner and setting  forth  such  other  particulars  as  may  be  prescribed;  and  the  provisions  of  this  Act  shall, so far as may be, apply accordingly as  if  such return were a return required to be  furnished under section 139.

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(2) The Assessing Officer shall, before issuing  any  notice  under  this  section,  record  his  reasons for doing so.”

21. Sub-section (1) of Section 139, clause (i) sub-section (1)  

of  Section 142 and Section 148 are mentioned in  Section  

276CC of the Act.  Section 276CC is extracted as under:

“276CC.  Failure  to  furnish  returns  of  income.   If a person wilfully fails to furnish  in due time 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, he shall be punishable,-  

(i)    in a case where the amount of tax, which  would  have  been  evaded if  the  failure  had  not  been  discovered,  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 imprisonment for  a  term  which  shall  not  be  less  than  three  months but which may extend to three years  and with fine:  Provided that  a  person  shall  not  be  proceeded  against  under  this  section  for  failure  to  furnish  in  due  time the  return  of  income under sub-section (1) of section 139-

 (i)    for  any  assessment  year  commencing  prior to the 1st day of April, 1975 ; or  (ii)  for any assessment year commencing on  or after the 1st day of April, 1975 , if-

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(a)  the return is furnished by him before the  expiry of the assessment year; or  

(b)    the  tax  payable  by  him  on  the  total  income  determined  on  regular  assessment,  as reduced by the advance tax, if any, paid,  and  any  tax  deducted  at  source,  does  not  exceed three thousand rupees.”

 22. The constitutional validity of Section 276CC, was upheld  

by the Karnataka High Court in Sonarome Chemicals Pvt.  

Ltd. and others v. Union of India and others  (2000) 242  

ITR 39 (Kar) holding that it does not violate Article 14 of 21  

of  the  Constitution.   Section  punishes  the  person  who  

“willfully fails to furnish the return of income in time”.  The  

explanation willful default, as observed by Wilber Force J. in  

Wellington v.  Reynold  (1962) 40  TC  209  is  “some  

deliberate  or  intentional  failure  to  do  what  the  tax  payer  

ought  to  have  done,  knowing  that  to  omit  to  do  so  was  

wrong”.   The  assessee  is  bound  to  file  the  return  under  

Section 139(1) of the Act on or before the due date.  The  

outer limit is fixed for filing of return as 31st August of the  

assessment year, over and above, in the present case, not

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only  return  was  not  filed  within  the  due  date  prescribed  

under Section 139(1) of the Act, but also the time prescribed  

under  Section  142  and  148  of  the  Act  and  the   further  

opportunity given to file the return in the prescribed time  

was also not availed of.

23. Section 276CC applies to situations where an assessee  

has  failed  to  file  a  return  of  income  as  required  under  

Section 139 of the Act or in response to notices issued to the  

assessee under Section 142 or Section 148 of the Act.  The  

proviso  to  Section  276CC  gives  some  relief  to  genuine  

assesses.  The proviso to Section 276CC gives further time  

till the end of the assessment year to furnish return to avoid  

prosecution.   In  other  words,  even  though  the  due  date  

would be 31st August of the assessment year as per Section  

139(1) of the Act, an assessee gets further seven months’  

time  to  complete  and  file  the  return  and  such  a  return  

though belated, may not attract prosecution of the assessee.  

Similarly, the proviso in clause ii(b) to Section 276CC also  

provides  that  if  the  tax  payable  determined  by  regular

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assessment  has  reduced  by  advance  tax  paid  and  tax  

deducted  at  source  does  not  exceed  Rs.3,000/-,  such  an  

assessee  shall  not  be  prosecuted  for  not  furnishing  the  

return  under  Section  139(1)  of  the  Act.   Resultantly,  the  

proviso under Section 276CC takes care of genuine assesses  

who either file the returns belatedly but within the end of the  

assessment  year  or  those  who  have  paid  substantial  

amounts of their tax dues by pre-paid taxes, from the rigor  

of the prosecution under Section 276CC of the Act.

24. Section 276CC, it  may be noted, takes in sub-section  

(1) of Section 139, Section 142(1)(i) and Section 148.  But,  

the proviso to Section 276CC takes in only sub-section (1) of  

Section 139 of the Act and the provisions of Section 142(1)(i)  

or 148 are conspicuously absent.  Consequently, the benefit  

of  proviso is  available only to voluntary filing of return as  

required under Section 139(1) of the Act.  In other words, the  

proviso would not apply after detection of the failure to file  

the return and after a notice under Section 142(1)(i) or 148  

of the Act is issued calling for filing of the return of income.

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Proviso,  therefore,  envisages  the  filing  of  even  belated  

return before the detection or discovery of the failure and  

issuance of notices under Section 142 or 148 of the Act.

25. We may in this respect also refer to sub-section (4) to  

Section 139 wherein the legislature has used an expression  

“whichever is earlier”.  Both Section 139(1) and Sub-Section  

(1)  of  Section  142  are  referred  to  in  sub-section  (4)  to  

Section  139,  which  specify  time  limit.   Therefore,  the  

expression “whichever  is  earlier”  has  to be read with  the  

time if allowed under sub-section (1) to Section 139 or within  

the time allowed under notice issued under sub-section (1)  

of Section 142, whichever is earlier.  So far as the present  

case is  concerned,  it  is  already noticed that the assessee  

had not filed the return either within the time allowed under  

sub-section (1)  to  Section  139 or  within  the  time allowed  

under notices issued under sub-section (1) to Section 142.

