Prosecution 276C(2) – Evasion of tax vs evasion of payment of tax. High Court quashed prosecution when ITAT reduced income and there was no indifference on the part of assessee to pay demanded tax
ABCAUS Case Law Citation:
ABCAUS 2677 (2018) (12) HC
Important Case Laws Cited/relied upon:
Commissioner of Income Tax, Mumbai vs. Bhupen Champak Lal Dalal and another [(2001) 3 SCC 459]
Gujarat Travancore Agency vs. Commissioner of Income Tax, Kerala, Ernakulam [(1989) 3 SCC 52]
G.L. Didwania v. ITO [1995 Supp (2) SCC 724]
The instant Criminal Revision Case was preferred by the accused assessee seeking to set aside the order passed by the Additional Chief Metropolitan Magistrate (ACMM)
The Income Tax Department had launched prosecution before the Additional Chief Metropolitan Magistrate against the petitioner/accused, for the offence under Section 276C(2) of the Income Tax Act, 1961 (the Act).
It was the case of the Income Tax Department that for the relevant assessment year, the accused filed income tax returns declaring meagre income. The Department conducted investigation and found that his total income was highly under stated and determined the tax payable, including interest.
The accused filed an appeal before the Commissioner of Income Tax (Appeals) who gave some relief. The accused filed an appeal before the Income Tax Appellate Tribunal; however, the Income Tax Appellate Tribunal dismissed his stay petition; hence, the accused was liable to be punished under Section 276C(2) of the Act for non-payment of the determined tax.
After the Income Tax Department closed the pre-charge evidence, the accused filed Criminal Miscellaneous Petition under Section 245(1) Cr.P.C. for discharge, which was dismissed by the trial Court.
Aggrieved by which, the accused was before the Hon’ble High Court in this criminal revision case.
The Hon’ble High Court observed that the the expression “wilfully attempts” employed in Section 276C(2) is an inclusive one, despite which, it does not, in any way, change the common and fundamental meaning of it. However, the allegation against the accused could not be fitted into any of the clauses, viz., clause (i) to clause (iv) set out in the Explanation.
The accused submitted that the complaint was not for evasion of tax, but, was for evasion of payment of tax.
It was submitted that the on appeal by the assessee, the Tribunal remitted the matter back to the Commissioner of Income Tax (Appeals); after the matter was remanded, the accused placed sufficient materials before the Commissioner of Income Tax (Appeals) to repudiate the assessment made by the Income Tax Officer and succeeded substantially, inasmuch as the total income as determined by the AO was reduced substantially. Therefore, the accusation regarding the quantum of the tax payable as per the complaint did not survive any more.
The Department on the other hand contended that the accused cannot be discharged from the prosecution, since tax was due from him at the time when the prosecution was launched.
The Hon’ble High Court opined that the authorities created under the Income Tax Act are fact-finding bodies and the accused had been knocking the doors of these bodies challenging the determination of the income by the Income Tax Officer. There was no supine indifference on the part of the accused in not paying the demanded tax, but, on the contrary, he had agitated before various fora and at the end of the day, the fact-finding body itself had come to the conclusion that the income of the accused for the relevant period was much lower and the tax payable by him thereon was also very much lower that as determined by the AO.
The Hon’ble High Court opined that in view of the above, the very edifice on which the prosecution was launched against the accused, had crumbled. There was no necessity for the Income Tax Department to have launched the prosecution hurriedly since the law of limitation under Section 468 Cr.P.C. for criminal prosecution has been excluded by the Economic Offences (Inapplicability of Limitation) Act, 1974.
The Hon’ble High Court noted that even in the complaint, the Income Tax Officer had stated that the accused had approached the Income Tax Appellate Tribunal, which showed that the Income Tax Officer was aware of the fact that the accused is agitating his case before the Income Tax Appellate Tribunal, which is the final fact-finding body.
The Hon’ble High Court opined that in the peculiar facts and circumstances of the case, it could not be stated that the accused was wilfully evading the payment of tax. But, unfortunately, the Trial Court had failed to appreciate the contention of the accused in the right perspective.
Accordingly, the Criminal Revision case was allowed and the order passed by the ACMM was set aside and the accused was discharged from the prosecution.
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