Delayed Payment of Income Tax may call for Penalty or Interest but could not be construed as an attempt to Evade Tax: Gujarat HC [Read Judgment]

The Gujarat High Court held that the delayed payment of Income Tax may call for penalty or interest but could not be construed as an attempt to evade tax.

The petitioner, Ganga Devi Somani is the independent and non-executive Director of the Company named Sumeet Industries Limited. It is submitted by the petitioners that they have no role to play in the day to day affairs of the Company and they have tendered their resignation, the said resignation is also reflected in Form DIR-12 maintained with the Ministry of Corporate Affairs.

The petitioner stated that since they have resigned from the Company, are not aware about the functioning of the Company but from the information gathered from the sources and averment made in the complaint, it is stated by the Petitioners that the Company was having the Tax liability of Rs. 13,90,27,650/- out of which prior to the filing of the complaint, Rs. 11,12,00,439/- was already paid. The accused- Company has responded to the show-cause Notice dated 25.1.2019, the Company had informed Respondent of having already paid Rs.7,28,45,394/- and further Rs. 3,83,55,045/- was due from the GST Department as refund on export for which the Respondent had already issued a notice to the GST Department for remitting the said refund directly in the account of the Income Tax Department. On the same line, with a similar request, the accused Company had written a letter to the GST Department making a similar request to the GST Department for transferring the said refund directly into the Account of the Income Tax Department. Thus, it is stated by the petitioners that the total amount of Rs. 11,12,00,439/- was secured with the respondent prior to filing of the impugned complaint.

Mr. Navin Pahwa, the counsel on behalf of petitioner, urged that the accused Company has after the complaint paid the remaining tax amount. Certain amount was directly deposited by the Company and the remaining amount was deposited by the GST Department which clearly shows that the delay, if any, was attributable to the GST Department and not to the accused Company.

Mr. Pahwa further submitted that, even if the Assessee deposits part of tax due subsequent to Notice with a prayer for extension of time for the balance amount to be paid then too it could not be said that there is any wilful attempt on the part of the assessee under Section 276C to evade payment of tax and, therefore, that fact was required to be considered by the department prior to the launching of prosecution.

On the other hand, Mr. Manish Bhatt, Senior Counsel for the respondent submitted that the documentary evidence as produced by the petitioners show that the petitioner is not in a category of independent Director. As per the object of Section 140A, due taxes are required to be paid prior to filing of returns. Whether an attempt to evade payment of taxes, would be attributable to the petitioners, would be a question of facts which would be decided only during trial and further what would be the effect of the subsequent payment, is for the parties to prove. Mr. Manish Bhatt submitted that there is no jurisdictional error in filing the complaint under Section 276C of the Income Tax Act.

The single judge bench of Justice Gita Gopi held that delayed payment under the provisions of the Act may call for penalty or interest but by no stretch of imagination in the circumstances as pleaded by the petitioners, could be construed as an attempt to evade the tax so as to entail prosecution of the petitioner for the alleged offence of Section 276C(2) of the Act.

The court said that the prosecution initiated against the petitioners is illegal and tantamount to abuse of process of law and required to be quashed.

“The complaint made by the Office of the Assistant Commissioner of Income Tax, Surat which has culminated into Criminal Case No. 23693 of 2019 pending before the Court of learned Chief Judicial Magistrate, Surat against the petitioners for the offence punishable under Section 276C(2) read with Section 278E of Income Tax Act, as well as the order issuing summons dated 13.6.2019 are quashed and set-aside,” the order read.

Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.