Non payment of Self Assessment Tax after filing ITR is not an offence : High Court
The 1st petitioner company filed return of Income-tax admitting the tax liability of Rs. 38,00,170/-, but failed to make payment. However, on receiving notice dated 9-6-2016, in reply, the petitioners enclosed a challan for an amount of Rs. 50,55,310/- (Rs.12,55,140/- excess towards interest and other charges) towards tax.
HIGH COURT OF TELANGANA
Sujata Electrical Infratech India (P.) Ltd.
Deputy Commissioner of Income-tax
K. SURENDER, J.
CRIMINAL PETITION NO.5210 OF 2019
NOVEMBER 4, 2022
Sri.S. Ravi, Ld. Counsel and Ms. Divya Datla for the Petitioner. Sri. B. Narasimha Sharma, Enforcement Directorate for the Respondent.
1. This petition is filed to quash the proceedings against the petitioners/A1 to A3 in CC No. 37 of 2018 on the file of Special Judge for Economic Offences, Hyderabad.
2. The 1st petitioner filed original return of income tax in the assessment year 2014-15 on 29-11-2014 declaring a total income of Rs. 1,03,44,060/-. After claiming a tax credit for TDS of Rs. 53,016/, out of the admitted tax liability, as per the return of income, the accused filed return of Rs. 38,00,170/-. However, the tax was not paid.
3. It is the case of the respondent that the accused has willfully defaulted in payment of self assessment tax of admitted income as required under section 140A of the Income-tax Act, 1961 attracting the provisions under section 276C(2) of the Act, which penalizes such default.
4. The Income-tax Department issued a show-cause notice dated 9-6-2016 which was served on the petitioners/accused. The petitioners replied in writing on 23-6-2016 informing that there was no wilful default or mala fide intention to evade tax payment, but the same was on account of certain financial difficulties beyond control. Along with reply, a letter along with a copy of self assessment tax challan for Rs. 50,55,310/- along with interest was paid and requested the department not to initiate any proceedings.
5. However, according to the department, since the accused with an intention to evade tax filed return without paying self assessment tax, the accused committed an offence under section 276C(2) r/w 278B of the Income-tax Act. Further there is a presumption of culpable mental state on the part of the accused for such default.
6. Sri S. Ravi, learned Senior Counsel appearing for the Petitioners would submit that there is no evasion of tax. Even according to the department, though the assessed tax was Rs. 38,00,170/-, the petitioners paid along with interest an amount of Rs. 50,55,310/-. The said conduct itself indicates that there was never any intention or attempt to evade tax payment, for which reason, the penal provision under Income-tax Act is not attracted. In support of his contention, he relied on the judgment in the case of Vyalikaval House Building Co-operative Society Ltd. v. Income-tax Department  428 ITR 89 (Kar.).
7. In the aforesaid judgment, the accused was prosecuted on the ground that though returns were filed, he failed to pay the said tax amount. The Court found that the act of filing returns by itself cannot be construed as an attempt to evade tax rather it would suggest that there was a voluntary declaration to pay the tax.
8. In the case of Prem Dass v. ITO  236 ITR 683 (SC)/ 5 SCC 241 , the Hon’ble Supreme Court held that a positive act on the part of the accused is required to establish a charge under section 276-C(2).
9. Learned Senior Counsel also relied upon the judgment of this Court in Criminal Petition No. 3164 of 2008, dated September, 2015, which was decided on similar lines.
10. The Learned Standing Counsel appearing on behalf of the Income-tax Department submits that whether there was an intention or not to evade tax is subject matter of trial and this Court under section 482 of Cr.P.C cannot decide the said fact. Further, the judgment relied by the learned Senior Counsel for the petitioners, have no bearing since the facts in present case are distinguishable on facts of the judgments relied by the learned Senior Counsel. He further submits that the Income-tax department has to be given an opportunity to establish its case before the concerned Court and the defence of the petitioners can be taken before the trial Court, as such, petition has to be dismissed.
11. In the present case, the facts are not disputed either by the petitioners or by the department. The 1st petitioner company filed return of Income-tax admitting the tax liability of Rs. 38,00,170/-, but failed to make payment. However, on receiving notice dated 9-6-2016, in reply, the petitioners enclosed a challan for an amount of Rs. 50,55,310/- (Rs.12,55,140/- excess towards interest and other charges) towards tax. The present prosecution was launched on 1-3-2018.
12. Section 276C of Income-tax Act is extracted hereunder:
“276C. 2 Wilful attempt to evade tax, etc.
|(1)||If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable,-|
|(i)||in a case where the amount sought to be evaded exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine;|
|(ii)||in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine.|
|(2)||If a person wilfully attempts in any manner whatsoever to evade the payment of any tax, penalty or interest under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and shall, in the discretion of the court, also be liable to fine. Explanation.- For the purposes of this section, a wilful attempt to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof shall include a case where any person-|
|(i)||has in his possession or control any books of account or other documents (being books of account or other documents relevant to any proceeding under this Act) containing a false entry or statement; or|
|(ii)||makes or causes to be made any false entry or statement in such books of account or other documents; or|
|(iii)||wilfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents; or|
|(iv)||causes any other circumstance to exist which will have the effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof.]”|
13. From the present facts, it has to be ascertained whether requisite mens rea was present to infer a wilful attempt at evading tax. Unless a person with dishonest intention tries to conceal facts and consequently attempts at evading the tax, which he is liable to pay are the requisite ingredients to prosecute person under section 276C of the Income-tax Act.
14. It is not the case of the Income-tax department that the self assessment tax returns which were filed had an element of concealment on any factual aspects and tried to evade tax, which is liable to paid. There is no dispute regarding the claims made by the petitioners in their income tax returns.
15. Having received the notice, the petitioners have paid additional amount of Rs. 12,55,140/- towards interest and other charges, apart from the assessed tax. It was stated that due to financial difficulties beyond control, the amount could not be paid in time.
16. As already discussed, this is not a case wherein false declaration is made or that the department has found that there is a deliberate attempt to evade tax by suppressing material information. Whether there is willful delay or not are discernible from the facts of the case.
17. The conduct of the petitioners itself would indicate that it was a case of delayed payment of tax or deferred payment. The tax along with interest and penalty was accepted by the department without any reservations. Such delay in the payment will not amount to willful attempt to evade tax. Cogent reasons are given stating that tax could not be paid due to financial difficulties. It cannot be inferred from the facts of the present case that any attempt was deliberately made to evade the tax payment. For the said reasons, the continuation of the proceedings against the petitioners would an abuse of process of the Court. It is a fit case wherein this Court has to exercise its inherent powers under section 482 of Cr.P.C to quash the proceedings against the petitioners.
18. Accordingly the proceedings against the petitioners in CC No. 37 of 2018 on the file of Special Judge for Economic Offences, Hyderabad are hereby quashed and the Criminal Petition is allowed.