MUKESH H SANGHVI vs. INCOME TAX DEPARTMENT THROUGH CHANDRAPAL SINGH AND ORS.

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WP/972/2023HC BombayHCBM01011999202307 May 2026Author: HON'BLE SHRI JUSTICE N. R. BORKAR6 pages
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What did the High Court hold?

The High Court held that the petition is allowed and the impugned order is set aside. The complaint filed by the respondent No.1 is dismissed. The Court reasoned that, as held in Unique Trading Company & Ors. vs. Income Tax Officer & Ors., Section 276C(2) does not indicate that mere failure to pay tax falls within its ambit; there must be a willful attempt to evade tax. The Court noted that it is a well-settled rule of construction for penal statutes to lean towards an interpretation that exempts the subject from penalty if two reasonable constructions are possible. In this case, the entire amount of tax was paid before the filing of the complaint. The petitioner had also pointed out circumstances in his explanation to the show cause notice that led to the default. Therefore, the mere failure to pay the tax was not sufficient to constitute the offense, and the order impugned could not be sustained.

What were the facts?

The petitioner, Mukesh H. Sanghvi, an assessee involved in trading ferrous and non-ferrous alloys, filed his income tax return for Assessment Year 2017-18 on 07.11.2017, declaring a total income of Rs. 18,97,340/- and a self-assessment tax liability of Rs. 4,02,260/- under Section 140A of the Income Tax Act. A show cause notice was issued on 24.10.2018 for failure to pay this tax. The petitioner replied on 15.11.2018, citing financial difficulties. This explanation was deemed unsatisfactory, and the Principal Commissioner of Income Tax granted sanction under Section 279(1) on 06.12.2018 to file a complaint. The complaint was filed on 05.02.2019. The petitioner paid Rs. 2,50,000/- on 14.11.2018 and the remaining Rs. 1,52,260/- on 25.01.2019, before the complaint was filed.

What were the issues?

1. Whether the failure to pay self-assessment tax, when the entire amount was paid before the filing of the complaint, constitutes a willful attempt to evade tax punishable under Section 276C(2) read with Section 278E of the Income Tax Act? Assessee's Contention: The petitioner argued that the entire self-assessment tax was paid before the filing of the complaint, and mere failure to pay tax does not amount to a willful attempt to evade tax. They relied on the judgment in Unique Trading Company & Ors. vs. Income Tax Officer & Ors. Revenue's Contention: The respondents argued that the petitioner was required to make payment of tax within 30 days from the date of intimation under Section 143(1) and that the delayed payment constituted a willful attempt to evade tax. They also submitted that the petitioner failed to prove circumstances preventing payment of self-assessment tax under Section 140A.

Which sections of the Income-tax Act were involved?

