Section 276CC prosecution cannot stand where tax liability is unalleged and the statutory presumption is rebutted.

The petitioner was prosecuted under Section 276CC of the Income Tax Act, 1961, for not filing her return for Assessment Year 2014–15 by the due date.

The complaint alleged that she had received rental income of ₹55,50,000 and that a jointly owned property had been sold for ₹74,00,000.

The trial court convicted her; the appellate court affirmed the conviction but reduced the custodial sentence to three months’ rigorous imprisonment.

In revision, the petitioner argued that no tax liability had been determined and that she had filed a return claiming a refund.

She also relied on evidence that the property was jointly purchased with her husband and financed through a loan.

Whether prosecution under Section 276CC could be sustained where the Department had not determined the petitioner’s tax liability and the complaint did not allege that she was liable to pay tax.

Whether the petitioner had rebutted the presumption of culpable mental state under Section 278E and shown that her failure to file the return was not wilful.

Section 276CC of the Income Tax Act penalises failure to furnish a return within the prescribed time.

Its applicable proviso (ii)(b) bars prosecution where the tax payable, after the specified reductions, does not exceed ₹3,000; the amount of tax payable also affects the applicable punishment.

Section 278E raises a presumption of culpable mental state, which the accused may rebut.

In Guru Nanak Enterprises v. Income Tax Officer, prosecution was held unwarranted where the assessed tax was below the statutory threshold.

The Court distinguished Vinubhai Mohanlal Dobaria v. Chief Commissioner of Income Tax, which held that later filing does not undo a completed failure to file by the due date, because that case involved an established tax liability and did not address the proviso’s bar.

The Court held that tax payable was relevant both to the statutory bar on prosecution and to punishment.

Here, the Department had made no assessment, the complaint did not allege that the petitioner was liable to pay tax, and her claim to a refund had not been accepted or rejected through an assessment.

The Court further found that the petitioner’s testimony and defence documents supported her account that the property was jointly owned and purchased with borrowed funds.

On these facts, she had rebutted the Section 278E presumption, and the Court was not satisfied that her non-filing was wilful.

It also directed the High Court Legal Services Committee, Chennai, to pay the appointed legal aid counsel ₹10,000 as remuneration.