Law: Income Tax Act, 1961

Section: 276C(1),277,278

Income-tax--- ----Offences and prosecution---Wilful attempt to evade tax---False statement in verification ---Mens rea must be proved---Firm---Remuneration paid to two persons---Remuneration shown by the persons in their returns and accepted by Income-Tax Authorities ---Mens rea could not be inferred---Prosecution not valid---Indian Income Tax Act, 1961, Ss. 276-C,'277 & 278-B. Mere possession or control of books and documents containing false entries is not punishable under section 276-C of the Income Tax Act, 1961, unless the prosecution establishes a wilful attempt on the part of the accused to evade tax and it is essential that mens rea must be established. In order to bring home the guilt under section 277, it is necessary for the prosecution to prove that the accused either knows or believes to be false or does not believe it to be true that the statement he makes or the verification he made under the Act is false. The word "wilful" generally means an act done with a bad purpose, with an evil motive as a constituent element of the crime and it should be established beyond all reasonable doubt and there should be presence of mens rea, a bad motive and a guilty mind. The first petitioner was a firm. Its returns were signed and verified by the second petitioner. The Income-Tax Officer found debit entries in the names of two brothers of the second petitioner. The firm stated that they had assisted the firm and remuneration had been paid to them. Prosecution was launched against the petitioners under sections 276-C and 277 read with section 278-B of the Income Tax Act, 1961. The learned Single Judge and the Metropolitan Sessions Judge imposed sentences on the firm and the partner. On a revision petition, it was contended that the Courts below bad ignored the Income-tax Returns submitted by the two persons showing their income from salaries paid by the first petitioner-firm, though the said statements were accepted by the Department. The further submission was that the prosecution failed to establish mens rea on the part of the petitioners: Held, -that the second petitioner had asserted that his brothers assisted the firm in the business in making purchases…

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