2009 (12) TMI 640 - HC - Income Tax

Imposing prosecution under section 276C(2) of the Income-tax Act - wilful attempt to evade payment of tax - assessee on January 13 2006 prayed for some more time to pay the entire amount on account of lack of financial incapacity - petitioner had deposited the entire amount with interest - whether the petitioner has wil-fully evaded the payment of tax - Held that - if there is no evidence on record to show that the assessee had enough resources to pay the amount and wilfully evaded to pay tax there was no wilful evasion on the part of the assessee to evade the payment of tax.

Summary

Issues:
Petition to quash order under section 276C(2) of the Income-tax Act for wilful evasion of tax.

Analysis:

1. The petitioner sought to quash the order passed by the Special Court relating to wilful evasion of tax under section 276C(2) of the Income-tax Act, 1961. The petitioner contended that he had paid the entire tax and there was no wilful evasion. The timeline of events, including filing returns, demand notices, penalty notices, rectification applications, and partial payments made by the petitioner, was presented. The petitioner argued that he had not wilfully evaded tax and had made efforts to comply with the demands.

2. The counsel for the Income-tax Department argued that recovery proceedings and criminal proceedings are distinct. He referred to a legal decision to support the view that proceedings under section 276C(2) are judicial. However, it was acknowledged that prosecution under this section applies to wilful tax evasion. The court considered both parties' arguments and the legal implications of the case.

3. The court examined the notices issued to the petitioner, his responses, and the payments made towards the tax dues. It noted that the petitioner had requested additional time to pay the amount due due to financial constraints. The court referred to a previous tax court ruling emphasizing the need for evidence of wilful evasion when prosecuting under section 276C(2).

4. After reviewing the facts and legal precedents, the court concluded that there was no evidence of wilful evasion by the petitioner. The court quashed the order passed by the Special Judge, Economic Offences, Patna, in Complaint Case No. 336(C)/2006, stating that the petitioner had not evaded tax wilfully. The judgment highlighted the importance of assessing the intent behind tax non-compliance before initiating criminal proceedings under the Income-tax Act.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the court's reasoning in arriving at its decision to quash the order under section 276C(2) of the Income-tax Act.