Provisions relating to prosecutions under the Act constitute the most stinging part of the whole scheme of taxation of undisclosed income and assets located Outside India and are designed to be most effective deterrent against the practice of keeping such income and asset in tax heavens or offshore financial centres.In fact, it is this aspect of consequences which should drive the erring person to avail of the prescribed time which will avoid prosecutions under this Act and also not influence proceedings under other applicable laws viz. Income Tax Act, Wealth Tax Act, Foreign Exchange Management Act, Companies Act or Customs Act.
Various offences for which prosecution proceedings can be launched and the punishment provided for such offences are contained in Chapter V of the Act containing Sections 48 to 58. Section 48 of the Act makes it clear that prosecution for offences under this Act shall be in addition to and not in derogation of, the provisions of any other law providing for prosecution for offences there under. If, therefore, the default which is made punishable under any other Act also, the offender may be punished under both the Acts. The offences under this Act are described below –
OFFENCE OF FAILURE TO FURNISH RETURN IN RELATION TO FOREIGN INCOME AND ASSET [SECTION 49]
The offence is for similar default as in section 42 which provides for imposition of penalty, and is in relation to the failure in complying with the provisions of Income Tax Act requiring of return by persons holding foreign assets. The provision applies to persons who were resident, other than not ordinarily resident, and who held income from foreign source or held any asset (including financial interest in any entity) located outside India as a
– Beneficial owner or in any other capacity;
– Beneficiary of such asset
And who willfully fails to furnish in due time the return of income which he is required to furnish under sub-section (1) of Section 139 of Income Tax Act.
The offence of failure to company with the requirement of section 139(1) by not furnishing the required within prescribed time is made punishable under the Act with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine.
Punishment for similar offence is provided under the Income Tax Act under the provisions of Section 276CC. The punishment provided under the Income Tax Act is rigorous imprisonment for similar terms and fine if the income that would have been evaded exceeds twenty five lakhs and, punishment for a term of not less than three months and upto two years with fine, in other cases. There has been no exemption from prosecution under the Income Tax Act, with the enactment of this Act. Further, the Undisclosed Income and Asset Act clarifies that the provisions under this Act are in addition to the provisions of any other law providing for offences. The result is that the failure to file the return under the Income Tax Act will be an offence under the Income Tax Act as well as under this Act which may lead to double jeopardy.
In relation to the offence of delayed failing of return, it is clarified that a person will not be proceeded against for prosecution under this Act, if the return is furnished by him before the expiry of the assessment year. The benefit is available only to voluntary filing of return as required under section 139(1).
OFFENCE OF FAILURE TO FURNISH ANY INFORMATION IN THE RETURN ABOUT ANY FOREIGN ASSET [SECTION 50]
This is the offence for the same act of omission in respect of which penalty is provided in section 43 of the Act.
The offence contemplated is by a resident person (other than not ordinarily resident) who has furnished the return of income as required from him under the provisions of the Income Tax Act, but has wilfully failed to furnish in such return any information relating to an asset (including financial interest in an entity) located outside India held by him as a beneficiary or a beneficial owner or in any other capacity, or wilfully failed to disclose any income from a source outside India. Such a person is made punishable with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine.
The provision specifically uses the word ‘wilfully’ and makes the omission to disclose the income or asset an offence only if such failure to furnish the information is willful. Conviction under the provision therefore, gets warranted only when wilfulness is established indicating the presence of mens rea, a bad motive and a guilty mind. A clear explanation, given by the assesse showing ignorance or other circumstances showing that he acted or omitted to act without any guilty mind and the default occurred for reasons not actuated by circumstances showing intentional failure, will absolve the person from prosecution, even if the default was there.
OFFENCE OF WILFUL ATTEMPT TO EVADE TAX [SECTION51]
A person being a resident (other than not ordinarily resident), wilfully attempting, in any manner whatsoever, to evade any tax, penalty or interest chargeable or imposable under this Act, is liable to be punished with rigorous imprisonment for a term which shall not be less than three years but which may extend to ten years and with fine.
Apart from wilful attempt to evade any tax, penalty or interest chargeable or imposable under this Act, punishment is also prescribed for willful evasion of payment of such tax, penalty or interest. The punishment prescribed is rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and, in the discretion of the Court, to fine.
Wilful attempt to evade tax etc., or the payment thereof has been clarified to include –
A case where any person has in his or control any books of accounts or other documents (being books of accounts or other document relevant to any proceeding under this Act) containing a false entry or statement; or
A case where the person makes or causes to be made any false entry or statement in such books of account or other documents; or
Where the person willfully omits or causes to be omitted any relevant entry or statement in such book of account or documents; or
Where the person causes any other circumstances to exist which will have the effect of enabling him to evade any tax, penalty or interest or the payment thereof.
