TaxTMI 
TaxTMI 
2024 (2) TMI 405
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....f applicant No. 1 firm. (b) Applicant No. 1 firm had filed its original return of income for Assessment Year (AY) 2010-2011 declaring income of Rs. 21,79,850/- computing the tax payable alongwith interest at Rs. 7,15,573/-. Out of which Rs. 1,06,512/- was claimed as Tax Deducted at Source (TDS) and Rs. 1,00,000/- was paid as advance tax. An amount of Rs. 5,09,061/- was shown as tax payable on the reported income. (c) The applicants claim, applicant No. 1 firm is a family run concern. Mr. P. G. Purohit, the husband of applicant No. 2 and father of applicant Nos. 3 and 4, was managing the entire affairs of the firm. Mr. P. G. Purohit passed away in the month of May, 2014. Applicant Nos. 2 to 4 were unaware of the affairs of the firm especially the non-payment of the tax of Rs. 5,09,061/- declared in the return for AY-2010-2011. 3. Principal Commissioner of Income Tax, respondent No. 2, issued a notice calling upon the applicant to show cause as to why prosecution proceedings under Section 276C(2) of the IT Act, 1961 be not initiated as the applicant had allegedly wilfully attempted to evade payment of due tax. After assessing the position, the applicants claim, immediately on....
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....behalf of respondent Nos. 1 and 2 controverting the contentions in the application. At the outset, respondent Nos. 1 and 2 contend that the claim of the applicants that applicant Nos. 2 to 4 were unaware of the affairs of the firm as late P. G. Purohit was managing the entire affairs is patently incorrect. In fact, the ITR filed on 28th September, 2019 was signed and verified by Mr. Rakesh Purohit, applicant No. 3. Thus, the applicants cannot feign ignorance. 8. The respondents further contend that it was only after the service of the show cause notice the applicants paid the tax which was shown to be payable in the ITR for AY-2010-2011. Had the applicants paid the tax suo motu, different considerations would have come into play. Therefore, the applicants cannot derive mileage from the factum of payment of the tax after service of the show cause notice, in the year 2018. On the contrary, according to respondent Nos. 1 and 2, the said fact points to the wilful evasion of tax. 9. Respondent Nos. 1 and 2 have also refuted the assertions of the applicants that mere failure to pay the tax does not amount to a wilful attempt to evade the tax. In any event, according to respondent Nos. ....
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.... Income Tax Department (2020) 428 ITR 206 (Mad). 13. Per contra, Mr. Chandrashekhar, the learned Counsel for respondent No. 2, would submit that the time-lag of more than eight years in making the payment in itself speaks volumes about the intent on the part of the applicants to evade the tax. It is only after the service of the show cause notice, the applicants paid the amount of self-assessment tax. The applicants, therefore, cannot be heard to urge that there was no wilful attempt at evasion of the tax. 14. Taking the Court through the provisions of sub-sections (1) and (2) of Section 276C of the IT Act, 1961 and comparing and contrasting the text thereof, the learned Counsel for respondent No. 2 submitted that the legislature has consciously used different language to prescribe punishment in the matter of wilful evasion of tax chargeable and imposable, i.e. before filing of return, and wilful evasion of payment of tax, i.e. after filing of the return. The evasion of payment of self-assessment tax by the applicants squarely falls within the dragnet of the offence punishable under Section 276C(2) of the Act, 1961 as a clear case of deliberate evasion for eight long years has b....
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....books of account or other documents; or (iii) wilfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents; or (iv) causes any other circumstances to exist which will have the effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof.]. 17. On a plain reading of sub-section (1) and (2) of Section 276C, the distinction between two sub-sections becomes evidently clear. While sub-section (1) of Section 276C deals with wilful attempt to evade any tax penalty or interest chargeable or imposable or under reporting of income, sub-section (2) of Section 276C punishes wilful attempt to evade the payment of any tax, penalty or interest. Evidently, sub-sections (1) and (2) of Section 276C operate in different spheres. However, the linchpin of the offences covered by sub-section (1) as well as sub-section (2) of Section 276 is, "wilful attempt to evade". The Explanation to Section 276C by way of illustration provides the kinds of acts which may amount to wilful attempt to evade tax. Undoubtedly, the Explanation is inclusive and, therefore, there can be a wilful....
