Vyalikaval House Building Co operative Society Ltd. v. DCIT – [2019] 110 taxmann.com 107 (Karnataka)

In response to the show-cause notice, the assessee filed returns of income and declared the total income of certain amount and the total tax payable of certain amount. But the assessee failed to pay the self-assessment tax along with the return of income.

The revenue contended that the assessee had willfully and deliberately made an attempt to create circumstances to enable it to evade payment of tax. A compliant was lodged before the court for economic offences, seeking prosecution of the assessee for the offence punishable under section 276C(2).

The Karnataka High Court held that the gist of the offence under section 276C(2) is the wilful attempt to evade any tax, penalty or interest chargeable or imposable under the Act. What is made punishable under this section is an ‘attempt to evade tax penalty or interest’ and not the actual evasion of tax.

In the instant case, the only circumstance relied on by the dept. in support of the charge levelled against the assessee was that, even though assessee filed the returns but it failed to pay the self-assessment tax along with the returns.

This circumstance even if accepted as true, the same does not constitute the offence under section 276C(2). The act of filing the returns by itself couldn’t be construed as an attempt to evade tax, rather the submission of the returns would suggest that assessee had voluntarily declared his intention to pay tax. Therefore, prosecution proceedings couldn’t be initiated against assessee even if such tax was recovered from assessee after coercive steps taken by department.