Forewords I-5 - I-9
About the Author I-11
Preface to Fifth Edition I-13
Acknowledgement I-15
Chapter-Heads I-17
List of Cases I-25
CHAPTER 1
GENESIS OF PROSECUTION UNDER INCOME-TAX
1.1 History of income-tax in India 1
1.2 Brief overview of income-tax 2
1.3 Introduction of prosecution in the Income-tax law in India 3
CHAPTER 2
OFFENCES SUBJECT TO PROSECUTION – A SNAPSHOT
2.1 Chapter XXII of the Income-tax Act 12
2.2 Relevant legal terms 12
2.3 Difference between summons case and a warrant case under the BNSS 13
2.4 Relevance of difference between Summon and Warrant case 14
2.5 Classification of the offences under Chapter XXII of the Income-tax Act, 1961 17
2.6 Classification of the offences under Chapter XXII of the Income-tax Act, 2025 24
2.7 Provision of arrest under the Income-tax Act, 1961 28 I-19
CHAPTER 3
OFFENCES UNDER CHAPTER XXII
3.1 Section 473 : Contravention of an order made under search action
3.2 Section 474: Failure to afford facility for inspection of books of account during search
3.3 Section 475: Removal, concealment, transfer or delivery of property to prevent tax recovery
3.4 Section 276A: Failure to comply with the provisions of sub-sections (1) and (3) of section 178
3.5 Section 276AB: Failure to comply with the provisions of sections 269UC, 269UE and 269UL
3.6 Section 476: Failure to pay tax to credit of Central Government under Chapter XIX-B
3.7 Section 477: Failure to pay tax collected at source
3.8 Section 478: Wilful attempt to evade tax, etc.
3.9 Section 479: Failure to furnish returns of income
3.10 Section 480: Failure to furnish return of income in search cases
3.11 Section 481: Failure to produce accounts and documents
3.12 Section 482: False Statement in verification, etc.
3.13 Section 484: Abetment of False Return, etc.
CHAPTER 4
OFFENCES BY CORPORATE ASSESSEES
4.1 Can a company be prosecuted?
4.2 Prosecution of individuals related to companies
CHAPTER 5
PROSECUTION OF DIRECTORS WHERE COMPANY HAS GONE UNDER LIQUIDATION OR INSOLVENCY
5.1 Introduction
5.2 Suspension of legal proceedings
5.3 Whether tax recovery suits are prohibited?
5.4 Can the directors of such company be arraigned?
CHAPTER 6
OFFENCES BY OTHER PERSONS
6.1 Introduction 190
6.2 Offences by Individuals 191
6.3 Offences by a Firm 198
6.4 Offences by a Limited Liability Partnership 202
6.5 Offences by an HUF 203
6.6 Offences by Trusts 206
CHAPTER 7
REASONABLE CAUSE AND PRESUMPTION AS TO CULPABLE MENTAL STATE
7.1 Introduction 212
7.2 Concept of reasonable cause 213
7.3 What constitutes ‘reasonable cause’? 216
7.4 Presumption as to culpable mental state 222
7.5 Presumption as to culpable mental state when warranted 242
CHAPTER 8
INITIATION OF PROSECUTION
8.1 Procedure for identification and processing of cases for prosecution under the Income-tax Act, 1961 245
8.2 Sanction for prosecution 246
8.3 Is it necessary to obtain sanction for prosecution? 249
8.4 Necessity to issue notice before passing an order of sanction to prosecute? 250
8.5 Can the Court take cognizance of the offence if the sanction order is not obtained? 251
8.6 Complaint to be filed by whom? 256
8.7 Application of mind before granting sanction for prosecution 257
8.8 Sanction can only be granted by Principal Commissioner or Commissioner or Commissioner (Appeals) or the appropriate authority