Section 276C(2),Section 278E,Section 140A,Section 279(1),Section 143(1)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
908-WP-972-2023doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION WRIT PETITION NO. 972 OF 2023 Mukesh H. Sanghvi …Petitioner V/s. Income Tax Department through Chandrapal Singh and Ors ...Respondents Mr. Prakash Pandit a/w Adv. Prachi Pandit i/b Adv. Ratnesh M. Dube, Advocate for the Petitioner. Mr. Siddharth Chandrashekhar, Advocate for Respondent Nos.1 & 2. Mr. P. H. Gaikwad, APP for the Respondent No.3/State. CORAM : N.R. BORKAR, J. DATE : 07.05.2026. P.C. : 1. This petition takes exception to the order dated 05.02.2019 passed by the Additional Chief Metropolitan Magistrate, Mumbai, below Exh. 1 in C.C. No. 99/SW/2014. 2. By the order impugned, the learned Magistrate has issued process against the present petitioner for the offences punishable under section 276C (2) r/w. 278E of the Income Tax Act, in the complaint case filed by the respondent No.1. Pramod S.Lakare 1/6 908-WP-972-2023doc 3. The petitioner is involved in the business of trading in ferrous and non-ferrous alloys. The petitioner is an assessee under the Act, bearing PAN Card No. AAGPS1251H. 4. On 07.11.2017, the petitioner filed his income tax return for the Assessment Year 2017-18, thereby declaring his total income as Rs.18,97,340/-. Accordingly, the income tax liability of the petitioner amounting to Rs.4,02,260/- was payable by way of self-assessment tax under section 140A of the Act. Consequently, a show cause notice dated 24.10.2018 was issued to the petitioner by the respondent no.2, calling upon him to explain as to why prosecution should not be initiated under section 276C (2) of the Act on the ground of failure to pay self- assessment tax of Rs. 4,02,260/-. 5. The Petitioner, vide his reply dated 15.11.2018, stated that he was facing financial difficulties, which hindered him from paying the taxes within the stipulated time. The explanation of the petitioner was found to be unsatisfactory. Resultantly, vide order dated 06.12.2018, respondent no.2- Principal Commissioner of Income Tax granted sanction under section 279(1) of the Act to file a complaint against the petitioner for an offence punishable under Pramod S.Lakare 2/6 908-WP-972-2023doc section 276C (2) r/w. section 278E of the Act. Pursuant to the said sanction, the respondent No.1 filed the complaint for the said offences. 6. I have heard the learned counsel for the petitioner and learned counsel for the respondent Nos. 1 & 2. 7. The learned counsel for the petitioner submits that after issuance of the show cause notice, the petitioner on 14.11.2018 had paid an amount of Rs.2,50,000/- and remaining amount of Rs.1,52,260/- on 25.01.2019. It is submitted that the entire amount of self-assessment tax was paid before the filing of the complaint on 05.02.2019. It is submitted that thus there was no willful attempt to evade the payment of tax. It is submitted that mere failure to pay the tax does not amount to a willful attempt to evade tax. In support of the said submission, the learned counsel for the petitioner has relied upon the judgment of this Court in Unique Trading Company & Ors. vs. Income Tax Officer & Ors.1. 8. On the other hand, the learned counsel for the respondent nos. 1 & 2 submits that in terms of Section 148, the petitioner was required to make payment of tax within 30 days 1 (2024) 467 ITR 682 (BOM) Pramod S.Lakare 3/6 908-WP-972-2023doc from 23.04.2018, being the date of intimation under Section 143(1) of the Act. It is submitted that the petitioner had made the payment of Rs.2,50,000/- on 14.11.2018 & Rs.1.52,260/- on 25.01.2019. It is submitted that the petitioner has thus willfully attempted to evade the payment of tax. It is submitted that the petitioner has failed to prove the circumstances which prevented him from paying Self-Assessment Tax under Section 140A of the Act. It is thus submitted that no interference is called for in the

impugned order.

9.

This Court in Unique Trading Company & Ors. vs. Income Tax Officer & Ors has held thus :

“41. To sum up, on a plain reading the provisions 4/6

908-WP-972-2023doc

42.

On the aforesaid touchstone, reverting to the facts of the case, there is material to indicate that within five days of the show cause notice the applicants had deposited the tax due as declared in the return for AY-2010-2011. Since the applicants had declared the income and assessed the self-assessment tax, it cannot be urged that there was an attempt to evade the tax. It was neither a case of under reporting of income nor that of showing diminished tax liability. The action on the part of the applicants to pay the tax due under five days of the notice militates against the stand of the Income Tax Department that there was an intent to evade the tax throughout. It is not disputed on the date of the lodging of the complaint, no tax was due, and even the applicants deposited the amount of Rs.4,47,420/- towards interest on the due amount.”

10.

In the present matter also it is not disputed that the entire amount of tax was paid before the filing of the complaint. It is well settled that mere failure to pay the tax is not sufficient to constitute the offence punishable under Section 276C read with Section 278E and there must be a wilful attempt on the part of the assessee to evade payment of any tax, penalty or interest. In the Pramod S.Lakare 5/6

908-WP-972-2023doc explanation to show cause notice, the petitioner has pointed out the circumstances which forced him to commit such default. Considering the overall facts and circumstances of the case, the order impugned cannot be allowed to stand. O R D E R i) The petition is allowed. ii) The order impugned is set aside. iii) Complaint filed by the respondent No.1 is dismissed. [N.R.BORKAR, J.] Pramod S.Lakare 6/6

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