India: Offences And Prosecutions Under Chapter XXII Of The (Indian) Income-Tax Act, 1961

Last Updated: 11 February 2015
Article by Vijay Pal Dalmia, Partner

Article by Vijay Pal Dalmia, Advocate, Partner Vaish Associates Advocates, New Delhi
Mobile: +91 9810081079
Email: vpdalmia@vaishlaw.com


Offences And Prosecutions Under Chapter XXII Of The (Indian) Income-Tax Act, 1961

Chapter XII of the Income Tax Act, 1961 (I.T. Act), which deals with the OFFENCES & PROSECUTIONS, is always a matter of concern for anyone concerned and related with the I.T. Act. It is quite perplexing to understand the defenses available to anyone prosecuted under the provisions of this chapter of the I.T. Act.

For understanding the nuances and implications of the Chapter XII of the I.T. Act, it is necessary to first of all to take note of abbreviations used hereinafter, and understand some legal terms.

  • Cr.P.C. = The Code of Criminal Procedure, 1973.
  • I.T. Act = Income Tax Act, 1961.
  • RI = Rigorous Imprisonment.
  • "Mens rea"1 shall mean and include intention, motive, knowledge of a fact, belief, and reason to believe a fact.

    • The onus of proof that there was no Mens rea, shall be on the accused.
  • Company2 shall mean and include,

    • A Body Corporate;
    • A Firm;
    • An Association of Persons (whether incorporated or not);
    • A Body of individuals (whether incorporated or not).
  • Director shall mean and include3,

    • A Partner in the Firm;

      • Any member controlling the affairs of

        • any Association of Persons,
        • a Body of individuals.
  • 'Bailable Offence' shall mean an offence which is made Bailable, and in case of such offence, bail can be claimed as a matter of right, which is subject to fulfilment of certain conditions like furnishing a bail bond, and surety, etc. to the satisfaction of the officer concerned.
  • 'Non-Bailable Offence' shall mean an offence which is not a Bailable offence (all offences which are not made Bailable by any Statute), and in which bail cannot be claimed as a matter of right.
  • 'Cognizable Offence' means an offence in which, a Police officer may arrest without any warrants or orders of the court.
  • 'Non-cognizable Offence' means an offence in which a Police Officer has no authority to arrest without warrants.
  • 'Summons-Case' means a case relating to an offence, or a case which is declared to be a Summons-Case, by any Statute.
  • 'Warrant-Case' means a case relating to an offence, punishable with death, imprisonment for life, or imprisonment for a term exceeding 2 years.

It is important to note that since some of the above terms have not been defined under the I.T. Act, the meaning of the terms used above have to be taken from the Code of Criminal Procedure, 1973, as mandated under Sec. 280C of the I.T. Act.

JUDICIAL PRESUMPTION OF MENS REA IN CASE OF PROSECUTION UNDER CHAPTER XXII OF THE I.T. ACT

It is utmost important to note that with respect to all the offences under Chapter XXII of the I.T. Act, a judicial presumption, under Sec. 278E of the I.T. Act, as to the culpable state of mind i.e. Mens rea, is raised against all accused in relation to all offences.

The onus of proof has been put on the accused to prove that the accused had no Mens rea which include intention, motive or knowledge of a fact or belief in, or reason to believe a fact, to commit any offences under the said Chapter.

Absence of Mens rea can be taken as a defense and this is one of the strongest defense available for any prosecutions under this Chapter. Going by Sec.278E(2) of the I.T. Act, the presumption against the accused has to be judiciously raised only when the court believes that there are facts on record to establish guilt of the accused beyond reasonable doubt, and mere existence of a possibility of commission of an offence cannot be a ground for conviction.

While dealing with the aspect of Mens rea in relation to Sec.276C of the I.T. Act, the Supreme Court in the case of Gujarat Travancore Agency v. CIT4, held that:

"There can be no dispute that having regard to the provisions of Sec. 276C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established."

