Wilful attempt to evade tax requires conscious conduct; mere delayed self-assessment payment does not sustain prosecution.

Section 276C(2) of the Income-tax Act, 1961 requires a wilful attempt to evade payment of tax, penalty or interest, and penal liability cannot rest on mere delay or non-payment. The Bombay HC held that where the assessee had disclosed the income in the return and paid the self-assessment tax soon after service of the show-cause notice, followed by payment of interest, the facts did not show any conscious or positive act of evasion or the requisite mens rea. The prosecution was therefore not sustainable, and its continuation was treated as an abuse of process.

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Issues: Whether prosecution for wilful attempt to evade payment of tax under Section 276C(2) of the Income-tax Act, 1961 was sustainable where the return disclosed the income, the self-assessment tax remained unpaid for years, and the entire tax was paid shortly after service of the show cause notice.

Analysis: Section 276C(2) punishes a wilful attempt to evade payment of tax, penalty or interest, and the provision is penal in nature. The expression "wilful attempt to evade" imports a conscious and deliberate design, and mere failure or delay in payment is not enough. The Court drew support from the distinction between civil defaults and criminal liability, and from the principle that penal statutes must be strictly construed. On the facts, the applicants had disclosed the income in the return and paid the tax after the show cause notice was served, with interest also being paid thereafter. That conduct did not disclose a positive act of evasion or the requisite mens rea to attract the offence.

Conclusion: The offence under Section 276C(2) was not made out. Continuation of the prosecution was held to be an abuse of process and the quashing application was allowed in favour of the assessee.

Ratio Decidendi: Mere delayed payment of self-assessment tax, without a conscious and positive act showing a wilful design to evade tax, does not constitute the offence under Section 276C(2) of the Income-tax Act, 1961.

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