2. INTRODUCTION
• Generally, under the taxation laws, levy of monetary penalty is levied for the default
committed by the tax payer. However, upsurge in willful tax evasions and with a view to
strengthening the tax surveillance led the Parliament to introduce stringent provisions for
prosecution of the defaulters not complying with the provisions of the Income Tax Act.
• Under the Income Tax Act, penalties are incurred for the defaults committed by the
taxpayers. In addition to penalties, there are other offences that are prosecuted under the
Income Tax Act.
• Besides the tax evasion, delay or failure of tax return filing, many other offences are liable
to prosecution that the taxpayers should be aware of, to avoid the associated harsh legal
consequences.
3. Article 20 in The Constitution Of India 1949
Protection in respect of conviction for offences
(1) No person shall be convicted of any offence except for violation of
the law in force at the time of the commission of the act charged as an
offence, nor be subjected to a penalty greater than that which might
have been inflicted under the law in force at the time of the commission
of the offence
(2) No person shall be prosecuted and punished for the same offence
more than once
(3) No person accused of any offence shall be compelled to be a
witness against himself
4. Principle of double jeopardy
• The principle of double jeopardy is a procedural defence which prevents an accused person from being tried
once again on the same or similar charges and on the same facts following a valid acquittal or conviction.
• However, in case of prosecution u/s. 276B of the Act, the principles of double jeopardy would not be
applicable on the ground that penalty or interest has already been imposed for the same offence. This is
because prosecution has no relation whatsoever with the penalty or interest as levied as per the provisions of
the Act.
• The Bombay High Court had in the case of [ITO vs. Sultan Enterprises & Ors. (2002) 256 ITR 185
(Bom)] held that the assessee is liable both for recovery of the amount with interest and penalty so also for
prosecution for having committed offence of the IT Act for his failure to pay the amount within the prescribed
period. punishable under s. 276B
5. Sec 278E
Presumption As To Culpable Mental State
In any prosecution for any offence under this act
• Defence can’t be proved by preponderance of probability
• Section 278E of the act presumes the existence of a culpable mental
state.
Unlike the civil or criminal laws which presumes the accused to be
innocent until found to be guilty. Therefore the increased onus lies on
the assessee to prove the absence of a culpable mental state.
6. Who is liable to be prosecuted
• Any person, committing the offence is liable to be prosecuted. In this connection it
is not necessary that the person should be an assesse under the Income-tax Act.
• In the case of an offence committed by a Company, Firm, Association of Persons
or Body of Individuals, every person in charge of or responsible for the conduct
of the business of the concern as well as the concern are deemed to be guilty.
• Similarly, in the case of an offence by a Hindu Undivided Family, the karta
thereof is deemed to be guilty of the offence.
7. Sections Relating To Prosecution
Sections 275A to 280 of the income tax act, 1961 provides for various types
of offences for which the department can prosecute an assessee.
• Prosecution can be launched only at the instance of the principal
commissioner of income tax or commissioner of income tax or commissioner
of income tax (appeals).
• Balwant singh gopal (279 itr 510)(sc) – no opportunity is required to be
given to assessee before lodging complain.
8. Sec 275A- Removing Seized Assets
• Section 132 authorizes the tax officials to execute a search at the premises of the taxpayer and
also empowers them to seize in their custody on finding the suspect violating.
• In such a course, if the authorities are unable to remove the physical possessions due to its
volume, section 132(1) allows the tax authorities to keep the seized items in the taxpayer’s
place only.
• In this circumstance, the authority will pass an order on the possessor of the asset stating
him/her not to remove, part with or otherwise deal with the asset except with the permission
of the former.
• The authorities on ensuring the owner not complying with the provision will attract
prosecution of two-year imprisonment and fine.
9. Failure to afford necessary facility to authorized officer
to inspect books of account – 275 B
• If any person has failed or omitted to produce the books of accounts or other
documents as required by the intimation or summon, the tax authorizations
will exercise a search. In such a case where the tax authorities conduct a
search, the person who possesses or in control of
• (i) the books of accounts or
• (ii) the electronic records of the documents, should afford necessary facility for
the authorized inspecting officer.
• Under section 275 B, failing to facilitate the search, the person is punishable
with imprisonment for a period that may extend to two years and is liable to
fine.
10. Prevention Of Tax Recovery- Sec 276
• Tax evasion has been a criminal offence always. The tax authority can recover
the tax defaults of a taxpayer if failing to file returns or release the liable tax.
Retrieval of the tax dues from the defaulter is carried out by attaching
his/her movable and immovable property.
• If the taxpayer attempts to prevent the recovery of that property or interest by
fraudulently removing, concealing, transferring or delivering the property,
the assessee is accountable for punishment.
• Prosecution for the commission of such an offence under section 276 would be
imprisonment for two years and liable to fine.
11. Offence Committed by Liquidator - 276 A
• As per section 178(1), any person or a liquidator of the company who is legally empowered to act
on behalf of the company as the receiver of its assets should intimate the tax authority
responsible for assessing the income of the company within 30 days.
• The Assessing Officer notifies an amount to be set aside for the payment of the debts due to the
Government. Under section 178(3), the liquidator should not part with any asset or amount
without the permission of the Principal Chief Commissioner or should not part with any asset or
property without setting aside the amount notified.
• Section 276 A prosecutes the liquidator in case of failing to notify the tax authority or not putting
back the amount in regards with the provision or parting with any asset or property with
imprisonment of 2 years or less than 6 months on providing adequate reasons.