8.9 Period of limitation for launching prosecution
8.10 Summary of prosecution proceedings
CHAPTER 9
FILING OF THE COMPLAINT BEFORE TRIAL COURT AND BAIL
9.1 Filing of criminal complaint
9.2 Bail application
CHAPTER 10
PRE-CHARGE PROCEEDINGS
10.1
10.3 Challenging the complaint in summons case
10.4 Whether a magistrate can end proceedings in a summons case without going through a full trial?
CHAPTER 11
FRAMING OF CHARGE AND POST-CHARGE PROCEEDINGS
11.1
11.3 Separate charge for distinct offences
CHAPTER 12
CROSS EXAMINATION
12.1 Right of accused to cross examine the witness of prosecution
CHAPTER 13
HOW TO MITIGATE FRAMING OF CHARGES BY A TRIAL COURT
13.1 Discharge application
13.3 Compounding
14.1
CHAPTER 14
APPEAL, REVISION AND WRIT
CHAPTER
15
PROSECUTION UNDER THE
15.1 Introduction
15.2 Offences and punishment under
15.3 Offences
15.4 Term of
15.5
15.6 Classification of
15.7 Constitutional validity of the provisions of arrest
15.8 Sanction for prosecution and its cognizance
15.9 Order for sanction is not an appealable order
15.10
15.11
15.12 Bail
15.13 Can the taxpayer be arrested without assessment?
15.14 Confidentiality of data collected under GST
15.15 Presumption of culpable mental state
15.16 Statement made before the officer admissible as evidence for prosecution proceedings
15.17 Offences by non-individuals
15.18 Compounding of offences
15.19 Offences not compoundable
15.20 Fee for compounding
15.21 Limitation period for taking cognizance or institution of prosecution
15.22 Applicability of prosecution provisions to the IGST Act
Annexure 1 : Section 3, read with section 5 of the Central Goods and Service Tax Act, 2017 - Officers under the ActNotified officers
Annexure 2 : Form GST CPD-01 (Application for Compounding of offence) and Form GST CPD-02 (order for rejection/ Allowance of compounding of offence)
CHAPTER 16
OFFENCES AND PROSECUTIONS UNDER THE BLACK MONEY ACT, 2015
16.1 Purpose of the Black Money Act, 2015 415
16.2 Offences and prosecutions under the Black Money Act, 2015 417
16.3 Retrospective operation of the Act 427
APPENDICES
APPENDIX 1 : CBDT GUIDELINES & CIRCULARS 435
APPENDIX 2 : LANDMARK RULINGS 465
SYNOPSIS CHAPTER
2.1 Chapter XXII of the Income-tax Act
2.2 Relevant legal terms
2.2.1 Bailable offence & Non-bailable offence
2.2.2 Cognizable offence
2.2.3 Non-cognizable offence
2.2.4 Summons-case
2.2.5 Warrant-case
2.3 Difference between summons case and a warrant case under the BNSS
2.4 Relevance of difference between Summons and Warrant case
2.4.1 Can a warrant case be tried as a summons case
2.4.2 Relevance of the classification of offence as cognizable or non-cognizable
2.5 Classification of the offences under Chapter XXII of the Income-tax Act, 1961
2.5.1 Summons cases
2.5.2 Warrant cases
2.6 Classification of the offences under Chapter XXII of the Income-tax Act, 2025
2.6.1 Summons cases
2.6.2 Warrant cases
2.7 Provision of arrest under the Income-tax Act
2.7.1 Whether provision for anticipatory bail can be resorted to when a person receives a notice from a Tax Recovery Officer
2.1 CHAPTER XXII OF THE INCOME-TAX ACT
Section 280A of the Income-tax Act, 1961 (“1961 Act”), deals with the constitution of Special Courts for conducting prosecution proceedings under the Act. As per section 280D of the Act, the provisions of the Code of Criminal Procedure, 1973 (“Cr.P.C”) (including provisions as to bails and bonds) to the extent inconsistent with the Act shall apply to the proceedings before a Special Court.
The corresponding section of the 2025 Act dealing with the constitution of Special Courts is Section 495. As per section 498 of the 2025 Act, the provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”) (including the provisions as to bails or bonds) to the extent inconsistent with the Act shall apply to the proceedings before a Special Court.
2.2 RELEVANT LEGAL TERMS
For a clear understanding of the offences under Chapter XXII of the 1961 Act and the 2025 Act and their implication, it is pertinent to take note of the following legal terms:
2.2.1 Bailable offence & non-bailable offence
As per section 2(a) of the Cr.P.C, “bailable offence” means an offence which is shown as bailable in the First Schedule (of the Cr.P.C), or which is made bailable by any other law for the time being in force; and “non-bailable offence” means any other offence.
As per section 2(c) of the BNSS, “bailable offence” means an offence which is shown as bailable in the First Schedule (of the BNSS), or which is made bailable by any other law for the time being in force; and “non-bailable offence” means any other offence.
2.2.2 Cognizable offence
As per section 2(c) of the Cr.P.C, “cognizable offence” means an offence for which and “cognizable case” means a case in which, a police officer may, in accordance with the First Schedule (of the Cr.P.C) or under any other law for the time being in force, arrest without warrant.
