2015 (9) TMI 1740 - HC - Income Tax

Criminal prosecution u/s 276C - Wilful attempt to evade tax, etc. - As alleged that though the assessee was having sufficient resources to make payment of demand, the assessee has not paid and attempted to evade payment of tax - HELD THAT - Continuing the criminal prosecution of the petitioner/assessee will be subjecting the assessee to needless harassment in view of the facts and circumstances noted hereunder - In the instant case, the complaint is that an additional demand was raised on 27-01-2006. It is admitted that the assessee has paid the same on 17-11-2006 and due to oversight, he again paid the said amount on 25-06-2007. Proof thereof is produced. It is not disputed. In that view of the matter, all further proceedings are liable to be quashed. In the result, the Criminal Petition is allowed quashing all further proceedings on the file of the Special Judge for Economic Offences at Hyderabad against the petitioner/accused.

Issues Involved:
1. Alleged willful attempt to evade tax under Section 276C of the Income-Tax Act, 1961.
2. Determination of whether the petitioner's actions constituted a willful attempt to evade tax.
3. Applicability of Section 276C versus Section 271 of the Income-Tax Act.
4. The relevance of the Supreme Court's precedent in K.C. Builders v. The Assistant Commissioner of Income Tax.

Detailed Analysis:

1. Alleged Willful Attempt to Evade Tax Under Section 276C of the Income-Tax Act, 1961:
The petitioner was accused of not paying the self-assessment tax for the assessment year 2003-04, amounting to Rs. 4,59,322/-, and failing to file proof of payment, thereby being treated as a defaulter. Additional tax demands were raised, and despite notices, the petitioner allegedly did not pay the dues, leading to the accusation of attempting to evade tax.

2. Determination of Whether the Petitioner's Actions Constituted a Willful Attempt to Evade Tax:
The court examined whether the petitioner's conduct fell within the ambit of Section 276C, which penalizes willful attempts to evade tax, penalty, or interest. The court noted that the petitioner had declared his income and tax payable and that the tax was eventually collected from a refund due to another individual with her consent. The additional demand of Rs. 70,647/- was paid twice by the petitioner due to oversight.

3. Applicability of Section 276C Versus Section 271 of the Income-Tax Act:
The court distinguished between Section 276C, dealing with willful evasion of tax, and Section 271, which pertains to penalties for failure to furnish returns, comply with notices, or conceal income. It emphasized that Section 276C is invoked for more serious offenses involving willful evasion, while Section 271 addresses penalties for non-compliance or concealment without willful evasion.

4. The Relevance of the Supreme Court's Precedent in K.C. Builders v. The Assistant Commissioner of Income Tax:
The court referred to the Supreme Court's decision in K.C. Builders, which held that prosecution under Section 276C is not sustainable if the penalty for concealment is canceled by the appellate authority. The Supreme Court emphasized that prosecution should not proceed if the Tribunal has set aside the penalty for concealment, as it indicates no willful evasion.

Conclusion:
The court concluded that continuing the criminal prosecution would subject the petitioner to needless harassment, given that the additional demand was paid, and there was no evidence of willful evasion. The Criminal Petition was allowed, quashing all further proceedings in C.C.No.109 of 2007.

Final Order:
The Criminal Petition is allowed, and all further proceedings in C.C.No.109 of 2007 on the file of the Special Judge for Economic Offences at Hyderabad against the petitioner/accused are quashed. Miscellaneous petitions, if any, pending in this Criminal Petition shall stand closed.

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