2023 (9) TMI 1229 - HC - Income Tax

Prosecution u/s 276(C)(2) r.w.s. 278B - petitioners are being prosecuted for making an attempt to evade the tax, which was self-assessed by them, while filing the Income Tax Returns for the Assessment Year 2011-12 - whether the delayed payment can be termed as evasion of tax, for which the complaint in question has been filed? - HELD THAT - There was no attempted evasion on the part of the petitioners. There was undoubtedly delayed payment, but for that penalty had already been levied. There is no debate on the issue of maintenance of the criminal proceedings simultaneously with the civil proceedings (in the present case levying of penalty etc.). While maintaining both these proceedings simultaneously, the one fact that must be present there that there was or has been a criminal intent in the mind of the accused right from the beginning. In the instant case, it is not in dispute that the income tax was self-assessed and payment of the same stands also made, though belatedly. Thus, the question of evasion of tax does not arise in the present facts and circumstances. The facts and circumstances of the case further does not reveal that there was a deliberate and willful default of evasion of tax on the part of the petitioners Department is unable to show anything on record as to how and in what manner, the petitioners have ever tried to evade the tax particularly, when the same was duly shown and admitted/acknowledged while filing the Income Tax Returns for the Assessment Year 2011-12. Assessee petition allowed.

Summary

Issues involved:
The judgment involves the quashing of a complaint under Section 276(C)(2) of the Income Tax Act, 1961, along with all consequential proceedings, based on the alleged non-payment of tax by the petitioners.

Details of the Judgment:

1. Issue of Non-Payment of Tax:
The petitioners, a registered firm, self-assessed their tax for the Assessment Year 2011-12 but failed to pay the amount in time, leading to a notice for prosecution under Section 276(C)(2) of the Act. The petitioners argued that there was no evasion as the tax amount was acknowledged in their returns, albeit paid belatedly.

2. Legal Interpretation of Evasion:
The petitioners contended that prosecution under Section 276(C)(2) requires willful evasion, which was absent in their case. They cited a Karnataka High Court judgment stating that delayed payment does not constitute tax evasion, especially when the tax was acknowledged during filing.

3. Judicial Precedents and Dismissal of Appeals:
The petitioners referred to judgments from the Karnataka and Madras High Courts, emphasizing that delayed payment does not amount to tax evasion unless there is a deliberate attempt to evade payment. The Supreme Court dismissed an appeal against the Karnataka judgment, reinforcing the stance on delayed payment not constituting evasion.

4. Prosecution and Intent:
The respondent department argued that the petitioners, despite being capable, chose not to pay the tax, causing loss. However, the court noted that there was no evidence of willful default or intent to evade tax, as the amount was eventually paid along with penalties.

5. Court's Decision and Rationale:
After considering the arguments and legal principles, the court quashed the complaint and all related proceedings, stating that there was no attempted evasion by the petitioners. The court highlighted that the delayed payment, while attracting penalties, did not indicate deliberate evasion of tax, as the amount was duly acknowledged in the tax returns.

By analyzing the facts, legal interpretations, and precedents, the court concluded that the delayed payment of tax, in this case, did not amount to willful evasion. As the tax amount was acknowledged and eventually paid, the court found no evidence of intentional evasion by the petitioners, leading to the quashing of the complaint and associated proceedings.