The above decision, in a way, is an explanation to Sec.278E of the I.T. Act, wherein it has been held that for offences under Sec. 276C(1), the prosecution has to establish the element of Mens rea. This is contrary to the plain language of Sec.278E of the I.T. Act.

Applying unequivocally Sec. 278E of the I.T. Act, which deals with the presumption as to culpable mental state in a prosecution of offence, for offenses committed under Sec.276CC of the I.T. Act, the Supreme Court in Sasi Enterprises Vs. Assistant Commissioner of Income Tax5, held that in case of a prosecution of an offence, the Court has to presume the existence of mens rea and it is for the accused to prove the contrary and that too beyond reasonable doubt. Resultantly, the accused in a prosecution case has to prove the circumstances which prevented them from filing the returns as per Sec. 139(1) of the I.T. Act or in response to notices under Sec.s 142 and 148 of the I.T. Act.

DEFENSES IN CASE OF PROSECUTION UNDER CHAPTER XXII OF THE I.T. ACT

In case, a prosecution has been launched, the accused may defend the case:

  • By compounding6,7;
  • By pleading not guilty and facing trial;
  • By discharging the onus of proof of absence of Mens rea for commission of the crime alleged;
  • In a Warrant-case, by demonstrating at the state of framing of the charge by the court, that no case can be made out on the basis of the facts and documents available on record; or
  • By filing a petition under Sec. 482 of the Cr.P.C. for quashing of the prosecution, provided merits of the case support such petition.

QUASHING PETITION UNDER SEC. 482 OF THE CR.P.C.

One of the most resorted to and sought after remedy in prosecutions under Chapter XXII of the I.T. Act, is filing of a quashing petition under Sec. 482 of the Cr.P.C. However, one has to understand that for each and every case, quashing petition under Sec.482 of the Cr.C.P.C., may not be an effective remedy.

The general and consistent law is that the inherent power of the High Court under Sec. 482 of Cr.P.C. for quashing has to be exercised sparingly with circumspection and in the rarest of rare cases.

The Supreme Court in Som Mittal vs Govt. Of Karnataka8, has held that the power under Sec. 482 Cr.P.C. must be exercised sparingly, with circumspection and in rarest of rare cases. Exercise of inherent power under Sec. 482 of the Code of Criminal Procedure is not the rule but it is an exception. The exception is applied only when it is brought to the notice of the Court that grave miscarriage of justice would be committed if the trial is allowed to proceed where the accused would be harassed unnecessarily if the trial is allowed to linger when prima facie it appears to Court that the trial would likely to be ended in acquittal.

In the case of Central Bureau of Investigation v. Ravi Shankar Srivastava9, the Supreme Court was of the opinion that, the High Court in exercise of its jurisdiction under Sec. 482 of the Code does not function either as a court of appeal or revision, and held and envisaged that three circumstances under which the inherent jurisdiction may be exercised, namely,

  1. to give effect to an order under the Code,
  2. to prevent abuse of the process of the Court, and
  3. to otherwise secure the ends of justice.

The Supreme Court further held that while exercising powers under Sec. 482 of the Cr.P.C., the court does not function as a court of appeal or revision. Inherent jurisdiction under Sec. 482 of the Cr.P.C., though wide, has to be exercised sparingly, carefully and with caution and only when such exercise is justified by the tests specifically laid down in Sec. 482 of the Cr.P.C., itself. It would be an abuse of the process of the court to allow any action which would result in injustice and prevent promotion of justice. In exercise of powers the court would be justified to quash any proceeding if it finds that initiation/continuance of it amounts to abuse of the process of the court or quashing of these proceedings would otherwise serve the ends of justice. When no offence is disclosed by the complaint, the court may examine the question of fact. When a complaint is sought to be quashed, it is permissible to look into the materials to assess what the complainant has alleged and whether any offence is made out even if the allegations are accepted in toto.

