Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live and central. The flagship tax-evasion prosecution provision.
Finance Act, 2026: WHOLLY SUBSTITUTED w.e.f. 1 March 2026 — graded-threshold structure; rigorous imprisonment and mandatory minimum removed; 'whatsoever' deleted (see amendment note).
Mechanism: Section 276C(1) punishes a wilful attempt to evade tax/penalty/interest or to under-report income; section 276C(2) punishes a wilful attempt to evade the payment of tax. Mens rea ('wilful') is the gravamen.
Litigation profile: Very high — a deep Supreme Court line on mens rea, the effect of penalty/Tribunal findings, and abuse of process, with a strong 2021-2025 High Court/Supreme Court quashing trend.
A. COMMENTARY
Two distinct offences
Section 276C creates two offences. Sub-section (1) addresses a wilful attempt to evade any tax, penalty or interest 'chargeable or imposable', or to under-report income — i.e. evasion at the assessment/chargeability stage, typically through concealment or false claims. Sub-section (2) addresses a wilful attempt to evade the 'payment' of tax, penalty or interest — i.e. defeating recovery of an admitted or determined liability. The Explanation deems certain conduct (false entries, omission of relevant entries, creating circumstances to enable evasion) to be a wilful attempt. The distinction matters: a mere failure or inability to pay self-assessment tax, without a contrivance to defeat recovery, does not satisfy sub-section (2).
'Wilful' — mens rea is essential
The defining ingredient is wilfulness. Unlike civil penalty under section 271(1)(a)/270A, which can attach without mens rea, a conviction under section 276C requires proof of a deliberate, conscious attempt to evade (Gujarat Travancore Agency; Prem Dass). Section 278E now requires the court to presume culpable mental state, but the presumption is rebuttable and does not dispense with proof of the actus reus — the prosecution must still establish the evasive act, and the incriminating material must emanate from the assessee (Srinidhi Karti Chidambaram).
Effect of deletion of penalty / favourable appellate findings
A powerful line of authority holds that where the very foundation of the charge — concealment or a false claim — is knocked out by the appellate/Tribunal findings, the criminal prosecution cannot survive. If the penalty for concealment is cancelled on a finding of no concealment, quashing of the 276C/277 prosecution is the natural and often automatic consequence (K.C. Builders; G.L. Didwania; Uttam Chand; and, recently, Nagendra Choudhary). The principle now extends to conclusive findings of the Settlement Commission (Vijay Krishnaswami). Conversely, the mere pendency of assessment is not, by itself, a bar to launching prosecution (P. Jayappan).
FA 2026 Amendment (w.e.f. 1 March 2026)
By section 26 of the Finance Act, 2026, with effect from 1 March 2026, section 276C is wholly substituted. The words 'in any manner whatsoever' become 'in any manner'. Both sub-sections are recast into a graded structure: simple imprisonment up to two years, or fine, or both, where the amount sought to be evaded or tax on under-reported income exceeds Rs. 50 lakh; simple imprisonment up to six months, or fine, or both, where it exceeds Rs. 10 lakh but not Rs. 50 lakh; and fine only in any other case. The earlier rigorous imprisonment and the mandatory minimum sentences are removed, and the historic Rs. 25 lakh single threshold is replaced by the Rs. 50 lakh / Rs. 10 lakh bands. The Explanation is retained (re-lettered (a)-(d)). The verbatim text in Part B is the pre-substitution text. Read also section 270AA (as amended by the Finance Act, 2026), under which an assessee fulfilling the conditions may obtain immunity from initiation of proceedings under section 276C — though no such immunity is available once Chapter XXII proceedings have been initiated.
B. STATUTORY TEXT (verbatim — pre-Finance Act, 2026 text)
The text reproduced is the pre-Finance Act, 2026 text. With effect from 1 March 2026 section 276C is wholly substituted (graded thresholds; simple imprisonment; 'whatsoever' deleted) — see the amendment note above.
