Penalties and prosecution under the Income Tax Act, 1961 Issues and Landmark Judicial Pronouncements

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1 Pune Branch of WIRC of ICAI Direct Tax Refresher Course on 20 th April, 2013 Penalties and prosecution under the Income Tax Act, 1961 Issues and Landmark Judicial Pronouncements Kishor B. Phadke, FCA Kirtane & Pandit Chartered Accountants

2 PENALTIES

3 Meaning The term Penalty has not been defined under the Income Tax Act, 1961 (Act). Punishment; Suffering or loss imposed for breach of a law; a fine or loss agreed upon in case of non-fulfilment of some undertaking; a fine - Chambers 20 th Century Dictionary, 1983 Edition Penalty is a liability composed as a punishment on the party committing the breach of contract. Agreement to pay at default interest at a higher rate does not amount to penalty. - P Ramanatha Aiyar s Law Lexicon, 2 nd Reprint Edition

4 Meaning contd Punishment imposed on wrongdoer, usually in the form of imprisonment or fine; especially a sum of money exacted as punishment for either a wrong to the state or a civil wrong (as distinguished from compensation for the injured party s loss). Though usually for crimes, penalties are also sometimes imposed for civil wrongs. - Black s Law Dictionary, 9 th Edition 4

5 Contents Section 271 Section 271F Section 271(1B) Section 271G Section 271A Section 27BB Section 271AA Section 273 Section 271AAA Section 273AA Section 271AAB Section 273B Section 271B Section 274 Section 271BA Section 275 Section 271C Section 271D Section 271E 5

6 Sec 271 Failure to furnish returns, comply with notices, concealment of income etc. If the Assessing Officer or Commissioner (Appeals) or Commissioner in the course of any proceedings under this Act, is satisfied that any person (a)... (b) has failed to comply with a notice (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or (d) has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits 6

7 Observations of the Supreme Court in Anwar Ali s case, 76 ITR 696 Gist of the offence under section 28(1)(c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and, therefore, the department must establish that the receipt of the amount in dispute constitutes income of the assessee. If there is no evidence on the record except the explanation given by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes his taxable income. 7

8 Judgments Prior to Explanation to Sec 271 Hindustan Steel Ltd, 83 ITR 26- SC observed: Penalty will not be imposed because it is lawful to do so. It is a matter of discretion of the authority to be exercised judicially Anwar Ali 76 ITR 696 discussed earlier Khoday Eswara & Sons, 83 ITR 369- SC : It is clear that penalty proceedings being penal in character, the department must establish that the receipt in dispute constitutes income of the assessee 8

9 Explanation 4 to Section 271(1) (c) Explanation 4.-For the purposes of clause (iii) of this sub-section, the expression "the amount of tax sought to be evaded",- in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into income, means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income; in any case to which Explanation 3 applies, means the tax on the total income assessed as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice under section 148 ; in any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished. 9

10 Explanation 5A to section 271 (1) (c) In the course of search initiated after , assessee found to be the owner of : Any money, bullion, jewellery etc.. And assessee claims that such asset have been acquired by him utilising wholly or partly his income for previous year; or Any income based on any entry in any books of account or other documents or transactions and he claims that such entry represents his income wholly or partly for any previous year, ended before search date and Where return of income has been furnished before the said date without declaring the said income; Where return of income has not been filed and due date has expired. Notwithstanding that income has been declared by him, in return furnished on or before the date of search, he shall for the purpose of penalty u/s 271(1)(c) be deemed to have concealed the particulars of income. 10

11 Judgments Post Explanation to Sec 271 Suresh Chandra Mittal, 251 ITR 9 SC : It is well settled that initial burden lies on revenue to establish that the assessee had concealed /furnished inaccurate particulars of income. Burden shifts to assessee if he fails to offer any explanation. However, Expl 1 provides for shifting of this burden again where the explanation offered by the assessee is found to be bonafide. K C Builders & Another, 265 ITR 562 SC : The word "concealment" inherently carried with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if it takes out the case from the purview of nondisclosure, it cannot by itself take out the case from the purview of furnishing inaccurate particulars. 11

