Income-tax law / Offences and prosecutions
Section 276 of the Income-tax Act, 1961: Fraudulent Transfer or Concealment of Property to Defeat Tax Recovery
Section 276 addresses fraudulent dealings with property intended to obstruct the execution of an income-tax recovery certificate. It provides for rigorous imprisonment of up to two years and a fine. The essential distinction is between an ordinary lawful transaction and a fraudulent act intended to defeat recovery.
Section 276 - statutory provision
Removal, concealment, transfer or delivery of property to thwart tax recovery. Whoever fraudulently removes, conceals, transfers or delivers to any person, any property or any interest therein, intending thereby to prevent that property or interest therein from being taken in execution of a certificate under the provisions of the Second Schedule shall be punishable with rigorous imprisonment for a term which may extend to two years and shall also be liable to fine.
Legislative history: Section 276 in this form was inserted by the Direct Tax Laws (Amendment) Act, 1987 (Act 4 of 1988), section 117, with effect from 1 April 1989. The original webpage's historical amendment note is retained here.
What Section 276 means
The provision deals with intentional obstruction of recovery of tax arrears through dealings with property. It covers removal, concealment, transfer or delivery of property or an interest in property where the conduct is fraudulent and is intended to stop the property being taken in execution of a recovery certificate.
Essential ingredients of the offence
- There is property or an identifiable interest in property capable of being reached in certificate recovery proceedings.
- The person removes, conceals, transfers or delivers that property or interest.
- The conduct is fraudulent, not merely a routine or genuine transaction.
- The person acts with the intention of preventing execution of a certificate under the Second Schedule.
The prosecution must establish the elements of the offence on the evidence. The mere existence of tax arrears or a transfer of property does not, by itself, establish the required fraudulent intention.
Tax recovery certificate and the Second Schedule
The Second Schedule of the Income-tax Act, 1961 sets out procedures for recovering tax through a certificate and related enforcement measures. A Tax Recovery Officer administers recovery under the applicable statutory framework. A certificate is the instrument used in those recovery proceedings; Section 276 concerns fraudulent conduct intended to prevent property from being taken in execution of that certificate.
Depending on the circumstances and applicable procedural rules, recovery can involve attachment and sale of property. The statutory focus of Section 276 is interference with certificate execution, rather than every unpaid tax demand.
Illustrative situations
| Situation | Section 276 consideration |
|---|---|
| Property is hidden to prevent its attachment in certificate proceedings. | Concealment and fraudulent intention may be relevant. |
| Property is transferred to another person to put it beyond recovery. | Evidence of fraud and intent to obstruct certificate execution is critical. |
| Property is sold in a genuine transaction without the prohibited intention. | A transfer alone does not establish the offence; the complete facts matter. |
Punishment, evidence and prosecution
The statutory punishment is rigorous imprisonment for a term extending up to two years, together with liability to a fine. The provision does not itself prescribe a fixed amount of fine. Because it creates a criminal offence, allegations require proper investigation and prosecution under the applicable legal procedure; they are not equivalent to an automatic civil penalty on assessment.
Relevant records may include recovery notices and certificates, attachment records, conveyances, ownership and possession documents, bank records, communications and the chronology of transactions. A person facing allegations should preserve records and obtain advice on the specific statutory and procedural requirements.
Income-tax Act, 2025: repeal and savings
The Income-tax Act, 2025 came into force on 1 April 2026 and repealed the Income-tax Act, 1961 subject to the repeal-and-savings provisions of section 536. These provisions preserve the previous operation of the repealed law and relevant accrued rights, obligations and liabilities; they also address pending proceedings, older tax years and recovery of sums payable under the earlier Act.
Consequently, Section 276 may remain relevant to conduct and liabilities governed by the 1961 Act. For a new matter, determine the applicable statutory provision and the relevant savings rule instead of assuming that the old section number applies unchanged.
Frequently asked questions
What does Section 276 prohibit?
It prohibits fraudulent removal, concealment, transfer or delivery of property or an interest in it with the intention of preventing execution of a tax recovery certificate under the Second Schedule.
What is the punishment under Section 276?
Rigorous imprisonment for a term that may extend to two years, and liability to a fine.
Is every transfer of property an offence?
No. Section 276 requires fraudulent conduct and the specific intention to prevent property from being taken in execution of a recovery certificate. The facts and evidence matter.
Does the Income-tax Act, 2025 erase older liabilities?
No. Section 536 contains repeal-and-savings provisions preserving accrued liabilities and relevant proceedings under the 1961 Act.
Official statutory sources and guidance
- Income Tax Department - Section 276 (Income-tax Act, 1961)
- Income-tax Act, 1961, as amended by the Finance Act, 2025 (official PDF)
- Income Tax Department - Second Schedule, tax recovery procedures
- CBDT Circular No. 545, dated 24 September 1989
- Income-tax Act, 2025, as amended by Finance Act, 2026 (official text)
- Income Tax Department - Income-tax Act, 2025 and transition resources
This is a general explanation of legislation and not advice on the facts of any individual case.