Wilful attempt to evade tax, etc.
276C. (1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable, or under reports his income, under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable,—
(i) in a case where the amount sought to be evaded or tax on under-reported income exceeds twenty-five hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine;
(ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and with fine.
(2) If a person wilfully attempts in any manner whatsoever to evade the payment of any tax, penalty or interest under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and shall, in the discretion of the court, also be liable to fine.
Explanation.—For the purposes of this section, a wilful attempt to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof shall include a case where any person—
(i) has in his possession or control any books of account or other documents (being books of account or other documents relevant to any proceeding under this Act) containing a false entry or statement; or
(ii) makes or causes to be made any false entry or statement in such books of account or other documents; or
(iii) wilfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents; or
(iv) causes any other circumstance to exist which will have the effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof.
C. AUTHORITIES
The authorities are arranged by issue-cluster. The principles survive the 2026 substitution.
Cluster 1 — Mens rea ('wilful') is the gravamen
Prem Dass v. ITO (1999) 236 ITR 683 (SC)
Citation (1999) 236 ITR 683 / 158 CTR 1 (SC).
Facts Prosecution under sections 276C(2)/277 alleging a wilful attempt to evade; the case turned on whether the requisite mental element had been proved.
Held / ratio A 'wilful attempt' to evade is a positive, deliberate act done with the specific intent to evade; mens rea must be established by the prosecution and cannot be inferred from mere default. The prosecution element is distinct from civil penalty.
Significance The classic statement that wilfulness, not mere default, is the gravamen of section 276C.
Gujarat Travancore Agency v. CIT (1989) 177 ITR 455 (SC)
Citation (1989) 177 ITR 455 (SC).
Facts Considered the difference between the civil penalty for default under section 271(1)(a) and the criminal offences under the Act.
Held / ratio A criminal offence under the Act requires mens rea, whereas civil penalty under section 271(1)(a) attaches on default without proof of a guilty mind; the legislature, where it intends a criminal sanction, uses words such as 'wilful'.
Significance The doctrinal foundation distinguishing penalty from prosecution under the Act.
Srinidhi Karti Chidambaram v. PCIT (2021) 437 ITR 206 (Mad)
Facts Prosecution under sections 276C/277/278 for alleged non-disclosure of cash received on a land sale; the case rested largely on statements and material gathered from third persons during search/survey.
Held / ratio For sections 276C/277 the incriminating material or evidence of wilful evasion must emanate from the assessee; reliance on third-party material plus the assessee's denial does not establish the offence. The complaint and the section 279 sanction also reflected non-application of mind. Prosecution quashed.
Significance A leading recent High Court authority on the evidentiary threshold for wilful evasion and on sanction validity.
Cluster 2 — Tribunal (ITAT) / appellate-finding linkage: a favourable finding defeats the charge
The ITAT has no jurisdiction over the prosecution itself; the linkage is that a conclusive finding in the quantum/penalty appeal binds the criminal court. Where the Tribunal deletes the addition or cancels the concealment penalty for want of concealment, the foundation of a section 276C(1)/277 charge collapses and quashing follows.
Facts The Assessing Officer treated the gap between original and revised returns as concealed income and levied a section 271(1)(c) penalty, on which the section 276C/277 complaint was founded. The Tribunal subsequently deleted the additions and cancelled the penalty, finding no concealment.
Held / ratio Penalty and prosecution under section 276C are simultaneous; once the Tribunal finds there is no concealment, the very foundation of the criminal charge disappears and quashing of the prosecution is automatic — it follows 'by operation of law'. Continuing the prosecution thereafter is an abuse of process.
Significance The cornerstone authority for the Tribunal-finding linkage.
Facts The prosecution alleged suppression of income through a benami concern; the Tribunal held the income did not belong to the assessee.
