Waterways Shipyard Pvt. Ltd. Vs Income Tax Department (Bombay High Court)
The Bombay High Court considered a petition filed by the Petitioners seeking quashing of Private Complaint A.O.A. No. 331/2019 pending before the Court of Chief Judicial Magistrate, Panaji, Goa. The complaint was filed under Section 200 of the Cr.P.C. for an offence punishable under Section 276C(2) read with Section 278B of the Income Tax Act.
For Assessment Year 2013-14, the Petitioners filed income tax returns declaring a self-assessment tax liability of more than Rs.28 lakhs. The Department subsequently determined the Petitioners’ tax liability at Rs.35,08,430/-. The Petitioners sought time to make payment, citing the stoppage of mining activities in Goa and the absence of business activities. A show cause notice was issued in 2016, following which the Petitioners sought permission to pay the amount in three installments between July and September 2016 and also requested waiver of interest and penalty.
In 2017, the Department obtained authorisation to launch prosecution concerning the self-assessment tax of Rs.28,94,550/- together with interest. The Petitioners again requested time for payment. Subsequently, between 23.06.2017 and 19.03.2018, the Petitioners paid the self-assessment tax along with additional amounts through installments, totaling Rs.35,08,430/-. By letter dated 28.03.2018, they again requested waiver of interest and penalty under Section 220(2) of the Income Tax Act.
Despite these payments, the Department filed the criminal complaint on or about 25.06.2019. The complaint relied on the authorisation obtained in 2017 and did not refer to the payments made during 2017-18, although those payments had occurred approximately a year before the complaint.
The Petitioners argued that there was no wilful default or attempt to evade tax. They relied on the fact that the self-assessment return itself disclosed the tax liability and that payment had subsequently been made before the complaint was filed. They relied upon Prem Dass Vs. Income Tax Officer, (1999) 5 SCC 241 and Unique Trading Company and Others Vs. Income Tax Officer, 2024 SCC OnLine Bom 417.
The Respondent contended that the case concerned delayed payment and that the Petitioners had wilfully defaulted despite being granted time and installments. It was submitted that subsequent payments would not affect the issue of delayed payment of interest and penalty.
The High Court considered the scope of Section 276C and the requirement of a wilful act. Referring to Prem Dass, the Court noted the principle stated therein that a wilful attempt to evade tax, penalty or interest under Section 276C is a positive act required to be proved against the accused. The Court also relied upon Unique Trading Company, which, following Vyalikaval House Building Co-operative Society Ltd & Others Vs. Deputy Commissioner of Income Tax, (2020) 428 ITR 89 (Karn.), held that filing returns and admitting tax liability does not constitute an offence merely because the admitted liability is not paid within time, including where it is subsequently paid by installments. The Court noted that a wilful act including mens rea to evade tax was required.
Applying these principles, the High Court found that the Petitioners’ filing of returns declaring their tax liability and their requests for installments did not establish wilful default. The Court also noted that the self-assessment tax had been paid during 2017-18, whereas the complaint was filed in 2019 without disclosing those payments.
The Court further held that the 2017 authorisation no longer subsisted after payment of the self-assessment tax. At the time of filing the complaint, what remained was interest on delayed payment and penalty. According to the Court, the Department therefore needed a fresh authorisation for prosecution concerning those amounts. The Court also noted that there had been no response to the Petitioners’ request for waiver of interest and penalty.
The High Court concluded that continuation of the prosecution would amount to an abuse of the process of law. Exercising its extraordinary powers under Section 482 of the Cr.P.C., it quashed and set aside the complaint. The Rule was made absolute.
Cases Discussed
- Unique Trading Company and Others Vs. Income Tax Officer (Bombay High Court), 2024 SCC OnLine Bom 417
- Vyalikaval House Building Co-operative Society Ltd & Others Vs. Deputy Commissioner of Income Tax (Karnataka High Court), (2020) 428 ITR 89 (Karn.)
- Prem Dass Vs. Income Tax Officer (Supreme Court), (1999) 5 SCC 241
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
Heard Mr. Rao for the Petitioners and Ms. Linhares for the Respondent.
2. Rule. Rule made returnable forthwith. The matter is taken up for final disposal at the admission stage with consent of parties.
