High Court denies bail to Muzaffarnagar Income Tax staff involved in tax refund scam

High Court denies bail to the Income Tax staff involved in Muzaffarnagar tax refund scam 

In a recent judgment, the Hon’ble Allahabad High Court has denied bail to the Income Tax staff involved in Muzaffarnagar income tax refund scam 

ABCAUS Case Law Citation:
ABCAUS 4056 (2024) (05) HC

In the instant case a bail application had been filed on behalf of the Income Tax Inspector who was one of the accused of involved in a income tax refund scam.

In 2022 a case was registered by the CBI on the basis of complaint lodged by Joint Commissioner of Income Tax regarding income tax refund fraud by the officials of the Income Tax Department and private persons.

It was alleged that erstwhile one TA, one Senior T.A. and one Stenographer (now Inspector) were the master minds of the refund scam who unauthorisedly using digital signature/RSA token of the superior Income Tax Officer (ITO) fraudulently issued refund of crores of rupees to eleven assesses.

During investigation, it was found that refunds had been worked out by increasing the claim of TDS of the assessees, which exceeded TDS claim in the income tax returns, by passing rectification under Section 154 of the Income Tax Act, 1961 (the Act) at the level of ITO/DCIT on their system without having any application from the assessees. For issuing fraudulent refunds all accused received illegal gratification credited in their bank accounts.

Before the Hon’ble High Court it was argued that applicant was innocent and he had been falsely implicated in this case. During inquiry, co-accused had admitted in writing regarding involvement in fraudulent processing of refund orders. Applicant had also filed an application during departmental inquiry. Referring to facts of the matter, it was submitted that there was no credible evidence against applicant. Further, only Assessing Officers were assigned the job of processing and working out of claim of refund of an assessee, whereas applicant was discharging his duty as Income Tax Inspector and thus he could not have played any role in processing and working out of the refund claims of the assesses.

It was contended that the RSA token is totally tamper proof and it can be used only by the authorised person. Income Tax Inspector or stenographer is not included in the list of officials entitled for use of RSA token. Only Assessing Officer can allow a refund by passing a specific order and that too by using his own RSA token and in case amount of refund exceeds Rs. one lakh, refund can be made only after approval of Joint Commissioner. In the instant matter, the refund in question was more than Rs. one lakh and as such it could not have been made without specific order by Assessing Officer and approval by the Joint Commissioner.

Regarding receipt of money in his bank account, the applicant contended that it was purely a private transaction and it has no connection with scam.

It is further submitted that applicant was not arrested by the investigating officer during investigation and now charge-sheet had already been filed and thus in view of dictum of Hon’ble Apex Court, the applicant-accused was entitled for bail.

On the other hand, the CBI presented the complete trail of the modus operandi of the accused and submitted that after filing of charge-sheet against the accused persons, summons were issued against them but the applicant/accused did not appear and thus non-bailable warrants were issued against him and applicant was arrested after execution of non-bailable warrants. It was submitted that in case applicant is granted bail, he may abscond and flee from justice. Economic offences constitute a class apart and need to be visited with a different approach in matters of bail. The economic offences having deep routed conspiracies and involving huge loss of public funds need to be viewed seriously.

Considering the nature of accusations, complicity of applicant and all attending facts of the matter, the Hon’ble High Court declined to grant bail to the applicant-accused at this stage. However, it was added that if no significant progress is made in the trial during a period of 7 months , the applicant would be at liberty to file a fresh bail application in accordance with law.

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