Criminal proceedings for failure to furnish income tax returns under Section 276CC are not maintainable if the tax payable is below the statutory threshold (Rs. 3,000 for the relevant period), and subsequent amendments excluding companies from this benefit apply prospectively.

PRAYER:

Criminal Original Petition is filed under Section 482 of Cr.P.C., to call for the records in EOCC.No.153 of 2016 pending before the Additional Chief Metropolitan Magistrate (Economic Offences-II), Egmore and quash the same.

ORDER

This criminal original petition has been filed praying to quash the proceedings in EOCC.No.153 of 2016 pending before the Additional Chief Metropolitan Magistrate (Economic Offences-II), Egmore.

The respondent filed complaint for the offence under Section 276 CC of the Income Tax Act, 1961 for non filing of income tax returns for the assessment year 2013-2014 on the allegation that the first accused is the company, which engaged in the business of renting of cars to various companies for transportation of their employees, officers, etc on contract basis and also individual basis. The second petitioner is the Director of the first accused company. During the assessment year 2013-2014, they failed to file income tax returns despite huge transactions during the financial year 2012-2013. As per Section 139(1) of Income Tax Act, 1961 (hereinafter called as ‘the Act’), they ought to have filed returns of income on or before 30.09.2013. However, the accused failed to file returns and as such, show cause notice dated 26.04.2016 was issued to the accused and on receipt of the same, on 18.05.2016, the accused submitted reply stating that the Managing Director was suffering from medical illness and was undergoing treatment. Therefore, on the reason the accused wilfully and deliberately had concealed the true and correct income by non furnishing their returns of income, the complaint as contemplated under Section 139(1) of the Act was filed as they committed offence under Section 276 CC of the Act.

The learned counsel for the petitioners would submit that even according to the respondent, the total tax amount is only Rs.1,750/-. As per proviso to Section 276 CC of the Act, a person shall not be proceeded for failure to furnish returns of income if tax payable by him on the total income determined on regular assessment, as reduced by the advance tax, if any, paid and any tax deducted and so does not exceed Rs.3,000/-. In the case on hand, the accused ought to have paid income tax only to the tune of Rs.1,750/-. Therefore, they cannot be punished under Section 148 of the Act. He further submits that after receipt of notice under Section 148 of the Act on 04.02.2019, the accused paid tax on 28.02.2019 only. Therefore, assessment order was passed on 18.12.2019. As such, the complaint itself is premature and it cannot be sustained against the accused.

Per contra, the respondent filed counter and the learned Senior Panel Counsel for Income Tax Department appearing for the respondent submitted that the proviso to Section 276 CC of the Act is not applicable to the accused, since it is a company and it is being the company, the proviso (ii) sub clause b of Section 276 CC is not applicable. It is applicable only to the individual person and that too for regular assessment. In the case on hand, the respondent scrutinised the accounts and assessed tax. Therefore, the proviso to Section 276 CC is not applicable to the petitioners. She further submitted that on verification of database of income tax department, it was found that the accused had made contract receipts to the tune of Rs.2,65,03,859/-, rent received to the tune of Rs.36,89,255/- and cash deposits in bank to the tune of Rs.57,64,056/-. However, the accused had not filed returns of income for the assessment year 2013-2014. Therefore, the respondent caused show cause notice dated 26.04.2016. Reply ws submitted by the accused was not satisfied and therefore prosecution was initiated under Section 276CC of the Act for non filing of income tax returns. Further, the proviso applies only where regular assessment has been framed. In the case on hand, no regular assessment has been framed. Regular assessment order is the first order under Sect