3. The Petitioners are seeking reliefs as per prayer clauses (A) and (B) as under:
A. This Hon’ble Court be pleased to issue a Writ of Certiorari or a Writ in the nature of Certiorari or anu other Writ, Order or Direction calling for the Records and Proceedings from the Court of Chief Judicial Magistrate at Panaji, Goa in A.O.A. 331/2019 and upon perusing the validity and propriety thereof, be pleased to quash and set aside the Private Complaint being A.O.A. No. 331/2019;
B. During the pendency and disposal of the present Petition, this Hon’ble Court be pleased to stay the proceedings before the Court of Chief Judicial Magistrate, Panaji, Goa in Private Complaint being A.O.A. No. 331/2019.
4. The Petitioners filed their income tax returns for the Assessment Year 2013-14 by showing the liability to pay a tax of more than Rs.28 lakhs as self assessment tax. The said returns were considered by the Department and over and above the self assessment tax liability, the Petitioners tax liability was considered as Rs.35,08,430/-. The Petitioners sought time to pay the amount on the grounds that mining activities have been stopped in the State of Goa and there are no business activities.
5. Subsequently, a show cause notice was issued to the Petitioners by the Department in the year 2016 and thereafter, time was granted to the Petitioners to pay the tax along with the one assessed by the Department in three installments i.e. from July to September 2016. It is admitted that the Petitioners failed to deposit such tax assessed, however, thereafter, the correspondence exchanged between the Petitioners and the Respondent shows that a request was made for extension of time to pay the amount and also for waiver of interest.
6. Somewhere in the year 2017, the Department obtained authorisation for the purpose of launching prosecution with regard to the self assessment tax of Rs.28,94,550/- together with interest. The Petitioners again sought time to pay the said amount and requested for waiver of interest. Finally, the Petitioners paid the amount of Rs.35,08,430/- which includes the self assessment tax and the tax assessed by the Department in 2018. While depositing such an amount, the Petitioners again requested for waiver of interest, however, there was no response from the Department.
7. Suddenly, in the year 2019, a criminal complaint under Section 200 of Cr.P.C. for the offence punishable under Section 276C(2) read with Section 278B of the Income Tax Act was launched against the Petitioners. The complaint filed in the year 2019 only refers to the self assessment and the default in paying the tax which is assessed by the Department together with interest and penalty.
8. Mr. Rao appearing for the Petitioners would submit that in the present peculiar circumstances, there is no question of any wilful default or attempt on the part of the Petitioners to evade the tax liability. He submits that by filing self assessment returns, showing the liability of more than Rs.28 lakhs, the Petitioners showed the willingness to deposit such amount. However, due to the circumstances, a request was made to the Department to grant installments along with the waiver of the interest and penalty.
9. Mr. Rao would submit that the fact remains that before filing of the complaint, the self assessment tax is already paid together with the tax which is assessed by the Department. Thus, according to him, the authorisation itself is invalid, which failed to consider the aspect of payments made in the year 2017-2018. In this respect, he placed reliance on the decision of the Apex Court in the case of Prem Dass Vs. Income Tax Officer, (1999) 5 SCC 241 and the decision of this Court in the case of Unique Trading Company and Others Vs. Income Tax Officer, 2024 SCC OnLine Bom 417.
10. Per contra, Ms. Linhares appearing for the Respondent would submit that this is a case with regard to delayed payment and though time was granted to make payment even in installments, the Petitioners wilfully defaulted such payment of the self assessment, the interest as well as the penalty. She submits that subsequent payments will not be considered for the purpose of assessing the penalty and the interest. She submits that the authorisation clearly shows that it is for the purpose of delayed payment as well as non-payment of interest and penalty for the Assessment Year 2013-2014.
11. The rival contentions fall for determination.
12. In Prem Dass (supra), the Apex Court while considering the scope of Section 276 and more particularly on “wilful act”, observed as under:
“8. Wilful attempt to evade any tax, penalty or interest chargeable or imposable under the Act under Section 276-C is a positive act on the part of the accused which is required to be proved to bring home the charge against the accused. Similarly a statement made by a person in any verification under the Act can be an offence under Section 277 if the person making the same either knew or believe the same to be false or does not believe to be true. Necessary mens rea, therefore, is required to be established by the prosecution to attract the provisions of Section 277. We see nothing in Section 132 (4-A) which would establish the ingredients of aforesaid two criminal offence contemplated under Sections 276-C and 277 of the Indian Income Tax Act. It may be noticed at this point of time that the Tribunal while interfering with the penalty imposed under Section 271 (1-C) of the Act came to a positive finding that there is no act of concealment on the part of the assessee and he had returned the income on estimate basis. The Tribunal, further found that it is a case purely on difference of opinion as to the estimates and not a case of concealment of income or even furnishing of inaccurate particulars of income.”