Held / ratio Where the very finding that the assessee made a false statement has been set aside by the Tribunal, the criminal prosecution cannot be sustained; the trial court was directed to drop proceedings.
Significance Establishes that a conclusive appellate finding negating the substratum binds the criminal court.
Uttam Chand v. ITO (1982) 133 ITR 909 (SC)
Citation (1982) 133 ITR 909 (SC).
Facts The prosecution proceeded on the footing that the firm was not genuine and the return therefore false; the Tribunal, on the whole record, found the firm genuine and the partner real.
Held / ratio In light of the Tribunal's finding, the assessee could not be prosecuted for filing a false return; the prosecution was quashed.
Significance The earliest of the trilogy founding the linkage.
Nagendra Choudhary v. Union of India (Raj HC, 26 November 2025)
Citation Rajasthan High Court, Crl. Misc. Petn. No. 4839/2019, decided 26 November 2025 (reporter citation to be confirmed).
Facts A section 276C(1) prosecution was built on entries found in a search; the Tribunal subsequently deleted the concealment penalty, finding no concealment.
Held / ratio Once the Tribunal removes the penalty for want of concealment, the factual foundation of the section 276C(1) charge no longer exists and its continuance is an abuse of process; prosecution quashed, applying K.C. Builders.
Significance A clean, recent High Court application of the linkage — confirming its continuing vitality. (Cited from the order; the reporter page should be confirmed before reliance.)
Cluster 3 — Conclusive findings beyond the Tribunal; assessment pendency no bar
Vijay Krishnaswami v. Dy. Director of Income Tax (Inv.) (2025 INSC 1048) (SC)
Citation 2025 INSC 1048, decided 28 August 2025 (SC).
Facts A search seized substantial unaccounted cash and a section 276C(1) complaint was launched; the Settlement Commission later granted immunity from penalty under section 245H, recording that there was no wilful attempt to evade and that disclosure was full and true. The prosecution was nonetheless pressed.
Held / ratio By section 245-I the Settlement Commission's findings are conclusive; absent a confirmed finding of concealment or wilful evasion the section 276C(1) prosecution has no foundation and is an abuse of process. The Revenue was bound by its own CBDT prosecution circulars (which require the penalty to be confirmed by the Tribunal and to exceed the monetary threshold before a 276C prosecution is launched); the Court quashed the prosecution and imposed costs of Rs. 2,00,000 on the department.
Significance Extends the K.C. Builders linkage to conclusive Settlement-Commission findings and underscores that the CBDT prosecution circulars bind the department.
P. Jayappan v. S.K. Perumal, First ITO (1984) 149 ITR 696 (SC)
Facts The accused sought to stall a section 276C/277 prosecution by pointing to pending reassessment proceedings.
Held / ratio Pendency of reassessment/penalty proceedings is not a bar to launching prosecution; criminal and assessment proceedings are independent and the criminal court need not wait. The Court preserved the Uttam Chand escape route — a prosecution already launched may be quashed if a later favourable finding is recorded — but held that pendency alone is no bar to initiation.
Significance The leading authority on the limits of the linkage.
Cluster 4 — Section 276C(2): wilful evasion of payment
S.P. Velayutham v. ACIT (2022) 442 ITR 74 (Mad)
Citation (2022) 442 ITR 74 (Madras).
Facts Self-assessment tax was admitted but paid late, in instalments; a section 276C(2) complaint for evasion of payment was launched.
Held / ratio Section 276C(2) requires a wilful attempt to evade payment; a mere failure or delay in paying, without mens rea or a deliberate design to defeat recovery, is not an offence. Where the assessee was paying the demand and there was no mala fide, the prosecution was quashed.
Significance Defines the mens-rea threshold for the payment-evasion offence.
G. Victor Devasahayam v. ACIT (2022) 441 ITR 131 (Mad)
Facts Companion case to S.P. Velayutham; admitted tax paid late.
