M/s. S.R.S. Projects V. The Dy. Commissioner of Income Tax

CRLP/11775/2023

AI Insights

The case involves M/s. S.R.S. Projects and its partners, who were accused of willfully evading tax by not paying the required tax amount when filing their income tax returns for the assessment year 2014-15. The Deputy Commissioner of Income Tax filed a complaint leading to the charges under Sections 276C(2) and 278B of the Income Tax Act, 1961. The petitioners argued that the failure to pay the tax was due to a mistake by their auditor, and once the mistake was discovered, they promptly paid the due amount with interest. The court examined whether the actions of the petitioners constituted an attempt to evade tax and whether the proceedings against them were justified.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 760753 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 02-04-2024
• Assessment Year: misc
• Other Referred Cases: M/s. Bejan Singh Ege Hospital Pvt. Ltd vs. Income Tax Department, Prem Dass vs. Income Tax Officer
• Laws Referred To: Code of Criminal Procedure, 1973, Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SUNDARI PISUPATI
• Assessee Lawyers: G KUMAR
• Keywords: Culpable Mental State; Income Tax; Quash Proceedings; Willful evasion of tax
• Section: 276C(2); 482; 278B

Judgement Text

"[ 3385 ] IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD TUESDAY, THE SECOND DAY OF APRIL TWO THOUSAND AND TWENTY FOUR PRESENT THE HONOURABLE SMT JUSTICE K. SUJANA CRIMINAL PETITIQN NO: 11775OF 2023 Between: 1. M/s. S.R.S. Projects, having its Regd Office at 15, Survey No.283, Peart's Valley, Nizampet, Kukatpally, Hyderabad-s0O 090 Represented by its Managing Partner V. Ravi Kumar, i.e., Petitioner no.2 2. V. Ravi Kumar, S/o. Kamaiah Naidu Vadlamudi, Aged about 4'l years, H.No.34-78-2, Vivekandapuram Colony, Near Neredemet X Roads, Sainikpuri, Secunderabad -500094 3. V. Suresh Kumar, Sh. Kamai Naklu Vadamudi, Aged about 39 years, Plot No.15, Green Avenue, Rasi Developers, Beside K.A. Sagham, Nizampet, Hyderabad-S0O 072. 4. Sreevidya Vadlamudi, D/o. Venkateswara Swamy Soorapaneni, Aged about 32, Plot no. 15, Green Arenue, Rasil Devetopers, Beside K.A Sagham, Nizampet, Hyderabad-s00 072. 5. Swapna Vadlamudii, D/o. Brabhakar Naidu Boyapati, Aged about 38 years, 34-78-2, Vivekandapuram Colony, Near Neredemet X Roads, Sainikpuri, Secunderabad -500094 ...PETITIONER/ACCUSED Nos. 1 to 5 AND The Dy. Commissioner of lncome Tax, Circle-11(1), Raum Na 1012, 10th Floor, Signature Towers, Opp- Botanical Garden, Kondapur, Hyderabad ...RESPONDENTS/COMPLATNANT Petition under Section 482 of Cr.P.C praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition, the High Court may be pleased to quash C.C.NO.268/2017 on the fib of SPECIAL JUDGE FOR ECONOMIC OFFENCES AT HYDERABAD and quash the Charges under Sec. 276C(2) rtw 2788 OF THE INCOME TAX ACT, 1961 against the Accused. l.A. NO:2OF 2023 Petition under Section 482 of cr.p.c praying that in the circumstances stated in the Memorandum of Grounds of criminal petition, the High court may be pleased to stay all the iurther proceedings in c.c.No.268 t2017 on the file of SPECIAL JUDGE FOR ECONOMIC OFFENCES AT HYDERABAD. This Petition coming on for hearing, upon perusing the Memorandum of Grounds of criminal Petition and upon hearing the arguments of sri G. ANIL KIRAN KUMAR, Advocate for thE petitioner and of Sri sUNDAR| R. ptsupATl, Sr. SC for lT Department for the Respondent No. 2. The Gourt made the following: ORDER THE HONOURABLE SMT. JUSTICE K. SUJANA CRIMINAL PETITION No. 1 1775 of 2o23 ORDER: . This Criminal Petition is frled under