Taxpayer Missed Filing Deadline Despite Notice Under Section 148; Bombay High Court Ends Prosecution After Finding No Tax Was Payable
Facts
The petitioner, Rajesh Somandas Sachdev, approached the Bombay High Court under Articles 226 and 227 of the Constitution seeking quashing of Criminal Complaint No. SW/535/2018 pending before the Additional Chief Metropolitan Magistrate, Ballard Pier, Mumbai.
The prosecution had been initiated under Section 276CC of the Income Tax Act, 1961, alleging wilful failure to file an income tax return for the Assessment Year 2014–2015.
The petitioner did not file his return within the prescribed time.
Consequently, the Income Tax Department issued a notice under Section 148 of the Act on 18 September 2017, requiring him to furnish his return.
Despite receiving the notice, the petitioner still failed to file the return.
The Department thereafter launched criminal prosecution on 7 March 2018 by filing Criminal Complaint No. SW/535/2018.
Subsequently, on 10 September 2018, the petitioner filed his income tax return.
The return disclosed that:
- Tax Deducted at Source (TDS): ₹2,54,788;
- Refund claimed: ₹1,64,340.
The assessment was later completed, and the Assessing Officer accepted the return, confirming that the petitioner was indeed entitled to a refund of ₹1,64,340.
The petitioner argued that once the assessment demonstrated that no tax was payable and a refund was due, the statutory protection contained in the proviso to Section 276CC became applicable, making continuation of the criminal prosecution illegal.
Issues
The High Court considered the following issues:
- Whether prosecution under Section 276CC could continue after the assessment established that the petitioner was entitled to a tax refund.
- Whether the protection contained in proviso (ii)(b) to Section 276CC applied even though the return was filed after issuance of a notice under Section 148.
- Whether the fact that prosecution had already commenced before the return was filed prevented the petitioner from relying upon the statutory proviso.
- Whether the criminal complaint amounted to an abuse of the process of law.
- Whether the High Court should exercise its writ and inherent jurisdiction to quash the criminal proceedings.
Petitioner’s Arguments
The petitioner argued that although the return had been filed after issuance of the Section 148 notice and after initiation of criminal prosecution, the assessment itself demonstrated that he was entitled to a refund of ₹1,64,340.
He submitted that the proviso to Section 276CC specifically protects taxpayers where, after regular assessment and adjustment of TDS and advance tax, the tax payable does not exceed the prescribed statutory threshold.
In the present case, there was not merely negligible tax liability; rather, the Department itself accepted that a refund was due.
The petitioner relied principally upon:
- Guru Nanak Enterprises v. Income Tax Officer;
- Rajkumar Thiyagarajan v. Income Tax Department (Madras High Court);
- Manav Menon v. Deputy Commissioner of Income Tax (Madras High Court).
He argued that once the assessment established that no tax remained payable, continuation of criminal prosecution defeated the legislative object of Section 276CC.
Respondents’ Arguments
The Income Tax Department argued that the petitioner had admittedly failed to file his return despite receiving a notice under Section 148.
According to the Department:
- the return was filed only after reassessment proceedings had commenced;
- criminal prosecution had already been instituted before the return was filed;
- the offence under Section 276CC was therefore complete.
The Department further argued that the proviso relied upon by the petitioner was intended for regular assessments and should not protect a person who ignored a reassessment notice under Section 148.
However, the Department fairly conceded two important facts:
- the assessment order accepted the return filed by the petitioner; and
- the petitioner was entitled to a refund of ₹1,64,340.
Analysis of the Law
Object of Section 276CC
Section 276CC criminalises the wilful failure to furnish income tax returns within the prescribed time.
The provision applies to returns required under:
- Section 139;
- Section 142;
- Section 148; and
- Section 153A.
However, Parliament incorporated exceptions through the proviso.
The proviso reflects the legislative intention that criminal prosecution should not be launched in cases where, after adjustment of TDS and advance tax, the tax payable falls below the prescribed statutory limit.
The High Court observed that the purpose of the provision is to punish serious tax default and not technical delay where no tax loss ultimately results to the Revenue.
Effect of Refund Determined in Assessment
The Court noted that the petitioner’s return disclosed:
- TDS of ₹2,54,788; and
- refund entitlement of ₹1,64,340.
The Department itself accepted those figures during the assessment proceedings.
Therefore:
- no additional tax was payable;
- instead, excess tax had already been collected through TDS.
The Court held that this factual position squarely attracted the statutory protection contained in proviso (ii)(b) to Section 276CC.
The Court observed that the petitioner stood on even stronger footing than taxpayers whose tax liability merely falls below the statutory threshold, because he was actually entitled to receive money back from the Department.
Failure to Consider TDS Before Sanctioning Prosecution
The Court also noted an important omission.
While granting sanction for prosecution, the Commissioner failed to consider that:
- TDS amounting to ₹2,54,788 had already been deducted.