Held / ratio Section 276C(2) is attracted only by a deliberate, wilful attempt to evade payment; non-payment in time simpliciter, without mens rea, is not an offence; prosecution quashed.
Significance Corroborates the 276C(2) standard.
Vilas Babanrao Kalokhe v. PCIT (Central), Pune (2025:BHC-AS:45535) (Bom)
Citation Bombay High Court, 2025; neutral citation 2025:BHC-AS:45535.
Facts Non-payment of self-assessment tax, subsequently paid; a section 276C(2) prosecution was continued.
Held / ratio Non-payment later cured, without any contrivance to evade, cannot sustain a section 276C(2) prosecution; continuation is an abuse of process.
Significance A 2025 reaffirmation of the payment-evasion mens-rea requirement.
Cluster 5 — Corporate liability and an overruled limit
Standard Chartered Bank v. Directorate of Enforcement (2005) 4 SCC 530 (SC, CB)
Facts Whether a company could be prosecuted for an offence carrying a mandatory term of imprisonment together with fine.
Held / ratio A company is prosecutable and convictable even where the offence prescribes a mandatory term of imprisonment and fine; the court imposes the fine. Velliappa Textiles overruled.
Significance Foundational to prosecuting companies under section 276C read with section 278B.
Facts / holding Held (2:1) that a company could not be prosecuted for offences carrying mandatory imprisonment under sections 276C/277/278 — since overruled by Standard Chartered. Retained for the doctrinal narrative.
CHAPTER XXII — OFFENCES AND PROSECUTIONS
Section 276C — Wilful attempt to evade tax, etc.
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live and central. The flagship tax-evasion prosecution provision.
Finance Act, 2026: WHOLLY SUBSTITUTED w.e.f. 1 March 2026 — graded-threshold structure; rigorous imprisonment and mandatory minimum removed; 'whatsoever' deleted (see amendment note).
Mechanism: Section 276C(1) punishes a wilful attempt to evade tax/penalty/interest or to under-report income; section 276C(2) punishes a wilful attempt to evade the payment of tax. Mens rea ('wilful') is the gravamen.
Litigation profile: Very high — a deep Supreme Court line on mens rea, the effect of penalty/Tribunal findings, and abuse of process, with a strong 2021-2025 High Court/Supreme Court quashing trend.
A. COMMENTARY
Two distinct offences
Section 276C creates two offences. Sub-section (1) addresses a wilful attempt to evade any tax, penalty or interest 'chargeable or imposable', or to under-report income — i.e. evasion at the assessment/chargeability stage, typically through concealment or false claims. Sub-section (2) addresses a wilful attempt to evade the 'payment' of tax, penalty or interest — i.e. defeating recovery of an admitted or determined liability. The Explanation deems certain conduct (false entries, omission of relevant entries, creating circumstances to enable evasion) to be a wilful attempt. The distinction matters: a mere failure or inability to pay self-assessment tax, without a contrivance to defeat recovery, does not satisfy sub-section (2).
'Wilful' — mens rea is essential
The defining ingredient is wilfulness. Unlike civil penalty under section 271(1)(a)/270A, which can attach without mens rea, a conviction under section 276C requires proof of a deliberate, conscious attempt to evade (Gujarat Travancore Agency; Prem Dass). Section 278E now requires the court to presume culpable mental state, but the presumption is rebuttable and does not dispense with proof of the actus reus — the prosecution must still establish the evasive act, and the incriminating material must emanate from the assessee (Srinidhi Karti Chidambaram).
Effect of deletion of penalty / favourable appellate findings
A powerful line of authority holds that where the very foundation of the charge — concealment or a false claim — is knocked out by the appellate/Tribunal findings, the criminal prosecution cannot survive. If the penalty for concealment is cancelled on a finding of no concealment, quashing of the 276C/277 prosecution is the natural and often automatic consequence (K.C. Builders; G.L. Didwania; Uttam Chand; and, recently, Nagendra Choudhary). The principle now extends to conclusive findings of the Settlement Commission (Vijay Krishnaswami). Conversely, the mere pendency of assessment is not, by itself, a bar to launching prosecution (P. Jayappan).