This provision makes willfulness in such attempts, the necessary ingredient for the act to constitute offence under the Act. The provision is similar to the provision contained in section 276C of the Income Tax Act with the difference that punishment for the offence under the Income Tax Act, in so far as it relates to evasion, is linked to the quantum of tax, penalty or interest sought to be evaded whereas, the same under this Act is independent of such intended evasion even through the quantum might weigh in the decision to determine the period of imprisonment between the minimum and maximum prescribed term. The punishment provided under the Income Tax Act is of a term ranging from six months to seven years in cases where income sought to be evaded is more than rupees twenty five lakhs and of a term ranging from three months to two years in other cases. For attempt to evade payment of tax, penalty or interest, the punishment provided under the Income Tax Act is of a term ranging from three months to two years and also fine if the Court so decides. The circumstances which constitute willful evasion or payment of tax are also the same under the Income Tax Act as laid down under this Act.
OFFENCE OF FALSE STATEMENT IN VERIFICATION [SECTION 52]
A person making a statement in any verification under the Act or delivering an account or statement, which is false and which he either knows or believes to be false, or does not believe to be true, is punishable with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine.
The provision under this Act is similar to the provisions of section 277 of the Income Tax Act with the difference that punishment prescribed under the Income Tax Act is linked to the amount of income which would have been evaded if the statement or account had been accepted as true. If such amount is more than rupees twenty five lakhs, the punishment ranges between six months and seven years and in other cases it ranges between three months and two years.
The element of conscious default is also present under both the Acts as it is only such false verification or delivery of false accounts is punishable in respect of which the person had knowledge or belief about such falsity. An honest or innocent false verification is outside the purview of such provisions.
OFFENCE OF ABETMENT [SECTION 53]
If a person abets or induces in any manner another person to make and deliver an account or statement or declaration relating to tax payable under this Act, which is false and which he knows to be false or does not believe to be true, or to commit an offence of wilful evasion of tax etc., he shall be punishable with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine.
Similar provision exists in section 278 of the Income Tax Act. The act of abetment or inducement is punishable under that Act also. The only difference in the provision under the Income Tax Act and under this Act is the prescribed term of punishment which, under the Income Tax Act, is with reference to the tax etc., which would have been avoided if the person had succeeded. The punishment under the Income Tax Act is of a term ranging between six months and seven years if such tax penalty or interest exceeds rupees twenty five lakhs and of a term ranging between three months and two years in other cases.
The provision introduces of criminal jurisprudence which makes any person who aids, abets, counsels or procures the commission of an offence, liable for prosecution. The prosecution for abetment of false return under this section can continue even where the assesse is not to be proceeded against for an offence under section 276C of the Income Tax Act.
The section is couched in wide terms resulting in bringing within its ambit even a professional person engaged in advising and counselling persons in tax matters, if the abet or induce any person to make or deliver a false return inspite of the awareness of the falsity. The provision will result in consequence also to advisors, banks or financial institutions aiding and abetting the commission of offences which resulted in foreign undisclosed income stashed abroad.
SECOND AND SUBSEQUENT OFFENCE
If a person who has been convicted of any offence mentioned in his chapter i.e., offences under Section 49 to 53 commits the offence again and is convicted under any of these provisions, he shall be punishable for the second and every subsequent offence with rigorous imprisonment for a term which shall be minimum three years and which can go upto ten years and with fine. The fine shall not be less than Rs. Five Lakh and may extend to Rupees One Crore.
OFFENCE BY COMPANIES
In case the resident entity involved in commission of offences mentioned above is a company, the Act provides for prosecution of the person who, at the time of commission of offence, was in charge of, and was responsible to the company for conduct of its business, as also the company itself.
The person mentioned above i.e. the person who was incharge of and responsible to the company will not be proceeded against if he is able to prove that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of that offence.
Apart from the prosecution of the company itself and the person incharge of and responsible for conduct of its business, any director, manager, secretary or other officer of the company can also be proceeded with if it can be proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on their part.
The punishment provided for various offences under the Act is imprisonment and fine and since the company being an impersonal body cannot be imprisoned, the law provides that the company shall be punished with fine and every other person who can be proceeded with as mentioned above, shall be liable to be proceeded against and punished in accordance with the provision of the Act.
The above provisions apply to a body corporate, an unincorporated body and a Hindu Undivided family. Director in relation to an unincorporated body means a participant in the body and in relation to Hindu Undivided Family an adult member of the family.
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(These are personal views of the contributor .These should not be construed as legal or professional advise. The contributor is not responsible for any decision taken by readers on the basis of this Article.)