Kubendra Davalaji Kalal Vs Income Tax Department (Karnataka High Court)
Karnataka HC: Criminal Proceedings u/s 276C & 277 Cannot Be Sustained Against Assessee Where CA Fraudulently Manipulated Tax Payment Challan
The Karnataka High Court (Dharwad Bench) has quashed criminal proceedings initiated against a 79-year-old assessee for alleged offences u/s 276C(2) & 277 of the Income-tax Act, holding that an assessee cannot be prosecuted for fraudulent acts of his Chartered Accountant & staff when he had already discharged his tax liability in full.
The petitioner had filed return of income for AY 2008-09 declaring income of ₹4,49,300 & liability of ₹87,990. He duly handed over this amount to his CA. However, the CA & his staff deposited only ₹7,990 & fraudulently altered the challan by adding an extra digit “8” to make it appear as if ₹87,990 was paid. Based on this manipulation, a complaint was lodged u/s 279 against the assessee (A1), CA (A2) & staff (A3 & A4).
The petitioner contended that he had entrusted the full tax to his CA, had no knowledge of the fraud, & even repaid the tax immediately upon notice. Statements recorded u/s 131 from the CA & staff confirmed that they had received the full tax from the petitioner & had committed the fraud. The Revenue argued that since the petitioner signed the return with the altered challan, the presumption of culpable mental state u/s 278E applied.