In another case, State of Haryana and others v. Ch. BhajanLal &Ors.10, the Supreme Court laid down the categories of cases in which the High Court may, in exercise of powers under Sec. 226 of the Constitution of India or under Sec. 482 Cr.P.C., interfere in proceedings to prevent abuse of process of the Court or otherwise to secure the ends of justice.

  1. Where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima-facie constitute any offence or make out a case against the accused.
  2. Where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers Under Sec. 156(1) of the Code except under an order of a Magistrate within the purview of Sec. 155(2) of the Code.
  3. Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.
  4. Where, the allegations in the F.I.R. do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated Under Sec. 155(2) of the Code.
  5. Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.
  6. Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party.
  7. Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.

It has been held by the Apex Court that "when the allegations made in the complaint even if taken on their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused or where allegations made in the complaint and the evidence produced in support of the same do not disclose the commission of any offence and make out a case against the accused, it is open to the High Court in the exercise of extra ordinary inherent powers to quash the complaint or the FIR."

In the case of Pepsi Foods Ltd. v. Special Judicial Magistrate11, wherein it has been specifically held that though the Magistrate trying a case has jurisdiction to discharge the accused at any stage of the trial if he considers the charge to be groundless but that does not mean that the accused cannot approach the High Court under Sec. 482 of the Code or Article 227 of the Constitution to have the proceeding quashed against them when no offence has been made out against them and still why must they undergo the agony of a criminal trial.

DIFFERENCE BETWEEN SUB-SEC. (1) AND SUB-SEC. (2) OF SEC. 276C OF THE I.T. ACT

The wording and language in both sub-Sec. (1) and sub-Sec. (2) of Sec. 276C of the I.T. Act appear to be identical except for two important differences.

The sub-Sec. (1) of Sec. 276C of the I.T. Act deals with evasion of any tax, penalty or interest 'chargeable or imposable' under the Act.

The sub-Sec. (2) of Sec. 276C of the I.T. Act deals with the evasion of the 'payment' of any tax, penalty or interest under the Act.

Therefore, it would appear that the provisions of sub-Sec.(1) of Sec. 276C operate when any tax, penalty or interest is chargeable or imposable and the same is alleged to have been evaded. On the other hand, the provisions of Sec. 276C(2) would operate when the payment of tax, penalty, or interest is due and an attempt is made to evade the payment thereof12 13.

For being charged, under Sec. 276C(2) following three conditions are required to be fulfilled:

  1. Wilful attempts in any manner,
  2. To evade the payment of any tax, penalty or interest under this Act, and
  3. The tax, penalty or interest that is assessed, imposed or charged as the case may be and not otherwise.

The Kerala High Court has held that "Sub-Sec. (1) and (2) of Sec. 276C of the I.T. Act, deal with two different situations. Sub-Sec. (1) deals with evasion of tax, penalty or interest CHARGEABLE OR IMPOSABLE under the Act. Therefore, evidently, WHAT IS CONTEMPLATED IS EVASION BEFORE CHARGING OR IMPOSING tax, penalty or interest. That may include wilful suppression in the returns before assessment and completion. But Sub-Sec. (2) DEALS WITH EVADING THE PAYMENT OF TAX, PENALTY OR INTEREST under the Act. The words CHARGEABLE OR IMPOSABLE ARE NOT THERE. What sub-Sec. (2) says is without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable...... Therefore, evidently, Sub-Sec. (2) TAKES IN CASES OF TAX EVASION AFTER CHARGING OR IMPOSITION. Evasion after completion of assessment also comes within the operation of the sub-Sec.214.

FILING OF RETURN UNDER SEC. 276CC: WITHIN TIME – PROSECTION WRONG

In a revision petition against the proceedings under Sec. 276C(1) of the I.T. Act before the Andhra Pradesh High Court, it was held that where the respondents have yet to file a return, the prosecution is premature and the dismissal of the complaint is right. Thus, even before the act of attempt to evade is started, on a mere anticipation or contemplation that there may be a possibility of accruing liability after finalization of regular assessment proceedings, it cannot be said that the accused is liable for conviction under Sec. 276C(1) of the I.T. Act15.

