2020 (3) TMI 1029 - HC - Income Tax

Offences u/s 276 (c) (2) - belated filing of return - willful failure on the part of the petitioner for non payment of huge tax liability - respondent issued show cause notice even then, the accused has not paid the huge tax liability at the time of filing the return of income - HELD THAT - On perusal of the documents, it is seen that the last date for filing the returns for the financial year 2012-2013 was on or before 05.08.2013. The respondent did not hand over the book of accounts seized from the petitioner ill 05.08.2013. Therefore, there is delay in payment of income tax and the petitioner filed return of income on 31.01.2014. Thereafter, it was returned on 31.03.2015 directing the petitioner to pay a sum of ₹ 4,30,20,260/-. Thereafter, the petitioner paid tax as demanded by the respondent on 18.03.2018, for which the respondent also issued a letter on 24.03.2018 acknowledging the receipt of tax. Referring to provision to punish the accused, there must be wilful attempt to evade payment of tax, he must be in possession of the book with false entries, the person should have made false entries in the book of accounts and omitting any entry in the statement of accounts. The petitioner voluntarily disclosed the undisclosed income to the respondent on the inspection conducted under Section 132 of the Income tax Act, 1961 on 18.12.2012. Therefore, there is no intention from the petitioner for willful evading of payment of tax. Admittedly, the respondent on the inspection dated 18.12.2012, had seized the relevant book of accounts and as such the petitioner could not able to file the return of income on or before 05.08.2013. Therefore, the petitioner had no wilful intention to evade tax as alleged by the respondent. Petitioner had paid the entire tax amount on 13.03.2018 and the respondent had also acknowledged the same by the acknowledgment dated 14.03.2018. Therefore, the offence under Section 276 (c ) (2) of the Income Tax Act is not at all attracted as against the petitioner herein, and the entire criminal proceedings pending against the petitioner is nothing but clear abuse of process of law. As such it cannot be sustained as against the petitioner and it is liable to be quashed.

Summary

Issues:
Challenge to criminal proceedings under Section 276 (c ) (2) of the Income Tax Act, 1961.

Analysis:

1. Issue of Filing Return of Income and Payment of Demand:
The respondent initiated criminal proceedings against the petitioner for not filing the return of income within the prescribed time limit under Section 139(1) of the Income Tax Act. The petitioner belatedly filed the return on 31.01.2014, admitting the income. The respondent issued a show cause notice on 17.07.2017. The petitioner argued that after filing the return and paying the demand, he should not be penalized under Section 276 (c ) (2) of the Act.

2. Examination of Timelines and Tax Payment:
The Court observed that the last date for filing returns for the relevant financial year was 05.08.2013. The respondent did not return the seized book of accounts to the petitioner until that date, leading to a delay in filing the income tax return. The petitioner eventually paid the demanded tax amount on 13.03.2018, which was acknowledged by the respondent on 14.03.2018. The Court analyzed the provisions of Section 276 (c ) (2) which prescribe punishment for willful tax evasion.

3. Wilful Attempt to Evade Tax:
To establish guilt under Section 276 (c ) (2), the accused must have willfully attempted to evade tax, possessed books with false entries, made false entries, or omitted relevant entries. The petitioner voluntarily disclosed undisclosed income during an inspection in 2012, showing no intention to evade tax willfully. The Court noted that the respondent had seized the relevant book of accounts during the inspection, preventing the petitioner from filing the return on time. Therefore, the Court found no deliberate intention on the part of the petitioner to evade tax.

4. Conclusion and Judgment:
The Court held that since the petitioner had paid the entire tax amount and the respondent acknowledged the payment, the offense under Section 276 (c ) (2) was not applicable to the petitioner. The Court deemed the criminal proceedings against the petitioner as an abuse of process of law and quashed the proceedings in E.O.C.No.578 of 2017. The judgment allowed the criminal original petition, leading to the closure of connected miscellaneous petitions.