Merely Paying Penalty For Wilful Delay In Filing Income Tax Returns Does Not Exonerate Assessee From Being Prosecuted: Karnataka High Court

The Karnataka High Court has refused to quash prosecution initiated by the Income Tax Department against an assessee who had willfully failed to submit his income tax returns in time for the Assessment Years 2012- 13 to 2015-16 and thereby committed the alleged offence.A single judge, Justice S Vishwajith Shetty dismissed the petitions filed by Rajkumar Agarwal. It said, “Delay in filing of the income tax returns would not only result in payment of penalty, but it also results in prosecution as provided under Chapter 22 of the Act. Therefore, merely for the reason that petitioner has paid the penalty levied by the Competent Authority for the delay in filing of the returns, the same does not exonerate the petitioner from being prosecuted.”The Department filed four separate private complaints against the petitioner for an offence punishable under section 276CC of the Income Tax Act, after obtaining necessary sanction orders from the Competent Authority to prosecute. It was alleged that the petitioner had willfully failed to submit his income tax returns in time for the Assessment Years 2012- 13 to 2015-16 and thereby committed the alleged offence. The petitioner argued that on receipt of notice under section 139 of the Act, he had submitted his income tax returns. Since there was a delay in filing the returns a penalty was levied which was paid by him. Therefore there was no occasion for the respondent-Department to initiate criminal prosecution against him for the alleged offence. It was claimed that he was not granted an opportunity by the competent authority before issuing the sanction order. Moreover, he had not willfully delayed the filing of the returns and the delay was beyond the control of the petitioner since his brothers had died. The department submitted that merely for the reason that the petitioner had submitted the income tax returns, it will not exonerate him from criminal prosecution. There is a presumption against the petitioner available under section 278E of the Act, which is required to be rebutted by the petitioner in accordance with the law before the learned Magistrate.Findings: The bench noted that 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 specified therein. Then it said that the proviso to Section 276 CC takes in only sub-section 1 of Section 139 of the Act and the provisions of Section 142(1)(i) or Section 148 are conspicuously absent. The benefit of the proviso is available only to voluntary filing of the return as required under Section 139(1) of the Act. In other words, it said the proviso would not apply after detection of the failure to file the return and after a notice under Section 142(1)(i) or Section 148 of the Act, is issued calling for filing of the return of the income. Court noted that under Section 278E of the Act, there is a negative presumption and it is for the accused assessee to successfully rebut the said presumption by producing necessary material before the said court, failing which he shall be liable to be punished.The court held “Under the circumstances, the explanation sought to be offered on behalf of the petitioner before this Court cannot be accepted and it is for the petitioner to lead evidence and produce necessary material before the learned Magistrate in support of his defence and rebut the presumption available against him under Section 278E of the Act.” Accordingly,“Delay in filing of the income tax returns would not only result in payment of penalty, but it also results in prosecution as provided under Chapter 22 of the Act. Therefore, merely for the reason that petitioner has paid the penalty levied by the Competent Authority for the delay in filing of the returns, the same does not exonerate the petitioner from being prosecuted.” it dismissed the petitions.Appearance: Advocate Kadloor Satyanarayanacharya for Petitioner.Advocate M Thirumalesh for Respondent. Citation No: 2025 LiveLaw (Kar) 40Case Title: Rajkumar Agarwal AND Income Tax Department. Case No: CRIMINAL PETITION NO. 201214 OF 2023 (482(Cr.PC)/528(BNSS)) C/W CRIMINAL PETITION NO. 201213 OF 2023 CRIMINAL PETITION NO. 201215 OF 2023 CRIMINAL PETITION NO. 201216 OF 2023Click Here To Read/Download Order

Merely Paying Penalty For Wilful Delay In Filing Income Tax Returns Does Not Exonerate Assessee From Being Prosecuted: Karnataka High Court

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