12 Contd Virtual Soft Systems, 289 ITR 83 SC : This court as well as the various High Courts of the country have consistently held that the statute creating the penalty is the first and the last consideration and must be construed within the term and language of the particular statute. In Bijaya Kumar Agarwala v. State of Orissa [1996] 5 SCC 1 it has been held by this court in paragraphs 17 and 18 as under: "17. Strict construction is the general rule of penal statutes. Justice Mahajan in Tolaram Relumal v. State of Bombay, AIR 1954 SC 496, at pages , stated the rule in the following words: 'If two possible and reasonable constructions can be put upon a penal provision, the court must lean towards that construction which exempts the subject from penalty rather than the one which imposes penalty. It is not competent to the court to stretch the meaning of an expression used by the Legislature in order to carry out the intention of the Legislature.' 12

13 contd Gold Coin Health Food P Ltd, 304 ITR 308 -SC : Whether the penalty was leviable even in a case where addition of concealed income reduces the returned loss? Finding: Yes. The court has to analyse the nature of the amendment to come to a conclusion whether it is in reality a clarificatory or declaratory provision. Therefore, the date from which the amendment is made operative does not conclusively decide the question. The court has to examine the scheme of the statute prior to the amendment and subsequent to the amendment to determine whether the amendment is clarificatory or substantive. 13

14 Contd T Ashok Pai,292 ITR 11- SC : It is not a case where penalty has been imposed for breach or contravention of a commercial statute where lack of intention to contravene or existence of bona fides may not be of much importance. It is also not a case where penalty is mandatorily imposable. It was, therefore, not a case where the enabling provision should have been invoked. 14

15 CIT Vs. Reliance Pertroproducts Pvt. Ltd ITR 158 SC Penalty Concealment of particulars of income In order to be covered by section 271 (1)(c), there has to be concealment of particulars by the assessee. Making incorrect claim does not amount to concealment of particulars. To attract penalty, the details furnished in return must not be accurate or correct. Mere making of claim which is not sustainable in law will not amount to furnishing of inaccurate particulars. 15

16 Dilip Shroff s case 291 ITR 519 SC The role of the Explanation having regard to the principle of statutory interpretation must be borne in mind before interpreting the aforementioned provisions. Imposition of penalty is not automatic. Levy of penalty is not only discretionary in nature but such discretion is required to be exercised on the part of the Assessing Officer keeping the relevant factors in mind. Some of those factors apart from being inherent in the nature of penalty proceedings as has been noticed in some of the decisions of this court, inheres on the face of the statutory provisions. 16

17 Dilip Shroff contd Section 271(1)(iii) again provides for a discretionary jurisdiction upon the assessing authority inasmuch as the amount of penalty may not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of his income, but it may not exceed three times thereof. 17

18 Dharmendra Textile Processors Case- 306 ITR 277 SC The question which arises for determination in all these appeals is whether section 11AC of the Central Excise Act, 1944 (in short "the Act") inserted by Finance Act, 1996, with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is scope for levying penalty below the prescribed minimum. 18

19 Contd Conclusion : It is pointed out that in Dilip N. Shroff's case, the question relating to discretion was not the basic issue. In fact, section 271(1)(c) of the Income-tax Act provides for some discretion and, therefore, that decision has no relevance. So far as the present dispute is concerned, whether the discretion has been properly exercised is a question of fact. 19

20 Contd Dilip N. Shroff's case was not correctly decided but Chairman, SEBI's case [2006] 5 SCC 361 has analysed the legal position in the correct perspectives. The reference is answered. 20

21 Post Dharmendra Decision Cases Rajasthan Spinning & Weaving Mills,23 DTR 158 SC : The decision in Dharmendra case must therefore, be understood to mean that once the section is applicable,the concerned authority would have no discretion in quantifying the amount and penalty must be imposed M/s Siddhartha Enterprises 184 Taxmann 460 P&H The judgment in Dharmendra Textile cannot be read as laying down that in every case where particulars of income are inaccurate, penalty must follow. 21

22 Contd Kanbay Software India P Ltd, 22 DTR 481- Pune Tri. The views expressed in Dharmendra case cannot be viewed as an authority for the proposition that penalty u/s 271(1)(c) is an automatic consequence being made to addition to the income. Final conclusion : By resorting to a process of interpretation, we must not dilute the law laid down by their Lordships in Dharmendra Textiles case. 22

23 Observations of the Supreme Court in D M Manasvi s case 86 ITR 557 at pages 561 & 562 Satisfaction in the very nature of things precedes the issue of notice and it would not be correct to equate the satisfaction of the Income-tax Officer or Appellate Assistant Commissioner with the actual issue of notice. The issue of notice is a consequence of the satisfaction of the Income-tax Officer or the Appellate Assistant Commissioner and it would, in our opinion, be sufficient compliance with the provisions of the statute if the Income-tax Officer or the Appellate Assistant Commissioner is satisfied about the matters referred to in clauses (a) to (c) of sub-section (1) of section 271 during the course of proceedings under the Act even though notice to the person proceeded against in pursuance of that satisfaction is issued subsequently. 23

