TMI Blog2024 (2) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... ept the cases where the punishment is imposed on the principle of strict liability. From the text of the provisions contained in Section 276C(1) and the use of the expressions, wilful attempt to evade it becomes clear that Section 276C professes to punish an act or omission on the part of the assessee designed to evade the liability to pay the tax and not a mere failure to pay the tax. There are provisions in the Income Tax Act, 1961 which take care of interest (of the revenue) of recovering the due tax amount alongwith interest and/or penalty where the tax has not been paid within time. It is the wilful evasion of tax due which is the crux of the offence u/s 276C(2) and not a mere failure to pay tax. In a given case, if it could be demonstrated that though the assessee was in a position to pay tax, interest on penalty, the assessee evaded payment of tax by dishonestly disabling himself from payment of tax, interest or penalty or fraudulently dealt with his assets or property with intent to evade the payment of tax, interest or penalty, different considerations may come into play. However, mere failure cannot be equated with wilful attempt to evade. To sum up, on a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sameer Dalal, i/b Satish Mody. For the State/Respondent : Mr. S. R. Aagarkar, APP. For the Respondent No. 2 : Mr. Siddharth Chandrashekhar. JUDGMENT:- 1. This is an application under Section 482 of the Code of Criminal Procedure, 1973 ( the Code ) to quash the complaint lodged by the Income Tax Authorities for an offence punishable under Section 276C(2) read with Section 278B of the Income Tax Act, 1961 ( the IT Act, 1961 ). 2. Shorn of unnecessary details, the background facts can be stated as under: (a) Applicant No. 1 is a partnership firm registered under the provisions of Indian Partnership Act, 1932. Applicant No. 1 is engaged in the business of distribution of welding electrodes, machines and accessories. Applicant Nos. 2 to 4 are the partners of applicant No. 1 firm. (b) Applicant No. 1 firm had filed its original return of income for Assessment Year (AY) 2010-2011 declaring income of Rs. 21,79,850/- computing the tax payable alongwith interest at Rs. 7,15,573/-. Out of which Rs. 1,06,512/- was claimed as Tax Deducted at Source (TDS) and Rs. 1,00,000/- was paid as advance tax. An amount of Rs. 5,09,061/- was shown as tax payable on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o evade the tax on the part of the applicants. Under four days of the service of the show cause, the applicants deposited the due tax and interest thereon. Subsequently, the applicants have also deposited a sum of Rs. 4,47,220/- towards interest for AY-2010-2011 under Section 220 of the IT Act, 1961, on 23rd January, 2020. Since applicant No. 1 firm had faithfully disclosed the income and the tax which was payable thereon and the due tax alongwith interest came to be paid immediately after service of the show cause notice, the non-payment cannot be construed as a wilful attempt to evade the payment of tax, to fall within the mischief of Section 276C(2) of the IT Act, 1961. Hence, the applicants were constrained to invoke the inherent jurisdiction of this Court. 7. An affidavit-in-reply is filed on behalf of respondent Nos. 1 and 2 controverting the contentions in the application. At the outset, respondent Nos. 1 and 2 contend that the claim of the applicants that applicant Nos. 2 to 4 were unaware of the affairs of the firm as late P. G. Purohit was managing the entire affairs is patently incorrect. In fact, the ITR filed on 28th September, 2019 was signed and verified by Mr. Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x due and wilful attempt to evade the tax, which requires a positive act on the part of the assessee. To bolster up this submission, the learned Counsel for the applicants placed reliance on the decision of the Supreme Court in the case of Prem Dass vs. Income Tax Officer (1999) 5 SCC 241., a decision of Karnataka High Court in the case of Vyalikaval House Building Co-operative Society Ltd ors. vs. Deputy Commissioner of Income Tax (2020) 428 ITR 89 (Karn.)., a decision of the Madras High Court in the case of S. P. Velayutham vs. Assistant Commissioner of Income Tax (2022) 327 CTR (Mad)., a decision of Gujarat High Court in the case of Ganga Devi Somani ors. vs. State of Gujarat(2021) 321 CRT (Guj) 640., and another decision of Madras High Court in the case of Bejan Singh Eye Hospital Pvt. Ltd. and ors. vs. Income Tax Department (2020) 428 ITR 206 (Mad). 13. Per contra, Mr. Chandrashekhar, the learned Counsel for respondent No. 2, would submit that the time-lag of more than eight years in making the payment in itself speaks volumes about the intent on the part of the applicants to evade the tax. It is only after the service of the show cause notice, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever 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 [two] years and shall, in the discretion of the court, also be liable to fine. Explanation . For the purposes of this sections, a wilful attempt to evade any tax, penalty or interest chargeable or impossible 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 circumstances to exist which will have the effect of enabling such person to evade any tax, penalty or interest charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WANTON. wilfulness , n. The word wilful or wilfully when used in the definition of a crime, it has been said time and again, means only intentionally or purposely as distinguished from accidentally or negligently and does not require any actual im-propriety; while on the other hand it has been stated with equal repetition and insistence that the requirement added by such a word is not satisfied unless there is a bad purpose or evil intent. Rollin M. Perkins Ronald N. Boyce, Criminal Law 875 76 (3d ed. 1982). 21. In P. Ramnatha Aiyar s Advanced Law Lexicon, 3rd Edition, after noting the aforesaid explanation in the Black s Law Dictionary, the import of the term in civil and criminal causes is elucidated as under: The question whether an act or omission is wilful arises oftener in criminal than in civil causes; since in the former the general principle requiring the presence of mens rea excludes from criminality acts done accidentally and unintentionally and even acts done intentionally under honest but mistaken belief in the existence of facts which, if true, would have made the acts lawful or excusable. (emphasis supplied) 22. In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained in Section 276C(1) and Section 277 (false statement in verification etc.) of the IT Act, 1961, the Supreme Court enunciated that wilful attempt to evade any tax, penalty or interest chargeable or imposable under Section 276C is a positive act on the part of the accused which is required to bring home the charge against the accused. Similarly, a statement made by a person in any clarification under the Act can be an offence under Section 277 if the person making the same effort knew or believed the same to be false or does not believe it to be true. Necessary mens rea, therefore, is required to be established by the prosecution to attract the provisions of Section 277 of the Act. 30. Following the aforesaid pronouncement, a learned Single Judge of the Karnataka High Court in the case of Vyalikaval House Building Co-operative Society Ltd. (supra) enunciated the law as under: 8. The gist of the offence under Section 276C(2) of the Act is the wilful attempt to evade any tax, penalty or interest chargeable or imposable under the Act. What is made punishable under this Section is an attempt to evade tax penalty or interest and not the actual evasion of tax. 'At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect is the decision of the Madras High Court in the case of Mrs. Noorjahan vs. Deputy Commissioner of Income Tax (2022) 445 ITR (Mad). Repelling the submissions that presumption contained in Section 278B of the IT Act, 1961 comes to the aid of the prosecution, the learned Single Judge, in the facts of the said case, observed as under: 13. In the instant case, admittedly there is no concealment of any source of income or taxable item, inclusion of a circumstance aimed to evade tax or furnishing of inaccurate particulars regarding any assessment or payment of tax. What is involved is only a failure on the part of the petitioner to pay the tax in time, which was later on paid after 4 months along with interest payable. So, it would not fall under the mischief of Section 276 C of the Income Tax Act, which requires an attempt to evade tax and such attempt must be a wilful. 14. If the intention (culpable mental state) of the assessee was to evade tax or attempt to evade tax, they would not have filed the returns in time disclosing the income and the tax liable to be paid. They would not have remitted the tax payable along with interest without waiting for the authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court in the case of Nayan Balu (supra), on which reliance was placed by the learned Counsel for respondent No. 1, does not govern the facts of the case as in the said case the challenge was to the initiation of the prosecution under Section 276C(1) of the IT Act, 1961 as it was alleged that the petitioner therein failed to substantiate the claim of purchases as the Assessing Officer had found the purchases to be bogus. 34. A profitable reference, in this context, can be made to a decision of the Supreme Court in the case of M/s. Gujarat Travancore Agency vs. Commissioner of Income Tax, Kerala, Ernakulam (1989) 3 SCC 52. wherein pointing out the distinction between the nature of the provisions contained in Section 271(1)(a) (failure to furnish return) and Section 276C (as it then stood), the Supreme Court enunciated that there can be no dispute having regard to the provisions of Section 276C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established. In most cases of criminal liability, the intention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276C of the I.T. Act. (emphasis supplied) 37. The aforesaid pronouncements thus indicate that there is an essential distinction between the cases where failure or breach leads to civil liability, even in the nature of imposition of monetary penalty, and the cases which entail punishment as a sequel to the commission of offences. Ordinarily in the cases where the breach or failure leads to civil liability, mens rea is not considered as an essential ingredient and proof of mere failure or breach in itself may be sufficient. In contrast, where the punishment is to be imposed, existence of mens rea is ordinarily considered as an essential ingredient of the offence, save and except the cases where the punishment is imposed on the principle of strict liability. 38. From the text of the provisions contained in Section 276C(1) and the use of the expressions, wilful attempt to evade it becomes clear that Section 276C professes to punish an act or omission on the part of the assessee designed to evade the liability to pay the tax and not a mere failure to pay the tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicants had declared the income and assessed the self-assessment tax, it cannot be urged that there was an attempt to evade the tax. It was neither a case of under reporting of income nor that of showing diminished tax liability. The action on the part of the applicants to pay the tax due under five days of the notice militates against the stand of the Income Tax Department that there was an intent to evade the tax throughout. It is not disputed on the date of the lodging of the complaint, no tax was due, and even the applicants deposited the amount of Rs.4,47,420/- towards interest on the due amount. 43. In the aforesaid view of the matter, I find substance in the submissions on behalf of the applicants that in the facts of the case the continuation of the prosecution for the offence punishable under Section 276C(2) of the IT Act, 1961 amounts to abuse of the process of the Court. It is true there was delay of about eight years in paying the amount of self-assessment tax. In this proceeding, it may not be appropriate to delve into the veracity of the claim of the applicants that on account of death of Mr. P. G. Purohit they were unaware of the tax liability. It is the condu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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