13. In the case of Unique Trading Company (supra), the learned Single Judge of this Court in similar circumstances, discussed the provisions of Section 276C including the concept and definition of “wilful act” as well as the word “evade”. While placing reliance upon the decision of the Karnataka High Court in the case of Vyalikaval House Building Co-operative Society Ltd & Others Vs. Deputy Commissioner of Income Tax, (2020) 428 ITR 89 (Karn.), it clearly observed that when the returns including self assessment of the tax are filed, the liability to pay the tax is admitted. However, it does not constitute an offence when such admitted liability is not paid within time, but even paid subsequently. The question of failure to pay the tax by the Assessee, subsequently, and by installments, would not fall under the mischief of Section 276C of the Income Tax Act and it would not be considered as an attempt to evade the tax. It is also observed that there must be a wilful act including mens rea to evade the tax. Thus, the observations of the learned Single Judge in the case of Unique Trading Company (supra) are clearly applicable to the matter in hand.
14. The correspondence exchanged between the parties, would clearly go to show that the Petitioners filed the self assessment returns showing the tax liability for more than Rs.28 lakhs for the Assessment Year 2013-2014. The correspondence further shows that the Petitioners sought time to pay the assessed tax and that too, by installments. However, it is also a matter of record that such tax was not paid and accordingly, a show cause notice was issued in the year 2016 by the Department. The Petitioners filed a reply to such show cause notice by giving reasons and asking for some installments. The letter dated 29.06.2016 would clearly go to show that the Petitioners requested for three intallments to pay the tax. The reasons for delayed payment are also disclosed therein. Accordingly, a request was also made for the purpose of waiver of interest and penalty.
15. However, the Respondent sought authorisation for launching of prosecution from the concerned Authority vide letter dated 22.03.2017. After receipt of such authorisation which refers to the self assessment tax of more than Rs.28 lakhs, the Petitioners again addressed a letter dated 25.03.2017 to the Respondent. Subsequently, on 28.03.2018, the Petitioners in installments deposited the self assessed tax along with additional amounts by way of challans, which shows that the first installment was paid on 23.06.2017 and the last installment was paid on 19.03.2018, a total of Rs.35,08,430/-. Similarly, in the same letter, the Petitioners again requested the Respondent to kindly waive the interest and penalty under Section 220(2) of the Income Tax Act for the assessment year 2013-2014.
16. Mr. Rao submits that there is no response to such letter from the Respondent, however, the complaint was filed somewhere on 25.06.2019 on the basis of authorisation obtained in the year 2017. A perusal of the complaint filed under Section 200 of Cr.P.C. would clearly go to show that the averments in the said complaint are based only on the authorisation obtained in the year 2017. There is absolutely no reference with regard to the payments made by the Petitioners in the year 2017-2018 as reflected in the letter dated 28.03.2018. Thus, the payment of the tax liability was deposited by the Petitioners about a year ago, prior to filing of the complaint. There is no whisper of such deposits made by the Petitioners in the entire complaint. The averments in the complaint would go to show that the Petitioners failed to pay the self assessment tax together with interest and penalty. Thus, when the self assessment tax was deposited much prior to the filing of the complaint and intimated to the department vide letter dated 28.03.2018, it was incumbent upon the complainant to obtain a fresh authorisation with regard to the delayed interest and penalty only. Besides, there is no response given to the request made by the Petitioners in the letter dated 28.03.2018 for waiver of interest and penalty. Thus, the authorisation obtained in the year 2017, no longer subsists when the Petitioners paid the self assessment tax during the year 20172018. What remained at the time of filing of the complaint was only interest on delayed payment as well as penalty. Thus, it was necessary for the Department to obtain a fresh authorisation to launch the prosecution only for the purpose of interest and penalty.
17. The question is whether there is any wilful default in making payment of the assessed tax. Applying the ratio in the case of Unique Trading Company (supra), it is crystal clear that the Petitioners by filing returns, declaring the tax liability and also requesting the Department to grant installments, would certainly show that such attempts cannot be considered as wilful default in making the payment, which is sine qua non for launching prosecution. Even otherwise, the amount was deposited somewhere during the year 2017-2018 whereas the complaint is filed in the year 2019 and that too, without disclosing such payments.
18. For all the above reasons, the prosecution which has been launched against the Petitioners has to be termed as an abuse of the process of law as no purpose would be served in continuing with such a complaint. The complaint which is launched by the Department, therefore, requires to be quashed and set aside by exercising extraordinary powers under Section 482 of Cr.P.C. The complaint is, therefore, quashed and set aside.
19. Rule is made absolute in the above terms.