26. We have indicated that on failure to file the returns by  

the  appellants,  income  tax  department  made  a  best  

judgment assessment under Section 144 of the Act and later

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show  cause  notices  were  issued  for  initiating  prosecution  

under Section 276CC of the Act.  Proviso to Section 276CC  

nowhere states that the offence under Section 276CC has  

not been committed by the categories of assesses who fall  

within the scope of that proviso, but it is stated that such a  

person shall not be proceeded against.   In other words, it  

only provides that under specific  circumstances subject to  

the proviso, prosecution may not be initiated.  An assessee  

who comes within clause 2(b) to the proviso, no doubt has  

also  committed  the  offence  under  Section  276CC,  but  is  

exempted  from  prosecution  since  the  tax  falls  below  

Rs.3,000/-.  Such an assessee may file belated return before  

the detection and avail the benefit of the proviso.  Proviso  

cannot control the main section, it only confers some benefit  

to certain categories of assesses.  In short, the offence under  

Section  276CC  is  attracted  on  failure  to  comply  with  the  

provisions  of  Section  139(1)  or  failure  to  respond  to  the  

notice issued under Section 142 or Section 148 of the Act  

within the time limit specified therein.  

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27. We  may  indicate  that  the  above  reasoning  has  the  

support  of  the  Judgment  of  this  Court  in  Prakash  Nath  

Khanna (supra).  When we apply the above principles to the  

facts  of  the  case  in  hand,  the  contention  of  the  learned  

senior counsel for the appellant that there has not been any  

willful failure to file their return cannot be accepted and on  

facts,  offence  under  Section  276CC  of  the  Act  has  been  

made  out  in  all  these  appeals  and  the  rejection  of  the  

application for the discharge calls for no interference by this  

Court.

28. We also find no basis in the contention of the learned  

senior  counsel  for  the  appellant  that  pendency  of  the  

appellate proceedings is a relevant factor for not initiating  

prosecution  proceedings  under  Section  276CC  of  the  Act.  

Section 276CC contemplates that an offence is committed  

on the non-filing of the return and it is totally unrelated to  

the pendency of assessment proceedings except for second  

part of the offence for determination of the sentence of the  

offence,  the  department  may  resort  to  best  judgment

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assessment  or  otherwise  to  past  years  to  determine  the  

extent of the breach.  The language of Section 276CC, in our  

view, is clear so also the legislative intention.  It is trite law  

that  as  already  held  by  this  Court  in  B.  Permanand  v.  

Mohan  Koikal (2011)  4  SCC  266  that  “the  language  

employed  in  a  statute  is  the  determinative  factor  of  the  

legislative intent.   It  is well  settled principle of law that a  

court cannot read anything into a statutory provision which  

is  plain and unambiguous”.   If  it  was the intention of  the  

legislature to  hold  up the prosecution proceedings till  the  

assessment proceedings are completed by way of appeal or  

otherwise the same would have been provided in  Section  

276CC itself.  Therefore, the contention of the learned senior  

counsel  for  the  appellant  that  no  prosecution  could  be  

initiated  till  the  culmination  of  assessment  proceedings,  

especially in a case where the appellant had not filed the  

return  as  per  Section  139(1)  of  the  Act  or  following  the  

notices issued under Section 142 or Section 148 does not  

arise.  

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29. We  are  also  of  the  view  that  the  declaration  or  

statement made in the individual returns by partners that  

the accounts of the firm are not finalized, hence no return  

has been filed by the firm, will not absolve the firm in filing  

the ‘statutory return under section 139(1) of the Act.  The  

firm is independently required to file the return and merely  

because there has been a best judgment assessment under  

Section 144 would not nullify the liability of the firm to file  

the  return  as  per  Section  139(1)  of  the  Act.   Appellants’  

contention  that  since  they  had  in  their  individual  returns  

indicated that  the firm’s  accounts  had not  been finalized,  

hence no returns were filed, would mean that failure to file  

return was not willful, cannot be accepted.   

30. Section 278E deals with the presumption as to culpable  

mental  state,  which  was  inserted  by  the  Taxation  Laws  

(Amendment and Miscellaneous Provisions) Act, 1986.  The  

question  is  on  whom  the  burden  lies,  either  on  the  

prosecution or the assessee,  under Section 278E to prove  

whether  the  assessee  has  or  has  not  committed  willful

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default in filing the returns. Court in a prosecution of offence,  

like Section 276CC has to presume the existence of  mens  

rea and it is for the accused to prove the contrary and that  

too beyond reasonable doubt.   Resultantly,  the appellants  

have to prove the circumstances which prevented them from  

filing the returns  as  per  Section 139(1)  or  in  response to  

notices under Sections 142 and 148 of the Act.

31. We, therefore, find no reason to interfere with the order  

passed  by  the  High  Court.   The  appeals,  therefore,  lack  

merits and the same are dismissed and the Criminal Court is  

directed to complete the trial within four months from the  

date of receipt of this Judgment.

……. ………………………J.

 (K.S. Radhakrishnan)

…………………………….J.   (A.K. Sikri)

New Delhi, January 30, 2014.