SC: Late Income Tax Return Filing Doesn’t Exempt Taxpayers from Prosecution U/S 276CC

Filing an Income Tax Return (ITR) post deadline but before prosecution does not remove the obligation for the offences u/s 276CC of the Income Tax Act, 1961, Apex court held.

The petitioner Vinubhai Mohanlal Dobaria, contested a ruling of the Gujarat High Court that carried the Chief Commissioner of the income tax’s rejection of his compounding application. The HC held that the belated appellants’ filing does not entitle them to compound under the 2014 CBDT guidelines, as it was not his “first offence”.

The taxpayer loses to submit his returns within time for AY 2011-12 and AY 2013-14. He subsequently submitted the belated income tax returns but was furnished a SCN u/s 276CC for AY 2011-12 on 27.10.2014. The self-assessment tax payable was nil, and he applied for compounding under the 2008 guidelines, which were granted dated 11.11.2014.

Another show-cause notice was issued for AY 2013-14 dated 12.03.2015. The self-assessment tax liable to be filed for that year was Rs 2,78,740. A compounding application was filed by the appellant under the 2014 guidelines citing that he does not have the funds and that the delay was not intended.

The application was rejected by the tax department citing that the return for AY 2013-14 was furnished after a Show Cause Notice (SCN) for AY 2011-12 was issued, which means that it cannot be deemed as a first offence under the 2014 compounding norms. The Gujarat High Court approved this interpretation and dismissed the challenge of the appellant.

It was carried by the bench comprising Justice J.B. Pardiwala and Justice Sanjay Karol that an offence u/s 276CC is devoted just after the deadline for filing the return u/s 139(1) is skipped.

It was said by the court that filing the return u/s 139(4) subsequently or even before the prosecution initiates, does not revise the fact that the offence emerged on the day after the deadline. The court post analysing the legal provisions and the CBDT norms for compounding ruled that the HC made a mistake in rejecting the claim of the appellant that AY 2013-14 was his “first offense.”

It was mentioned by the court that the offence u/s 276CC is devoted to the day following the deadline for return filing lapses not on the date of belated filing. As the offence for AY 2013-14 (initiated dated 01.11.2013) took place before the SCN for AY 2011-12 was issued (27.10.2014), both offences must have been deemed as a “first offence.” The appeal was disposed of.