2020 (3) TMI 1175 - HC - Income Tax

Offence u/s 276(c) (2) - willful failure on the part of the petitioner for non payment of huge tax liability - accused has not paid the huge tax liability at the time of filing the return of income - intention from the petitioner for willful evading of payment of tax - 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 three months 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 ₹ 4,08,04,345/-. Thereafter, the petitioner paid tax as demanded by the respondent on 13.03.2018, for which the respondent also issued a letter on 24.03.2018 acknowledging the receipt of tax. 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 u/s 132 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 24.03.2018. 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 - criminal original petition is allowed.

Summary

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

Analysis:
The respondent initiated criminal proceedings against the petitioner for willful failure to pay tax under Section 276(c)(2) of the Income Tax Act. The petitioner, an assessee, disclosed undisclosed income during a search conducted under Section 132 of the Income Tax Act. It was alleged that the petitioner failed to file the return of income for the assessment year 2013-2014 as required by law. The respondent issued a show cause notice, claiming the petitioner committed an offense under Section 276(c)(2) for non-payment of a substantial tax liability.

The petitioner argued that upon filing the return of income and paying the demanded tax amount, he should not be punished under Section 276(c)(2) of the Income Tax Act. The petitioner contended that there was no willful attempt to evade tax, as he voluntarily disclosed the undisclosed income during the inspection. The petitioner also highlighted that due to the seizure of relevant book of accounts by the respondent, he could not file the return of income within the stipulated time frame.

Upon examination of the facts, it was revealed that there was a delay in payment of income tax by the petitioner. However, the petitioner eventually paid the tax as demanded by the respondent. The provisions under Section 276(c)(2) of the Income Tax Act were scrutinized, emphasizing the requirement of a willful attempt to evade tax, possession of books with false entries, and making false entries in accounts. The court noted that the petitioner's actions did not demonstrate a willful intent to evade tax, especially considering the voluntary disclosure of undisclosed income and the eventual payment of the tax liability.

Consequently, the court allowed the criminal original petition, quashing the entire proceedings against the petitioner. The court deemed the criminal proceedings as an abuse of process of law and unsustainable against the petitioner, leading to the closure of connected miscellaneous petitions.