2023 (6) TMI 353 - HC - Income Tax

Prosecution proceedings u/s 276CC and 277 - variation in the tax payments - assessee claimed in the return of income that total self assessment tax was paid more than payments as per challan details available in the OLTAS database - HELD THAT - Before noticing that there was a mistake in submission of appropriate tax returns, the petitioners have immediately filed revised returns on 01.02.2018 i.e., prior to issuing of show cause notice or even prior to lodging of complaint. Thus, there are bonafides on the part of petitioners in submitting revised tax returns after noticing that there is a bonafide omission/mistake. It is not the case, wherein a deliberate attempt is made by the petitioners to evade tax. The conduct of the petitioners in filing revised returns immediately after noticing error on their part indicate that it was a case of delayed payment of tax or deferred payment. The subsequent tax amount paid by the petitioners was accepted by the Department without any reservations. Such delay in the payment will not amount to willful attempt to evade tax. The petitioners have substantiated their contention by giving cogent and convincing reasons for submitting original tax returns with some errors. Thus, it cannot be inferred from the facts of the present case that a deliberate attempt was made by the petitioners to evade the tax. There is no material to arrive to a conclusion that there is false statement of verification or filing of false return and thereby penal provisions are not attracted. Continuation of the proceedings against the petitioners would amount to abuse of process of the Court and thereby it is a fit case to quash the proceedings against the petitioners on the file of Special Judge for Economic Offences at Hyderabad.

Issues Involved:
1. Whether the proceedings against the petitioners in C.C. No. 90 of 2018 can be quashed.
2. Whether the petitioners made a willful attempt to evade tax under Section 276C(2) and 277 read with Section 278B of the Income Tax Act.
3. Whether the revised return filed by the petitioners rectifies the alleged false claims in the original return.
4. Whether the prosecution's actions were premature and without jurisdiction.
5. Whether the petitioners' actions constitute a false statement of verification or filing of a false return.

Issue-wise Detailed Analysis:

1. Whether the proceedings against the petitioners in C.C. No. 90 of 2018 can be quashed:
The petitioners filed a criminal petition under Section 482 of the Code of Criminal Procedure to quash C.C. No. 90 of 2018. The court examined whether there was any guilty intention on the part of the petitioners in evading tax payments. It was concluded that the petitioners had filed revised returns voluntarily before any show cause notice or complaint was lodged, indicating bonafide omission/mistake rather than a willful attempt to evade tax. Therefore, the proceedings against the petitioners were deemed an abuse of process, and the criminal petition was allowed, quashing the proceedings in C.C. No. 90 of 2018.

2. Whether the petitioners made a willful attempt to evade tax under Section 276C(2) and 277 read with Section 278B of the Income Tax Act:
The prosecution alleged that the petitioners made a false claim of payment of self-assessment tax in the original return filed on 22.01.2018, which was not paid as on that date. However, the court found that the petitioners had filed revised returns on 01.02.2018, rectifying the mistakes voluntarily. The court noted that there was no material to conclude that there was a false statement of verification or filing of a false return, and thus, penal provisions were not attracted. The court relied on previous rulings that delayed payment of tax does not amount to evasion if the tax is eventually paid.

3. Whether the revised return filed by the petitioners rectifies the alleged false claims in the original return:
The petitioners argued that the revised return filed on 01.02.2018 substituted the original return filed on 22.01.2018, rectifying the mistakes due to a bonafide omission. The court accepted this argument, noting that the revised return was filed voluntarily and before any show cause notice or complaint was lodged. The court found that the petitioners' actions indicated a case of delayed payment rather than a willful attempt to evade tax.

4. Whether the prosecution's actions were premature and without jurisdiction:
The petitioners contended that the complaint was filed prematurely as the jurisdiction over the returns of income for the assessment year 2017-18 was not vested with the ACIT/DCIT Central Circle, Hyderabad until 21.05.2018. The court found merit in this argument, noting that the complaint was lodged on 23.03.2018, before the transfer of jurisdiction. Therefore, the prosecution's actions were deemed premature and without jurisdiction.

5. Whether the petitioners' actions constitute a false statement of verification or filing of a false return:
The court examined whether the petitioners' actions amounted to a false statement of verification or filing of a false return. It was concluded that the petitioners had filed revised returns voluntarily and without any notice from the Assessing Officer, indicating bonafides on their part. The court found no material to conclude that there was a false statement of verification or filing of a false return, and thus, penal provisions were not attracted.

Conclusion:
The criminal petition was allowed, and the proceedings in C.C. No. 90 of 2018 against the petitioners were quashed. The court found that the petitioners had acted in good faith by filing revised returns voluntarily, and there was no willful attempt to evade tax. The prosecution's actions were deemed premature and without jurisdiction. The court emphasized that delayed payment of tax does not amount to evasion if the tax is eventually paid.

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