Tax evasion is a serious offense under the Income Tax Act, 1961, and Sections 276C and 276CC provide for stringent prosecution measures to penalize willful defaulters. These sections aim to deter fraudulent practices and ensure compliance with tax laws. Below is a detailed explanation of the provisions under Sections 276C and 276CC, along with their applicability, penalties, and defenses.

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1. Section 276C: Willful Attempt to Evade Tax

Scope and Applicability:

Section 276C applies to cases where a person willfully attempts to evade:

• Payment of any tax, penalty, or interest under the Act.
• Income tax assessments by concealing income, falsifying accounts, or using fraudulent methods.

Punishment Under Section 276C:

1. For Evasion of ₹25 Lakh or More:
   • Imprisonment: 6 months to 7 years.
   • Fine: As determined by the court.
2. For Evasion Below ₹25 Lakh:
   • Imprisonment: 3 months to 2 years.
   • Fine: As determined by the court.

Examples of Offenses Under Section 276C:

• Concealing income through unreported cash transactions.
• Falsifying financial statements to reduce taxable income.

Scenario	Evasion Amount (₹)	Punishment
Willful concealment of income	30,00,000	6 months to 7 years + fine
False invoices leading to tax evasion	10,00,000	3 months to 2 years + fine

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2. Section 276CC: Failure to File Returns of Income

Scope and Applicability:

Section 276CC applies to cases where a person:

• Fails to file returns of income as required under Section 139(1).
• Fails to file returns within the prescribed time limits after notices under Sections 142(1) or 148 are issued.

Punishment Under Section 276CC:

1. For Tax Due of ₹25 Lakh or More:
   • Imprisonment: 6 months to 7 years.
   • Fine: As determined by the court.
2. For Tax Due Below ₹25 Lakh:
   • Imprisonment: 3 months to 2 years.
   • Fine: As determined by the court.

Exceptions Under Section 276CC:

• No prosecution if the tax due, including interest, does not exceed ₹10,000.
• Relief for taxpayers under genuine hardship if reasonable cause is demonstrated.

Examples of Offenses Under Section 276CC:

• Not filing returns despite earning taxable income.
• Ignoring repeated notices from tax authorities.

Scenario	Tax Due (₹)	Punishment
Failure to file returns	30,00,000	6 months to 7 years + fine
Ignoring notice under Section 148	15,00,000	3 months to 2 years + fine

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3. Procedure for Initiating Prosecution

1. Identification of Default:
   • Tax authorities detect willful evasion or non-compliance during assessments or investigations.
2. Issuance of Show-Cause Notice:
   • A notice is sent to the taxpayer, providing an opportunity to explain the reasons for non-compliance.
3. Filing of Complaint:
   • If the explanation is unsatisfactory, tax authorities file a complaint with the appropriate court.
4. Court Proceedings:
   • The court evaluates evidence, hears arguments, and determines guilt or innocence.

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4. Defenses and Reliefs Available

a) Reasonable Cause Defense (Section 273B):

• Taxpayers can avoid prosecution by demonstrating reasonable cause for non-compliance.
• Examples include:
  • Natural disasters.
  • Severe illness or incapacity.

b) Immunity Under Section 273AA:

• Taxpayers who cooperate with authorities and pay taxes and penalties may apply for immunity from prosecution.

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5. Judicial Precedents

1. K.C. Builders v. ACIT (2004):
   • Held that prosecution under Section 276C is invalid if the penalty for concealment is deleted.
2. Prem Dass v. ITO (1999):
   • Established that failure to file returns despite repeated notices constitutes willful default under Section 276CC.

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6. Key Differences Between Section 276C and Section 276CC

Aspect	Section 276C	Section 276CC
Nature of Default	Willful evasion of tax.	Failure to file returns of income.
Threshold for Severe Punishment	₹25 Lakh or more in evasion.	₹25 Lakh or more in tax due.
Exceptions	No specific exceptions.	Excludes cases with tax due ≤ ₹10,000.

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7. Importance of Sections 276C and 276CC

These sections serve as a deterrent to tax evasion by:

• Ensuring strict action against willful defaulters.
• Promoting voluntary compliance among taxpayers.
• Reinforcing the integrity of the tax system.

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8. Section 278A: Presumption as to Culpable Mental State

Scope and Applicability:

Section 278A presumes that a person has a culpable mental state (intention or knowledge of wrongdoing) in prosecution cases under Sections 276C and 276CC.

Key Provisions:

1. Burden of Proof:
   • The burden is on the accused to prove the absence of culpable mental state.
2. Presumed Culpable Mental State Includes:
   • Intention.
   • Motive.
   • Knowledge of facts.
   • Belief in or reason to believe an act is wrongful.
3. Scope for Defense:
   • Taxpayers can rebut the presumption by presenting evidence of genuine mistakes or reasonable cause.

Judicial Precedent:

• Bachan Lal Kapoor v. State (1980): The court held that the presumption under Section 278A is rebuttable, provided the accused furnishes strong evidence.

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Conclusion

Sections 276C, 276CC, and 278A collectively strengthen the prosecution framework for tax evasion by imposing strict penalties while providing a fair chance for defense. Understanding these provisions helps taxpayers avoid inadvertent defaults and ensures accountability in financial reporting.

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Additional Resources

Learn more about Tax Provisions on the official Income Tax India website.

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