Ambey Constructech Company & Ors. Vs DCIT (Supreme Court of India)
Summary: The Supreme Court issued notice in a special leave petition concerning a complaint under Section 276C(2) of the Income-tax Act, 1961, and stayed further proceedings pursuant to the complaint pending consideration of the matter. The complaint alleged a wilful attempt to evade payment of tax, penalty or interest in relation to ₹15 crore received from PACL for assessment year 2011–12. The petitioners submitted that the Income Tax Appellate Tribunal had recorded disclosure of the receipt, although the related expenses were not allowable, and argued that they could therefore not be treated as wilful tax evaders or defaulters. The High Court had earlier declined to quash the complaint, observing that the Tribunal had set aside the reassessment without a finding on the merits that ruled out the alleged evasion. The Supreme Court condoned the delay in refiling the special leave petition and issued notice returnable in six weeks. Its stay is interim: the Court has not decided whether the prosecution is valid or set aside the High Court’s ruling.
Read HC Judgment in this case: Technical Quashing of Reassessment Does Not End Tax Prosecution: P&H HC
Background and High Court ruling
For assessment year 2011–12, the Income Tax Department filed a complaint against the firm and its partners under Section 276C(2) of the Income-tax Act, 1961. The complaint alleged a wilful attempt to evade payment of tax, penalty or interest concerning ₹15 crore received from PACL. The amount was shown as business income, while the Department treated it as income from other sources and questioned the genuineness of the transactions.
After the Income Tax Appellate Tribunal set aside the reassessment proceedings on 21 September 2019, the accused sought discharge. The trial court rejected their application, and the revisional court upheld that decision. The accused then approached the High Court to quash the complaint and set aside the revisional order.
The petitioners argued that the Tribunal’s order had removed the basis for prosecution, relying on K.C. Builders v. Assistant Commissioner of Income Tax. The Department submitted that the reassessment had been set aside on technical grounds, without a finding that the alleged evasion had not occurred. It relied on P. Jayappan v. S.K. Perumal to argue that criminal proceedings could continue independently of assessment proceedings.
The High Court dismissed the petition. It distinguished K.C. Builders, where penalty proceedings had been set aside on merits with a finding that there was no concealment. The Tribunal had made no comparable finding in the petitioners’ favour in this case. The High Court considered the survey material sufficient for the criminal court to examine the allegations at trial and found no ground to interfere under Section 482 of the Code of Criminal Procedure.
Supreme Court proceedings and present effect
Before the Supreme Court, the petitioners drew attention to paragraph 18 of the Tribunal’s order. They submitted that it recorded disclosure of the ₹15 crore receipt, even though the related expenses were not allowable. They argued that, in those circumstances, they could not be treated as wilful tax evaders or defaulters for the purpose of Section 276C.
The Supreme Court condoned the delay in refiling the special leave petition, issued notice returnable in six weeks, and stayed further proceedings pursuant to the complaint in the meantime. The supplied order contains no final determination of the petitioners’ argument and does not set aside the High Court judgment.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Delay in refiling the Special Leave Petition is condoned.
2. The submission on behalf of the petitioners is that even if it is taken that the order passed by the Income Tax Appellate Tribunal (for short ‘Tribunal’) was on the point of jurisdiction but there is a clear finding returned in paragraph 18 of Tribunal’s order that there has been a disclosure of receipt of Rs.15 crores though the expenses were not allowable. In such circumstances, the petitioners cannot be considered a willful evader of tax or willful defaulter in payment of tax for the purposes of invocation of Section 276C of the Income Tax Act, 1961.
3. Issue notice, returnable in six weeks.
4. In the meantime, further proceedings pursuant to the impugned complaint shall remain stayed.