As per section 2(g) of the BNSS, “cognizable offence” means an offence for which, and “cognizable case” means a case in which, a police officer may, in accordance with the First Schedule (of the BNSS) or under any other law for the time being in force, arrest without warrant;
2.2.3 Non-cognizable offence
As per section 2(l) of the Cr.P.C, “non-cognizable offence” means an offence for which and “non-cognizable case” means a case in which, a police officer has no authority to arrest without warrant.
As per section 2(o) of the BNSS “non-cognizable offence” means an offence for which, and “non-cognizable case” means a case in which, a police officer has no authority to arrest without warrant.
2.2.4 Summons-case
As per section 2(w) of the Cr.P.C, “summons-case” means a case relating to an offence, and not being a warrant case. As per section 280C of the 1961 Act, it has been clarified that a special court shall try an offence under Chapter XXII of the Act punishable with imprisonment not exceeding two years or with fine or with both, as a summons case.
As per section 2(x) of the BNSS “summons-case” means a case relating to an offence, and not being a warrant-case. As per section 497 of the 2025 Act, it has been clarified that a special court shall try an offence under Chapter XXII of the Act punishable with imprisonment not exceeding two years or with fine or with both, as a summons case.
2.2.5 Warrant-case
As per section 2(x) of the Cr.P.C, “warrant-case” means a case relating to an offence punishable with death, imprisonment for life or imprisonment for a term exceeding two years.
As per section 2(z) of the BNSS, “warrant-case” means a case relating to an offence punishable with death, imprisonment for life or imprisonment for a term exceeding two years.
2.3 DIFFERENCE BETWEEN SUMMONS CASE AND A WARRANT CASE UNDER THE BNSS
Warrant-caseSummons-case
BNSS prescribes two procedures for the trial of a warrant case by Magistrates, (i) where a case instituted on a Police Report (ii) where a case is instituted otherwise than on a Police Report.
Where a warrant case has been tried as a summons case, and it has resulted in the acquittal of the accused, such acquittal shall operate only as a discharge under section 268 of the BNSS.
When the accused appears or is brought before a Magistrate in a warrant case, the Magistrate shall proceed to hear the prosecution and take all such evidence as may be produced in support of the prosecution.
There is only one procedure prescribed for the trial of a summons case whether it is instituted on a Police Report or a complaint.
Where a summons case has been tried as a warrant case and the accused is discharged under section 268, the discharge will amount to an acquittal under section 278 of the BNSS.
In a summon case, the particulars of the offence are stated to the accused, and he shall be asked whether he pleads guilty or wishes to defend himself. 13 DIFFERENCE BETWEEN
Warrant-caseSummons-case
Framing of a formal charge is necessary in a warrant case.
A warrant case may result in the discharge of the accused under section 272 of the Act in the absence of the complainant.
A warrant case cannot be converted into a summons case.
It is not necessary in a summons case.
In a summons case, the result would be the acquittal of the accused under section 279 of the Act.
The Magistrate is empowered to convert a summons case into a warrant case under Section 282 of the Act.
2.4 RELEVANCE OF DIFFERENCE BETWEEN SUMMONS AND WARRANT CASE
The difference between a summons case and a warrant case is significant since the nature of the case determines the procedure to be adopted by the court in its proceedings. Whether a case is a summons-case or a warrant-case generally depends upon the gravity of the offence and the punishment prescribed for it.
Chapter XX of BNSS deals explicitly with the procedure relating to Warrant cases. Chapter XXI of BNSS, on the other hand, deals expressly with the procedure relating to the summons cases. There are cases where, generally, the punishment prescribed does not exceed two years. The process followed, however, in a warrant case is different. Warrant cases are usually where the punishment for the offence is minimum imprisonment of 2 years and can go up to a death sentence (depending on the nature of the offence). The trial in a warrant case is more elaborate as compared to the summons case.
2.4.1 Can a warrant case be tried as a summons case
A warrant case cannot be tried as a summons case. In this connection the Kerala High Court in State of Kerala v. E. Bhaskaran1 held as under:
[at page 956 (of Cri LJ)]:
“The procedures prescribed for warrant and summons cases are entirely different. The procedure prescribed for summons cases is simpler and speedier than that prescribed for warrant cases. Warrant cases as they deal with offences graver than those in summons cases cannot be tried in the same simple and speedy fashion as summons cases. Greater opportunities for defence are offered to the accused in a warrant case than in a summons case. Unlike in a summons case a charge has to be framed in a warrant case and the accused has also a right to reserve cross-examination of the prosecution witnesses till a last stage. These are substantial and valuable rights which an accused has if the procedure prescribed in Chapter XXI is followed and he cannot be deprived of them. The difference between the two forms of trial is not therefore merely one of form
1. AIR 1971 Ker. 188.
15
importing more irregularity curable u/s. 537 of the Criminal Procedure Code (Sec. 511 of the BNSS). On the other hand, it is so vital that there is an almost indefeasible presumption of prejudice to the accused if a warrant case is tried as a summons case.”
