PCIT can Sanction Income Tax Prosecution where Alleged Tax Evasion Exceeds ₹25 Lakh: Delhi HC [Read Order]

The Delhi High Court reaffirmed that the Principal Commissioner of Income Tax (PCIT) is competent to sanction the department to launch prosecution under the Income Tax Act, 1961, in cases where the alleged tax evasion exceeds ₹25 lakh.

The ruling came in a writ petition filed by Saumya Chaurasia challenging sanction orders dated February 10, 11 and 19, 2025 issued under Section 279(1) of the Income Tax Act, authorising initiation of prosecution under Sections 276C and 278E of the Act for multiple assessment years ranging from AY 2011-12 to AY 2022-23.

Also Read: GST Fraud Writ Delayed Due to Unremoved Defects for 3 Months: Delhi HC Grants One-Time Libertyto File Statutory Appeal Beyond Limitation

The petitioner had also assailed Circular No. 5/2020 dated January 23, 2020 issued by the Central Board of Direct Taxes (CBDT), contending that it was arbitrary and violative of Article 14 of the Constitution.

As per the petitioner, a search and seizure operation was conducted at their residence in February 2020, following which proceedings under Section 153C were initiated. Assessment orders were later passed in March 2024 for several assessment years. Parallelly, the petitioner faced proceedings by other investigative agencies, including registration of FIRs by the Economic Offences Wing and arrest by the Enforcement Directorate in an unrelated matter.

Appeals against the income tax assessment orders remained pending before the Commissioner of Income Tax (Appeals).

Subsequently, the PCIT, Central-1, Delhi, granted sanction for prosecution, leading to the filing of criminal complaints before the Additional Chief Judicial Magistrate, Tis Hazari Courts, Delhi.

Senior Advocate Balbir Singh appeared for the petitioner argued that the sanction was without jurisdiction and that Circular No. 5/2020 vests the sanctioning authority with unbridled and absolute discretion for determining when prosecution may be launched in cases where the tax amount sought to be evaded is more than Rs.25 Lacs, although no guidelines have been prescribed for exercise of such power.

Ruchir Bhatia, Senior Standing Counsel for the Revenue submitted that the sanction for prosecution was validly granted by the PCIT under Section 279(1) of the Income Tax Act, which expressly empowers the Principal Commissioner to authorise prosecution.

It was argued that CBDT Circular No. 5/2020 is only an administrative guideline issued to ensure uniformity in prosecution matters and does not override or dilute the statutory provision. The SSC contended that the pendency of appeals before the CIT(A) does not bar initiation of prosecution, particularly where the alleged tax evasion exceeds ₹25 lakh, and that prosecution proceedings are independent of assessment and appellate remedies.

The Division Bench of Justice V. Kameswar Rao and Justice Vinod Kumar observed that Section 279(1) of the Income Tax Act clearly vests the power to grant sanction for prosecution in the Principal Commissioner or Commissioner of Income Tax, and therefore, the challenge to the PCIT’s competence was misconceived.

Also Read: Customs Orders Must Bear Name and Designation of Officer Passing Them: Delhi HC Rejects StaffShortage Justification

The Bench noted that the impugned CBDT Circular was in the nature of a guideline issued for regulating prosecution and does not override or supplant the statutory provision.

The Court further held that the mere pendency of appeals before the Commissioner of Income Tax (Appeals) does not prohibit the initiation of prosecution, particularly when the statute itself does not provide for such a bar.

It was also observed that the sanction orders reflected due consideration of the material on record and could not be said to suffer from non-application of mind as alleged by the petitioner counsel. The Bench also found no merit in the challenge under Article 14.

In view of the above, the Court declined to interfere with the impugned sanction orders or the validity of the circular, and dismissed the writ petition.

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