Section 276 and 276A of Income Tax Act 1961: Tax Recovery and Liquidator Offences

Sections 276 and 276A are prosecution provisions in Chapter XXII of the Income Tax Act, 1961. Section 276 deals with fraudulent removal, concealment, transfer or delivery of property intended to defeat tax recovery. Section 276A deals with specified defaults by a liquidator under Section 178, but no proceeding can be initiated under Section 276A on or after 1 April 2023.

Applicable-law note: This page explains the Income Tax Act, 1961 provisions relevant to proceedings governed by that Act, with the requested evidence-law position before the Bharatiya Sakshya Adhiniyam, 2023 came into force. The date of the alleged offence is important because prosecution provisions and procedural law may change over time.

Section 276 - Property dealt with to thwart tax recovery

Section 276 applies where a person fraudulently removes, conceals, transfers or delivers to another person any property, or any interest in property, intending thereby to prevent that property or interest from being taken in execution of a certificate under the Second Schedule to the Income Tax Act.

Meaning and ingredients of Section 276

Property or an interest in property: The provision extends not only to the property itself but also to an interest in it.
Prohibited conduct: Removal, concealment, transfer or delivery of the property or interest.
Fraudulent conduct: The statutory language expressly requires the act to be fraudulent.
Specific intention: The act must be intended to prevent the property or interest from being taken in execution of a recovery certificate under the Second Schedule.

What is the Second Schedule?

The Second Schedule to the Income Tax Act contains the procedure for recovery of tax through a Tax Recovery Officer after the prescribed recovery process. Section 276 protects that recovery machinery by criminalising fraudulent dealing with property intended to keep it beyond execution of a recovery certificate.

Punishment under Section 276

Under Section 276 of the Income Tax Act, 1961, the offence is punishable with rigorous imprisonment for a term which may extend to two years and the offender is also liable to fine.

Section 276A - Liquidator's failure to comply with Section 178

Section 276A historically provided for prosecution where a person responsible as liquidator failed to comply with specified obligations under Section 178 relating to a company in liquidation.

Section 178(1) - Notice of appointment as liquidator

Section 178 requires the liquidator of a company to give notice of appointment to the Assessing Officer within the statutory period. The provision enables the Income Tax Department to determine and protect tax claims in the course of liquidation.

Section 178(3) - Setting aside tax amount and restriction on parting with assets

Section 178(3) requires the liquidator, subject to the statutory scheme, to set aside the amount notified for tax liabilities and restricts dealing with company assets or properties in the liquidator's hands contrary to the provision.

Defaults covered by Section 276A

Failure to give notice in accordance with Section 178(1).
Failure to set aside the amount required by Section 178(3).
Parting with company assets or properties in the liquidator's hands in contravention of Section 178(3).

Historical punishment under Section 276A

For conduct to which the prosecution provision applied, Section 276A prescribed rigorous imprisonment for a term which could extend to two years. In the absence of special and adequate reasons recorded by the court, the imprisonment was not to be less than six months.

Decriminalisation from 1 April 2023: Section 276A was amended to provide that no proceeding shall be initiated under this section on or after 1 April 2023. The provision therefore remains relevant principally to the historical statutory position and proceedings, if any, lawfully initiated before that date.

Section 276 and Section 276A - Key distinction

Provision	Nature of offence	Essential connection
Section 276	Fraudulent dealing with property to prevent tax recovery.	Execution of a certificate under the Second Schedule.
Section 276A	Specified non-compliance by a liquidator.	Obligations under Section 178(1) and Section 178(3); no proceeding to be initiated on or after 1 April 2023.

Prosecution sanction and criminal proceedings

Sections 276 and 276A form part of Chapter XXII dealing with offences and prosecutions. Section 279 contains statutory restrictions on prosecution and identifies the competent income-tax authorities whose previous sanction is required for prosecution of specified offences. The version of Section 279 applicable on the relevant date should be checked before assessing the validity of sanction or institution of prosecution.

Evidence law before Bharatiya Sakshya Adhiniyam, 2023

For criminal proceedings governed by the general evidence law before the Bharatiya Sakshya Adhiniyam, 2023 came into force on 1 July 2024, the Indian Evidence Act, 1872 was the general evidence statute, subject to its applicability and special statutory provisions. Depending on the charge, relevant material may include the recovery certificate, attachment and recovery records, title and transfer documents, bank or property records, communications, liquidation records, notices under Section 178 and evidence bearing on fraudulent conduct or the intention required by Section 276.

Official references

Important: Prosecution is fact-specific and date-sensitive. The statutory provision in force on the date of the alleged act, sanction requirements, limitation or procedural rules, and any saving or transition provision should be checked before applying these sections to a particular case.