Whereas, a summons case can be tried as a warrant case as no prejudice is caused to the accused. The Supreme Court in Gopal Das Sindhi v. State of Assam2 observed that the irregularity of a summon case tried as a warrant case does not vitiate the proceedings and is curable under section 537 of the 1898 Code (sec 465 of the 1973 Code, and Section 511 of the BNSS) as no prejudice is caused to the accused.
A warrant case procedure being more elaborate provides a better opportunity for the accused to defend himself. The summons or summary procedure is prescribed only for the trial of comparatively minor offences involving relatively lesser sentences. In serious cases, it is open to the Magistrate to convert a summon case into a warrant case, as provided for in section 282 of the BNSS3
The detailed procedure of summons and warrant trial is explained in Chapter 10 later.
2.4.2 Relevance of the classification of offence as cognizable or non-cognizable
The classification of an offence as cognizable or non-cognizable also assumes significance. As per section 2(g) of the BNSS “cognizable offence” means an offence for which a police officer may, in accordance with the First Schedule of the BNSS or under any other law for the time being in force, arrest without warrant. The First Schedule of the BNSS provides that any offence (under any law other than the Bharatiya Nyaya Sanhita, 2023) which is punishable for the imprisonment of 3 years and upwards is Cognizable and other offences which are punishable for a period less than three years are non-cognizable. In other words, any offence which is punishable for the imprisonment of 3 years and upwards, the police officer may arrest without a warrant from any court.
However, it is important to note that there is no provision of arrest by a tax officer under the Income Tax Act for any offence under Chapter XXII, and therefore a person cannot be detained by a tax officer. The position that there is no power to arrest with a tax officer is further substantiated by the fact
2. AIR 1961 S.C. 986.
3. Section 282. Power of Court to convert summons-cases into warrant-cases. When in the course of the trial of a summons-case relating to an offence punishable with imprisonment for a term exceeding six months, it appears to the Magistrate that in the interests of justice, the offence should be tried in accordance with the procedure for the trial of warrantcases, such Magistrate may proceed to re-hear the case in the manner provided by this Sanhita for the trial of warrant-cases and may recall any witness who may have been examined.
that section 279A of the 1961 Act makes certain offences under section 276B or section 276C or section 276CC or section 277 or section 278 which are punishable for a period of more than 3 years as non-cognizable. Similarly, Section 492 of the 2025 Act makes certain offences under sections 476, 478, 479, 480, 482 or 484 non-cognizable.
It is important to note that section 279A was inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. l-10-1975 and at the relevant time only section 276B or section 276C or section 276CC or section 277 or section 278 of the Act punishes for a period of more than 3 years and accordingly section 279A of the Act effectively made all the offences under the Income Tax Act as non-cognizable. However, certain offences like section 276BB, punishable up to 7 years were inserted in the Act by the Finance Act, 1988, w.e.f. 1-6-1988 and since section 279A was not amended consequentially, it remained as a non-cognizable offence. It may, however, be noted that it is not clear as to how the tax officer would arrest a person for violation of this section without any specific power to arrest under the Act.
The classification of an offence as non-cognizable also assumes significance as no police officer has the power of their own to investigate any such offence. This issue came before the Calcutta High Court in the case of Hiralal Banka and Ors. v P.S. Bose and Ors.4 wherein an F.I.R was lodged by the C.B.I for violation of the provisions of sections 120B/420/468/471 of I.P.C. and sections 277/278 of the Income Tax Act, 1961, without any such complaint by the tax authorities and without any sanction requited under section 279 of the Act. The Hon’ble High Court quashed the F.I.R and it was held as under:
“4. It may be mentioned here that Section 276C of the Income Tax Act provides for punishment for wilful attempt to evade tax, etc. It is also to be noted in this connection that Sub-section (1) of Section 279 of the Income Tax Act provides that a person shall not be proceeded against for an offence Under Section 275A, Section 276, Section 276A, Section 276B, Section 276BB, Section 276C, Section 276CC, Section 276D, Section 277 or Section 278 except with the previous sanction of the Chief Commissioner or Director-General or Commissioner unless the prosecution is at the instance of the Commissioner (Appeals) or of the appropriate authority referred to therein. Section 279A of the Income Tax Act provides that notwithstanding anything contained in the Code of Criminal Procedure, 1973, an offence punishable Under Section 276B or Section 276C or Section 276CC or Section 277 or Section 278 shall be deemed to be non-cognizable within the meaning of that Code. Reading Section 279A and Section 279 together it is evident that offences Under Section 277 and Section 278 of the Income Tax Act are not cognizable offences and as such the police have no power of their own to investigate any such offence and any prosecution for any such offence can be launched by a complaint with the previous sanction of the Chief Commissioner or Director-General or Commissioner. As we have 4. (1993) 2 CALLT 299 (HC).
