• Notification Date: 21-06-2023
  • Notification No: N/A

Two Jewellery Directors Imprisoned for delay in ITR Filing

Two jewellery directors were given 6 months rigorous imprisonment by the Additional Chief Metropolitan Magistrate of Delhi for failing to file the income tax returns of their jewellery firm on time vide judgment pronounced in the month of April 2023. The Court stated that the accused failed to prove that the delay was not intentional. However, the accused was granted bail for filing appeals after they moved court. The Special Public Prosecutor asserted that the two jewellery owners namely M/s Saloni Jewellers Pvt Ltd and M/s Yellow Jewellers Pvt Ltd. were habitual offenders. According to the submissions of the prosecutor, there was a similar pending case against them. 

According to the court, the defendant- Companies did not timely file their income tax returns for 2014–15. And the latter filing of the same cannot be taken into account. They are liable for the errors committed by the jewellery company if they did not deny their directorship. Additionally, the complainant has proved the accused’s guilt in accordance with Sections 276CC and 278E of the Income Tax Act of 1961. The Section 276CC of Income Tax Act states about the imprisonment of in case of wilful failure to furnish income tax returns. Section 276CC is attracted for any of the following defaults by the taxpayer: 

1. Failure to file the return of income as per section 139(1) of the Income Tax Act.   

2. Failure to file the return of income in response to a notice issued under section 142(1)(i) or section 148 or section 153A.  

Failure to comply with this section would result in rigorous imprisonment for a minimum of six months but a maximum of seven years, as well as a fine if the amount of tax intended to be evaded exceeds Rs. 25 lakhs. The Section 278E of the Income Tax Act, in any prosecution for any offence under the Income tax Act which required a culpable mental state on the part of the accused, the court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution. 

In the instant case, the defendant – companies furnished the same subsequently. However, the court did not consider the same as they failed to prove the reason for delay of income tax returns filing. 

The companies deposited Rs. 12 crores in the mid of 2016. If the company was facing a financial loss in the business in the Financial Year 2014-15, then it’s impossible to deposit 12 crores right after the demonetisation, observed the court. The audit report and balance sheet of Yellow Jewellers’ company premises were examined by the Income Tax survey, which revealed a profit after tax of Rs. 1 crore. Additionally, the Saloni jewellers pvt ltd made a profit after tax of Rs. 6.8 crores. The Court added that the accused companies failed to prove that the default or delay in income tax returns filing was not intentional and wilful and caused due to financial loss. They have previously delayed returns numerous times, including in the current instance and thus sentenced 6 months rigorous imprisonment. The Central Board of Direct Taxes (CBDT) has published the circular revising the monetary limits of condonation of delay in refund claims and loss carry forward claims under Section 119(2)(b) of the Income Tax Act, 1961.