The proviso to Section 276CC provides some relief to genuine assesses/ taxpayers.
Question: Can non-furnishing of income tax return attract prosecution u/s 276CC of the Income Tax Act, 1961 (hereinafter referred to as ‘the IT Act) wherein the net tax payable after deduction of TDS and advance tax payable is less than Rs 10,000? Kindly guide us on the recent decision of the Madras High Court pertaining to initiation of prosecution u/s 276CC of the IT Act in regards to the same.
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Answer by Dr Suresh Surana, Founder, RSM India: Section 276CC provides for imprisonment in case of failure to file the return of income. Prosecution under the said section would be attracted in case of failure to furnish return of income u/s 139(1) or in response to a notice issued under Section 142(1)(i) [for Enquiry before assessment] or Section 148 [for Income escaping assessment] or Section 153A [for Search or Requisition] of the IT Act.
The proviso to Section 276CC provides some relief to genuine assesses/ taxpayers. The proviso in clause (ii)(b) of Section 276CC provides that if the tax payable determined by regular assessment as reduced by advance tax paid and tax deducted at source does not exceed Rs. 10,000, such taxpayer shall not be prosecuted for not furnishing the return under Section 139(1) of the IT Act.
The Madras High Court in the case of Manav Menon vs Deputy Commissioner of Income Tax Crl. O.P. No. 26013 of 2021 has provided a ruling with regards to the same. In the said case, the taxpayer has failed to file his return of income for the Assessment year 2013-2014. Therefore, the revenue issued show cause notice u/s 276CC of the IT Act to show cause why the proceedings u/s 276CC should not be initiated against the taxpayer for his wilful failure to furnish the return of income within the stipulated time as mandated u/s 139(1) of the IT Act. On receipt of the said notice, the taxpayer filed his income of return on 14.01.2019.
In context of the said facts, the High Court has held that the aforementioned proviso takes care of genuine assesses/ taxpayers 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 prepaid taxes from the rigor of the prosecution under Section 276CC of the IT Act.
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Thus, the High Court concluded that since the taxpayer had paid taxes under the Heads of Advance Tax, TDS, TCS, Self Assessment Tax to the tune of Rs.23,75,066/- whereas the total tax and interest payable by him was Rs. 23,74,610/-, the proviso (ii)(b) of Section 276CC rescues the taxpayer from the rigor of the prosecution under Section 276CC of the IT Act.
As such, an objective assessment on the applicability of the prosecution provision need to be made considering the provisions of section 276CC as well as the related jurisprudence on a case by case basis.
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