TaxTMI 
TaxTMI 
Criminal Liability for Tax Evasion in India : Clause 478 of the Income Tax Bill, 2025 Vs. Section 276C of the Income-tax Act, 1961
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....f Section 276C, retaining the core elements of the existing law while introducing subtle modifications in language and structure. Both provisions reflect the legislative intent to penalize deliberate and fraudulent conduct that undermines the tax system. This commentary provides a comprehensive analysis of Clause 478, its objectives, structure, and practical implications. It further undertakes a detailed comparative analysis with Section 276C, highlighting continuities and changes, and examining the implications for taxpayers, enforcement agencies, and the broader legal framework. Objective and Purpose The primary objective of both Clause 478 and Section 276C is to deter and punish wilful attempts to evade tax liabilities, including tax, ....
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...." is broad, encompassing any deliberate act or omission intended to evade tax liabilities. The inclusion of "under-reports his income" aligns the provision with the concept of under-reporting as introduced in recent amendments to tax law, reflecting the evolving nature of tax evasion techniques. * Sub-clause (2): Wilful Attempt to Evade Payment This sub-clause addresses wilful attempts to evade the payment of any tax, penalty, or interest (as distinct from evasion of the liability itself). It provides: * Rigorous imprisonment for a term not less than three months and up to two years. * Discretionary fine as determined by the court. The distinction between evasion of liability and evasion of payment is significant. The former covers....
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....entical in structure and language. The core elements-offence, gradation of punishment, and inclusive definition of wilful attempt-are preserved. This continuity suggests a deliberate legislative choice to retain the established framework for prosecuting tax evasion. 2. Key Similarities * Scope of Offence: Both provisions criminalize wilful attempts "in any manner whatsoever" to evade tax, penalty, or interest, or to under-report income. The breadth of the language ensures that a wide range of conduct can be prosecuted. * Quantum-based Punishment: The threshold of Rs. 25 lakh (Rs. 2.5 million) for aggravated punishment is identical in both provisions, as is the range of imprisonment (six months to seven years for aggravated cases; three....
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....lness implies a deliberate and conscious act, not a mere error or mistake. The prosecution must prove the mental element (mens rea) beyond reasonable doubt. * "Any manner whatsoever": The broad phraseology is intended to prevent technical loopholes, but may also raise concerns about overbreadth. Courts have generally interpreted this language to require that the act must be connected to evasion, not merely a procedural lapse. * "Other Circumstance": The catch-all clause ensures flexibility, but may lead to interpretational disputes regarding what constitutes a circumstance "having the effect of enabling" evasion. * Overlap with Other Provisions: The provisions are "without prejudice" to other penalties, but there may be questions of d....
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....lfulness" provides a safeguard against prosecution for inadvertent errors. For Tax Professionals - Advising clients on compliance and documentation remains critical. - Professionals must be vigilant in identifying potential red flags that could be construed as wilful evasion. For Enforcement Agencies - The burden of proving wilfulness and deliberate attempt remains, requiring robust investigation and evidence collection. - The provision supports the use of forensic accounting and document analysis to establish false entries or omissions. For the Judiciary - The jurisprudence developed u/s 276C will continue to guide the interpretation of Clause 478. - The courts will continue to distinguish between deliberate evasion and bona f....