Section 482 of the Code of Criminal Procedure, 1973 (for short 'Cr.P.C.J to quash the proceedings against the petitioners/accused Nos.l to 5 in C.C.No.268 of 2017, on the file of the learned Special Judge for Economic Offences, Hyderabad, registered for the offences punishable under Section 276 C (21 read with 278 B of the Income Tax Act, 1961(for short the ActJ. 2. Brief facts of the case are that respondent No.2lde facto complainant, who is the Deputy Commissioner of Income Tax, Hyderabad, lodged a complaint against the petitioners/accused Nos. lto 5 stating that petitioner No. I i.e., M/s S.R.S. Projects, represented by its Managing Partner i.e., petitioner No.2, is running construction business etc., and petitioner Nos.2 to 5 are the partners of petitioner No.1-Company and they are responsible for ttre day to day affairs of the company. On 3 1. I 1.2014, the said company frled original return of income for the Assessment year 2014-15 declaring the total income as Rs.Sl,7O,8 20 / - and the tax liability as per the return filed by the petitioners was Rs. 18, 16,670/-. It is further stated that the petitioners without I 1 2 making any payment of tax, Iiled rerurns. cause notice was issued by the offrce of srs,J Crl.P.No.71775 of 2023 Thereafter, a show the respondent to petitioner respondent before the No.l-Company. Basing on the said complaint, No.2 filed a charge sheet vide C.C.No.268 of 2Ol7 learned Special Judge for Economic C)ffences, Hyderabad for the offences punishable under Seclions 276 C (21 read with 278 B of the Act. 3. Heard Sri G. Anil Kiran Kumar, learned counsel appearing on behalf of the petitioners as well as Ms. Sundari R. Pisupati, learned Senior Standing Counsel for Income Tax appearing on behalf of the respondent. 4. Irearned counsel for the petitioners submitted that petitioner No. t has to pay the entire tax amount of Rs. 18,16,670 l- in November 2014. Petitioner No. 1 was under the impression that its auditor has paid the tax amount to the Income Tax Department. I-.a.ter, it came to the notice of petitioner No. I that its auditor did not pay the said amount. Then, petitioner No. 1 paid Rs.1O,0O,OOO/- and sought time for pa5rment of remaining amount. In the meantime, the offrce of respondent initiated assessment proceedings and directed pelitioner No. 1 to Pay a sum of Rs.28,51,270 l- by way of assessment order dated 30.11.2016 and the same was also paid on 3O.f 0.2018. [,earned counsel further 3 sxs,J CrLP.Itb.17775 of 2O23 submitted that it is the mistake of the auditor of the company and there was no willful evasion of tax by petitioner No.1-Company. Hence, prayed the Court to quash the proceedings against the petitioners. 5. In support of his submissions, learned counsel for the petitioners relied on the Judgment of Madras High Court in Mls. Bejan Singh Ege Hospltal hrt. Ltd ts. Income Tdx Depdrtmentt, wherein it is held in paragraph No.S, as follows: \"5. The issue is no longer res integra. Tle learned counxl appeaing for the petitioner dreut mg attention to the deci.sion made bg thE Hon'ble Kamataka High Court in Crl.P.No.4891 of 2014, dated 14.06.2019. Tle Hon'ble Kanataka High Couft in the aforesaid decision held as follows: \"ln the instant case, the onlg circumstance relied. on bg the respondent in suPport of th.e charge leue^ed. against tLre petitioenrs is tlmt, etEn tlough accused filed the retumq Uet, it failed to pay the sell-assessrnenl tax along uith the returns. The circumstance euen if accepted as true, tle safi].