FA 2026 Amendment (w.e.f. 1 March 2026)
By section 26 of the Finance Act, 2026, with effect from 1 March 2026, section 276C is wholly substituted. The words 'in any manner whatsoever' become 'in any manner'. Both sub-sections are recast into a graded structure: simple imprisonment up to two years, or fine, or both, where the amount sought to be evaded or tax on under-reported income exceeds Rs. 50 lakh; simple imprisonment up to six months, or fine, or both, where it exceeds Rs. 10 lakh but not Rs. 50 lakh; and fine only in any other case. The earlier rigorous imprisonment and the mandatory minimum sentences are removed, and the historic Rs. 25 lakh single threshold is replaced by the Rs. 50 lakh / Rs. 10 lakh bands. The Explanation is retained (re-lettered (a)-(d)). The verbatim text in Part B is the pre-substitution text. Read also section 270AA (as amended by the Finance Act, 2026), under which an assessee fulfilling the conditions may obtain immunity from initiation of proceedings under section 276C — though no such immunity is available once Chapter XXII proceedings have been initiated.
B. STATUTORY TEXT (verbatim — pre-Finance Act, 2026 text)
The text reproduced is the pre-Finance Act, 2026 text. With effect from 1 March 2026 section 276C is wholly substituted (graded thresholds; simple imprisonment; 'whatsoever' deleted) — see the amendment note above.
Wilful attempt to evade tax, etc.
276C. (1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable, or under reports his income, under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable,—
(i) in a case where the amount sought to be evaded or tax on under-reported income exceeds twenty-five hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine;
(ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and with fine.
(2) If a person wilfully attempts in any manner whatsoever to evade the payment of any tax, penalty or interest under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and shall, in the discretion of the court, also be liable to fine.
Explanation.—For the purposes of this section, a wilful attempt to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof shall include a case where any person—
(i) has in his possession or control any books of account or other documents (being books of account or other documents relevant to any proceeding under this Act) containing a false entry or statement; or
(ii) makes or causes to be made any false entry or statement in such books of account or other documents; or
(iii) wilfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents; or
(iv) causes any other circumstance to exist which will have the effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof.
C. AUTHORITIES
The authorities are arranged by issue-cluster. The principles survive the 2026 substitution.
Cluster 1 — Mens rea ('wilful') is the gravamen
Prem Dass v. ITO (1999) 236 ITR 683 (SC)
Citation (1999) 236 ITR 683 / 158 CTR 1 (SC).
Facts Prosecution under sections 276C(2)/277 alleging a wilful attempt to evade; the case turned on whether the requisite mental element had been proved.
Held / ratio A 'wilful attempt' to evade is a positive, deliberate act done with the specific intent to evade; mens rea must be established by the prosecution and cannot be inferred from mere default. The prosecution element is distinct from civil penalty.
Significance The classic statement that wilfulness, not mere default, is the gravamen of section 276C.
Gujarat Travancore Agency v. CIT (1989) 177 ITR 455 (SC)
Citation (1989) 177 ITR 455 (SC).
Facts Considered the difference between the civil penalty for default under section 271(1)(a) and the criminal offences under the Act.
Held / ratio A criminal offence under the Act requires mens rea, whereas civil penalty under section 271(1)(a) attaches on default without proof of a guilty mind; the legislature, where it intends a criminal sanction, uses words such as 'wilful'.
Significance The doctrinal foundation distinguishing penalty from prosecution under the Act.
Srinidhi Karti Chidambaram v. PCIT (2021) 437 ITR 206 (Mad)
Citation (2021) 437 ITR 206 / 282 Taxman 112 (Madras).