For the interpretation of Sec.276CC of the I.T. Act, in a criminal appeal titled Sasi Enterprises Vs. Assistant Commissioner of Income Tax16, the Hon'ble Supreme Court Of India formulated the following questions as under:

  1. Whether an Assessee has the liability/duty to file a return under Sec. 139(1) of the Act within the due date prescribed therein?
  2. What is the effect of best judgment assessment under Sec. 144 of the Act and will it nullify the liability of the Assessee to file its return under Sec. 139(1) of the Act?
  3. Whether non-filing of return under Sec. 139(1) of the Act, as well as non-compliance of the time prescribed under Sec.s 142 and 148 of the Act are grounds for invocation of the provisions of Sec. 276CC of the Act?
  4. Whether the pendency of the appellate proceedings relating to assessment or non-attaining finality of the assessment proceedings is a bar in initiating prosecution proceedings under Sec. 276CC due to non-filing of returns?
  5. What is the scope of Sec. 278E of the Act, and at what stage the presumption can be drawn by the Court?

While answering the above questions framed by it, the Supreme Court has held as under:

"Sec. 276CCapplies to situations where an Assessee has failed to file a return of income as required under Sec. 139of the Act or in response to notices issued to the Assessee under Sec. 142or Sec. 148of the Act."

The proviso to Sec. 276CC gives some relief to genuine assesses. The proviso to Sec. 276CC gives further time till the end of the assessment year to furnish return to avoid prosecution. In other words, even though the due date would be 31st August of the assessment year as per Sec. 139(1) of the Act, an Assessee gets further seven months' time to complete and file the return and such a return though belated, may not attract prosecution of the Assessee. Similarly, the proviso in clause ii(b) to Sec. 276CC also provides that if the tax payable determined by regular assessment has reduced by advance tax paid and tax deducted at source does not exceed Rs. 3,000/-, such an Assessee shall not be prosecuted for not furnishing the return under Sec. 139(1) of the Act. Resultantly, the proviso under Sec. 276CC takes care of genuine assesses 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 pre-paid taxes, from the rigor of the prosecution under Sec. 276CC of the Act.

Sec. 276CC contemplates that an offence is committed on the non-filing of the return and it is totally unrelated to the pendency of assessment proceedings. The department may resort to best judgment assessment or otherwise to past years to determine the extent of the breach. The language of Sec. 276CC, is clear so also the legislative intention. It is trite law that as already held by the Supreme Court in B. Permanand v. Mohan Koikal that "the language employed in a statute is the determinative factor of the legislative intent. It is well settled principle of law that a court cannot read anything into a statutory provision which is plain and unambiguous". If it was the intention of the legislature to hold up the prosecution proceedings till the assessment proceedings are completed by way of appeal or otherwise the same would have been provided in Sec. 276CC itself. Therefore, it would be wrong to hold that no prosecution could be initiated till the culmination of assessment proceedings, especially in a case where the Appellant had not filed the return as per Sec. 139(1) of the Act or following the notices issued under Sec. 142 or Sec. 148 does not arise.

PENDENCY OF THE REASSESSMENT PROCEEDINGS: NO BAR TO THE THE CRIMINAL PROSECUTION ACT

17In a case, before the Supreme Court the question was, whether prosecutions under Sec. 276 and 277 of the I.T. Act and under Sec.s 193 and 196, Indian Penal Code, instituted by the Department while THE REASSESSMENT PROCEEDINGS under the Act are pending, are liable to be quashed on the ground that they were not maintainable. The Supreme Court, in the circumstances of that case held that:

"On a careful consideration of the relevant provisions of the Act, we are of the view that the PENDENCY OF THE REASSESSMENT PROCEEDINGS CANNOT ACT AS A BAR TO THE INSTITUTION OF THE CRIMINAL PROSECUTION for offences punishable under Sec. 276C or Sec. 277 of the Act. The institution of the criminal proceedings cannot in the circumstances also amount to an abuse of the process of the court."

