Finding that the taxpayer had paid the tax, though at a belated stage, citing financial difficulties, the Bombay High Court held that no inference can be drawn that the taxpayer has committed wilful default in paying the tax along with the ITR. Accordingly, the Court quashed the complaint as well as the prosecution.
A Single Judge Bench of Justice S.M. Modak observed that there is a difference between ‘failure’ and ‘evasion’, as the evasion should not only be simple, but it should be wilful evasion. Thus, Section 276-B of the Income Tax Act will be applicable when the tax deducted at source is not credited to the Government, which is one of the contingencies.
The Single Judge clarified that the ‘Failure to credit’ itself is sufficient, and it need not be wilful. Because a tax is deducted from the income of another person (who is liable), such a person is bound to credit it. That omission itself is an offence without the addition of wilfulness/intention.
However, the legislatures have cautiously used the word ‘wilful evasion’ in Section 276-C of the Income Tax Act, which indicates there may be cases wherein there is a genuine case for not paying tax on or before the due date, even though a return is submitted. In a given case, such failure cannot be considered as a wilful evasion. Such cases will be outside the clutches of Section 276-C.
If a particular act/obligation states that there is a punishment for its non-fulfilment, then these provisions need to be interpreted strictly, and their adherence should be insisted upon when there is a complaint of non-adherence, added the Bench.
Briefly, the Income Tax Department filed a complaint before the JMFC alleging that the petitioner, while filing his ITR, did not deposit the tax dues which is due as per his calculation, and therefore, not only was there a default, but also there was a wilful default as contemplated under Section 276C(2) of the Income Tax Act.
The petitioner opposed the allegation of wilful default and claimed that he had paid the self-assessment tax. However, the JMFC issued a process for the offence punishable under Section 276C(2).
Cases Distinguished:
Kashiram vs. IT Officer – [1977] 107 ITR 825 (AP)
M/s. Madhumilan Syntex Ltd. vs. Union of India – [2007] 160 Taxman 71 (SC)
ITO vs. Sultan Enterprises – (2003) 127 Taxmann 514
Nayan Jayantilal Balu vs. Union of India – Criminal Writ Petition No. 2698 of 2021
Appearances:
Advocates Rohan Deshpande, Vihit Shah, and Alisha Pinto, for the Petitioner
Advocates S.E. Phad, Ashok Kotangle, Vishnu Chaudhari, Nikitesh Kotangale, Narendra Bhagat, and Neha Pende, for the Respondent
