IMPORTANT POINT
The rule of evidence under Section 278 E of the Act regarding rebuttable presumption as to existence of culpable mental state on the part of accused would come into play. As such there is no scope for applying the rebuttable presumption under Section 278E of the Act in the instant case.

ORDER :

The complaints alleging offence under Section 276 C (2) of the Income Tax Act are sought to be quashed on the ground that a mere failure to pay the income tax based on the self assessment would not constitute the offence under that section. Admittedly, at the time of submission of return based on self assessment tax, the tax was not remitted. Subsequently, it was remitted with interest by availing installment facility. Regarding the penalty imposed, an appeal was preferred, which is pending before the appellate authority.

2. The petitioner seeks to quash the complaints and its further proceedings on the reason that there is only a failure to make payment of the tax in time as per the self assessment return and it will not fall under any of the clauses (i) to (iv) in the Explanation attached to Section 276 C of the Income Tax Act and hence, the criminal liability under that section cannot be fastened. But it was countered by the Income Tax Department stating that it is incumbent on the tax payer to remit the tax based on the self assessment and the non-payment would come under the expression “evade the payment of tax” as incorporated in sub-section (2) of Section 276 C of the Act and cannot seek protection under the Explanation, which is not applicable to that sub-section. It was brought to the notice of this Court that in sub-section (1), the words used are “evade any tax”, but the words “evade the payment of any tax” have been incorporated in sub-section (2). It is submitted that the word “payment” is conspicuously absent in sub-section (1) and the Explanation attached thereto and that what is dealt under the Explanation is with regard to “evade any tax” and not with respect to “evade the payment of tax” as incorporated in sub section (2) and hence the Explanation attached must be understood only relating to the cases, which would fall under sub-section (1) and not sub section (2) and took support from G.Viswanathan v. Income Tax Officer, A-Ward, Parameswar Nagar (1987 Vol. 167 ITR 103). The relevant portion of the said judgment is extracted below for reference :

“Sub-sections (1) and (2) of Section 276C deal with two different situations. Sub-section (1) deals with 'evasion of tax, penalty or interest chargeable or imposable under the Act'. Therefore, evidently, what is contemplated is evasion before charging or imposing tax, penalty or interest. That may include wilful suppression in the returns before assessment and completion. But sub-section (2) deals with evading 'the payment of tax, penalty or interest under the Act'. The words 'chargeable' or 'imposable' are not there. What sub-section (2) says is 'without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable.....'. Therefore, evidently, sub-section (2) takes in cases of tax evasion after 'charging' or 'imposition'. Evasion after completion of assessment also comes within the operation of the sub-section. We are concerned in these cases with such alleged evasion.

What the Explanation to Section 276C deals with is “wilful attempt to evade any tax, penalty or interest chargeable or imposable under this Act or payment thereof” contemplated by sub-section (1) and not “payment of any tax, penalty or interest under this Act' as contemplated in subsection (2). Therefore, the Explanation concerns only subsection (1) and not sub-section (2). Further the Explanation is only inclusive and not exhaustive. Item (iv) of the Explanation also makes this position clear. Sub-section (2) is so clear that at any rate it takes in the cases of evasion of tax, penalty or interest after assessments were made. Avoidance of tax is avoidance of tax liability under some manner as distinguished from evasion of tax whether before or after charging or imposition. It is not illegal as distinguished from penal evasion. Section 276C(2) deals with evasion after quantification. It becomes applicable only after income is assessed and the assessee a