WHEN TO FILE APPLICATION FOR COMPOUNDING OF OFFENCE

Where application for compounding of offence was not moved by the petitioner-firm before the conviction order was passed by the criminal court. In such circumstances, there is no hesitation in holding that the application for compounding of offence was moved after the conviction order was passed by the Criminal court and, therefore, the question of compounding of offence, particularly when conviction and sentence against the present petitioners had already been passed by the Chief Judicial Magistrate, does not arise18.

DISTINCTION BETWEEN SUMMONS-CASE AND A WARRANT-CASE

The first Schedule of the Cr.P.C. Part II, provides that if any offense is punishable with imprisonment for 3 years and upwards, but not more than 7 years, such offense shall be classified as a cognizable and a Non-Bailable offense. In case an offense is punishable with imprisonment for less than 3 years or with fine only, such offense shall be non-cognizable and Bailable. While classifying the offenses below, wherever there is no provision for any offense under the I.T. Act, the above Schedule has been referred,.

It is also necessary to understand the difference between the Summons-Case and a Warrant-Case and process of criminal trial relating to the same.

IN A SUMMONS-CASE,

  • When an accused appears or brought before the Magistrate,
  • The particulars of the offence are stated to him, and
  • The accused is asked whether he wish to plead guilty or has any defense to make19.

    • On pleading guilty, the Magistrate may record the plea and convict the accused20.
  • The court may or may not frame a formal charge.
  • If the accused does not plead guilty and claims trial, or if the Magistrate does not convict the accused,

    • The Magistrate proceed to hear the prosecution and take all such evidences as may be produced,
    • And also hear the accused and take evidence as the accused may produce in his defense21.
    • After completion of the evidence on the part of both the parties, the Magistrate may acquit the accused or punish in accordance with the law, as the case may be.22

IN A WARRANT-CASE,

  • When an accused appears or not before the Magistrate,
  • The Magistrate proceed to hear the prosecution and take all such evidences as may be produced23.
  • If upon taking evidence, the Magistrate considers that no case against the accused has been made out, the Magistrate shall discharge the accused. The Magistrate can also discharge the accused provided the Magistrate considers that the charge is groundless24.
  • If upon taking evidence or at any earlier stage, the Magistrate is of the opinion that the accused has committed an offence triable as a Warrant – Case, the Magistrate will frame the charge against the accused. After framing of the charge, if the accused pleads guilty, the Magistrate will convict him, else the Magistrate will give an opportunity to the accused to cross-examine the witnesses, if any of the prosecution. At this stage, the entire evidence of the prosecution will be recorded by the Magistrate25.

    • After completion of the evidence, the accused will be allowed to enter defense and produce his evidence26.
    • On the conclusion of the trial, the Magistrate will pass the judgment and acquit or convict the accused27.

From the above, it can be observed that the trial in a summons – case, is carried out in a summary manner, whereas trial in a warrant case is elaborately done. The differentiation in these 2 type of cases is based on the nature of the gravity of the offence.

COGNIZABLE/NON-COGNIZABLE AND BAILABLE / NON-BAILABLE, WHICH SHALL BE SUBJECT TO THE SPECIAL PROVISIONS OF THE I.T. ACT

Since the provisions of Cr.P.C., 1973 have been made applicable for conduct of trial for commission of offenses under Chapter XXII, it may be necessary to understand the methodology for classification of offenses as cognizable/non-cognizable and Bailable / Non-Bailable, which shall be subject to the special provisions of the I.T. Act.

In the Table below, the offences under Chapter XII of the I.T. Act, an attempt has been made to dissect various offences under the said Chapter, for easy understanding of the offences and the consequences.

