Prosecution Provisions: Sections 276B & 276CC Explained

The Income Tax Act, 1961, includes stringent prosecution provisions to deter tax evasion and non-compliance. While penalties involve monetary fines, prosecution can lead to imprisonment. Among the most commonly invoked sections are Section 276B, dealing with failure to pay tax deducted/collected at source, and Section 276CC, concerning failure to furnish income tax returns.

Section 276B: Failure to Pay Tax Deducted/Collected at Source

Section 276B of the Income Tax Act addresses situations where a person, without reasonable cause, fails to pay to the credit of the Central Government the tax deducted at source (TDS) or tax collected at source (TCS) within the prescribed time. This provision aims to ensure that tax deducted or collected by an assessee on behalf of the government is promptly remitted.

Applicability and Consequences:

• Who is liable: Any person who has deducted TDS or collected TCS but fails to deposit it to the government exchequer within the stipulated time.
• Punishment: The punishment for an offence under Section 276B is rigorous imprisonment for a term that shall not be less than three months but which may extend to seven years and a fine. The severity of the punishment reflects the seriousness of holding government revenue.
• "Without reasonable cause": The phrase "without reasonable cause" is crucial. If the assessee can demonstrate a genuine and reasonable cause for the delay or non-payment, prosecution may not be initiated. However, proving reasonable cause is often challenging and subject to the interpretation of the courts.

Section 276CC: Failure to Furnish Return of Income

Section 276CC deals with the failure to furnish a return of income as required under various provisions of the Income Tax Act. This section targets individuals and entities who deliberately avoid filing their income tax returns, thereby attempting to evade tax.

Applicability and Consequences:

• Who is liable: Any person who willfully fails to furnish a return of income under Section 139(1) (original return), or fails to furnish it within the time allowed under a notice issued under Section 142(1) (inquiry before assessment) or Section 148 (income escaping assessment).
• Punishment:
  • If the tax sought to be evaded exceeds twenty-five lakh rupees, the punishment is rigorous imprisonment for a term not less than six months but which may extend to seven years and a fine.
  • In any other case (where the tax sought to be evaded does not exceed twenty-five lakh rupees), the punishment is rigorous imprisonment for a term not less than three months but which may extend to two years and a fine.
• Wilful Default: For prosecution under Section 276CC, it is essential to prove "wilful default." This means the failure to file the return was intentional and not due to oversight or genuine difficulty.
• Due Dates: The reference to return due dates is critical here, as failure to file by these deadlines can trigger this provision.

Compounding of Offences:

It's important to note that certain offences under the Income Tax Act, including those under Section 276B and Section 276CC, can be compounded. Compounding means that the accused pays a sum of money in lieu of prosecution, thereby avoiding criminal proceedings. This option is generally available for first-time offenders or in cases where the default is not severe.