Assessee Filed ITR of Company Being A Director, But Failed To File Individual ITR; Mumbai Court Upholds Conviction Under S. 276CC of ITA

The Court of Additional Sessions Judge, Dr. A. A. Joglekar, added that while prosecuting the offence under Section 276CC of the Income Tax, existence of mens rea can be presumed and it is for the accused to prove the contrary.

Section 276CC of the Income Tax Act provides for punishment in cases where a person wilfully fails to furnish the income tax return in due time, which he is required to furnish under Section 139 (1) or in pursuance of the notice issued under Section 153A.

The accused/ assessee, Hema Chetan Shah, was issued a notice under Section 153A of the Income Tax Act for filing Income Tax Return for the relevant accounting year within 30 days from the receipt of the notice.

After the accused failed to file the Return within the stipulated period, a show cause notice was served upon the accused, seeking to initiate prosecution under Section 276CC of the Income Tax Act.

Since the accused, Hema Chetan Shah, failed to file a response to the said show cause notice, offence under Section 276CC read with Section 278E of the Income Tax Act was registered against him and prosecution for wilful failure to furnish Income Tax Return was initiated.

The accused was convicted of the said offence by the Court of Additional Chief Metropolitan Magistrate, who also directed him to pay the fine. The accused challenged the order by filing an appeal before the Additional Sessions Judge.

The accused/ appellant, Hema Chetan Shah, submitted before the Sessions Court that he was prevented from filing the Income Tax Return since the relevant files/papers were in custody of the Income Tax Department after search and seizure operations were conducted against the Company in which the accused stood as a director. Thus, he argued that no wilful default was committed by the accused in filing the Income Tax Return and therefore, no criminal liability can be fastened against him.

Referring to the facts of the case, the Court took note that inspite of the Section 153A notice and the show cause notice seeking to initiate prosecution being served upon the accused, the revenue authorities had issued a letter to the accused, conveying that, as per the Income Tax Act, supplying/ providing copies of the seized documents/statements is not a pre­condition for compliance of the Section 153A notice.

“Furthermore, the complainant agency as on 15.09.2016 again corresponded by letter (Exh.43) thereby providing such last and final opportunity to the accused to collect such photocopies of the seized documents by 23.09.2016,” the Court observed.

Holding that the accused was given the opportunity of collecting the relevant documents in xerox form from the income tax authorities, the Court said, “Therefore, in this regard, undoubtedly the factum of wilful default is well propelled and the complainant agency has succeeded in proving their case beyond reasonable doubt.” It added that inspite of the correspondence and affording of opportunity to collect the relevant copies, the accused had failed to comply with the notice.

The Sessions Court further observed that the accused had admitted in his cross-examination that, in his capacity as the director of M/s. Decent Dia Jewels Pvt. Ltd., he had complied with the filing of Income Tax Returns. Noting that the accused had, however, failed to comply with the obligation to file his individual Income Tax Return, the Court remarked, “This particular admission will naturally have bearing upon the case wherein the accused on one hand has filed such returns pertaining to the company of which he is director while has failed to comply with filing of such material Income Tax Returns, wherein the presumption as to the culpable mental state can be well derived and therefore, it can be clearly inferred that, the accused has committed, violated and transgressed the provision under Section 276CC read with Section 278E of the Income Tax Act.”

The Judge concluded, “The accused undoubtedly failed to comply with the notice under Section 153A and therefore, is an offender under Section 276CC also that in a prosecution of offence as in the instant case it can be well presumed the existence of Mens rea and it is for the accused to prove the contrary.”

Upholding the order of the Trial Court, the Court dismissed the appeal.

Case Title: Hema Chetan Shah versus Government of India & Anr.

Dated: 30.01.2023

Counsel for the Appellant: Adv. Mr. Bharat Gandhi A/w Adv. A. K. Chauhan

Counsel for the Respondent: Adv. Mr. Pranil Pawar A/w Adv. Madhura Muley H/f SPP Ravi Goenka; APP. Mr. Abhijit Gondwal for the State

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