The Delhi High Court has clarified that where the amount of tax sought to be evaded was more than Rs. 25 lakhs, then the appropriate authority for initiating prosecution proceedings would be the sanctioning authority, i.e., Principal Commissioner of Income Tax (Pr. CIT) and not the collegium of two CCIT/DGIT rank officers.
The Court referred to the CBDT Circular dated September 09, 2019, which deals with offences under section 276(C)(1) of the Income Tax Act, and clarified that when the amount sought to be evaded or taxed is below the sum of Rs. 25 lakhs, such cases shall not be processed for prosecution except with the previous administrative approval of collegium of two CCIT/DGIT rank officers. However, this stipulation/ restriction is not meant for cases where the amount sought to be evaded or taxed on under-reported is more than Rs. 25 lakhs.
The Division Bench comprising Justice V. Kameswar Rao and Justice Vinod Kumar observed that the Circular grants a discretion that the prosecution can be launched at any stage of the proceedings before the Income Tax Authority. Further, the prosecution in other cases, including cases covered under sections 132, 132A and 133A of the Income Tax Act, may be launched at any stage before the Income Tax Authority with the previous approval by the collegiums of two CCIT/DGIT rank officers.
Clarifying that no pre-conditions have been attached while taking action in cases where the evasion is more than Rs. 25 lakhs, the Bench pointed out that the intent behind the CBDT Circular No. 24/2019, as amended by Circular No. 5/2020, is that the CBDT was of the view not to launch prosecution in small cases. Therefore, the cases where the non-payment of tax is Rs. 25 lakhs or below, in those exceptional cases like those of habitual defaulters, based on particular facts and circumstances of each case, prosecution may be initiated only with the previous administrative approval of a collegium of two CCIT/DGIT rank officers.
However, the case at hand differs to the extent that the amount demanded is more than Rs. 348 crores, for which the approval of the sanctioning authority would be adequate as per the aforementioned circulars. Thus, the Bench concluded that the decision of the Sanctioning Authority approving would suffice the requirement, which in this case is PCIT.
Briefly, the petitioner was subjected to a search and seizure operation, which culminated in proceedings under Section 153C of the Income Tax Act, and the AO completed the assessments, raising an aggregate demand exceeding Rs. 348 Crores. When the appeal before the CIT(A) was pending consideration, the Principal Commissioner authorised the AO to initiate prosecution under Section 276C of the Income Tax Act.
Pursuant thereto, the AO filed complaints under Section 223 of the Bhartiya Nagarik Suraksha Sanhita, 2023 (BNSS) before the Additional Chief Judicial Magistrate (ACJM), seeking a trial and conviction of the petitioner under Section 276C. Aggrieved, the petitioner challenged the validity of CBDT Circular No.5/2020.
Circulars Referred:
CBDT Circular No.24 of 2019 dated September 09, 2019
CBDT Circular No. 5/2020 bearing file No. F. No.285/08/2014-IT (Inv. V)/712 dated January 23, 2020
Cases Distinguished:
Indian Express Newspapers (Bombay) (P) Limited v. Union of India [1986] 159 ITR 856(SC)
State of Punjab v. Khan Chand (1974) 1 SCC 549
Banwari Lal Agarwal v. UOI WPO/ 1418/2023
Miraj Digvijay Shah v. PCIT WPO/1345/2023
CIT v. Ravi Kumar [2007] 294 ITR 78 (Punjab & Haryana)
Vijay Krishnaswami v. Deputy Director of Income-tax (Investigation) 479 ITR 467 (SC)
UCO Bank v. Commissioner of Income-tax [1999] 237 ITR 889
BS Uday Shetty v. ACIT [W.P. No. 8589 of 2022]
Anjanadari Feul Station v. ITO [W.P. No. 6164/2024]
Appearances:
Senior Advocate Balbir Singh, along with Advocates Anshul Rai and Harshwardhan, for the Petitioner/ Taxpayer
Senior Advocate Ruchir Bhatia, along with Advocates Anant Mann, Premtosh K. Mishra, Sarthak Anand, Anurag Tiwari, Shrey Sharma, and Prarabdh Tiwari, for the Respondent/ Revenue
