2016 (10) TMI 1113 - HC - Income Tax

Violation of sections 276C(2) and 277 - making false statements - error committed by the clerk of the chartered accountant - contention of the petitioner is that the tax amount is less than ₹ 25,000 and therefore an attempt to evade tax is covered by the circular - Held that - Whether the amount involved is less than ₹ 25,000 or less is irrelevant. Section 277 deals with making a false declaration. Further, the allegation is that the document has been tampered with by showing that he has paid the tax correctly. Whether the amount is covered by the circular or not becomes an irrelevant fact. The allegation that he has made a false statement to the Department is admitted. The contention is that it comes within the monetary limit. Unable to accept such a contention. The allegation is with regard to filing of a false declaration. Therefore, the provisions of law stand applicable and circular prescribing a monetary limit therefore would not be applicable to the case on hand. The question of evading the tax and the consequential monetary limit in launching the prosecution is an alien consideration. It is not a case of evading the tax. It is a case of furnishing of false declaration while submitting the return. Submission of a false declaration is quite different from evading the tax. The circular would therefore be applicable in case of evasion of tax. Under no grounds the circular could be read with regard to filing of a false declaration. Since the case pertains to a false declaration, the circular cannot come to the aid of the petitioners. Hence, find no good ground to entertain the petition.

Summary

Issues:
1. Filing of a false income tax return with a tampered document.
2. Allegation of evasion of tax under sections 276C(2) and 277 of the Income-tax Act, 1961.
3. Applicability of circular exempting prosecution for tax evasion under &8377; 25,000.

Issue 1: Filing of a false income tax return with a tampered document:
The case involved the filing of an income tax return by the petitioner with the assistance of a chartered accountant, declaring a taxable income of &8377; 1,23,220. However, upon investigation, it was discovered that only &8377; 465 was paid instead of the declared amount of &8377; 1,465. The Income-tax Department filed a private complaint under sections 276C(2) and 277 of the Income-tax Act, 1961, alleging tampering with the document to show a higher payment. The petitioner sought to quash the proceedings, claiming an error by the accountant's clerk. The court rejected this argument, emphasizing that the petitioner had indeed made a false declaration by tampering with the document, making the circular exempting prosecution for tax evasion irrelevant in this context.

Issue 2: Allegation of evasion of tax under sections 276C(2) and 277 of the Income-tax Act, 1961:
The court upheld the charges against the petitioner for violating sections 276C(2) and 277 of the Income-tax Act, 1961. Section 277 specifically addresses false statements, making the petitioner liable for prosecution. The court clarified that the focus was on the false declaration made to the Department, rather than the monetary limit specified in the circular regarding tax evasion. The petitioner's argument that the amount involved was less than &8377; 25,000 and, therefore, covered by the circular was dismissed. The court emphasized that the case pertained to filing a false declaration, distinct from evading tax, and hence, the circular's monetary limit exemption did not apply.

Issue 3: Applicability of circular exempting prosecution for tax evasion under &8377; 25,000:
The court addressed the contention regarding the circular exempting prosecution for tax evasion under &8377; 25,000. It ruled that the circular's monetary limit exemption did not apply in this case as the core issue was the submission of a false declaration, not tax evasion. The court highlighted the distinction between evading tax and furnishing a false declaration, emphasizing that the circular was relevant only in cases of tax evasion, not false declarations. Consequently, the court rejected the petitioner's plea to quash the proceedings based on the circular, stating that it could not aid the petitioners in a case involving a false declaration.

Overall, the court dismissed the petition, finding no merit in the arguments presented by the petitioner. The judgment underscored the importance of accurate declaration in income tax filings and clarified the applicability of the circular regarding prosecution for tax evasion in cases of false declarations.