TABLE OF OFFENCES
UNDER CHAPTER XXII OF THE I.T. ACT
Sec. of the I.T. Act Offence Punishment Cognizable / Non-cognizable Bailable/Non-Bailable Summons case/Warrant case Triable by
275A Disobedience of the orders of the authorized officer for not removing, parting with or otherwise deal with any books of accounts, other documents, money, bullion, jewellery, or other valuable articles or things (Sec.132(1) second proviso, Sec.132(3)) RI up to 2 years and fine Non-cognizable Bailable Summons-case Special court or the Magistrate of the First Class
275B Refusal to allow and facilitate the inspection of accounts and books kept in electronic form Sec.132(1)(iib) RI up to 2 years and fine Non-cognizable Bailable Summons-case Special court or the Magistrate of the First Class
276 Fraudulent removal, concealment, transfer or delivery to any person of any property or any interest therein, to prevent that property or interest therein being taken in execution RI up to 2 years and fine Non-cognizable Bailable Summons-case Special court or the Magistrate of the First Class
276A Failure to give notice of appointment as
  • Liquidator;
  • Receiver;

Or

Failure to set aside sufficient amount to provide for any existing or likely tax liability, payable by the company;

Or

Parting with the assets of the company or the properties in contravention of the Assessing Officer (Sec. 178)

RI up to 2 years Non-cognizable Bailable Summons-case Special court or the Magistrate of the First Class
276(AB) Failure to comply with Sec.269UC (Transfer of Property ),
Failure to deliver the possession of the property under Sec.269UE (2)(Delivery of possession of the property), or
Contravene Sec.269UL(2)(Doing any act prejudicing Transfer of Property)
RI up to 2 years and fine Non-cognizable Bailable Summons-case Special court or the Magistrate of the First Class
276 B Failure to pay to the credit of the Central Government of
  • TDS,
  • Tax on distributed profits of domestic companies,
  • Failure to ensure payment of tax in respect of the winnings from lottery, or cross-word puzzles
RI of not less than 3 months but which may extend to 7 years and fine Non-cognizable Bailable Warrant-case Special court or the Magistrate of the First Class
276BB Failure to pay to the credit of the Central Government, the tax collected RI of not less than 3 months but which may extend to 7 years and fine Cognizable Non-Bailable Warrant-case Special court or the Magistrate of the First Class28
276C(1) Wilful attempt, in any manner, to evade any tax, penalty, or interest under the I.T. Act
  • For amount above Rs.25,00,000/-
  • For any other amount
RI of not less than 6 months but which may extend to 7 years and fine

RI up to 2 years and fine
Non-cognizable Non-Bailable

Bailable
Warrant-case

Summons-Case
Special court or the Magistrate of the First Class
276C(2) Wilful attempt, in any manner, to evade PAYMENT of any tax, penalty, or interest under the I.T. Act RI of not less than 3 months but which may extend to 2 years and fine Non-cognizable
(Sec. 279 A)
Bailable Summons-case Special court or the Magistrate of the First Class
276CC Failure to furnish the return of income under Sec. 139(1), or Sec. 148, or Sec. 153A or Sec. 115 WD(1) or Sec. 115 WD(2) or Sec. 115 WH in due time

For amount above Rs.25,00,000/-

For any other amount
RI of not less than 6 months but which may extend to 7 years and fine

RI up to 2 years and fine
Non-cognizable Non-Bailable

Bailable
Warrant-case

Summons-case
Special court or the Magistrate of the First Class
276CCC Failure to furnish in DUE TIME, RETURN of Total Income, required to be furnished under Sec. 158BC(a) Imprisonment of not less than 3 months but which may extend to 3 years and fine Non-cognizable Bailable Warrant-case Special court or the Magistrate of the First Class
276D Wilful failure to produce accounts and documents on Notice under Sec.142(1),

