Proceedings For Willful Tax Evasion Shall Be Launched By Deputy Director Of IT Alone Once He Sanctions The Same: Telangana HC

In the present matter the petitioner was charged under Sections 276C(1) and 278B of the Income Tax Act, 1961. Section 276C(1) of the act provides for the punishment where if a person willfully attempts to evade any tax, penalty or interest chargeable or imposable under the Act. While Section 278B provides for an offence under the Act committed by a company.

After considering the rival contentions and the precedents relied upon by the parties, a bench of Justice G. Anupama Chakravarthy observed, “…it is evident that once sanction has been given to a particular authority, i.e., the Deputy Director of Income Tax, the prosecution has to be launched by him alone and not by the Assistant Director of Income Tax, who did not have the power to launch the prosecution proceedings. Though it is the contention of the learned Standing Counsel for the respondent that the Deputy Director of Income Tax is a senior officer and the Assistant Director of Income Tax is a junior officer and both were doing the same duties, the said contention cannot be taken into consideration as in the present case, the sanction is accorded to the Deputy Director of Income Tax for initiating prosecution and not to the Assistant Director of Income Tax”.

Senior Advocate S. Ravi appeared for the petitioners and Standing Counsel A. Ramakrishna Reddy appeared for the respondent.

In the pertinent case, a petition was filed under Section 482 of Code of Criminal Procedure by the petitioner-accused seeking to quash the proceedings pending before the Special Judge for Economic Offences, Nampally, Hyderabad. The respondent in the matter is the complainant with a complaint under Section 190 R/w. Section 200 of CrPC. for the offences punishable under Sections 276C(1) and 278B of the Income Tax Act, 1961.

In the matter it was contended that a survey operation under Section 133A of the Act was carried out on May 25, 2016 by the D.D.I.T.(Inv), Unit-II, Hyderabad in case of certain assesses, during which the petitioners were found to have sold the land at Budvel to different parties in the Assessment Years 2015- 2016 and 2016-2017. It is further contended that after the money was realized, the petitioner neither filed income tax returns or pay any tax for the said assessment years. Pursuant to which summons were issued to the petitioners to show cause as to why prosecution should not be initiated against them as the tax was willfully avoided by the petitioners for the said assessment years.

Subsequently, the Special Court of Economic Offences, Hyderabad registered a case for prosecution against the petitioners for the offences punishable under Sections 276C(1) and 278B of the Act, 1961.

Therefore, the petitioners argued that that the authorization under Section 279(1) of the Act was issued the Principal Director of Income Tax (Inv.), Hyderabad, to the Deputy Director of Income Tax (Inv.), Unit-II, Hyderabad which is not the competent authority to accord sanction under Section 279(1) of the Act.

Further, argued that even if it is assumed that the Deputy Director of Income Tax is the authority to accord sanction, then it has to be seen that the said sanction was to the Deputy Director of Income Tax. However, in the present case the prosecution was initiated by the Assistant Director of Income Tax, who is lower in rank to the Deputy Director of Income Tax. Therefore, it was alleged that the complainant did not have any authorization to initiate the prosecution and further the respondent is not having jurisdiction.

While on the other hand, the respondent had contended that as per Section 319(1)(a) of the Act, every person being company or firm, shall, on or before due date, furnish a return on its income during the previous year in the prescribed form and verified in the prescribed manner and setting forth any such other particulars as may be prescribed. Therefore, as the petitioner-company did not file the returns of the income tax for the assessing year 2015- 2016 within the stipulated time, the authorities have every right to initiate prosecution against the petitioner-company.

However, the Court was of the considered opinion that it was a fit case to quash the proceedings against the petitioner, and accordingly while allowing the Criminal Petition quashed the proceedings before the Special Judge for Economic Offences, Nampally, Hyderabad.

Cause Title: Tirumala Tirupati Constructions India P Ltd. and Another v. Assistant Director of Income Tax Investigation