Deliberately Concealing The Income, Assessee Can Be Prosecuted : Madras High Court

The Single Bench of Justice G. Chandrasekharan observed that the concealment and suppression of income by the assessee came to light only after a survey operation was conducted and that the assessee had filed his return only after a statutory notice was issued to him under Section 148 of the Income Tax Act, 1961. Therefore, the Court held that the assessee had willfully and deliberately concealed his true income by not filing his income tax return within the stipulated time.

During the survey operations conducted by the revenue authorities, it was found that the assessee/ petitioner Dharampal R. Pandia had not been filing his income tax return, on or before the due date, with respect to several assessment years and that he was not paying the income tax. It was found that the assessee had concealed his income.

A statutory notice was issued to the assessee calling upon him to furnish his income tax return. Thereafter, the assessee furnished his income tax return and admitted additional income in relation to several assessment years. Subsequently, an assessment order was passed by the income tax authorities and a penalty was imposed on the assessee under the Income Tax Act. The revenue authorities filed complaints against the assessee for prosecution of offences under Sections 276 C(1), 276 CC and 277 of the Income Tax Act, 1961 with respect to six assessment years.

Against this, the assessee filed Criminal Petitions before the Madras High Court to quash the proceedings against the assessee, which were pending before the Court of the Additional Chief Metropolitan Magistrate, Economic Offences, Chennai.

Section 276 C of the Income Tax Act provides for punishment if an assessee wilfully attempts to evade any tax, penalty or interest chargeable under the Income Tax Act, or if he wilfully attempts to under report his income. Section 276 CC provides for punishment where an assessee fails to furnish the returns of income.

Under Section 277 of the Income Tax Act, a person shall be punishable for making a false statement in any verification under the Act, or for delivering a false account or statement, which he does not believe to be true or which he knows or believes to be false.

The assessee Dharampal R. Pandia submitted before the High Court that no specific allegation was made in the complaint regarding suppression of income by the assessee. The assessee averred that the income tax return filed by him was accepted by the income tax authorities and an assessment order was subsequently passed. The assessee submitted that 8 years had elapsed since the passing of the assessment order. Thus, the assessee contended that no cause of action for initiating criminal proceedings against the assessee subsisted. The assessee added that there was no allegation made against him that he had made a false statement and that the assessee had paid the amount that was due. Thus, the assessee averred that he could not be prosecuted for the said offences.

The revenue department contended that the assessee had deliberately omitted to file his income tax return and that he had concealed his true and correct income. The revenue department averred that the assessee had denied the income tax authorities the opportunity of assessing his true income. The revenue department added that it was only because of the survey operation that the willful omission of the assessee to file his income tax return came to light. The revenue department contended that there is no limitation for economic offences and since, the said offences committed by the assessee were economic offences, the provisions regarding the limitation period were not applicable.

The Court observed that the concealment of income by the assessee came to light only after a survey operation was conducted on the assessee. The Court noted that only after a statutory notice under Section 148 of the Income Tax Act was issued that the assessee filed his income tax return and subsequently, his tax liability was determined.

Thus, the Court held that the income tax return was filed by the assessee, after a delay of several months, only in consequence of the survey operation and in response to the notice issued under Section 148. The Court noted that the complaint filed by the revenue authorities specifically alleged that the assessee had concealed his income. The Court observed that the revenue authorities had averred in the complaint that in the absence of the survey operations, the assessee would not have filed his income tax return and paid the taxes.

The Court observed that the assessee, by concealing his income, had deprived the exchequer payment of tax for several months. The Court held that there were enough and specific allegations made against the assessee with regard to concealment of income. The Court ruled that there were specific allegations against the assessee that he had deliberately and willfully not filed his income tax return, which was subsequently filed by him after a delay of several months. The Court held that it was the duty of the assessee to file his income tax return for every assessment year within the statutory due date and that the assessee had patently not filed his return within the specified statutory date.

The Court noted that the assessee had relied upon the order passed by the Karnataka High Court in the case of C.P. Yogeshwar versus Income Tax Officer (2017), wherein it was held that if the income tax returns filed by the assessee, subsequent to the issuance of the statutory notice, are accepted by the revenue authorities and on the basis of which an assessment is also carried out, then the rigour of not filing the income tax return in due time would not be attracted.

The Court held that the amounts involved in the said order passed in C.P. Yogeshwar versus Income Tax Officer (2017) were insignificant, however, the amount of income concealed by the assessee was substantial. The Court added that the concealment and suppression of income by the assessee came to light only after the survey and that in the absence of the survey, the said concealment would not have come to light. The Court observed that the assessee filed his income tax return and was subsequently assessed only after a statutory notice was issued to him under Section 148. Thus, the Court held that the assessee had clearly concealed his correct income, willfully and deliberately, by not filing his income tax return within the stipulated time.

The Court thus ruled that a case for prosecuting the assessee for the offences mentioned in the complaint were clearly made out, which must go to trial. Hence, the Court dismissed the petition.

Case Title: Dharampal R. Pandia versus Assistant Commissioner of Income Tax

Dated: 16.06.2022 (Madras High Court)

Citation: 2022 LiveLaw (Mad) 269

Counsel For the Petitioner: Mr. AR. L. Sundaresan, Senior counsel for M/s. T. Pramodkumar Chopda

Counsel for the Respondent: Mr. N. Baskaran, Special Public Prosecutor

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