Section 276CC of ITA, 1961 : Section 276Cc: Failure To Furnish Returns Of Income

Explanation using Example

Imagine a business owner, Mr. Sharma, who operates a small manufacturing unit. For the financial year 2021-22, Mr. Sharma was required to file his income tax return by July 31, 2022. However, due to negligence, he fails to file his return by the due date. The Income Tax Department later discovers that Mr. Sharma's business had a taxable income that would have resulted in a tax liability of ₹3,000,000 if properly reported.

Under Section 276CC of the Income Tax Act, 1961, since the tax that would have been evaded exceeds ₹2,500,000, Mr. Sharma is liable for prosecution. He could face rigorous imprisonment for a term of not less than six months and up to seven years, along with a fine, because he wilfully failed to file his return on time.

If, on the other hand, Mr. Sharma's tax liability had been ₹2,000,000, he would still face prosecution, but the imprisonment term would be not less than three months and could extend to two years, plus a fine, as per the second point of the act.

However, Mr. Sharma would not face such consequences if he had filed the return before the end of the assessment year, i.e., before March 31, 2023, or if his tax liability after accounting for advance tax paid and tax deducted at source was below ₹3,000.