Can Police Lodge FIR For Tax Evasion Or Is Income Tax Department The Correct Authority To Initiate Proceedings? Gujarat High Court Asks

While hearing a man's plea seeking quashing of a cheating FIR lodged in connection with alleged tax evasion, the Gujarat High Court on Tuesday (September 24) orally asked the State whether the police can lodge an FIR for tax evasion or is the income department department the "correct authority" to initiate such proceedings.

The high court thereafter passed an interim order protecting the man from coercive action, who had claimed that the police cannot register an FIR for tax evasion when the Income Tax department had already initiated proceedings against him.

The court passed the order while hearing the petitioner Ronaksinh Gohil, who was previously the president of Yuva Jan Jagruti Party at the relevant point of time, seeking quashing of an FIR registered under various provisions of the IPC including Sections 409 (criminal breach of trust by a public servant, banker, merchant, or agent), 420 (cheating and dishonestly inducing the delivery of property), 465 (forgery), 467(forgery of valuable security, wills, or other important documents), 468 (forgery committed with the purpose of cheating), 471 (usage of a forged document or electronic record as genuine.), 120B (criminal conspiracy), 34 (act done by several persons in furtherance of a common intention) along with provisions of the Information Technology Act.

Taking note of the submissions by the parties, a single judge bench of Justice Nirzar S Desai in its order said, "...issue Notice to the respondents returnable on 27.11.2024. Learned Additional Public Prosecutor waives service of notice on behalf of respondents – State. In the meantime, though, the investigation may go on, there shall not be any coercive actions against the present petitioner".

At the outset the senior counsel appearing for the petitioner submitted that Gohil is facing the proceedings under the Income Tax Act for fraudulent evasion of tax and that he was participating. He submitted that no complaint has been filed by IT department so far.

He however argued that only and only Income Tax Department is empowered to initiate the proceedings and there cannot be any FIR for evasion of tax as it is a prerogative of Income Tax Department. Therefore, registration of FIR for alleged tax evasion is beyond the scope and authority of the police department and the FIR is absolutely misconceived and without any authority as the offence is registered under various sections of IPC, he added.

The court in its order noted that the counsel appearing for the State could not point out anything to indicate that at any point of time any provision of law has authorized such kind of FIR and that too when the Income Tax department had already initiated proceedings against the petitioner.

During the hearing on Tuesday, the high court after taking note of the allegations orally asked the counsel appearing for the state, "For what income tax department is there then? If their work is done by you then what will income tax department will do? As I recollect last time a submission was made that this FIR was registered based on a report of the IT department...Essentially your grievance is about tax evasion...When income tax department raids someone's premises what do they do? They also check documents...because they are empowered to under the provisions".

The counsel for the state said that on raiding the premises it was found that these many transactions have been done on the ground that there is a political party

The court further orally asked, "Who is the expert in this field the income tax department or the police department? Who can come to the conclusion that this amounts to tax evasion. It is done through forged documents etc? You can register an FIR only when income tax department prima facie comes to the conclusion that the documents are forged. Today it is without any basis".

The senior counsel for the petitioner meanwhile said that a complaint would have to be filed before a special court which would then decide whether an evasion or any modus operandi to defraud the state exchequer has taken place.

"This is a hotch-potch FIR," the senior counsel emphasized.

The court further orally asked the State's counsel that in the proceedings under the Income Tax Act, usually the Charted Accountants appear before the authority as well as the Tribunal. It then said, "Are you officers Charted Accountants, who can certify and discard the evidence?”