€ daes not constitute the offencc und.er Section 276C(2) of the Act. The act of filing the retunls by itself cannot be construed as an attenpt to euade tax rather the submission of ttrc retums uould' suggest that petitioner No-l lad uoluntdrilA d.eclared his intention to paA tax- The act of submilting retun6 is not connected. uith tle euasion of tox- ft is onlg an act uhich is closlg coruEcted with the intended crime' thol can be @nstrued. o,s an act in attefiWt of tlle intended offence. In the backdrop of this legal pnnciple, the Hon'ble Suprem-e Ca.rt in tte case of Prem Dass vs. Income Tax Offuer cited supra. t'a,s hed tat a posititn act on tle part of tLE ^cansed is reqired to be establistred to bring fome tte charge agdinst the rccused for the olfence urder *ction 276 C (2) of the Act.' 'crl.o.p.(tvto)no. t:383 of 2019 decidedon L2'03'2020 / 4 srs,J Crl.P.No.7 7775 of 2O23 6. On the other hand, learned Senior Standing Counsel for Income Tax submitted that without paying the tax the pelitioners filed returns and he relied upon Section 278 E of the Act, which provides for a statutory presumption of the culpable mental state and contended that it is for the petitioners to establish in defence that they did not have the culpable mental state in causing the delay in filing the returns and paying the tax, that it can be done only in the course of trial and cannot be decided in a petition filed under Section 482 Cr.P.C. Therefore, he prays for dismissal of the criminal petition. 7. Having regard to the rival submissions made by both the learned counsel and having gone through the material available on record, it is to be noted that the prime allegation against the petitioners is that without paying the tax they filed returns, as such, the oflice of the respondent ha.s initiated assessment proceedings and directed petitioner No.l to pay a sum of Rs.28,51,270/-. learned counsel for the petitioners has submitted that it is tJle mistake of auditors and they are under the impression that they paid the tax amount, as such, they frted the returns. When it came to the notice of the petitioners, they paid the entire amount as alleged by respondent No.2. Therefore, there is no intention to evade the tax. n 5 srs,J CrLP.No.11775 oJ 2O2O 8. As per the principle laid down by the Madras High Court in M/s. Bejan Slngh Ege Hospltat hrt. Ltd (Supra), a positive act on ttre part of the accused is required to be established to bring home the charge against the accused for the offence punishable under SecLion 276 C (21of the Act. 9. In view of the observation in the above Judgment, in tl,re case on hand the petitioner has already paid retums wittrout paying the tax. When it comes to the notice of the petitioner, he filed tax along with interest. Since the pelitioners have cleared the dues along wittr interest and as there is no intention to evade the tax, the Court cannot presume culpable mental state, as such, the proceedings again st the petitioners are liable to be quashed. 10. Accordingly, ttre Criminal petiLion is allowed and the proceedings against the petitioners/accused Nos. 1 to S in C.C.No.268 of 2OlT on the lile of theSpecial Judge for Economic Offences, Hyderabad are hereby quashed. Miscellaneous applications, if any pending, shall also stand closed. Sd/. A.V.S, PRASAD ASSISTANT REGISTRAR //TRUE COPY/ SECTION OFFICER 1. The Special Judge for Economic offen@s at Hyderabad 2. One CC to SRl. G. ANIL KIRAN KUMAR, Advocate [OPUC] 3. One CC to SRl. SUNDARI R PISUPATI' Sr SC for lncorne Tax Dept [OPUC] 4. Two CD C.opies To, R-;x\" 1' HIGH COURT DATED: 021A4t2024 ORDER GRLP.No.11775 of 202t ALLOWNG THE cRtMtNAl ceunou () -.._.ar- :::- f i -,,,1. ' 'i:.. ..,'r, , ( o- J o 0 0 i:r :\"14 a) rl '/ .,.:.' '.! I {q),1 u I "