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....e of mens rea excludes from criminality acts done accidentally and unintentionally and even acts done intentionally under honest but mistaken belief in the existence of facts which, if true, would have made the acts lawful or excusable." (emphasis supplied) 22. In the case of Kapildeo Prasad Sah vs. State of Bihar 1999(7) SCC 569., in the context of civil contempt, the Supreme Court enunciated the word 'wilful' would exclude casual, accidental, bona fide or unintentional acts or genuine inability to comply with the terms of the order. 23. It would be contextually relevant to note what the term "to evade" or "evasion" implies. 24. In Black's Law Dictionary, 'tax evasion', is defined as a wilful attempt to defeat or circumvent the tax law in order to illegally reduce one's tax liability. In P. Ramnathan Law Lexicon, the word "evade" is defined as under:- "Evade. To avoid by some dexterity; by some device or stratagem; to elude: to escape (as) to evade a blow; to evade punishment; to evade the force of an argument." 25. In the context of the payment of duty as enunciated by the Supreme Court in the case of Tamil Nadu Housing Board vs. CCE 1995 (Supp.) (1) SCC 50., the word ....
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.... the Act is the wilful attempt to evade any tax, penalty or interest chargeable or imposable under the Act. What is made punishable under this Section is an "attempt to evade tax penalty or interest" and not the actual evasion of tax. 'Attempt' is nowhere defined in the Act or in the Indian Penal Code. In legal echelons 'attempt' is understood as a "movement towards the commission of the intended crime". It is doing "something in the direction of commission of offence". Viewed in that sense, in order to render the accused guilty of "attempt to evade tax" it must be shown that he has done some positive act with an intention to evade tax. 9. In the instant case, the only circumstance relied on by the respondent in support of the charge levelled against the petitioners is that, even though accused filed the returns, yet, it failed to pay the self-assessment tax along with the returns. This circumstance even if accepted as true, the same does not constitute the offence under Section 276C (2) of the Act. The act of filing the returns by itself cannot be construed as an attempt to evade tax, rather the submission of the returns would suggest that petitioner No. 1 had v....
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....empt to evade tax, they would not have filed the returns in time disclosing the income and the tax liable to be paid. They would not have remitted the tax payable along with interest without waiting for the authorities to make demand or notice for prosecution. Thus, except a delay of 4 ½ months in payment of tax, it is clear that there was no tax evasion or attempt to evade the payment of tax. To invoke the deeming provision, there should be a default in payment of tax in true sense. Nothing can be deemed contrary to the fact borne by record. If such deeming fiction is applied by the authority, is has to be termed as non application of mind over the material records. ...... 16. A 'culpable mental state' which can be presumed under Section 278E of the Act would come into play only in a prosecution for any offence under the Act, when the said offence requires a 'culpable mental state' on the part of the accused. Section 278E of the Act is really a rule of Evidence regarding existence of mens rea by drawing a presumption though rebuttable. That does not mean that, the presumption would stand applied even in a case wherein the basic requirements constitutin....
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....the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established. In most cases of criminal liability, the intention of the legislature is that the penalty should serve as a deterrent. The creation of an offence by statute proceeds on the assumption that society suffers injury by the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. Thus, there was nothing in Section 271(1)(a) which required that mens rea must be proved before penalty can be levied under that provision. 35. In the case of Union of India and others vs. Dharmendra Textile Processors and others (2008) 13 SCC 369, the question that arose before a Three-Judge Bench of the Supreme Court was, whether Section 11-AC of the Central Excise Act, 1944 inserted by the Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is a scope of levying penalty below the prescribed minimum. Emphasising the element of mens rea as an essential ingredient for fastening the cri....
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....on 276C professes to punish an act or omission on the part of the assessee designed to evade the liability to pay the tax and not a "mere failure" to pay the tax. There are provisions in the Income Tax Act, 1961 which take care of interest (of the revenue) of recovering the due tax amount alongwith interest and/or penalty where the tax has not been paid within time. It is the wilful evasion of tax due which is the crux of the offence under Section 276C(2) and not a mere failure to pay tax. 39. The matter can be looked at from a slightly different perspective. The sections which precede Section 276C deserve to be noted. Section 276B punishes failure to pay tax to the credit of the Central Government, which has been deducted at source under Chapter XVIIB or the tax payable under Section 115-O or the second proviso to Section 194B. Likewise, Section 276BB provides punishment for failure to pay to the credit of the Central Government, the tax collected by a person as required under the provisions of Section 206C. Under these two sections, it is the act of mere failure to credit the tax, which has already been collected or deducted that entails punishment. The text of Section 276, on t....