TaxTMI 
TaxTMI 
2025 (12) TMI 680
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....cular No. 5/2020 bearing file No. F. No.285/08/2014-IT (Inv. V)/712 dated 23.01.2020 issued by Respondent No. 2, Central Board of Direct Taxes, Department of Revenue, Ministry of Finance is contrary to Article 14 of the Constitution of India and as such unconstitutional and non-est; c. Issue an appropriate Writ, Order or direction under Article 226 of the Constitution of India quashing the Impugned Circular No. 5/2020 bearing file No. F.No. 285/08/2014-IT (Inv. V)/712 dated 23.01.2020 issued by Respondent No. 2, Central Board of Direct Taxes, Department of Revenue, Ministry of Finance; d. Pass any other order issuing any other appropriate writs, orders or directions as this Hon'ble Court deems fair and equitable in the present facts and circumstances." 2. This petition assails orders dated 10.02.2025, 11.02.2025, and 19.02.2025 (impugned sanction orders hereafter) passed by the PCIT, Central-1, Delhi (PCIT) under Section 279(1) of the Income Tax Act, 1961 (the Act) authorising the DCIT, Central Circle-8, i.e., the Assessing Officer (AO) for initiating the prosecution and instituting a criminal complaint against the petitioner under Section 276C and 278E of the ....
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....relation to the offences committed, as per the first FIR. According to the petitioner, the ACJM vide order dated 22.09.2025, directed the petitioner to appear and make submissions before cognisance of the complaint filed by the respondents was taken. According to the petitioner, she is also in receipt of summons dated 25.09.2025 issued by the ACJM in the said matter. 6. Mr. Balbir Singh, learned Senior Counsel appearing for the petitioner would submit that the impugned orders are contrary to the 2019 Circular and the impugned circular issued by the CBDT. The details of the circulars according to the Mr Balbir Singh, are as follows: Amount sought to be evaded or tax on under -reported income Circular No. 24 of 2019 dated 09.09.2019 Circular No. 05 of 2020 dated 23.01.2020 Category I 25 Lacs or below Prosecution be to initiated by Sanctioning Authority (Principal Commissioner or Commissioner or Commissioner Appeals) with the previous administrative approval of the Collegium of two CCIT/DGIT rank officers. Prosecution to be launched only after confirmation of the order imposing penalty by the Income Tax Appellate Tribunal ("ITAT") Prosecution be to initiated by....
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....ingh has relied upon two judgments of the Calcutta High Court in the matters of Shri Miraj Digvijay Shah v. PCIT & Anr WPO/1345/2023 dated 12.07.2023 and Banwari Lal Agarwal v. UOI & Anr WPO/1418/2023, dated 24.07.2023. 10. On the issue of pendency of appeals before the CIT(A), it is the case of Mr. Singh that the petitioner ought not to be prosecuted during the pendency of appeals under Section 246A of the Act and this factum has also been acknowledged in the impugned orders. He argues that a perusal of the assessment orders makes it clear that in addition to the petitioner's income, the said orders rely on two grounds, viz. addition under Section 69A of the Act on the basis of which, entries made on loose papers including diaries seized in the searched premises and/or whatsapp chats, and addition under Section 69 of the Act on the basis of properties alleged to be benami held in the name of third party individuals and not the petitioner herself. Mr. Singh argues that the additions made by the AO to the income of the petition under Section 69A of the Act were on the basis of entries made on loose papers and diaries and as such the law in such circumstances is clear. He has refe....
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...."...prosecution in other cases, including cases covered under Section 132/132A/133A may be launched at any stage of the proceedings before an Income-tax Authority, with the previous approval of the Collegium of two CCIT/DGIT rank officers as mentioned in paragraph 3 of the Circular". He argues that the circulars lack adequate determining principle or criteria for objectively assessing whether a particular case deserves to be prosecuted notwithstanding the pendency of assessment or reassessment proceedings. In this regard, he has relied upon a judgment of the Supreme Court in the case of Indian Express Newspapers (Bombay) (P) Limited v. Union of India, (1985) 1 SCC 641 to argue that the impugned circulars being delegated legislation are liable to be quashed on the ground of being manifestly arbitrary. 14. Mr. Ruchir Bhatia, learned SSC appearing on behalf of the Revenue would argue that in February 2020, the Department conducted the search and seizure operations against the Bhatia, Tuteja and Dhand groups in Chhattisgarh in connection with unaccounted liquor sales and related financial irregularities. On 02.03.2020, a search was carried out at the residential premises of the peti....
