Taxpayer Cannot Escape Prosecution By Filing Revised Returns Post-Search: Kerala High Court

The Kerala High Court on 20 February held that filing revised income tax returns after a search and seizure operation does not absolve a taxpayer from criminal prosecution for wilful tax evasion, and that such revised returns cannot be used as a shield against offences punishable under the Income Tax Act, 1961.

Justice G. Girish, dismissed a batch of petitions filed by a medical practitioner challenging prosecutions pending before the Additional Chief Judicial Magistrate (Economic Offences), Ernakulam. The Bench stated:

"The contention of the petitioner that she cannot be held liable for concealment of income or making false statements in the original return since the revised return filed under Section 153A of the I.T Act shall be deemed to be a return required to be furnished under Section 139 of the said Act, also cannot be a reason to absolve the petitioner from the criminal liability alleged in these cases."

The prosecutions arose from allegations that the petitioner, a paediatrician who also operated medical shops under a proprietary concern, had substantially suppressed income while filing returns for several assessment years. The alleged evasion came to light following a search conducted in December 2013 at the business premises and the petitioner's residence, which resulted in the seizure of documents revealing discrepancies between actual income and what had been disclosed in the returns.

After the search, the petitioner filed revised returns under Section 153A of the Income Tax Act, declaring higher income. However, assessment and penalty proceedings showed that even these revised returns contained incorrect particulars and continued suppression of income. The Income Tax Department obtained statutory sanction under Section 276C(1) of the Income Tax Act and launched criminal prosecution alleging wilful attempt to evade tax and making false statements.

The petitioner contended that once a revised return has been filed under Section 153A of the Income Tax Act, it shall be deemed to be a return required to be furnished under Section 139, and hence, there cannot be any allegation of concealment of income or making false statements.

Rejecting these submissions, the Court observed that the complaints specifically alleged intentional tax evasion and that the taxpayer would have succeeded in evading tax but for the search operation. The Court further noted that the income figures accepted after appellate proceedings were substantially higher than those disclosed even in the revised returns, demonstrating continued false disclosure.

The Court opined that:

“The petitioner had made false statements even in the revised returns filed under Section 153A of the I.T Act, for the assessment years 2008-2009 to 2013-2014, and made concealment of her actual income for the respective assessment years and thus evaded tax.”

Finding no abuse of process or exceptional circumstance warranting interference under Section 482 of the Code of Criminal Procedure, the High Court refused to quash the prosecutions. 

Accordingly, the Court dismissed all the petitions.

For Petitioner: Anil D. Nair, Telma Raju and Aaditya Nair 

For Respondent: Navaneeth N. Nath