Supreme Court dismisses Revenue SLP over Income Tax Evasion by Bogus LTCG and STCL Claims [Read Judgement]
It was noted that delayed payment of tax cannot, without more, constitute a criminal “attempt to evade” tax.
![Supreme Court dismisses Revenue SLP over Income Tax Evasion by Bogus LTCG and STCL Claims [Read Judgement]](https://images.taxscan.in/h-upload/2025/08/05/2073227-income-tax-evasion-taxscan.webp "Supreme Court dismisses Revenue SLP over Income Tax Evasion by Bogus LTCG and STCL Claims [Read Judgement]")
In a recent decision, a two-judge Bench of the Supreme Court, comprising Justices Pankaj Mithal and S.V.N. Bhatti, dismissed an Income Tax Department Special Leave Petition (Criminal) challenging a December 2023 Karnataka High Court order that had quashed multiple criminal proceedings against businessman Anurag Bagaria, his family members and their companies under Section 276C of the...
In a recent decision, a two-judge Bench of the Supreme Court, comprising Justices Pankaj Mithal and S.V.N. Bhatti, dismissed an Income Tax Department Special Leave Petition (Criminal) challenging a December 2023 Karnataka High Court order that had quashed multiple criminal proceedings against businessman Anurag Bagaria, his family members and their companies under Section 276C of the Income Tax Act, 1961.
The petitions were filed to nullify proceedings initiated by the Deputy Director of Income-Tax (Inv.), Unit 2(1), on allegations of willful evasion of tax by claiming bogus long-term capital gains and short-term capital losses from trading in specified shares.
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The High Court, in its detailed 134-page judgment delivered on January 9, 2024, held that the criminal complaints suffered from fundamental legal infirmities, including lack of mens rea and failure to demonstrate any positive act of evasion, and that the magistrate’s orders taking cognizance did not disclose any application of judicial mind as required under Sections 191 and 204 of the CrPC. Consequently, all proceedings were quashed .
At the Supreme Court hearing, Solicitor General S. Dwarkanath and Senior Advocate Rupesh Kumar appeared for the Income-Tax Department, while Anurag Bagaria was represented by counsel whose names were not recorded in the Order sheet. The department sought condonation of a 271-day delay in filing the petitions and urged interference with the High Court’s conclusion that there was no “willful attempt” to evade tax, as mandated by Section 276C.
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However, the Bench found that the petitions were almost identical to earlier SLPs that this Court had already dismissed on December 13, 2021, in Crl. SLP No. 8316/2021 (Dharamendra Textiles), where similar issues regarding cognizance orders under Section 202 CrPC and the requirement of mens rea had been considered and rejected. “Since the similar special leave petitions have already been dismissed by this Court, we dismiss the present petition(s) as well, leaving the question of law open to be decided in some other appropriate case,” the Court held, while also condoning the delay .
By declining to intervene, the Supreme Court has upheld the High Court’s finding that mere filing of returns later revised under departmental advice and delayed payment of tax cannot, without more, constitute a criminal “attempt to evade” tax.
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While the order does not finally address the substantive merits of Section 276C liability, it reinforces established precedents requiring a clear showing of a positive act done with intent to evade tax before criminal prosecution may proceed.
The department may still pursue tax recovery and penalty under the Income-tax Act, but its criminal complaints relating to alleged bogus capital gains in respect of the financial years 2010–11 to 2012–13 now stand permanently quashed. The Supreme Court’s decision underscores the judiciary’s insistence on preserving the threshold protections against vexatious criminal prosecutions in the tax domain.
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