The assessment later confirmed that the petitioner was entitled to a substantial refund.
The Court found that this circumstance further demonstrated that continuation of criminal prosecution was unwarranted.
No Loss to Revenue
A significant factor influencing the Court was the admitted absence of any revenue loss.
The Department itself accepted:
- that the return had been assessed;
- that the assessment was completed;
- that refund was payable.
The Court therefore held that the prosecution served no legitimate purpose.
Instead, continuation of the complaint would merely amount to harassment despite the absence of any actual tax liability.
Exercise of High Court’s Jurisdiction
The Court observed that although inherent powers must be exercised sparingly, the Court is duty-bound to intervene where continuation of criminal proceedings would amount to abuse of process.
The principles governing Section 482 CrPC equally apply while exercising writ jurisdiction and under the corresponding provision of the Bharatiya Nagarik Suraksha Sanhita.
Where prosecution is legally unsustainable, the High Court must exercise its extraordinary jurisdiction to secure the ends of justice.
Precedent Analysis
Guru Nanak Enterprises v. Income Tax Officer
The Supreme Court held that prosecution under Section 276CC cannot continue where the assessed tax liability, after permissible adjustments, falls within the statutory exception contained in the proviso.
In that case, the taxpayer’s ultimate liability was only ₹1,360, which was below the then statutory threshold.
The Supreme Court quashed the criminal prosecution.
The Bombay High Court observed that the present case was even stronger because the petitioner was not merely below the threshold but was actually entitled to a refund of ₹1,64,340.
Accordingly, the Supreme Court’s reasoning directly governed the dispute.
Rajkumar Thiyagarajan v. Income Tax Department
The Madras High Court similarly recognised that prosecution under Section 276CC cannot survive where the statutory conditions contained in the proviso are satisfied.
The Bombay High Court treated this decision as consistent with the Supreme Court’s interpretation.
Manav Menon v. Deputy Commissioner of Income Tax
The Court also relied upon this Madras High Court decision, which reiterated that the benefit of the proviso is available where the statutory conditions relating to tax liability are fulfilled.
Court’s Reasoning
The High Court found that the factual position was undisputed.
The chronology was:
- Notice under Section 148 issued;
- Criminal complaint filed;
- Return subsequently filed;
- Assessment completed;
- Refund confirmed.
The Court accepted that the petitioner had filed the return belatedly.
However, the completed assessment established beyond dispute that:
- sufficient TDS had already been deducted;
- no tax remained payable;
- rather, the petitioner was entitled to receive ₹1,64,340 from the Department.
The Court held that these admitted facts brought the case squarely within the ratio of Guru Nanak Enterprises.
The Department’s attempt to distinguish the proviso on the basis of reassessment proceedings was rejected.
The Court further observed that sanction for prosecution had been granted without considering the substantial TDS already available.
Once the assessment confirmed refund entitlement, continuation of criminal proceedings served no legal purpose.
The Court therefore concluded that the criminal complaint constituted an abuse of the process of law and deserved to be quashed.
Conclusion
The Bombay High Court allowed the writ petition.
It quashed Criminal Complaint No. SW/535/2018 pending before the Additional Chief Metropolitan Magistrate, Ballard Pier, Mumbai.
The Court held that:
- although the petitioner had filed the return after receiving the notice under Section 148 and after commencement of prosecution,
- the completed assessment demonstrated that he was entitled to a refund of ₹1,64,340;
- the statutory protection under proviso (ii)(b) to Section 276CC therefore applied;
- continuation of the criminal complaint was wholly unwarranted and amounted to an abuse of the process of law.
The judgment reinforces that prosecution for delayed filing of income tax returns cannot continue where the completed assessment itself establishes that no tax was payable and, in fact, the assessee was entitled to a refund.
Key Takeaways
- Mere delay in filing an income tax return does not automatically justify criminal prosecution.
- The proviso to Section 276CC protects taxpayers where the tax payable after assessment falls within the statutory exception.
- A taxpayer entitled to a refund stands on an even stronger footing than one with negligible tax liability.
- TDS already deducted must be considered before sanctioning prosecution.
- Courts may quash prosecution where continuation would amount to abuse of the process of law.
- The completed assessment plays a decisive role in determining whether prosecution should continue.
- The High Court may exercise writ jurisdiction to prevent unnecessary criminal proceedings where the statutory requirements for prosecution are absent.
Case Details
Case: Rajesh Somandas Sachdev v. Income Tax Officer & Others
Court: Bombay High Court
Case Number: Criminal Writ Petition No. 5692 of 2025
Judge: Justice Madhav J. Jamdar
Date: 22 July 2026
Result: Writ Petition allowed. Criminal Complaint No. SW/535/2018 under Section 276CC of the Income Tax Act was quashed as the petitioner was ultimately found entitled to a refund of ₹1,64,340, making continuation of prosecution an abuse of the process of law.