12. Failure to pay TDS or DDT to the credit of the Government -
276 B.
• The Income Tax Department that is responsible for collecting and recovering tax has shifted the burden of collecting the
tax to the node of the source of income where specified persons are held responsible to withhold the income tax, which is
called TDS (Tax Deducted at Source).
• In such situations where the income of a person is deducted for tax at the source, the deductor should pay the interest to the
Government, which on delay levies penalty. A person failing to pay to the credit of the central Government that includes the
tax deducted by the individual, the dividend distribution tax (DDT) or the tax with respect to the amount winning from
crossword puzzle or lottery as per section 194 B within the prescribed time, then such person is punishable under section
276 B.
• 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.”
• The assessee is required to pay a fee to the Revenue Department instead of serving imprisonment.
13. Failure to pay Tax Collected - 206C
• Section 206C administers the provisions involving Tax Collection at
Source (TCS). Falling short of paying the collected tax to the credit of
the Government is an offence and a person committing it will be
prosecuted as per section 276BB with imprisonment not less than 3
months that may extend to seven years along with a fine.
14. Tax Evasion - 276C.
• If a person attempts to avoid tax, penalty, interest intentionally or
under-states his income, then prosecution proceedings against such
person will be imprisonment for a term not less than 3 months
extending to 3 years if the amount evaded accounts to 1 lakh wherein
it is 7 months to 7 years in other cases under section 276C.
15. Sec 276CC - Wilful Failure To Furnish Returns
• It is mandatory that every person have to file the income tax return if the total
income exceeds the exemption limit within the specified period.
• Non-submission of an income tax return by any person within the prescribed
deadline is punishable under section 276CC that will be imprisonment for a
term not less than 3 months extending to 3 years if the amount evaded accounts
to 1 lakh wherein it is 7 months to 7 years in other cases.
• However, if the payable tax does not exceed Rs.3000 or if the return is filed
within the expiry of the assessment year, the taxpayer will not be prosecuted.
16. Sec 276D-Wilful failure to produce accounts and
documents
• The Assessing Officer issues a notice of inquiry before assessment under section 142(1) asking the taxpayer
to furnish the returns or produce accounts and documents as he may require.
• The Assessing officer directs the accounts of the taxpayer for a re-audit from the Chartered Accountant in a
prescribed manner satisfying the conditions of the special audit under section 142(2A).
• If a taxpayer does not produce the accounts and documents as per section 142(1) or comply with the
directions issued under Section 142(2A), the person shall be punished with 1 year of prison or a fine at the
rate of Rs 4 to Rs.10 for every day of the default period.
• Any person who with knowledge making a false statement in any verification or producing false documents
or accounts is to be prosecuted for 6 months to 7 years of imprisonment with a fine.
17. Sec 277 False statement in verification or
delivery of false account, etc.
• “If a person makes a statement in any verification under this Act or under any rule made
thereunder, 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,—
• (i) 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;
• (ii) 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.”
18. Sec 277A Falsification of books of account or document,
etc., to enable any other person to evade any tax, penalty or
interest chargeable/leviable under the Act
• Falsification of books of account or document, etc., to enable any other person to evade any tax, penalty or
interest chargeable/leviable under the Act “If any person wilfully 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.
• Explanation.—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.”
19. Sec 278 Abetment of false return, account, statement or
declaration relating to any income or fringe benefits
chargeable to tax
• “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 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,—
• (i) 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;
• (ii) 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.”
20. Sec 278B Offences by company
• Under the Income Tax Act, when a company or firm has committed a crime and
every person in charge or responsible of the company or business at the time when
the offence was committed are considered guilty of the offence and are punished
as per section 278B.
• However, such a person will not be reckoned to be guilty on proving that the
offence was committed unintentionally and without his knowledge. Where a
person in a company has committed an offence under the Income-tax Act, then the
person is liable and punished in accord with the provisions of the Act.
21. Sec 278C Offences by HUF
• As per section 278C, when a Hindu Undivided Family has committed an
offence under the Income-tax Act, the Karta (manager of the joint family
and its properties) is deemed guilty of the offence and punished accordingly.
Wherein if a member of the Hindu Undivided Family has committed an
offence under the Income-tax Act and has proved to be committed
knowingly, then the member is liable to be punished.
• The offences liable for prosecution committed by a HUF include enabling
a member of the HUF to evade Income Tax.
22. Sec 280(1) Disclosure of particulars by public
servants
• “(1) If a public servant furnishes any information or produces any
document in contravention of the provisions of sub- section (2) of
section 138, he shall be punishable with imprisonment which may
extend to six months, and shall also be liable to fine.
• (2) No prosecution shall be instituted under this section except with
the previous sanction of the Central Government. ”
23. Section 278AA: No person shall be punished for any failure
if he proves that there is reasonable cause failure.
• However the onus to prove that there was a reasonable cause for
failure lies with the taxpayer taking the plea.
• 1. Lack of Financial Capacity
• 2.Pending refunds from the Government
• 3.Age of the taxpayer
24. REMEDIES IN CASE OF PROSECUTION
UNDER CHAPTER XXII OF THE I.T. ACT
In case, a prosecution has been launched, the accused may defend the case:
• In a Warrant-case, by demonstrating at the state of framing of the charge by
the court, that no case can be made out on the basis of the facts and
documents available on record;
• By discharging the onus of proof of absence of Mens rea for commission of
the crime alleged;
• By pleading not guilty and facing trial;
• By filing a petition under Sec. 482 of the Cr.P.C. for quashing of the
prosecution, provided merits of the case support such petition or
• By compounding
