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Gujarat HC: Penalty or Interest might be added on Delayed Payment of Income Tax but cannot be construed as an attempt to Evade Tax.
The petitioner is an independent and non-executive Director of the corporate named Sumeet Industries Limited. it's submitted by the petitioners that they need no role to play within the day to day affairs of the corporate and that they have tendered their resignation, the said resignation is additionally reflected in Form DIR-12 maintained with the Ministry of Corporate Affairs.
The petitioner stated that since they need resigned from the corporate, aren't aware of the functioning of the corporate but from the knowledge gathered from the sources and averment made within the complaint, it's stated by the Petitioners that the corporate was having the liabilities of Rs. 13,90,27,650/- out of which before the filing of the complaint, Rs. 11,12,00,439/- was already paid. The accused- Company has skilled the show-cause Notice dated 25.1.2019, the corporate had informed Respondent of getting already paid Rs.7,28,45,394/- and added Rs. 3,83,55,045/- was due from the GST Department as refund on export that the Respondent had already issued a notice to the GST Department for forwarding the said refund directly within the account of the tax Department. On an equivalent line, with an identical request, the accused Company had written a letter to the GST Department making an identical request to the GST Department for transferring the said refund directly into the Account of the tax Department. Thus, it's stated by the petitioners that the entire amount of Rs. 11,12,00,439/- was secured with the respondent before filing of the impugned complaint.
The counsel appearing on behalf of petitioner, urged that the accused Company has after the complaint paid the remaining tax amount. specific amount was directly deposited by the corporate and therefore the remaining amount was deposited by the GST Department which clearly shows that the delay, if any, was due to the GST Department and to not the accused Company. Mr. Pahwa further submitted that, albeit the Assessee deposits a part of "> a part of tax due after Notice with a prayer for extension of your time for the balance amount to be paid then too it couldn't be said that there's any wilful attempt on the part of the assessee under Section 276C to evade payment of tax and, therefore, that fact was required to be considered by the department before the launching of prosecution.
Senior Counsel for the respondent submitted that the documentary evidence as produced by the petitioners show that the petitioner isn't during a category of independent Director. As per the thing of Section 140A, due taxes are required to be paid before filing of returns. Whether an effort to evade payment of taxes, would be due to the petitioners, would be an issue of facts which might be decided only during trial and further what would be the effect of the next payment, is for the parties to prove. Mr. Manish Bhatt submitted that there's no jurisdictional error in filing the complaint under Section 276C of the tax Act.
The court held that delayed payment under the provisions of the Act may involve penalty or interest but by no stretch of imagination within the circumstances as pleaded by the petitioners, might be construed as an effort to evade the tax so on entail prosecution of the petitioner for the alleged offence of Section 276C(2) of the Act. The court said that the prosecution initiated against the petitioners is against the law and tantamount to abuse of process of law and required to be quashed. “The complaint made by the Office of the Assistant Commissioner of tax , Surat which has culminated into Criminal Case No. 23693 of 2019 pending before the Court of learned Chief Judicial Magistrate, Surat against the petitioners for the offence punishable under Section 276C(2) read with Section 278E of tax Act, also because the order issuing summons dated 13.6.2019 are quashed and set-aside”.
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