Wilful attempt to evade tax requires mens rea; mere delayed self-assessment tax payment after notice will not sustain prosecution.

Continuation of prosecution for non-payment of self-assessment tax was held unsustainable where the return disclosed the admitted liability, there was no allegation of concealment or false declaration, and the tax with interest was paid after notice. Section 276C(2) of the Income-tax Act, 1961 requires a wilful attempt to evade payment of tax, supported by mens rea and some positive dishonest act. Mere delayed payment, without material showing deliberate evasion, does not satisfy the statutory ingredients. The proceedings were therefore liable to be quashed in exercise of inherent powers.

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Issues: Whether continuation of prosecution for non-payment of self-assessment tax, after the return was filed and the tax along with interest was subsequently paid, disclosed a wilful attempt to evade tax so as to attract penal liability and warrant quashing of the proceedings.

Analysis: The return of income disclosed the admitted tax liability and there was no allegation of concealment of facts or false declaration in the return. On receipt of notice, the petitioners paid the tax together with interest and other charges, and the record showed only delayed payment attributable to financial difficulty. For an offence under Section 276C(2) of the Income-tax Act, 1961, a wilful attempt to evade payment of tax must be shown, which requires the requisite mens rea and some positive dishonest act. Mere non-payment at the initial stage, followed by payment on notice, without material indicating deliberate evasion, does not satisfy the statutory ingredients.

Conclusion: The prosecution was not sustainable, and the proceedings were liable to be quashed in exercise of inherent powers.

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