24 Independent proceedings Bhadra Advancing Pvt Ltd vs ACIT, Karnataka HC Madhushree Gupta vs Union of India and Another, Delhi HC CIT vs Atul Mohan Bindal, 317 ITR 1 SC 24

25 Agreed Additions Sir Shadilal Sugar & General Mills Ltd, 168 ITR 705 SC : From agreeing to additions, it does not follow that the amount agreed to be added was concealed income. There may be a hundred and one reasons for such admission CIT vs. Saran Khandsari Sugar Works Allahbad HC CIT vs Mansa Ram and Sons Allahabad HC 25

26 Contd K P Madhusudhanan, 251 ITR 99 SC : that the assessee had agreed to the additions to his income referred to hereinabove to buy peace and it did not follow therefrom that the amount that was agreed to be added was concealed income. That, it did not follow that the amount agreed to be added was concealed income, is undoubtedly what was laid down by this court in the case of Sir Shadilal Sugar and General Mills Ltd and that, therefore, the Revenue was required to prove the mens rea of a quasi-criminal offence. But it was because of the view taken in this and other judgments that the Explanation to section 271 was added. By reason of the addition of that Explanation, the view taken in this case can no longer be said to be applicable. 26

27 Penalty on Estimate Basis Harigopal vs CIT P&H CIT vs Sangrur Vanaspati Mills Ltd P&H CIT vs Dhillon Rice Mills P&H CIT vs Kailash Crockery House Patna Teja Constructions vs ACIT Hyd. 27

28 Sufficient cause - SC says Supreme Court in Rampal vs Rewa Coalfields Ltd, 1962 AIR 361 / 1962 SCR (3) 762 held that - sufficient cause' receiving a liberal construction so as to advance substantial justice when no negligence nor inaction nor want of bona fide is imputable to the appellant 28

29 Contd Supreme Court in Price Waterhouse Coopers Pvt Ltd vs CIT, 348 ITR 306 No penalty on inadvertent silly mistakes 29

30 Sec 271 Contd The person may be directed to pay penalty : Section Penalty 271(1)(b) Rs. 10, (1)(c) % of tax sought to be evaded 30

31 Sec 271 (1B) Satisfaction of AO for Initiation of Penalty Assessment order deemed to constitute satisfaction of the Assessing Officer : On addition or disallowance of any amount in computing the total income in an assessment order; and The penalty proceedings have been initiated under section 271(1)(c) 31

32 Sec 271AAA Penalty where Search has been initiated Search initiated after but before Penalty at the rate of 10% of the undisclosed income of the specified previous year No penalty under section 271(1)(c) in respect of undisclosed income 32

33 Sec 271AAA Contd Search initiated after but before Conditions 1. Assessee admits the undisclosed income 2. Assessee specifies and substantiates the manner of deriving undisclosed income 3. On or before the specified date- Pays the tax together with interest on undisclosed income Penalty not applicable 4. On or before the specified date- Furnishes the return of income for the specified year declaring such undisclosed income 33

34 Sec 271AAB Penalty where Search has been initiated Search initiated after Conditions Penalty 1. Admits the undisclosed income 2. specifies and substantiates the manner of deriving undisclosed income 3. On or before the specified date- Pays the tax together with interest on undisclosed income 10% of undisclosed income 4. On or before the specified date - Furnishes the return of income for the specified year declaring such undisclosed income 34

35 Sec 271AAB Contd Search initiated after Conditions Penalty 1. Does not admit the undisclosed income 2. On or before the specified date- Pays the tax together with interest on undisclosed income 20% of undisclosed income 3. On or before the specified date Declares such income in the return of income furnished for the specified year 35

36 Sec 271AAB Contd Search initiated after In any case not covered above, penalty shall not be less than 30% and shall not exceed 90% of such undisclosed income. 36

37 Sec 271D and 271E - Failure to comply with the provisions of section 269SS and 269T Section Conditions Penalty 271D 271E Acceptance of loans/deposits in contravention to section 269SS Repayment of loans/deposits in contravention to section 269T Shall be liable for penalty at the rate of 100% of such loans / deposits that are accepted/repaid. It shall be imposed by the Joint Commissioner. 37

