TaxTMI 
TaxTMI 
2022 (2) TMI 50
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....3) of the IT Act, 1961 for the Assessment year 2013-14 was completed by accepting the income returned by the assessee vide order dated 31.03.2016. Since the assessee has paid only Rs. 10,000,000/- towards undisputed tax and still remaining amount has not been paid, the prosecution has been launched. Show cause Notice also issued before the initiation of the prosecution on 16.09.2016. Reply given by the accused on 24.09.2016 is general in nature. Hence prosecution has been launched. Challenging the prosecution the present petition has been filed. 3.a. Learned Counsel appearing for the Petitioner mainly contended that it is not the case of the department that the petitioner/accused has suppressed the real income or undisclosed income was unearthed either under inspection or search. The return submitted by the accused was accepted and the assessment order of the year 2013-14 was also confirmed. He has paid part of the tax amount which was accepted by the department. The Assessment Order dated 31.03.2016 also confirmed the income. Thereafter an immovable property of the petitioner was attached on 13.05.2016. It is his further contention that he has paid tax with great difficulty and s....
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.... also passed on 31.03.2016. Even thereafter the amount has not been paid. Hence, it is his contention that when the tax has not been paid the prosecution certainly maintainable. It is his contention that as per Section 140A of the where any tax is payable on the basis of any return required to be furnished, assessee shall be liable to pay said tax without together with interest and failure to pay whole or any part of tax, assessee shall be deemed to be a defaulter in respect of the tax. Therefore, when the law mandates payment of tax within a period the person failed to pay such a tax, there is no bar for initiation of prosecution. Hence opposed the petitioner. He has also placed reliance on the following judgments: 1. Madhumilan Syntex Ltd. vs. Union of India and another [(2007)11 SCC 297] 2. Prakash Nath Khanna and Another vs. Commissioner of Income Tax and Another [(2004) 9 SCC 686] 3. Arun Arya Vs.Income Tax Officer [CRMC No. 205/2015, IA No. 01/2015 dated 28.09.2018 High Court of Jammu & Kashmir at Jammu] 4. Sujatha Venkateshwaran vs. the Assistant Commissioner of Inocme Tax [Crl.R.C.No.615 of 2011 dated 13.07.2018 Madras High Court] 5. M/s. Konark Refrigerator vs. D....
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.... attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable 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,- (i) in a case where the amount sought to be evaded exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine; (ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine. (2) If a person wilfully attempts in any manner whatsoever 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 three years and shall, in the discretion of the court, also be liable to fine. Explanation.- For the purposes of this section, a wilful attempt to evade any tax, penalty or interest chargeable or imposable under this Act or....
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....ction 140A reads as follows: "140A(3) If any assessee fails to pay the whole or any part of such tax or interest or both in accordance with the provisions of sub- section (1), he shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of the tax or interest or both remaining unpaid, and all the provisions of this Act shall apply accordingly." 10. The above sub-clause 3 of Section 140A makes it very clear that in the event of failure to pay tax the assessee shall be deemed to be a default in respect of tax. The word "wilfully attempt to evade the tax" is absent in Section 140A(3). If, mere default in payment of tax in time to be construed as a wilful attempt to evade the payment of tax the legislatures would have included the word "wilful attempt to evade the tax" in Sub-clause 3 of Section 140A which is in fact absent. Therefore, mere default on payment of tax in time the wilful attempt to evade the tax cannot be imported to prosecute. To prosecute the person for penal action, the penal provision has to be strictly construed. Only the circumstances and the conduct of the accused show the wilfull attempt in any mann....
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.... (2) of section 276C could be attracted only when a person wilfully attempts in any manner whatsoever to evade the payment of any tax, penalty or interest under this Act and not otherwise. The complaint is for offences punishable under section 276C(2) of the Act. In view of what is discussed above, it is very clear that there is not even a whisper that there is wilful attempt in any manner whatsoever to evade the payment of tax and hence the process issued is required to be quashed and is hereby quashed." 14. In Union of India (UOI) vs. Jiwal Lal Chironji Lal and Ors. [MANU/ MP/ 0143/2010] The High Court of Madhya Pradesh (Gwalior Bench) has held as follows: "22.From the minute analysis of the aforesaid Judgments of the Supreme Court, it clearly emerges that the conduct of the Assessee acquires importance, in relation to the proceedings of imposition of penalty or prosecution or conviction of the Assessee and whne the Assessee satisfactorily demonstrate that he was having no intention of concealment of Income, either Deliberately or indeliberately, the conviction could not be sustained. In the circumstances of the present case also, it is apparent from the perusal of the record ....
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....r Section 276CC of the Act when there is wilful failure to furnish return. The expression "failure" used in Section 276 CC of the Act is with respect to submission of assessment and return and the same cannot be equated with any failure to pay the tax in time and the liability under Section 276 C of the Act. A mere failure to pay the amount due (tax, interest or penalty) will not satisfy the requirement which would constitute the offence under Section 276C(2) of the Income Tax Act. Hence the crime registered and the further proceedings thereof will not serve any purpose, if it is proceeded further. The same is quashed." 17. In Ganga Devi vs. State of Gujarat [[2021] 437 ITR 323 (Guj)] the High Court of Gujarat at Ahmedabad held as follows: "22.1 What the law requires is the intention to evade payment of taxes then it is not mere failure to pay the tax but must be something more. The assessee must be aware that the tax was leviable and such assessee deliberately avoids paying it. The word 'evade' in the context means defeating the provisions of law of paying tax." 18. Considering the above judgments and the mere failure to pay the tax in time without any intention or del....
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....intainable. The above case factually distinguished where the assessee company having deducted the tax at source and failed to pay the TDS amount in time. Such circumstances the Apex Court took a view that they are not company or director not immune from prosecution. 21. In Prakash Nath Khanna and Another vs. Commissioner of Income Tax and Another [(2004) 9 SCC 686] the prosecution launched for the offence under Section 276(CC) was sought to be quashed. The plea before the Apex Court in the abvoe case is that as the assessee has already submitted the levy of interest and also penalty he could not be prosecuted under Section 276(CC) for the same default. The same was negatived by the Apex Court. Whereas in this case the prosecution initiated only under Section 276(C)(2) of the Act. Therefore, the above judgment is not applicable to the fact of this case. 22. The judgment relied upon by the Department in Arun Arya Vs.Income Tax Officer [CRMC No. 205/2015, IA No. 01/2015 dated 28.09.2018 High Court of Jammu & Kashmir at Jammu] on the basis of the survey conducted by the Income Tax Department under Section 133A of the IT Act, tax was assessed. The above case is also not applicable to ....