2025 Supreme(SC) 1272

SUPREME COURT OF INDIA
J.K. MAHESHWARI, VIJAY BISHNOI, JJ.
Vijay Krishnaswami @ Krishnaswami Vijayakumar – Appellant
Versus
The Deputy Director of Income Tax (Investigation) – Respondent
Criminal Appeal No. 3777-3779 of 2025 [Arising Out of SLP (Crl.) Nos. 3618-3620 of 2024]
Decided On : 28-08-2025

IMPORTANT POINTS
(1) Wilful tax evasion – Mens rea of assessee is required to be proved – In absence, lodging such prosecution would result into futility.
(2) Wilful tax evasion – Circulars issued by Revenue are binding on Authorities, and can tone down rigour of statutory provision.

Headnote:

(A) Income Tax Act, 1961 – Section 276C(1) – Wilful tax evasion – Ingredients – Gist of offence under sub-section (1) of Section 276C lies in wilful attempt to evade very imposition of liability – What is made punishable under this sub-section is not ‘actual evasion’ but ‘wilful attempt’ to evade as described in proviso to Section 276C – Assessee from whom recovery of unaccounted money has been allegedly reported, may apply before Settlement Commission disclosing full and true income and manner in which such income was derived – On such application, Commission may grant immunity from penalty and prosecution of any offence under IT Act or under Indian Penal Code or under any other Central Act on such terms and conditions with respect to subject matter covered under Settlement – Mens rea of assessee is required to be proved – In absence, lodging such prosecution would result into futility. (Paras 12, 17 and 18)

(B) Income Tax Act, 1961 – Sections 276C(1) and 245H – Criminal Procedure Code, 1973 – Section 482 – Wilful tax evasion – Dismissal of quashing petition by High Court – Circulars issued by Revenue are binding on Authorities, and can tone down rigour of statutory provision – Recourse to lodge prosecution was made permissible subject to department’s circular dated 24.04.2008 which provided for confirmation by ITAT in case penalty imposed under Section 276C(1) is exceeding Rs. 50,000/- – Said circular was in vogue on the date of grant of sanction by PDIT to DDIT for lodging prosecution against appellant – Circulars were binding on authorities and required to be adhered to while lodging prosecution by Revenue – Nothing has been brought on record to show that any wilful attempt to evade payment of tax by assessee was made – Act of authority in continuing prosecution is in blatant disregard to their own binding circular dated 24.04.2008 and in defiance to guidelines of Department – In settlement proceedings, assessee has disclosed all facts material to computation of his additional income and fully satisfied provisions of Section 245H – As such, immunity from penalty under IT Act was granted in exercise of powers under Section 245H – In terms of Section 245-I, findings of Settlement Commission are conclusive with respect to matters stated therein – Once such an order was passed, it was incumbent upon authorities to inform High Court that continuation of prosecution would amount to abuse of process of law – Conduct of authorities lacks fairness and reasonableness – Prosecution lodged by Revenue against appellant shall stand quashed – Costs of Rs. 2,00,000/- imposed against Revenue. (Paras 31, 32, 33, 35, 36, 37 and 38)

Facts of the case:

Appellant invoked the jurisdiction of High Court of Judicature at Madras in Crl. OP. No. 28763 of 2018 for quashing of proceedings of EOC No. 242 of 2018 initiated by the Revenue, before Additional Chief Metropolitan Magistrate (E.O. II), Egmore, Chennai, for offence under Section 276C(1) [Wilful attempt to evade tax, etc.] of Income Tax Act, 1961 for assessment year 2017-2018. High Court vide the impugned judgment dismissed the quashing petition filed by appellant. Challenging the same, he has knocked the doors of this Court preferring instant appeals. The consequence of the dismissal of quashing petition has led to the appellant facing trial for an offence in which settlement was entered by the Revenue with the appellant, granting him immunity from levy of penalty.

Following questions fall for consideration:

(i) Whether continuation of prosecution initiated by Revenue under Section 276C(1) against appellant after passing an order by Settlement Commission, would amount to abuse of process of Court?

(ii) Whether in facts of the present case, High Court was justified to dismiss quashing petition filed by appellant, and if not, what relief can be granted?

Findings of Court:

In terms of Section 245-I, findings of Settlement Commission are conclusive with respect to matters stated therein. Once such an order was passed, it was incumbent upon authorities to inform High Court that continuation of prosecution would amount to an abuse of process of law, in particular when Settlement Commission did not record any finding of wilful evasion of tax by appellant.

Result : Appeals allowed.