38 Sec 271C Penalty for failure to deduct tax at source If any person fails to Deduct the whole or any part of tax as per Chapter XVII-B; Pay the whole or any part of the tax a required by or under Section 115-O(2); or the second proviso to section 194B Attracts Penalty to the extent of tax to be deducted or paid as aforesaid Penalty shall be imposed by Joint Commissioner 38

39 Sec 271AA and Sec 271G Person in respect of International Transaction or specified domestic transaction Section 271AA : Particulars Conditions Penalty Failure to keep, maintain or retain books of account, documents, etc. in respect of certain transactions Without prejudice to provisions of section 271 or 271BA 1. Fails to keep and maintain books as required by section 92D(1) or sec 92D(2) 2. Fails to report such transaction which he is required to do so 3. Maintains or furnishes an incorrect information or document 2% of the value of each international transaction or specific domestic transaction 39

40 Sec 271AA and Sec 271G Person in respect of International Transaction or specified domestic transaction Section 271G : Conditions Failure to furnish information or document within 30days from receipt of notice as required under section 92D Penalty 2% of the value of each international transaction or specific domestic transaction 40

41 Others Section Particulars Penalty 271A Failure to keep, maintain or retain books of accounts, documents etc. Rs. 25, B Failure to get accounts audited u/s 44AB 0.5% of total sales, turnover or gross receipts or Rs. 1,50,000/- Whichever is less 271BA Failure to furnish report u/s 92E Rs. 1,00, F Failure to furnish return of income Rs. 5,000 41

42 Sec 273B Penalty not to be imposed in certain cases Notwithstanding anything contained in the provisions of sections 271 (1)(b), 271A, 271AA, 271B, 271BA, 271BB, 271C, 271CA, 271D, 271E, 271F, 271FA, 271FB, 271G, 271H, 272A(1)( c), 272A(2)(d), 272AA(1), 272B, 272BB(1) & (1A), 272BBB(1),273(1) (b),273(2) (b),(c) no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure. 42

43 Action based on CA certificate The Punjab & High Court has held that no penalty is leviable when the assessee has acted in a bonafide manner based on the certificate issued by the Chartered Accountant. The CA was directed to be examined. 275 ITR 206, S D Rice Mills; 274 ITR 603, Deep Tools Pvt Ltd 43

44 Sec 273A Power to reduce or waive penalty, etc., in certain cases The Commissioner may, reduce or waive the amount of penalty under section 271(1)(iii) On disclosure of full particulars by the assessee of income, prior to Assessing Officer detecting concealment of income Co-operation of assessee in all enquiries relating to the assessment of his income Payment or satisfactory arrangement to make payment of any tax and interest 44

45 Sec 273A Contd The Commissioner can waive or reduce penalty only with prior approval of Chief Commissioner or Director General in cases where the income on which the penalty is levied is greater than Rs. 5,00,000 45

46 Sec 273AA Power of Commissioner to grant immunity from penalty An Application may be made to Commissioner for granting immunity from penalty, if: Application is made for settlement u/s 245C and the proceedings for settlement have been abated under section 245HA; and The penalty proceedings have been initiated under this Act. Application for grant of immunity of penalty shall not be made after imposition of penalty after abatement 46

47 Sec 273AA Power of Commissioner to grant immunity from penalty The Commissioner may grant immunity from penalty if he is satisfied that the assessee has given: Full co-operation with income tax authorities in proceedings before him Made true disclosure of his income and the manner in which such income has been derived Immunity granted stands withdrawn if the person fails to comply with any condition subject to which the immunity was granted 47

48 Sec 274 Procedures No order imposing penalty under this Chapter shall be made : unless the assessee has been heard or has been given reasonable opportunity of being heard; No order imposing penalty under this Chapter shall be made : By the ITO, where the penalty exceeds ten thousand rupees; By the ACIT or DCIT, where the penalty exceeds twenty thousand rupees except with prior approval of Joint Commissioner 48

49 Sec 275 Bar of Limitations for imposing penalties Limitation for passing the order of penalty Condition 1. Assessments/Revision of order u/s 263 or In case of Appeal to Commissioner(Appeals) or Appellate Tribunal 3. In any other case Limitation Six months from the end of the month in which the order is passed Expiry of the FY in which penalty proceedings are completed or six months from the end of the month in which the CIT(A)/ITAT order is received by CCIT or CIT Whichever is later Expiry of the FY in which penalty proceedings are completed or six months from the end of the month in which penalty is initiated Whichever is later 49

