IMPORTANT POINT
The main legal point established in the judgment is the requirement of a positive act with a design to evade the liability to pay tax under Section 276C(2) of the Income Tax Act, 1961.

JUDGMENT :

1. This is an application under Section 482 of the Code of Criminal Procedure, 1973 (“the Code”) to quash the complaint lodged by the Income Tax Authorities for an offence punishable under Section 276C(2) read with Section 278B of the Income Tax Act, 1961 (“the IT Act, 1961”).

2. Shorn of unnecessary details, the background facts can be stated as under:

(a) Applicant No.1 is a partnership firm registered under the provisions of Indian Partnership Act, 1932. Applicant No.1 is engaged in the business of distribution of welding electrodes, machines and accessories. Applicant Nos.2 to 4 are the partners of applicant No.1 firm.

(b) Applicant No.1 firm had filed its original return of income for Assessment Year (AY) 2010-2011 declaring income of Rs.21,79,850/- computing the tax payable alongwith interest at Rs.7,15,573/-. Out of which Rs.1,06,512/- was claimed as Tax Deducted at Source (TDS) and Rs.1,00,000/- was paid as advance tax. An amount of Rs.5,09,061/- was shown as tax payable on the reported income.

(c) The applicants claim, applicant No.1 firm is a family run concern. Mr. P. G. Purohit, the husband of applicant No.2 and father of applicant Nos.3 and 4, was managing the entire affairs of the firm. Mr. P. G. Purohit passed away in the month of May, 2014. Applicant Nos.2 to 4 were unaware of the affairs of the firm especially the non-payment of the tax of Rs.5,09,061/- declared in the return for AY-2010-2011.

3. Principal Commissioner of Income Tax, respondent No.2, issued a notice calling upon the applicant to show cause as to why prosecution proceedings under Section 276C(2) of the IT Act, 1961 be not initiated as the applicant had allegedly wilfully attempted to evade payment of due tax. After assessing the position, the applicants claim, immediately on 12th March, 2018 the applicants paid the entire due tax including interest thereon aggregating to Rs.5,32,410/-. A reply was also filed to the show cause notice on 13th March, 2018 pointing out the payment of the aforesaid amount of Rs.5,32,410/- and also ascribing the reason for non-payment thitherto, namely, the late P.G. Purohit then being at the helm of the affairs of the firm and the applicants unaware thereof.

4. The applicants assert, without considering the factum of payment, the reason ascribed in the reply and absence of wilful attempt to evade the payment of tax, respondent No.2 granted sanction to prosecute the applicants for an offence punishable under Section 276C(2) of the IT Act, 1961. The sanction is vitiated by non-application of mind.

5. Armed with the said sanction, respondent No.1 filed a complaint for an offence punishable under Section 276C(2) read with Section 278B of the IT Act, 1961. The learned Additional Chief Metropolitan Magistrate, 30th Court Ballard Pier, issued process against the applicants for an offence punishable under Section 276C(2) read with Section 278B of the IT Act, 1961.

6. The applicants aver prosecution of the applicants for the alleged offence punishable under Section 276(2) of the IT Act, 1961 is an abuse of the process of the Court. Even if the case of the Income Tax Department, as set out in the complaint, is taken at its face value, no offence under Section 276C(2) of the IT Act, 1961 can be said to have been made out. In substance, it is the contention of the applicants that there was no wilful attempt to evade the tax on the part of the applicants. Under four days of the service of the show cause, the applicants deposited the due tax and interest thereon. Subsequently, the applicants have also deposited a sum of Rs.4,47,220/- towards interest for AY-2010-2011 under Section 220 of the IT Act, 1961, on 23rd January, 2020. Since applicant No.1 firm had faithfully disclosed the income and the tax which was payable thereon and the due tax alongwith interest came to be paid immediately after service of the show cause notice, the non-payment cannot be construed as a wilful attempt to evade the payment of tax, to fall within th