INCOME TAX ACT, 1961

Section 277 read with Section 276C(2) Section 200 Section 202

Prosecution - Offence under sections 276C(2) and 277 - Misstatement or wrong statement to evade payment of tax -

The first petitioner was a Company carrying on the business of construction of apartments and development and sale of plots. Petitioner Nos. 2 to 8 were the Directors of the said Company. The Company had submitted its returns on 30-9-2014. As per the income declared, the tax payable thereon was Rs. 8,08,49,132. It was claimed that they had made payment of tax of Rs. 7,83,69,785. However, no such payment had been made, since the Company did not have the money to make the payment of tax and they had a negative balance in the bank account of the first petitioner Company, the said tax amount was not paid. On 4-2-2016, the Deputy Commissioner issued a show cause notice calling upon as to why the penalty proceedings should not be initiated. This was replied by the petitioner on 23-2-2016. However, considering the same on the very same day, the Income Tax Department passed an order imposing penalty and filed a proceedings in C.C. No. 86/2016 on 29-3-2016 alleging offences under sections 276C(2) and 277 of Income Tax Act, which was taken cognisance by the Magistrate on 29-3-2016 and summons were issued. It was aggrieved by the same that the petitioners were before this Court. Held: Since the portal did not accept the return without the amount paid as income tax being entered into it, the said amount was entered and the income-tax returns were up-loaded. Admittedly, the petitioners did not have money to make payment of the income tax. It was not that the petitioners had money and did not make the payment of the amount. The assessee in the instant case had been forced to upload the returns by mentioning that the entire amount had been paid since without doing so the returns would not have been accepted by the software system set up by the Income Tax Department. Therefore, the said statement made had been forced upon the assessee by the Income Tax Department and cannot be said to be misstatement within the meaning and definition thereof under section 277 of the Income Tax Act. There is no straight-jacket formula which could be laid down as to determine what is a misstatement and what is not. It would be required for the Court and/or the AO or the Appellate Authority to determine the same on the facts of the case liberally in favour of assessee. For an offence to be said to be committed under section 277 of the Income Tax Act, the misstatement is required to be willfully made with a mala fide or dishonest intention in order to prosecute the assessee, there was no willful misstatement by the petitioners in the present proceedings.

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