2021 (8) TMI 1047 - HC - Income Tax

Offences punishable u/s 276C(2) and 277 - assessee paid at a lesser amount than actually shown in the counter file of the income tax challan enclosed along with returns and extra digit was prefixed to the amount actually paid. - petitioners have preferred this petition u/s 482 of Cr.P.C. seeking to quash the proceedings initiated against them - HELD THAT - In the instant case, according to the complainant, the self assessment tax was paid at lesser amount than shown in the counterfoil of the income tax challan filed along with the return and the challan was materially altered after payment to show excess payment of ₹ 1,800/- by accused No.1 in the return filed by him. According to the circular in F.No.285/160/90/IT(INV)/190 dated 07.02.1991, wherein para 5 (iv) Clause 4 of the said circular which says section 276C(2) willful attempt to evade payment of taxes etc. Prosecution need not be initiated for an offence under this section if the aggregate amount of tax interest and penalty involved is less than ₹ 10,000/-. This limit would be ₹ 1,000/- for the corresponding provision under the Wealth Tax Act, 1957. Since it is not in dispute that the aggregate amount of tax interest and penalty involved in the present case is less than ₹ 10,000/- as per the above circular and the relevant para as noted above, the initiation of prosecution against the petitioners is liable to be quashed.

Summary

Issues:
Proceedings to quash under Section 482 of Cr.P.C. for offences under Sections 276C(2) and 277 of Income Tax Act, 1961 based on altered income tax challan and tax evasion allegations.

Analysis:
The petitioners sought to quash proceedings under Section 482 of Cr.P.C. alleging that the complaint filed against them for offences under Sections 276C(2) and 277 of the Income Tax Act, 1961, was unjust. The complaint accused the first petitioner, an assessee, and the second petitioner, a Chartered Accountant, of colluding to evade tax by altering the income tax challan to show excess payment. The petitioners contended that the circular exempted prosecution if the tax amount involved was less than ?25,000. The respondent argued that prosecution need not be initiated if the amount was less than ?10,000 as per the circular.

The core issue revolved around the interpretation of circular F.No.285/160/90/IT(INV)/190 dated 07.02.1991, which exempted prosecution if the aggregate amount of tax, interest, and penalty involved was less than ?10,000 for Section 276C(2) offences. The circular specified a limit of ?1,000 for the corresponding provision under the Wealth Tax Act, 1957. The complainant alleged that the petitioners had altered the income tax challan to falsely claim excess payment of ?1,800, thus evading tax. The court analyzed the circular and noted that the aggregate amount of tax, interest, and penalty involved in the case was less than ?10,000, as per the circular's provisions.

Based on the interpretation of the circular and the facts presented, the court concluded that since the aggregate amount of tax, interest, and penalty involved was less than ?10,000, the initiation of prosecution against the petitioners was not warranted. Therefore, the court allowed the petition, quashed the proceedings initiated against the petitioners in CC No.692/2015, and dismissed IA 1/2021 as it did not survive for consideration.