Once the income tax authorities have accepted the revised returns under Section 139(5), it is impermissible for them to launch prosecution under Section 276(c), 277, and 278 of the Act.

Headnote:
Income Tax Act - Revised Return - Prosecution for Offence - The court held that once the income tax authorities have accepted the revised returns under Section 139(5), it is impermissible for them to launch prosecution under Section 276(c), 277, and 278 of the Act. The order of acquittal granted is sound and proper.
Fact of the Case:

The account books of A. 1 to 3 disclosed a sum of Rs. 100000/- as loan from A. 4. The tax authorities conducted a search and found no corresponding entries in the accounts of A. 4 to corroborate the loan. A. 4 stated to the income tax authority that the entry is a false entry. A. 1 to 3 filed revised returns under Section 139(5) and the revised return was accepted. Later, the department launched prosecution for committing an offence under Section 276(c), 277, and 278 of the Income Tax Act.
Finding of the Court:

The court found that the conscious and willful attempt to evade tax is the primary ingredient of the offence under the provisions. Once the income tax authorities have accepted the revised returns under Section 139(5), it becomes explicit that the earlier return filed was a bonafide mistake and does not indicate any mens rea element. Therefore, it is impermissible for the income tax authorities to launch prosecution under Section 276(c), 277, and 278 of the Act. The order of acquittal granted is sound and proper.
Issues: The main issue was whether the income tax authorities could launch prosecution under Section 276(c), 277, and 278 of the Act after accepting the revised returns under Section 139(5).
Ratio Decidendi: The court held that once the income tax authorities have accepted the revised returns under Section 139(5), it is impermissible for them to launch prosecution under Section 276(c), 277, and 278 of the Act.
Final Decision: The appeal was dismissed, and the order of acquittal granted was upheld.

K. SREEDHAR RAO, J.

( 1 ) THE account books of A. 1 to 3 disclosed a sum of Rs. 100000/- as loan from A. 4. Accordingly, the returns were filed by A. 1 to 3 for the assessment period 1986-87. The tax authorities conducted search of the premises of A. 4 and found that there is no corresponding entries in the accounts of A. 4 to corroborate the loan of Rs. 100000/- to A. 1 to 3. A. 4 was not able to substantiate the source, hence stated to the income tax authority that the entry is a false entry relating to loan from A. 4 shown by A. 1 to A. 3. The income tax accepted the version of A. 4. The income tax authorities issued notice to A. 1 to 3 for submitting false return. A1 to 3 filed revised returns Under Section 139 (5) of the Income Tax Act. The revised return is accepted. Accordingly, the tax liabilities have been recovered. Later on the department launched prosecution of A. 1 to 4 for committing offence Under Section 276 (c), 277 read with Section 278 of the. T. Act. The provisions of Section 139 (5) reads thus: 139 (5) If any person, having furnished a return under Sub-section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier:

( 2 ) THE provisions of Section 276 (c), 277 and 278 reads thus: 276-C. Wilful attempt to evade tax etc. ,- (1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or impossible under this Act, he shall, without prejudice of this Act, be punishable,

(i) in a case where the amount sought to be evaded exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than 6 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 three years and with fine.

(2) If a wilfully attempts is any manner whatsoever to evade the payment of any tax, penalty, or interest tinder this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and shall, in the discretion of the court, also be liable to fine. 277. False statement in verification 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 known 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 one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to three years and with fine. 278. Abetment of false return, etc.- 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 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 276-C 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 one 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 extent to three years and with fine.

( 3 ) THE assessee is permitted to file revised return if there is any bona

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Judicial Analysis

2006 Supreme(Kar) 394

Karnataka High CourtJudges : K.Sreedhar RaoK.E.SUNIL BABU, ASST.COMMR.OF INCOME TAX - AppellantVersusSTEEL PROCESSORS BANGALORE COOPERATIVE INDUSTRIAL ESTATE, SRI KEWAL GUPTA MAJOR - RespondentCrl. A. 1036 Of 2000Decided On : 06/01/2006Advocates Appeared : JEEVAN J.NEERALGI, P.V.GUNJAL, V.S.GUNJAL

Once the income tax authorities have accepted the revised returns under Section 139(5), it is impermissible for them to launch prosecution under Section 276(c), 277, and 278 of the Act.

Judicial Analysis