Delay in Payment of Tax Can’t be Equated With Wilful Attempt to Evade Tax | HC Quashes Prosecution

Case Details: Unique Trading Co. v. ITO - [2024] 159 taxmann.com 216 (Bombay)

Judiciary and Counsel Details

• • N.J. Jamadar, J.
  • Sameer Dalal & Satish Mody for the Applicant.
  • S.R. Aagarkar & Siddharth Chandrashekhar for the Respondent.

Facts of the Case

The case in question was a criminal complaint filed by the Income Tax Department against Unique Trading Company and its partners for an offence punishable under Section 276C(2) of the Income Tax Act, 1961. The section deals with the wilful attempt to evade the payment of tax, penalty or interest under the Act. The Income Tax Department alleged that the company had wilfully attempted to evade the tax payment and sought to prosecute the company and its partners for the same.

The company, however, argued that the delay in tax payment was not a wilful attempt to evade the tax payment. It was also argued that it had paid the tax due immediately after the service of the show cause notice. After hearing both sides, the Bombay High Court agreed with the company and quashed the criminal complaint filed by the Income Tax Department.

High Court Held

The High Court observed that the delay in tax payment was not a wilful attempt to evade the tax payment. It also observed that the company had paid the tax due immediately after the service of the show cause notice and that the tax due was paid in full.

The court also noted that the company had paid the interest on the due amount and that the tax due was paid under 5 days of the service of the show cause notice. The court also observed that the company had declared the income and assessed the self-assessment tax. It was neither a case of underreporting income nor showing diminished tax liability.

Accordingly, prosecution for alleged offence punishable under section 276C(2) was to be quashed.