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Sasi Enterprises vs. ACIT (Supreme Court)
January, 31st 2014

Prosecution for offence u/s 276CC for failure to file ROI can be initiated during the pendency of assessment proceedings. The statement in the individual returns of the partners that the firm has not filed a ROI as its’ accounts are not finalized does not absolve the firm of prosecution for non-filing of ROI

The assessee, a registered partnership firm, of which Ms. J. Jayalalitha and Mrs. N. Sasikala are partners, did not furnish returns of income despite several opportunities. The AO made a best judgement assessment u/s 144 and filed a complaint with the Megistrate against the assessee for committing offences punishable u/s 276CC. The assessee challenged the filing of the complaint on the ground that as the assessment had not attained finality no offence had taken place and so the complaint was pre-mature. It was also pointed out that in the individual returns of the partners it was stated that as the accounts of the assessee-firm had not been finalized, its return of income could not be filed. The Magistrate and High Court dismissed the challenge to the complaint. On appeal by the assessee to the Supreme Court, HELD dismissing the appeal:

(i) The offence u/s 276CC is attracted on failure to comply with the provisions of s. 139(1) or failure to respond to the notice issued u/s 142 or s. 148 within the time limit specified therein. The contention that pendency of the appellate proceedings is a relevant factor for not initiating prosecution proceedings u/s 276CC is not acceptable. S. 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 except for second part of the offence for determination of the sentence of the offence, the department may resort to best judgment assessment or otherwise to past years to determine the extent of the breach. The language of s. 276CC is clear so also the legislative intention. 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 s. 276CC itself. Therefore, the contention 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 s. 139(1) of the Act or following the notices issued u/s 142 or s. 148 does not arise;

(ii) The declaration or statement made in the individual returns by partners that the accounts of the firm are not finalized, hence no return has been filed by the firm, will not absolve the firm in filing the statutory return u/s 139(1) of the Act. The firm is independently required to file the return and merely because there has been a best judgment assessment u/s 144 would not nullify the liability of the firm to file the return as per s. 139(1) of the Act. The contention that since they had in their individual returns indicated that the firm’s accounts had not been finalized, hence no returns were filed would mean that failure to file return was not willful, cannot be accepted;

(iii) S. 278E deals with the presumption as to culpable mental state. The question is on whom the burden lies, either on the prosecution or the assessee u/s 278E to prove whether the assessee has or has not committed willful default in filing the returns. Court in a prosecution of offence, like s. 276CC 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 appellants have to prove the circumstances which prevented them from filing the returns as per s. 139(1) or in response to notices u/s 142 and 148 of the Act;

(iv) The details of the various proceedings reveal the dilatory tactics adopted in these cases. Courts must be guarded against those persons who prefer to see it as a medium for stalling all legal processes. The Criminal Court is directed to complete the trial within four months from the date of receipt of this Judgment.

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