Or

Wilful failure to comply with the directions issued under Sec.142(1)
RI up to 1 year and fine Non-cognizable Bailable Summons-case Special court or the Magistrate of the First Class
277 Making false statement in any verification or delivering false account or statement

For amount above Rs.25,00,000/-

For any other amount
RI of not less than 6 months but which may extend to 7 years and fine

RI of not less than 3 months but which may extend to 2 years and fine
Non-cognizable Non-Bailable

Bailable
Warrant-case

Summons-case
Special court or the Magistrate of the First Class
277A Falsification of Books of Accounts or documents, etc. RI of not less than 3 months but which may extend to 2 years and fine Non-cognizable Bailable Summons-case Special court or the Magistrate of the First Class
278 If a person abates, or induces another person to make and deliver an account; or a statement or a declaration relating to any income; or any fringe benefits chargeable to tax which is false, or to commit an offence under Section 276C(1)

For amount above Rs.25,00,000/-

For any other amount
RI of not less than 6 months but which may extend to 7 years and fine

RI of not less than 3 months but which may extend to 2 years and fine
Non-cognizable Non-Bailable

Bailable
Warrant-case

Summons-case
Special court or the Magistrate of the First Class
Offences by Companies Sec. 278 B : -

Where an offence has been committed by a Company,
  • Every person,

    • Who at the time the offence was committed,
    • Was in-charge of, and
    • Was responsible to,
    • The Company,

      • For the conduct of the business of the company
  • And the Company,
Shall be guilty of the offence under the Act, and proceeded and punished accordingly.

Defense /Exception under Sec. 278 B : -

The prosecution under this Sec. can be defended, If the accused person liable to punishment,
  • Proves,

    • The offence was committed without his knowledge, or
    • He had exercised all due diligence to prevent the commission of the offence
Following persons (Sec. 278 B (2)) may also be held liable for offences by companies:

If it is proved that the offence has been committed,
  • With the consent of,
  • With the connivance of, or
  • Is attributable to any neglect of,

    • Any Director, Manager, Secretary, or other officer of the company.

Footnotes

1 Sec.278E of the I.T.Act

2 Sec.278B explanation (a) of the I.T.Act

3 Sec.278B explanation (b) of the I.T.Act

4 [1989]177ITR455(SC)

5 [2014]222TAXMAN78(SC)

6 F.NO.285/35/2013 IT (INV.V)/108 dated 23-12-2014

7 GUIDELINES FOR COMPOUNDING OF OFFENCES UNDER DIRECT TAX LAWS, 2014 – Circular – Dated 23-12-2014 – Income Tax

8 AIR 2008 SC 1528

9 2006 Cri LJ 4050

10 AIR 1992 SC 604

111998 Cri LJ 1

12 [2001]118TAXMAN526(Guj)

13 [1995]213ITR307(Guj)

14 [1987]35TAXMAN66(Ker)

15 MANU/AP/0052/1989

16 [2014]222TAXMAN78(SC)

17 MANU/SC/0100/1984

18 [2009]183TAXMAN1(Punj & Har)

19 Sec. 251 of Cr.P.C.

20 Sec. 253 of Cr.P.C.

21 Sec. 254 of Cr.P.C.

22 Sec. 255 of Cr.P.C.

23 Sec. 244 of Cr.P.C.

24 Sec. 245 of Cr.P.C.

25 Sec. 246 of Cr.P.C.

26 Sec. 247 of Cr.P.C.

27 Sec. 248 of Cr.P.C.

28 Sec. 280 B of the I.T. Act

Article by Vijay Pal Dalmia, Advocate, Supreme Court of India and Delhi High Court, Partner & Head of Intellectual Property Laws Division, Vaish Associates Advocates, India

© 2015, Vaish Associates, Advocates,
All rights reserved with Vaish Associates, Advocates, 10, Hailey Road, Flat No. 5-7, New Delhi-110001, India.

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.

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Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions