Tax evasion prosecution fails where complaint alleges only non-disclosure of income source, not concealment of taxable income.

A prosecution under section 276C(1) of the Income-tax Act requires allegations of a wilful attempt to evade tax, penalty or interest by concealing or withholding taxable income itself; mere refusal to disclose the source of income does not satisfy the statutory ingredients. On the complaint as framed, no concealment or tax evasion was alleged, so the offence was not made out. The prosecution was therefore not maintainable, and the cognizance order with the consequential criminal proceeding was liable to be quashed.

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Issues: Whether prosecution under section 276C(1) of the Income-tax Act, 1961 could be sustained where the complaint alleged only refusal to disclose the source of income and not concealment or evasion of taxable income.

Analysis: Section 276C(1) penalises a wilful attempt to evade tax, penalty or interest chargeable or imposable under the Act. The complaint did not allege that any taxable income had been hidden or that tax liability had been evaded; it only alleged non-disclosure of the source of income. On that footing, the statutory ingredients of the offence were not made out. The Court also noticed that the penalty had been reduced to a small amount and that the prosecution stood on an even weaker footing than cases covered by the governmental circular relating to income escaping assessment. The authorities relied upon showed that where the basis of prosecution fails, the criminal proceeding cannot survive.

Conclusion: The prosecution was not maintainable under section 276C(1), and the impugned cognizance order and the consequential criminal proceeding were liable to be quashed in favour of the petitioners.

Ratio Decidendi: A prosecution for tax evasion under section 276C(1) cannot be sustained unless the complaint alleges a wilful attempt to evade tax by concealing or withholding taxable income itself; mere failure to disclose the source of income is insufficient.

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