Facts Prosecution under sections 276C/277/278 for alleged non-disclosure of cash received on a land sale; the case rested largely on statements and material gathered from third persons during search/survey.
Held / ratio For sections 276C/277 the incriminating material or evidence of wilful evasion must emanate from the assessee; reliance on third-party material plus the assessee's denial does not establish the offence. The complaint and the section 279 sanction also reflected non-application of mind. Prosecution quashed.
Significance A leading recent High Court authority on the evidentiary threshold for wilful evasion and on sanction validity.
Cluster 2 — Tribunal (ITAT) / appellate-finding linkage: a favourable finding defeats the charge
The ITAT has no jurisdiction over the prosecution itself; the linkage is that a conclusive finding in the quantum/penalty appeal binds the criminal court. Where the Tribunal deletes the addition or cancels the concealment penalty for want of concealment, the foundation of a section 276C(1)/277 charge collapses and quashing follows.
K.C. Builders v. ACIT (2004) 265 ITR 562 (SC)
Citation (2004) 265 ITR 562 / 135 Taxman 461 (SC).
Facts The Assessing Officer treated the gap between original and revised returns as concealed income and levied a section 271(1)(c) penalty, on which the section 276C/277 complaint was founded. The Tribunal subsequently deleted the additions and cancelled the penalty, finding no concealment.
Held / ratio Penalty and prosecution under section 276C are simultaneous; once the Tribunal finds there is no concealment, the very foundation of the criminal charge disappears and quashing of the prosecution is automatic — it follows 'by operation of law'. Continuing the prosecution thereafter is an abuse of process.
Significance The cornerstone authority for the Tribunal-finding linkage.
G.L. Didwania v. ITO (1997) 224 ITR 687 (SC)
Citation (1997) 224 ITR 687 / 140 CTR 273 (SC) (decided 1995).
Facts The prosecution alleged suppression of income through a benami concern; the Tribunal held the income did not belong to the assessee.
Held / ratio Where the very finding that the assessee made a false statement has been set aside by the Tribunal, the criminal prosecution cannot be sustained; the trial court was directed to drop proceedings.
Significance Establishes that a conclusive appellate finding negating the substratum binds the criminal court.
Uttam Chand v. ITO (1982) 133 ITR 909 (SC)
Citation (1982) 133 ITR 909 (SC).
Facts The prosecution proceeded on the footing that the firm was not genuine and the return therefore false; the Tribunal, on the whole record, found the firm genuine and the partner real.
Held / ratio In light of the Tribunal's finding, the assessee could not be prosecuted for filing a false return; the prosecution was quashed.
Significance The earliest of the trilogy founding the linkage.
Nagendra Choudhary v. Union of India (Raj HC, 26 November 2025)
Citation Rajasthan High Court, Crl. Misc. Petn. No. 4839/2019, decided 26 November 2025 (reporter citation to be confirmed).
Facts A section 276C(1) prosecution was built on entries found in a search; the Tribunal subsequently deleted the concealment penalty, finding no concealment.
Held / ratio Once the Tribunal removes the penalty for want of concealment, the factual foundation of the section 276C(1) charge no longer exists and its continuance is an abuse of process; prosecution quashed, applying K.C. Builders.
Significance A clean, recent High Court application of the linkage — confirming its continuing vitality. (Cited from the order; the reporter page should be confirmed before reliance.)
Cluster 3 — Conclusive findings beyond the Tribunal; assessment pendency no bar
Vijay Krishnaswami v. Dy. Director of Income Tax (Inv.) (2025 INSC 1048) (SC)
Citation 2025 INSC 1048, decided 28 August 2025 (SC).
Facts A search seized substantial unaccounted cash and a section 276C(1) complaint was launched; the Settlement Commission later granted immunity from penalty under section 245H, recording that there was no wilful attempt to evade and that disclosure was full and true. The prosecution was nonetheless pressed.
