2020 (3) TMI 1028 - 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 or not - surrender during survey / search proceedings - respondent issued show cause notice on 16.08.2015 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 18.03.2018 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. This criminal original petition is allowed.

Summary

Issues: Challenge to criminal proceedings under Section 276 (c ) (2) of the Income Tax Act, 1961 for willful failure to pay tax liability, delay in filing return of income, and alleged attempt to evade tax.

Analysis:

1. Filing of Criminal Proceedings:
The respondent initiated criminal proceedings against the petitioner under Section 276 (c ) (2) of the Income Tax Act, 1961, alleging willful failure to pay tax liability and non-filing of income tax return for the assessment year 2013-2014. The petitioner disclosed undisclosed income during an inspection and filed the return belatedly, leading to the issuance of a show cause notice.

2. Contention of the Petitioner:
The petitioner argued that upon filing the return of income and paying the demanded tax amount, he should not be held liable under Section 276 (c ) (2) of the Income Tax Act. The petitioner highlighted the timeline of events regarding the filing of returns and payment of tax to support this contention.

3. Legal Provisions and Interpretation:
The Court examined the provisions of Section 276 (c ) (2) of the Income Tax Act, emphasizing the requirement of a willful attempt to evade tax, possession of books with false entries, making false entries, or omitting relevant entries. The Court noted that the petitioner voluntarily disclosed undisclosed income during the inspection, indicating no intention to evade tax willfully.

4. Payment of Tax and Acknowledgment:
It was established that the petitioner paid the entire tax amount demanded by the respondent on a later date, which was duly acknowledged by the respondent. This payment and acknowledgment were crucial in determining the lack of willful intent on the part of the petitioner to evade tax.

5. Decision and Order:
After considering the arguments and evidence presented, the Court allowed the criminal original petition, quashing the entire proceedings against the petitioner in E.O.C.No.608 of 2017. 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.

In conclusion, the judgment highlighted the importance of assessing willful intent and timely payment of tax liabilities in cases involving alleged tax evasion. The Court's detailed analysis of the legal provisions and factual circumstances led to the favorable outcome for the petitioner, resulting in the quashing of the criminal proceedings.