Madras High Court Refuses To Quash Tax Evasion Case, Says Wilfulness Is Matter For Trial

The Madras High Court has refused to quash criminal proceedings against a taxpayer accused of failing to pay admitted income tax dues, noting that the issues raised had already been urged before the trial court and could not be re-agitated at a belated stage.

A single-judge bench of Justice M. Niraml Kumar was dealing with a petition filed by Abdul Khader Mohammed Farook seeking to quash proceedings pending before the Additional Chief Metropolitan Magistrate (Economic Offences), Egmore, for alleged wilful attempt to evade payment of tax under Section 276C(2) of the Income Tax Act.

Farook had filed his return for the assessment year 2017–18 declaring tax and interest liability of Rs.5,95,616 but did not pay the amount within the stipulated time.

Farook contended that mere non-payment of admitted tax, without concealment or falsification, does not amount to a wilful attempt to evade tax, especially when the income and liability were voluntarily disclosed. He also claimed that the omission was not deliberate and pointed to financial difficulties and other circumstances.

The Deputy Commissioner of Income Tax submitted that the assessment order dated 22.12.2019 determined a total demand of Rs.1,91,43,523 and that Farook had not paid any portion of the liability. It was further submitted that Farook had full knowledge of the liability, both at the stage of self-assessment and after the assessment order, but failed to discharge it.

The Court noted that Farook had not preferred any appeal against the assessment order for more than six years and later filed an appeal with a delay of 2,211 days, which was neither condoned nor admitted.

"The petitioner not preferred any appeal against the Assessment Order for more than six years and finally in the year 2019, with a delay of 2,211 days, filed appeal with condone delay petition. Neither the delay is condoned nor the appeal is admitted. This appears to be an afterthought raised only after the prosecution in this case launched and progressed. The petitioner had been repeatedly absent on more than four occasions and only began participating in the trial after initiation of proclamation proceedings."

The court also recorded that Farook had repeatedly remained absent during trial proceedings, leading to issuance of non-bailable warrants on multiple occasions, and that he began participating only after coercive steps were initiated.

The court observed that in the present case, once tax liability and continued non-payment were established, the statutory presumption regarding culpable mental state would apply, placing the burden on Farook to rebut it.

"In the present case, the foundational facts of tax liability and continued non-payment stand clearly established. Once non-payment and liability are shown, mens rea is presumed, and the burden shifts to the accused to disprove it beyond reasonable doubt. Failing to do so before the trial Court, thereafter filing this petition to quash the proceedings under Section 482 Cr.P.C./528 BNSS is not permissible."

It further observed:

"In view of the above, the prosecution is validly instituted supported by statutory presumption under Section 278E and the case progressed to the stage of final adjudication."

Holding that the grounds raised had already been urged before the trial court and could not be re-agitated at a belated stage, the Court dismissed the petition.

The court clarified that its observations were limited to the disposal of the quash petition and that the trial court shall decide the case independently on its own merits.

For Petitioner: Advocate N. Lavanya,

For Respondent: Sheela, Senior Standing Counsel (Income Tax) and H. Siddarth, Junior Standing Counsel (Income Tax)