50 Sec 272BB Failure to comply with provisions of section 203A Wrong quoting of tax deduction account number or tax collection account number or tax deduction and collection account number in challans, certificates, statements or documents referred to under section 203A(2) Assessing Officer may direct a penalty of Rs. 10,000 50

51 Sec 273 False estimate of, or failure to pay, advance tax Penalty in case of an assessee who furnished an advance tax statement u/s 209A(1)(a) which he knew or had reasons to believe to be untrue : 10% to 1 ½ times of the amount by which the advance tax paid falls short of : (1) 75% of the assessed tax as per section 215(5), or (2) the actual amount of advance tax, had the assessee furnished a correct statement as per section 209A(1), Whichever is less 51

52 Sec 273 Contd Penalty when assessee fails to furnish advance tax statement u/s 209 (1)(a) 10% to 1 ½ times of 75% of the assessed tax as per section 215(5) In case of company assessees, the provisions of this section shall have effect after substituting the word 75 % with 83 1/3 wherever it occurs. 52

53 Section Penalty payable when tax in default When an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under sub-section (2) of section 220, be liable, by way of penalty, to pay such amount as the Assessing Officer may direct, and in the case of a continuing default, such further amount or amounts as the Assessing Officer may, from time to time, direct, so, however, that the total amount of penalty does not exceed the amount of tax in arrears. 53

54 OFFENCES AND PROSECUTION

55 Offences and Prosecution While penalties may be imposed by the income-tax authorities, the imposition of fine or the launching of any offence under the ACT can be made only by a Magistrate of a Court under Section 275A to 280. In respect of the same default of an assessee, penalty may be imposed and a prosecution also may be launched against him. 55

56 Why is Prosecution necessary? In the fight against tax evasion, the imposition of monetary penalty alone is not sufficient. A calculating tax evader finds it profitable to evade tax for years, if he knows that he may get away with it by paying penalty in the year in which he is caught. However, the prospect of landing in jail is a far more dreaded consequence and works as a deterrent. Further, for more serious defaults, sometimes launching of prosecution is prescribed without prescribing monetary penalties. The Parliament has, therefore, been enacting deterrent laws for effective implementation of tax laws. The Income-tax Act contains a separate chapter XXII wherein offences have been defined and punishment provided. 56

57 Offences punishable under the income tax act Removal, parting with or otherwise dealing with books of accounts, documents, money, bullion, jewellery or other valuable article or thing put under restraint during the search. [Section 275A] Fraudulent removal, concealment, transfer or delivery of any property or any interest in the property with the intention to thwart recovery of tax. [Section 276] Failure on the part of a liquidator or receiver of a company to give notice of his appointment to the Assessing Officer or failure to set apart amount notified by the Assessing Officer, or parting away of company s properties in contravention of income-tax provision. [Section 276A] 57

58 Offences punishable under the income tax act Failure to enter into written agreement or failure to furnish the statement of immovable property intended to be transferred u/s.269uc, or failure to surrender or deliver the property u/s.269ue, purchased by the Appropriate Authority or doing or omitting to do anything u/s.269ul, which will have the effect of transfer of property without the permission of the Appropriate Authority (under the provisions of Chapter XX-C) [Section 276AB] Failure to pay to the credit of the Central Government the tax deducted at source. [Section 276B] Failure to pay the tax collected at source. [Section 276BB] 58

59 Offences punishable under the income tax act Wilful attempt to evade any tax, penalty or interest [Section 276C(1)] Wilful attempt to evade the payment of any tax, penalty or interest levied under Income Tax Act. [Section 276C(2)] Wilful failure to furnish in due time return of income. [Section 276CC)] Failure to furnish return of income in Search Cases as required under section 158BC [Section 276CCC] Wilful failure to produce accounts and documents as directed by issue of notice under section 142(1) [Section 276D] 59

60 Offences punishable under the income tax act Wilful failure to get the accounts audited as directed by the Assessing Officer under section 142(2A). [Section 276D] Making of a statement in verification or delivery of an account or statement which is false and which the concerned person knows or believes to be false or does not believe to be true. [Section 277] Abetting or inducing another person to make and deliver an account or statement or declaration relating to any taxable income which is false and which he either knows or believes to be false. [Section 278] Punishment for 2nd & subsequent offences in cases of certain defaults. [Section 278A] 60

61 Offences punishable under the income tax act No person shall be punished for any failure if he proves that there is reasonable cause failure. [Section 278AA] 61