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....nd 31.07.2017 vide F.No. 404172139-ITCC) containing guidelines issued by the Board regarding procedure to be followed for stay of demand. He further argues that it is clear that sanctioning authority for offences under Chapter XXII is the PCIT and the mandate of approval of a collegium of two CCIT/DGIT rank officers is only required in cases where the threshold limit is Rs. 25 Lacs. Since the case of the petitioner involves an amount exceeding the threshold limit, the sanctioning authority for such offences under Chapter XXII is the PCIT. The relevant portion of the circular is reproduced below:- Section 276C(1): Wilful attempt to evaded tax, penalty or interest or under-reporting of income Nature of default Approving Authority (a) Where tax which would have been evaded exceeds Rs. 25 Lakh Sanctioning Authority (b) In other case Sanctioning Authority with the previous administrative approval Of the Collegium Of two CCIT/DGIT rank officers 16. Mr. Bhatia states that it is clear from the above that the case of the petitioner does not require approval from a collegium of two CCIT/DGIT rank officers, but rather of the PCIT, who had already given his consent in t....
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.... No. 5/20 dated 23.01.2020 are unconstitutional, non-est and liable to be quashed. 22. The submission of Mr. Balbir Singh is primarily that on a reading of the circulars dated 09.09.2019 and 23.01.2020, it is clear that where the amount of tax sought to be evaded, is more than Rs. 25 lacs in such a case, prosecution could be initiated by the sanctioning authority only after imposition and confirmation of penalty by the ITAT. 23. At the outset, we may state that the circular dated 09.09.2019, more specifically in paragraphs no. 2 & 3 deals with offences under Section 276(C)(1) of the Act with which we are concerned herein. The circular dated 09.09.2019 refers to the fact when the amount sought to be evaded or taxed income is below the sum of Rs. 25 lacs, such cases shall not be processed for prosecution except with the previous administrative approval of collegium of two CCIT/DGIT rank officers. There is no dispute that the amount sought to be evaded or taxed on under reported income is more than Rs. 25 lacs. It may also be stated that the circular also contemplates that further prosecution under the said sanction notices shall be launched only after confirmation of the order ....
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....rs as mentioned in Para 3. Further, prosecution under this section shall be launched only after the confirmation of the order imposing penalty by the Income Tax Appellate Tribunal. iv. Offences u/s 276CC: Failure to furnish returns of income. Cases where the amount of tax, which would have been evaded if the failure had not been discovered, is Rs. 25 Lakhs or below, shall not be processed for prosecution except with the previous administrative approval of the Collegium of two CCIT/DGIT rank officers as mentioned in Para 3. 3. For the purposes of this Circular, the constitution of the Collegium of two CCIT/DGIT rank officers would mean the following- As per section 279(1) of the Act, the sanctioning authority for offences under Chapter XXII is the Principal Commissioner or Commissioner or Commissioner (Appeals) or the appropriate authority. For proper examination of facts and circumstances of a case, and to ensure that only deserving cases below the threshold limit as prescribed in Annexure get selected for filing of prosecution complaint, such sanctioning authority shall seek the prior administrative approval of a collegium of two CCIT/D....
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.... of the same would reveal that by this circular discretion has been given that prosecution can be launched at any stage of the proceedings before the Income Tax Authority. If the said amendment is read in context, it is in cases where the evaded amount is Rs. 25 lacs or below, the prosecution shall be proceeded with after the administrative approval of the collegium of two CCIT/DGIT rank officers. 26. Further, it is also stated that the prosecution under Section 276 (C)(1) of the Act shall be launched ordinarily after confirmation of imposing penalty by the ITAT. It also stipulates that prosecution in other cases including cases covered under Sections 132, 132A and 133A of the Act may be launched at any stage of proceedings before the Income Tax Authority with the previous approval by the collegiums of two CCIT/DGIT rank officers. This amendment primarily relates to the offences where amount sought to be evaded is less than Rs. 25 lacs. The said circular does not make any amendment to paragraph No. 4 and the annexure thereof. The annexure thereto is very clear that where tax which would have been evaded is more than Rs. 25 lacs in such cases the approving authority is the sancti....
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....der investigation is above Rs. 25 lacs or that the competent authority has not granted its approval. 29. Mr. Singh has placed reliance on the judgment in the case of Banwari Lal Agarwal (supra) and Miraj Digvijay Shah (supra) to state that the Calcutta High Court has in a similar case while granting interim relief to the petitioners therein held that the order which is in violation to the principles of natural justice, denying the petitioners therein the opportunity to be heard ought to be stayed. These judgments do not aid the case of the petitioner as the same are distinguishable on facts. 30. So far as the contention of Mr. Singh regarding the additions made by the AO with reference to Sections 69 and 69A of the Act in the income of the petitioner is concerned, the said additions find basis in loose papers. The same in our considered view is a question of fact and needs to be decided by the competent authority. Therefore, the reliance placed by Mr. Singh on the judgment in the case of Ravi Kumar (supra) would not aid the petitioner at this stage. 31. Even the reliance on the judgment in the case of Vijay Krishnaswani (supra) will not help the petitioner as the same is d....