Wilful tax evasion prosecution survives despite recovery remedies and deemed demand notice at the quashing stage.

Prosecution for wilful attempt to evade tax was held maintainable because the offence of wilful non-payment is distinct from civil recovery proceedings. A deemed notice of demand arising from an intimation under the income-tax assessment mechanism was treated as sufficient where applicable, and the existence of recovery remedies did not bar prosecution. On the facts alleged, the complaint showed admitted tax liability, service of notices, prolonged non-payment, and a plausible case of wilful default; the explanation that bills were awaited did not defeat the allegation at the quashing stage. The statutory presumption supporting prosecution left rebuttal to trial, so quashing was refused.

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Issues: Whether prosecution for wilful attempt to evade payment of tax under the Income-tax Act, 1961 could be quashed on the grounds that no separate notice under section 156 was issued and that recovery mechanisms under sections 220, 221 and 226 were available; and whether the complaint disclosed a prima facie case of wilful non-payment attracting section 276C(2).

Analysis: The statutory scheme shows that section 221 deals with penalty and section 156, by its proviso, treats an intimation under section 143(1) as a deemed notice of demand for sums determined payable. The availability of recovery machinery under sections 222 and 226 does not bar prosecution, because section 276C(2) creates a distinct offence of wilfully attempting to evade payment of tax, penalty or interest. On the facts, the accused had declared substantial income, admitted tax liability, received notices, and still did not clear the admitted tax for a long period; the explanation of awaiting contract bills did not negate the allegation of wilful default at the stage of quashing. The presumption under section 278E further supports prosecution, leaving rebuttal to trial.

Conclusion: The prosecution was held maintainable and the petition for quashing was rejected.

Final Conclusion: The criminal proceedings were allowed to continue, as the complaint disclosed a triable case of wilful evasion of tax and the objections based on demand notice and alternative recovery remedies were not sufficient to terminate the prosecution at the threshold.

Ratio Decidendi: A prosecution under section 276C(2) of the Income-tax Act, 1961 is independent of civil recovery proceedings, and a deemed notice of demand under section 143(1) satisfies the demand requirement where applicable; at the quashing stage, wilful non-payment supported by the complaint and statutory presumption under section 278E cannot be negated merely by asserting available recovery remedies.

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