2.5
seen the F.I.R. in this case mentions Sections 277 and 278 of the Income Tax Act but the offences under the said sections being non-cognizable the police cannot investigate the same on the basis of their own power as a matter of course although prosecution under those sections can be launched by filing complaint with the previous sanction or at the instance of any of such authorities as mentioned in Section 279 of the Income Tax Act which evidently is not the case here. There is no doubt that the F.I.R. of the present case also includes several sections of the Indian Penal Code, such as, Sections 120B, 420, 468 and 471. From the averments contained in the F.I.R. it is evident, apparent and transparent that substantially the allegation on the basis of which the investigation has been started is that the petitioners in collusion and conspiracy with others evaded payment of proper income tax and also submitted income tax returns based on false statements and forged and fabricated materials. The basic offences, if any, being under the Income Tax Act the requirement regarding sanction for prosecution and the bar of lack of authority on the part of the police to investigate such offences in view of the specific provisions of the Income Tax Act cannot be circumvented by inclusion of some other ancillary offences under the Indian Penal Code which are only components of or rather only incidental to or instrumental in the commission of the basic offences under the Income Tax Act or which are closely linked up with such offences and which have no separate consequences other than what are sought, to be prevented by enacting specific penal provisions in the Income Tax Act, namely, evasion of tax and steps in that direction. In that view of the matter also the F.I.R. cannot be sustained simply because offences punishable under certain sections of the Indian Penal Code, such as, sections 420, 468, 471 read with Section 120B have been included in the F.I.R. along with the main offences punishable under the Income Tax Act which, under law, the police cannot investigate on the basis of their own authority.”
2.5.1 Summon Cases
SectionOffencesPunishmentBailable/ NonBailable
275AContravention of an order made under section 132(1) (Second Proviso) requiring the assessee to maintain the status quo of any valuable article in assessee’s possession in which case it is not possible to take physical possession of such article
Imprisonment up to 2 Years and Fine Bailable
SectionOffencesPunishmentBailable/ NonBailable
by the authorized officer, due to its volume, weight or other physical characteristics or due to its being of dangerous nature; or contravention under section 132(3) which relates to the order prohibiting the assessee to part with or remove any article without the previous permission of the concerned officer in respect to cases not covered under section 132(1)
275BRefusal to allow and facilitate the inspection of accounts and books kept in electronic form. Section 132(1)(iib) which requires any person to afford the authorized officer to inspect any books of account or other document maintained in the form of electronic record as defined in section 2(1)(t) of the Information Technology Act, 2000.
276Fraudulent removal, concealment, transfer or delivery to any person of any property or any interest therein, to prevent that property or interest therein being taken in execution
276A Failure to give notice of appointment as Liquidator; Receiver; as required by section 178(1) [within 30 days of becoming liquidator, notice to be given to Assessing officer]
Imprisonment up to 6 months or with Fine or with Both Bailable
Imprisonment up to 2 Years and Fine Bailable
Rigorous Imprisonment up to 2 Years Bailable Para 2.5
19 CLASSIFICATION OF THE OFFENCES UNDER CHAPTER XXII Para 2.5
SectionOffencesPunishmentBailable/ NonBailable
Or
Failure to set aside sufficient amount to provide for any existing or likely tax liability, payable by the company as required by section 178(3); Or
Parting with the assets of the company or the properties in contravention of section 178(3).
Note: No prosecution under this section to be launched on or after April 1, 2023
276ABFailure to comply with section 269UC (Transfer of immovable property in such area as prescribed or of value exceeding 5 lakh rupees to be made after an agreement in writing which shall be made at least 4 months before the intended date of transfer), Failure to deliver the possession of the property under section 269UE(2) (Delivery of possession of the property), or Contravene section 269UL(2) (Doing any act prejudicing Transfer of Property).
Note: No prosecution under this section to be launched on or after April 1, 2022.
276C(1)W ilful attempt, in any manner, to evade any tax, penalty, or interest under the Act:
Rigorous Imprisonment up to 2 Years and Fine
Bailable
Amount sought to be evaded or Tax exceeds 50 Lakh Rupees: Imprisonment up to 2 Years or with Fine or with Both.
Bailable
