Vijay Krishnaswami @ Krishnaswami Vijayakumar Vs Deputy Director of Income Tax (Supreme Court of India)
SC Quashes Prosecution u/s 276C Where Settlement Commission Granted Immunity from Penalty – Revenue Acted in Defiance of Its Own Circulars
Supreme Court quashed prosecution initiated u/s 276C(1) of the Income-tax Act, 1961 against the appellant for alleged wilful attempt to evade tax in AY 2017-18.
A search was conducted on 24.04.2016 at the appellant’s residence, resulting in seizure of unaccounted cash of ₹4.93 crore. Prosecution sanction u/s 279(1) was accorded & complaint filed on 11.08.2018. Meanwhile, the appellant moved the Settlement Commission u/s 245C, disclosing additional income. Vide order dated 26.11.2019, the Settlement Commission granted immunity from penalty, though refrained from granting immunity from prosecution because a quash petition was pending before the Madras High Court. The High Court dismissed that petition, leading to the present appeals.
The appellant argued that once the Settlement Commission’s order u/s 245D(4) became conclusive u/s 245-I, no wilful attempt to evade tax could be alleged. He relied on CBDT’s 2008 Circular, Prosecution Manual 2009 & 2019 Circular, which clearly stipulated that prosecution u/s 276C(1) should be launched only after confirmation of concealment penalty by ITAT & only if tax sought to be evaded exceeded ₹25 lakhs. Since his undisclosed income led to tax below ₹25 lakhs & no concealment penalty was confirmed, continuation of prosecution was abuse of process.