62 Who is liable to be prosecuted? Any person, committing the offence is liable to be prosecuted. In this connection it is not necessary that the person should be an assessee under the Income-tax Act. In the case of an offence committed by a Company, Firm, Association of Persons or Body of Individuals, every person in charge of or responsible for the conduct of the business of the concern as well as the concern are deemed to be guilty. Similarly, in the case of an offence by a Hindu Undivided Family, the karta thereof, is deemed to be guilty of the offence. 62

63 Is mens-rea or clupable mental state or guilty intention necessary? In case of wilful act of omission or commission, the court shall presume the existence of culpable mental state. However, the accused can rebut this presumption by producing necessary evidence before the court. (Section 278E). 63

64 Can the offence be compounded? Section 279(2) of Income-tax Act empowers a Chief Commissioner of Director General of Income-tax to compound an offence either before or after the institution of prosecution proceeding 64

65 Points to be considered before compounding It was emphasised that a prosecution should not ordinarily be compounded if the prospects of success were good. The Board desires that in such case, the request of the assessee for having the offence compounded should not ordinarily be recommended to the Board The provisions of section 279(2) give a discretion to the Commissioner to compound any offence under the Income-tax Act and this discretion is an unfettered one. Even so it has to be exercised in a judicial manner. 65

66 Points to be considered before compounding Although it is neither possible to precisely lay down all the circumstances in which an offence may be compounded nor it is intended to fetter the Commissioner s discretion in this matter, it is nevertheless necessary to have a uniform policy for exercising the discretion in a judicial manner. 66

67 Points to be considered before compounding Some of the other points which have to be considered before deciding to compound an offence are indicated below: - Compounding of an offence may be considered only in those cases in which the assessee comes forward with a written request for compounding offence. - Cases in which the prospects of a successful prosecution are good, should not ordinarily be compounded. - Bearing in mind the deterrent effect of a prosecution, it should be considered whether the purpose will be more effectively served by making the assessee pay a deterrent composition fee or by obtaining a conviction. 67

68 Points to be considered before compounding - In case, where subsequent to the launching of prosecution fresh evidence becomes available which may show that the case for the prosecution is weak and the assessee is agreeable to have the offence compounded, it may be advisable to compound the offence and not to proceed with the prosecution. Ultimately the answer to the question whether the prosecution should be compounded or not will depend on the facts of each case. The above aspects are only intended to provide broad guidelines. The previous approval of the Board should always be obtained before deciding to compound an offence. No assurance of any kind should be given to the assessee before obtaining the Board s approval. Le tte r : F. No. 4/7/69-IT(INV.), dat ed

69 When public servant liable to be prosecuted? If a public servant furnishes any information in contravention of the provisions of Section 138(2), prosecution may be instituted against him with the previous sanction of the Central Government. (Section 280). 69

70 Summary of Offences and Prosecution in brief Section Nature of Default Rigorous Imprisonment Fine 275A Contravention of order made under the Upto 2 years No Limit specified second proviso 132(2)or 132(1) regarding search and seizure 275B Failure to afford necessary facility to Upto 2 years No Limit specified inspect the books of accounts or other documents 132(1)(iib) 276 B Failure to pay to CG TDS or the tax 3 months to 7 years No Limit specified payable by him as required by 115(O)(2) or second proviso to sec 194B 276BB Failure to Pay TCS 3 months to 7 years No Limit specified 276C(1) 276C(1) 276CC Willful attempt to evade tax, penalty or interest Willful attempt to evade tax, penalty or interest Willful failure to furnish in due time a ROI u/s 139(1) or u/s 142(1) or 148 or 153A Evaded Tax exceeding No Limit specified 25Lacks: 6 Months to 7 years other cases 3 months to 2 years 3 months to 2 years No Limit specified Evaded Tax exceeding 25Lacks: 6 Months to 7 years other cases 3 months to 2 years(if less than 3000 no prosecution) No Limit specified 70

71 Summary of Offences and Prosecution in brief Section Nature of Default Rigorous Imprisonment Fine 276D Willful failure to produce books of accounts u/s 142(1) or 142(2A) Upto 1 year Rs. 4 to Rs. 10 for every day default 277 False statement in verification Evaded Tax exceeding No Limit specified 25Lacks: 6 Months to 7 years other cases 3 months to 2 years(if less than 3000 no prosecution) 277A Falsification of books of accounts to 3 months to 2 years No Limit specified induce or abet any tax penalty interest 278 Abetment if false return Evaded Tax exceeding No Limit specified 25Lacks: 6 Months to 7 years other cases 3 months to 2 years 278A Second and subsequent offences 6 months to 7 years for every subsequent No Limit specified 71

72 Thank You 72