The Jharkhand High Court has upheld the conviction of a taxpayer under Section 277 of the Income Tax Act, ruling that a false claim for income tax refund based on forged documents cannot be excused merely because the assessee alleges that an office clerk filed the return without his knowledge. 

The bench of  Justice Pradeep Kumar Srivastava emphasized that Section 278E of the Income Tax Act raises a statutory presumption regarding the existence of a culpable mental state, which the accused failed to rebut. 

The petitioner/assessee had challenged the judgment of the Additional Sessions Judge-II, Dhanbad, which had affirmed his conviction and sentence imposed by the Special Judge (Economic Offences), Dhanbad. 

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The trial court had convicted the petitioner under Section 277 of the Income Tax Act, 1961, sentencing him to one year’s rigorous imprisonment and a fine of ₹5,000, with a default sentence. 

According to the prosecution, the petitioner was employed with Mugma Area of Eastern Coalfields Limited and filed his income tax return for the Assessment Year 2003-04 on 28 July 2003. In the return, he declared an annual income of ₹1,72,055 and claimed a refund of ₹35,875 on the basis of a housing loan deduction supported by a TDS certificate and related documents. 

During verification, the Income Tax Department discovered serious discrepancies. The enquiry revealed that the TDS certificate relied upon by the petitioner had not been issued by Eastern Coalfields Limited. No housing loan had been sanctioned in his favour by any bank. The documents submitted with the return were found to be forged. 

Following these findings, the Department issued a show-cause notice and subsequently initiated prosecution under Section 277 of the Income Tax Act. 

The petitioner contended that he was not well educated and had entrusted the preparation and filing of his income tax return to an office clerk. According to him, the clerk filed the return without his instructions and falsely claimed the refund. He maintained that he had never intended to make any fraudulent claim. 

It was further argued that the complainant, who appeared as a prosecution witness, admitted during cross-examination that no enquiry had been conducted regarding the explanation furnished by the petitioner in response to the show-cause notice. Therefore, the conviction deserved to be set aside. 

The Income Tax Department opposed the revision, arguing that ignorance or illiteracy cannot justify filing a false income tax return. It submitted that the petitioner had consciously claimed a housing loan deduction and refund despite the fact that no housing loan existed.

The Department also relied upon the findings of the enquiry conducted with the employer and the Bank of India, both of which conclusively established that the supporting documents were fabricated. Since both the trial court and appellate court had recorded concurrent findings of guilt, there was no justification for interference in revision. 

The High Court examined the prosecution evidence, including the testimony of the Income Tax Officer who had investigated the matter.

The officer deposed that the petitioner had filed the return claiming a refund of ₹35,875 supported by a forged TDS certificate and documents purporting to relate to a housing loan. The enquiry conducted with Eastern Coalfields Limited and the Bank of India confirmed that no such housing loan had ever been sanctioned. A show-cause notice was issued, but the explanation furnished by the petitioner was found unsatisfactory. 

The Branch Manager of the Bank of India also testified that the alleged housing loan account referred to in the return did not exist in the bank’s records. His written communication confirming this fact was exhibited during trial. 

The High Court held that the evidence clearly established that the petitioner sought a refund on the basis of forged documents and failed to furnish any credible explanation for the false claim.

The Court observed that Section 277 penalises any person who knowingly makes a false statement in a verification or furnishes a false account or statement under the Income Tax Act. It further referred to Section 278E, which creates a statutory presumption regarding the existence of a culpable mental state in prosecutions under the Act, leaving it to the accused to prove otherwise. 

Rejecting the defence based on illiteracy and reliance on an office clerk, the Court held that no material had been produced to rebut the statutory presumption or to establish absence of intention or knowledge.

The Court found no legal infirmity in the concurrent findings of the trial court and the appellate court and concluded that the conviction had been rightly recorded. 

Dismissing the criminal revision, the High Court cancelled the petitioner’s bail bond and directed him to surrender before the concerned trial court within two months to undergo the remaining period of imprisonment. 

The Court further directed that, in case of failure to surrender, the trial court should take coercive steps to secure his presence and commit him to custody for serving the remaining sentence.

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