M/S HEALTH BIO-TECH LTD & ORS vs. DEPUTY COMMISSIONER OF INCOME TAX CHANDIGARH

Facts

The petitioners, M/s Health Bio Tech Ltd. and its directors, are challenging a criminal complaint filed under Section 276(C)(2) read with Section 278B of the Income Tax Act, 1961, and the subsequent summoning order. The dispute pertains to the Assessment Year 2011-12, where the company self-assessed its income and tax liability. The initial return filed on September 29, 2011, declared a gross total income of Rs. 6,72,05,864/- with an aggregate tax of Rs. 1,36,20,887/-. This was revised on October 22, 2012, showing an aggregate tax of Rs. 1,50,81,728/-. The tax amount was not paid in time. A notice was issued on October 21, 2014, for potential prosecution. The petitioners replied on November 7, 2014, explaining the delay. Sanction for prosecution was granted on November 18, 2014, leading to the complaint filed on December 4, 2014, and the summoning order on December 22, 2014.

Held

The High Court held that the delayed payment of income tax, where the tax amount was acknowledged and admitted in the Income Tax Returns, does not amount to evasion of tax. The court noted that for the delay, a penalty had already been levied and paid, along with interest. The court emphasized that for criminal proceedings under Section 276(C)(2) to be maintainable, there must be a criminal intent and a willful attempt to evade tax from the beginning. In this case, the income tax was self-assessed, and payment was eventually made, albeit belatedly. The court found no evidence on record to suggest that the petitioners ever tried to evade tax, especially when it was duly shown and acknowledged in their returns. The court relied on the principle that delayed payment alone, without other circumstances indicating willful evasion, is not sufficient for prosecution under Section 276(C)(2). The petition was allowed, and the criminal complaint and summoning order were quashed.

Key Issues

1. Whether the delayed payment of self-assessed tax, where the tax amount was acknowledged in the return, constitutes willful attempt to evade tax under Section 276(C)(2) of the Income Tax Act, 1961, especially when a penalty has already been levied for the delay. The assessee argued that there was no evasion of tax, only a delay in payment, which was acknowledged and for which a penalty was levied. They contended that prosecuting for the same cause of action after levying a penalty is an abuse of process. They relied on the Karnataka High Court judgment in *Confident Projects (India) (P.) Ltd. Vs Income Tax Department* and the Madras High Court judgment in *S.P. Velayutham Vs. The Assistant Commissioner of Income Tax*, noting that the Supreme Court dismissed a SLP against the former. The assessee further argued that prosecution under Section 276(C)(2) requires willful evasion, which is absent here. The revenue argued that the petitioners had the capacity to pay but chose not to, causing loss to the department, and were therefore rightly prosecuted under Section 276(C)(2) read with Section 278B after obtaining sanction. They relied on Supreme Court judgments in *P. Jayappan vs S.K Perumal* and *Sri T. Ashok Pai vs Commissioner of Income Tax Bangalore*, and a Delhi High Court judgment in *Commissioner of Income Tax Vs. Worldwide Township Projects Ltd.*.