Facts of the Case

The present matter arose from prosecution initiated by the Income Tax Department against the respondent for alleged failure to file income tax returns pursuant to notices issued under Section 153A of the Income Tax Act, 1961.

A search and seizure operation under Section 132 was conducted on the premises of the Standard Watch Group, including the residential premises of the respondent. Subsequently, notices under Section 153A were issued requiring the respondent to file returns for Assessment Year 2008–09 within the prescribed time.

The respondent failed to file the return within the stipulated time. However, he contended that all financial records and documents were in possession of his brother due to family disputes, and he did not have access to necessary documents. He also sought copies of seized documents from the department, which were not fully provided.

Despite eventual filing of the return on 14.12.2011, prosecution was initiated under Section 276CC for failure to file returns within time.

Issues Involved

  1. Whether failure to file return in response to notice under Section 153A constitutes an offence under Section 276CC of the Income Tax Act.
  2. Whether such failure can be considered “willful default” in absence of necessary documents.
  3. Whether presumption under Section 278E (culpable mental state) applies in the present case.

 

Petitioner’s Arguments (Revenue Department)

  • The respondent had willfully failed to comply with statutory notices issued under Section 153A.
  • Under Section 278E of the Act, a presumption of culpable mental state exists; hence, the burden was on the respondent to prove absence of willfulness.
  • The respondent did not provide sufficient evidence to show that non-availability of documents prevented filing of return.
  • Partial documents had already been supplied; hence, the respondent could not justify complete non-compliance.

Respondent’s Arguments

  • The failure to file return was not willful but due to genuine hardship caused by family disputes.
  • All financial records and documents were in possession of his brother, who handled tax matters.
  • Despite repeated requests, complete copies of seized documents were not provided by the department.
  • Without access to relevant documents, it was not possible to prepare and file accurate returns.
  • The respondent had eventually filed the return once circumstances permitted.

Court’s Findings / Order

  • It was undisputed that complete copies of seized documents were not provided to the respondent.
  • The respondent had made multiple requests seeking access to documents necessary for filing returns.
  • Given the family disputes and lack of access to records, the failure to file return could not be considered willful.
  • The presumption under Section 278E stands rebutted in the facts of the case.
  • The appellate court’s conclusion that there was no willful default was reasonable and required no interference.

Accordingly, the petition was dismissed, and acquittal of the respondent was upheld.

Important Clarification

  • Mere delay or failure in filing return under Section 153A does not automatically attract prosecution under Section 276CC.
  • “Willful default” is a necessary ingredient and must be established based on facts.
  • If the assessee is unable to file returns due to genuine constraints such as lack of access to documents, prosecution may not sustain.
  • Presumption under Section 278E is rebuttable and not absolute.

Sections Involved

  • Section 132 – Search and Seizure
  • Section 153A – Assessment in case of search
  • Section 143(3) – Assessment
  • Section 276CC – Failure to furnish return of income
  • Section 278E – Presumption as to culpable mental state

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:1113/VIB17022020CRLMP2632017_205533.pdf

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