Offences and Prosecutions under Income-Tax

Offences and Prosecutions
under Income-tax
CA Jugal Gala

Credits and Acknowledgments
V Thirumal

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

Presentation Schema
Introduction
Offences and
Prosecutions
Persons Liable
in Specified
Cases
Power of PCIT or
CIT to Grant
Immunity
Presumption as to Assets,
Books of Account
Presumption as to
Culpable Mental State
Prosecution to be at the
Instance of Specified
Authorities
Certain Offences
to be Non-
Cognizable
Proof of Entries in Records
or Documents of Income-
tax Authorities
Special Courts
Offences Triable
by Special Court
Trial of Offences as
Summons Case
Application of Code of
Criminal Procedure to
Proceedings before Special
Court

Introduction
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
Income-tax Authorities can impose penalties for the offences of assessees
However, Prosecution proceedings or imposition of penalty of any offence can only be made by a
Special Court which is a Magistrate of a Court designated for that purpose
Penalty may be imposed and additionally, prosecution may be launched together against an assessee for
the same offence

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
upto 2 years
Liable to Fine
276
Removal, concealment, transfer or delivery of
property to prevent from being taken in execution of
certificate under Recovery Proceedings
upto 2 years
Liable to Fine
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
upto 2 years
Minimum of 6 months
-
(Rigorous imprisonment means imprisonment along with hard and unproductive labour work)

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
upto 2 years
Minimum of 6 months
Liable to Fine
276B
Failure to pay taxes deducted at source, DDT or taxes
when lottery winnings are received in kind to the
Central Government
of 3 months to 7 years
Liable to Fine
276BB Failure to pay taxes collected at source
of 3 months to 7 years
Liable to Fine

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
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
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

276CCC
Failure to furnish return of income
pursuant to order for Block
Assessment
Rigorous Imprisonment 3 months to 3
years
Liable to Fine
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
277
Intentional false statements in
verification under the Act or any rule
Tax would
have been
evaded
exceeds Rs
25 lakh
6 months to 7 years
Liable to Fine
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

278
Abetting or inducing to file
false returns or to evade tax
Tax would have
been evaded
exceeds Rs 25 lakh
6 months to 7 years
Liable to Fine
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
280
Wrongful disclosure of
assessee’s information by a
public servant
Imprisonment upto 6 months
Liable to Fine
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

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

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

Presumption as to Assets, Books of Account – Sec 278D
and also that the contents of such books of account and other documents are true
It would be presumed that such books of account or other documents and assets belong to
the person in whose control or possession they were found
Such assets or books of account or other documents are tendered by the prosecution in
evidence against such person and/or against any person who is convicted of abetting
Any money, bullion, jewellery or other valuable articles or things or any books of account
or other documents had been found in the possession or control of any person and
Where, during the course of any search made under Sec 132,
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

Presumption as to Culpable Mental State – Sec 278E
In any prosecution for any offence which requires a culpable mental
state on the part of the accused,
the court shall presume the existence of such mental state
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

Prosecution to be at the Instance of Specified Authorities
– Sec 279
A person shall not be proceeded against for an offence except with the previous sanction
of PCIT, CIT or CIT(A) or the Appropriate Authority
Principal CCIT or CCIT or Principal DGIT or DGIT may issue instructions to the above-
mentioned authorities to initiate prosecution proceedings
Any offence before or after initiation of proceedings can be compounded
Revised guidelines for compounding of offences issued by the CBDT came into effect on 17 June 2019
During Prosecution, evidence produced by the assessee before the authorities cannot be disregarded merely
on the basis that it was produced for Waiving of penalty or for compounding
has been reduced or waived by an order of PCIT or CCIT under Sec 273A
the penalty imposed or imposable on him for under-reporting or mis-reporting or failure to furnish
returns/ comply with notices (270A or 271)
A person shall not be proceeded against for an offence under Sec 276 (Wilful attempt to evade tax)
or Sec 277 (False statement in verification) in relation to the assessment for an AY in respect of which

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

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

Special Courts – Sec 280A
designate one or more courts of Magistrate of the first class as Special Court
for trial of offences punishable under Chapter XXII, by notification,
The Central Government, in consultation with the Chief Justice of the High Court, may,
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

Offences Triable by Special Court – Sec 280B
The Offences under Chapter XXII of Income-tax Act shall only be triable by a Special Court notwithstanding
anything contained in Code of Criminal Procedure, 1973
However, a court competent to try offences under Sec 292 (Cognizance of offences) which has been designated
as a Special Court, shall continue to try the offences before it or offences arising after such designation
Further, a court competent to try offences under Sec 292, which has not been designated as a Special Court,
may continue to try such offence pending before it till its disposal
A Special Court may take cognizance of the offence for which the accused is committed for trial, upon a
complaint made by an authority authorized in this behalf

Trial of Offences as Summons Case – Sec 280C
The Special Court shall, notwithstanding anything contained in the Code of Criminal
Procedure, 1973, try an offence under Chapter XXII punishable with imprisonment not
exceeding two years or with fine or with both, as a summons case
When an offence is so tried as a summons case, the provisions of the Code of Criminal
Procedure, 1973, as applicable in the case of trial of summons case, would be applicable
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.

Application of Code of Criminal Procedure to Proceedings
before Special Court – Sec 280D
The provisions of the Code of Criminal Procedure, 1973, including the provisions regarding bails and bonds,
would apply to proceedings before a Special Court, unless otherwise provided under the Income-tax Act, 1961
The person conducting the prosecution before the Special Court shall be deemed to be a Public Prosecutor
The Central Government may also appoint a Special Public Prosecutor for any case or class or group of cases
A person shall be qualified for appointment as a Public Prosecutor or a Special Public Prosecutor only if he has
been in practice as an advocate for at least seven years, requiring special knowledge of law
Every person appointed as Public Prosecutor or Special Public Prosecutor shall be deemed to be a Public
Prosecutor within the meaning of section 2(u) of the Code of Criminal Procedure, 1973. The provisions of the
Code of Criminal Procedure, 1973, would have effect accordingly

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