TMI Blog2021 (7) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... cial crisis, which had affected the recovery of tax liability determined by the accused Company was not controverted by the Income Tax Department and to that payable tax, as per the self-assessed Return of income, the Company had already paid and further amount was to be directly paid by the GST Department and as such amount was to be adjusted against GST refund which constitute the 80% of the total tax liability. The accused Company has stated the reasons for the delay and expressed readiness to pay the balance of ₹ . Delayed payment under the provisions of the Act may call for penalty or interest but by no stretch of imagination in the circumstances as pleaded by the petitioners, could be construed as an attempt to evade the tax so as to entail prosecution of the petitioner for the alleged offence of Section 276C(2) of the Act. Thus, in the considered opinion of this Court, the prosecution initiated against the petitioners is illegal and tantamount to abuse of process of law and required to be quashed. Petition is allowed. The complaint made by the Office of the Assistant Commissioner of Income Tax, Surat which has culminated into Criminal Case pending before the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad informed Respondent No.2 of having already paid ₹ 7,28,45,394/- and further ₹ 3,83,55,045/- was due from the GST Department as refund on export for which the Respondent No.2 had already issued a notice to the GST Department for remitting the said refund directly in the account of the Income Tax Department. On the same line, with similar request, the accused Company had written a letter to the GST Department making similar request to GST Department for transferring the said refund directly into the Account of the Income Tax Department. Thus, it is stated by the petitioners that already total amount of ₹ 11,12,00,439/- was secured with the respondent No.2 prior to filing of the impugned complaint. 3.2 It is urged by the Petitioners that the accused Company has after the complaint paid the remaining tax amount. Certain amount was directly deposited by the Company and the remaining amount was deposited by the GST Department which clearly shows that the delay, if any, was attributable to the GST Department and not to the accused Company. 3.3 The petitioners state that they have resigned way back in the month of November, 2018 and the Certificate of the Charter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment in terms of Section 276C. Mr. Pahwa submitted that 'wilful failure' brings into consideration the element of guilty mind. He stated that in the facts of the matter there was no wilful evasion. The petitioners have explained the delay and no ill- motive could be found out to have a prosecution under Section 276C of Income Tax Act. Mr. Pahwa further stated that the criminal prosecution must not be initiated as a matter of course where the prosecution would invoke question of interpretation of Income Tax Act and that the department should be slow in filing prosecution without any determination by the Income Tax Officer of the liability of the accused assessee which is made the basis of prosecution. 4.2 Mr. Pahwa, learned Senior Counsel for the petitioners has relied on the decisions in cases of (i) Sushil Kumar Saboo v. State of Bihar, reported in [2011] 336 ITR 202 (Patna); (ii) Vyalikaval House Building Co- operative Society Ltd. v. Income Tax Department, Central Circle-1(1), Bangalore, reported in [2019] 267 Taxman 81 (Karnataka); (iii) Income- Tax Officer v. Autofil and Others, reported in (1990) 184 ITR 47 and (iv)Gopalji Shaw v. Income-Tax Officer, D Ward, Disctr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by accused No.2 on 31.3.2018. The total tax payable has been ₹ 13,90,27,650/- [₹ 14,12,32,322/- - 22,04,669/- (TDS and TCS)]. It is contended that return of Income for the said Assessment year was filed without paying self-asessment tax of ₹ 13,90,27,650/-. It is contended that it was legal and statutory duty of the accused to pay full tax on or before 31.3.2018 and that it was well within the knowledge of the accused, still however accused chose not to pay the self-assessment tax by that date. Under that circumstances, show- cause notice was issued to the accused on 25.1.2019 as to why prosecution under Section 276C(2) of the Income Tax Act should not be launched against the accused for Assessment Year 2017-18. 8. According to the Income Tax department in response to the show-cause notice, the accused raised following contentions for not paying self assessment tax, which are reproduced hereinbelow :- (1) That accused could manage to pay the tax of ₹ 7,28,45,394/- and further ₹ 3,83,55,045/- was due from the GST Department as refund on export for which accused had already filed refund application and Income Tax Department had already issued a no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accused are required to be punished under Section 276C(2) of the Act. 10. Section 276C of the Income Tax Act is extracted hereinbelow: 276C. Wiful 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, or under reports his income, 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 or tax on under- reported income exceeds twenty-five 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 two 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nowledgment No. 580767721310318 is treated as invalid return and thus to that understanding the Company was in no position to even file revised return as the date of filing revised return for Assessment Year 2016-17 had elapsed, therefore, in such circumstances there would be no outstanding demand for Assessment Year 2016-17. The Income Tax Department has no issue with this explanation of the assessee. 