Sections 278C and 278D of Income Tax Act 1961: HUF Offences and Presumptions for Search Material

Section 278C deals with criminal liability where an offence under the Income Tax Act is committed by a Hindu undivided family. Section 278D applies statutory presumptions to specified assets, books of account and documents tendered by the prosecution after a search under Section 132 or a requisition under Section 132A.

Section 278C - Offences by Hindu undivided families

Section 278C provides rules for attributing criminal liability where an offence under the Income Tax Act is committed by a Hindu undivided family, commonly referred to as an HUF.

Section 278C(1) - Liability of the karta

Where an offence under the Act has been committed by an HUF, the karta is deemed to be guilty and is liable to be proceeded against and punished accordingly.

The proviso creates an important statutory protection. The karta is not liable to punishment if the karta proves either that the offence was committed without his knowledge or that he exercised all due diligence to prevent commission of the offence.

Section 278C(2) - Liability of a member of the HUF

Sub-section (2) operates notwithstanding sub-section (1). Where an HUF has committed an offence and it is proved that the offence was committed with the consent or connivance of, or is attributable to neglect on the part of, a member of the HUF, that member is also deemed guilty and may be proceeded against and punished accordingly.

Key elements of Section 278C

• There must first be an offence under the Income Tax Act committed by the HUF.
• The karta is brought within the statutory deeming provision in sub-section (1).
• The karta may rely on the statutory defence of absence of knowledge or due diligence.
• A member other than the karta may be liable under sub-section (2) where consent, connivance or neglect is proved.
• The ingredients and punishment of the underlying tax offence must also be established according to the provision under which prosecution is brought.

Section 278D - Presumption as to assets, books of account and documents

Section 278D is an evidentiary provision for prosecution. In the circumstances specified by the section, it makes the presumptions contained in Section 132(4A) applicable, so far as may be, when relevant assets, books of account or other documents are tendered by the prosecution in evidence.

Section 278D(1) - Material found during a search under Section 132

Where money, bullion, jewellery, another valuable article or thing, books of account or other documents are found in the possession or control of a person during a search under Section 132 and are tendered by the prosecution in evidence against that person, or against that person together with a person referred to in Section 278, the presumptions in Section 132(4A) apply so far as may be.

Section 278D(2) - Material obtained through requisition under Section 132A

Section 278D also covers specified assets, books of account or documents taken into custody by an officer or authority referred to in Section 132A(1) and delivered to the requisitioning officer under Section 132A(2). If that material is tendered by the prosecution in the circumstances stated in Section 278D(2), Section 132(4A) applies so far as may be.

What does the Section 132(4A) presumption cover?

In the statutory circumstances, Section 132(4A) permits presumptions concerning possession and ownership of books, documents, money, bullion, jewellery or other valuable articles or things; the truth of the contents of books and documents; and the authenticity of signatures and handwriting appearing in documents, together with the statutory treatment of documents that appear to have been stamped, executed or attested.

Section 278D does not create a presumption in the abstract. Its application depends on the statutory source of the material, possession or control, the prosecution tendering that material in evidence, and the other conditions stated in the provision.

Difference between Section 278C and Section 278D

Evidence law before Bharatiya Sakshya Adhiniyam, 2023

Before the Bharatiya Sakshya Adhiniyam, 2023 came into force on 1 July 2024, the Indian Evidence Act, 1872 was the general law governing evidence, subject to special statutory provisions such as Section 278D and the presumptions incorporated from Section 132(4A) of the Income Tax Act. Accordingly, admissibility, proof and evidentiary weight had to be considered together with any special presumption expressly created by the tax statute.

Depending on the case, relevant material could include search authorisations and records, panchnamas, inventories, seizure or requisition records, books of account, loose papers, electronic records, statements, ownership records, handwriting or signature evidence, HUF records and evidence concerning the karta's knowledge or due diligence and a member's alleged consent, connivance or neglect.

Related prosecution provisions

Section 278E concerns the statutory presumption as to culpable mental state in prosecutions requiring such mental state. Section 279 governs sanction for prosecution for specified offences and contains the statutory compounding framework. These provisions may have to be read with Section 278C and the substantive offence alleged in a particular prosecution.

Compounding in HUF cases

CBDT's Guidelines for Compounding of Offences under the Income-tax Act, 1961 dated 17 October 2024 specifically address co-accused in cases involving Section 278C. The guidelines permit the HUF and persons deemed guilty under Section 278C to seek compounding separately or conjointly, subject to the terms and competent-authority process stated in the guidelines.

Income-tax Act 2025 transition

The Income-tax Act, 2025 maps the subject matter of Section 278C to Section 488 and Section 278D to Section 489. For historical conduct and proceedings arising under the 1961 Act, the repeal, savings and transition provisions and the law applicable on the relevant date must be examined.

Official references

• Income Tax Acts and official resources - Income Tax Department
• Section 278C - Income Tax Department
• Section 278D - Income Tax Department
• Income Tax Act 1961 as amended by Finance Act 2025 - official PDF
• CBDT Compounding Guidelines dated 17 October 2024
• Income Tax e-Filing Portal
• India Code - Central legislation

Important: In an HUF prosecution, the underlying offence and the statutory basis for individual liability should be identified separately. In a Section 278D matter, the source, possession or control and evidentiary tender of the relevant search or requisition material should be checked before applying the statutory presumptions.