Held / ratio By section 245-I the Settlement Commission's findings are conclusive; absent a confirmed finding of concealment or wilful evasion the section 276C(1) prosecution has no foundation and is an abuse of process. The Revenue was bound by its own CBDT prosecution circulars (which require the penalty to be confirmed by the Tribunal and to exceed the monetary threshold before a 276C prosecution is launched); the Court quashed the prosecution and imposed costs of Rs. 2,00,000 on the department.
Significance Extends the K.C. Builders linkage to conclusive Settlement-Commission findings and underscores that the CBDT prosecution circulars bind the department.
P. Jayappan v. S.K. Perumal, First ITO (1984) 149 ITR 696 (SC)
Citation (1984) 149 ITR 696 / 1984 Supp SCC 437 (SC).
Facts The accused sought to stall a section 276C/277 prosecution by pointing to pending reassessment proceedings.
Held / ratio Pendency of reassessment/penalty proceedings is not a bar to launching prosecution; criminal and assessment proceedings are independent and the criminal court need not wait. The Court preserved the Uttam Chand escape route — a prosecution already launched may be quashed if a later favourable finding is recorded — but held that pendency alone is no bar to initiation.
Significance The leading authority on the limits of the linkage.
Cluster 4 — Section 276C(2): wilful evasion of payment
S.P. Velayutham v. ACIT (2022) 442 ITR 74 (Mad)
Citation (2022) 442 ITR 74 (Madras).
Facts Self-assessment tax was admitted but paid late, in instalments; a section 276C(2) complaint for evasion of payment was launched.
Held / ratio Section 276C(2) requires a wilful attempt to evade payment; a mere failure or delay in paying, without mens rea or a deliberate design to defeat recovery, is not an offence. Where the assessee was paying the demand and there was no mala fide, the prosecution was quashed.
Significance Defines the mens-rea threshold for the payment-evasion offence.
G. Victor Devasahayam v. ACIT (2022) 441 ITR 131 (Mad)
Citation (2022) 441 ITR 131 / 284 Taxman 531 (Madras).
Facts Companion case to S.P. Velayutham; admitted tax paid late.
Held / ratio Section 276C(2) is attracted only by a deliberate, wilful attempt to evade payment; non-payment in time simpliciter, without mens rea, is not an offence; prosecution quashed.
Significance Corroborates the 276C(2) standard.
Vilas Babanrao Kalokhe v. PCIT (Central), Pune (2025:BHC-AS:45535) (Bom)
Citation Bombay High Court, 2025; neutral citation 2025:BHC-AS:45535.
Facts Non-payment of self-assessment tax, subsequently paid; a section 276C(2) prosecution was continued.
Held / ratio Non-payment later cured, without any contrivance to evade, cannot sustain a section 276C(2) prosecution; continuation is an abuse of process.
Significance A 2025 reaffirmation of the payment-evasion mens-rea requirement.
Cluster 5 — Corporate liability and an overruled limit
Standard Chartered Bank v. Directorate of Enforcement (2005) 4 SCC 530 (SC, CB)
Citation (2005) 4 SCC 530 / AIR 2005 SC 2622 (Constitution Bench).
Facts Whether a company could be prosecuted for an offence carrying a mandatory term of imprisonment together with fine.
Held / ratio A company is prosecutable and convictable even where the offence prescribes a mandatory term of imprisonment and fine; the court imposes the fine. Velliappa Textiles overruled.
Significance Foundational to prosecuting companies under section 276C read with section 278B.
Asstt. Commissioner v. Velliappa Textiles Ltd. (2003) 263 ITR 550 (SC)
Citation (2003) 263 ITR 550 / (2004) 1 SCC 750 (SC) — overruled.
Facts / holding Held (2:1) that a company could not be prosecuted for offences carrying mandatory imprisonment under sections 276C/277/278 — since overruled by Standard Chartered. Retained for the doctrinal narrative.