2020 (11) TMI 316 - HC - Income Tax

Offences u/s 276 C(2) - petitioners had filed their income tax return in time admitting their liability but then the tax was not remitted in time as there was delay - whether this will amount a wilful evasion attracting the aforesaid penal provisions? - HELD THAT - The act of submitting returns is not connected with the evasion of tax. It is only an act which is closely connected with the intended crime, that can be construed as an act in attempt of the intended offence. It is admitted in the counter affidavit itself that the petitioner have since cleared the dues and as on date no tax dues are payable in respect of the aforesaid financial years. Inasmuch as the tax has been subsequently paid, I am of the view that continuance of the impugned prosecution would only amount to an abuse of legal process. Respectfully following the judgment in M/S. VYALIKAVAL HOUSE BUILDING CO OPERATIVE SOCIETY LTD. 2019 (7) TMI 184 - KARNATAKA HIGH COURT the impugned proceedings stand quashed and the criminal original petition is allowed.

Summary

Issues:
Quashing of proceedings in C.C.No.425 of 2019 under Sections 276 C(2) of the Income Tax Act based on alleged wilful evasion.

Analysis:
The petitioners sought to quash the proceedings in C.C.No.425 of 2019 before the learned Additional Chief Judicial Magistrate, Madurai, related to offences under Sections 276 C(2) of the Income Tax Act. The respondent, represented by the learned standing counsel, opposed the petition for quashing, submitting a detailed counter affidavit. The petitioners' counsel reiterated the contentions from the memorandum of grounds.

Upon careful consideration of the rival contentions, including the counter affidavit and the impugned complaint, it was observed that the petitioners, including the assessee and its Managing Director and Director, had filed their income tax returns on time but failed to remit the tax promptly for the financial years 2011-2012 to 2014-2015, resulting in a delay. The crucial issue for consideration was whether this delay constituted wilful evasion attracting penal provisions.

The judgment referred to a decision by the Hon'ble Karnataka High Court in a similar case, emphasizing that the mere act of filing returns, without timely tax payment, does not amount to an offence under Section 276 C(2) of the Income Tax Act. It was highlighted that the submission of returns indicated the intention to pay tax voluntarily and was not directly linked to tax evasion. The legal principle established the necessity of a positive act by the accused to establish the charge under Section 276 C(2).

Acknowledging that the petitioners had cleared the dues subsequently, with no outstanding tax liabilities for the mentioned financial years, the court concluded that continuing the prosecution would amount to an abuse of legal process. Therefore, following the precedent set by the Hon'ble Karnataka High Court, the impugned proceedings were quashed, and the criminal original petition was allowed, leading to the closure of connected miscellaneous petitions.