13. For the Assessment Year 2017-18, it is explained by the accused - Company that the Company had filed return of income for AY 2017- 18 by computing tax payable at ₹ 13,90,27,650/-. However, till date the Company could manage to pay tax of ₹ 7,28,45,394/- and further a balance of ₹ 3,83,55,045/- is due from the GST Department as GST Refund on export for which the Company has already filed a refund application to the GST Department. Further, the Income Tax Department has already issued a notice to the GST department for remitting the refund due to the Company directly to the Income Tax Department, therefore, the total tax paid will sum upto ₹ 11,12,00,439/-. 14. In the said reply dated 27.3.2019, the Company had also explained the adverse situation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the term 'in due time', used in Section 276CC, and in case of Sasi Enterprises v. Assistant Commissioner of Income Tax (Supra), it has been laid down that in a prosecution for offence like Section 276CC, the Court has to presume existence of mens rea in terms of provision of Section 278E and further laid down that it is for the accused to prove contrary and that too beyond reasonable doubt. Such observation has been made in relation to the failure to furnish Returns of Income. 18. Section 139 of the Act is provided for the Return of Income and in case of Sasi Enterprises v. Assistant Commissioner of Income Tax reported in (2014) 361 ITR 163 (SC), the Court formulated the question of consideration, 'whether non-filing of the Return under Section 139(1) of the Act, as well as non-compliance of the time prescribed under Section 142 and 148 of the Act are grounds for invocation of the provisions of Section 276CC of the Act.' 18.1 After reading Section 139 of the Act, the Apex Court laid down in Para-19 as under: 19. A plain reading of the above provisions indicates that it is mandatory on the part of the assessee to file the return before the due date. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is issued calling for filing of the return of income. Proviso, therefore, envisages the filing of even belated return before the detection or discovery of the failure and issuance of notices under Section 142 or 148 of the Act. 18.3 Dealing with Section 278E, it has been laid down in Para-30 as under: 30. Section 278E deals with the presumption as to culpable mental state, which was inserted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986. The question is on whom the burden lies, either on the prosecution or the assessee, under Section 278E to prove whether the assessee has or has not committed willful default in filing the returns. Court in a prosecution of offence, like Section 276CC has to presume the existence of mens rea and it is for the accused to prove the contrary and that too beyond reasonable doubt. Resultantly, the appellants have to prove the circumstances which prevented them from filing the returns as per Section 139(1) or in response to notices under Sections 142 and 148 of the Act. Thus, the circumstances which led to the failure is to be considered, proviso under Section 276CC takes care of genuine assessee. Wilful failure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances appears to be overlapping between the applicability of sub-section (1) and sub-section (2). 22. Under both the sub-sections of Section 276C, the first requirement is that the attempt to evade should be 'wilful'. This term 'wilful' has not be defined under the Act. Under common parlance the word 'wilful' suggest guilty mind of the assessee which means the assessee has consciously or knowingly attempted to thwart the chargeability of tax, interest or penalty. Such wilful attempt further should be to 'evade' chargeability or imposition of payment of taxes, etc. The work 'evade' has not been defined under the Act. As per K.J.Aiyar's Judicial Dictionary the word 'evade' is capable of being used in two senses, one which suggests underhand dealing, and another which means nothing more than intentional avoidance of something disagreeable.' [Lord Hobhouse in [1900] AC 323]. As per Taxmann's Direct Tax Manual, Volume-3, the word 'evade' occurring in section 276C will take in non-disclosure as well, depending upon the facts and the mens rea of the petitioner. [K.A. Khaja v. Sixth ITO (1992) 196 ITR 627 (Mad)]. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. The prosecution has been launched for the non-payment of the tax of ₹ 13,90,27,650/- on the Return of Income. To that the Company had contended in the Reply that for the Assessment Year 2017-18 for computing tax payable at ₹ 13,90,27,650/-, they could manage to pay ₹ 7,28,45,394/- and further balance of ₹ 3,83,55,045/- was stated to be due by the Company from the GST Department as GST Refund on export, which according to the Company, the Income Tax Department had issued notice to the GST Department for remitting the refund due. 23. Here, from the facts of the case it appears that Company had voluntarily declared its intention to pay tax and 80% of the tax was paid prior to the complaint. The Income Tax Department was instructed regarding the dues from the GST Department and there is no denial to the fact that the Income Tax Department had issued Notice to GST Department for remitting the refund directly to their Department. Certain tough circumstances were also pleaded by the Company regarding demonetisation and implementation of GST, the Textile Industry facing huge financial crisis, which had affected the recovery of tax liability determined by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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