Non-payment of tax in time cannot be treated as a ‘willful attempt’ to evade tax; no prosecution: HC

There are lot many cases where the taxpayers files the return without payment of self assessment tax. Even some taxpayers file the return by wrongly entering the self assessment details or advance payment details.

Income Tax Act provides for protection in such cases.

Here is an interesting case on the similar issue:

S.P. Velayutham v. ACIT – [2022] 135 taxmann.com 43 (Madras)

Short Overview;

At the time of filing of Income-tax Return (ITR), the assessee had shown tax payable of Rs.2,22,23,010/- and paid tax of Rs. 10,000,000/- only as self-assessment tax.

 The Assessing Officer (AO) has launched prosecution proceedings during the assessment as the assessee didn’t pay the required tax.

Against such launch of prosecution, the assessee had filed a petition before the Madras High Court to quash the proceedings.

The Madras High Court held that to prosecute a person; there must be a willful attempt on the part of the assessee to evade payment of any tax, penalty or interest.

 The explanation to the section 276C makes it very clear that the evasion must be by way of:

(a) Any false entry; or

(b) Statement in the books of account or other documents; or

(c) Omission to make any entry in the books of accounts or other documents; or

(d) Any other circumstances which will have the effect of enabling the assessee to evade tax or penalty or interest chargeable or imposable or the payment thereof.

It is not the case that the assessee had made any false entry in the statements or documents, omitted to make any such entry in the books of account or other documents, or acted in any other manner to avoid tax payment.

It is not the case that the assessee has attempted to alienate the property to defeat the payment etc.

Therefore, when the Return was correctly accepted and the assessment was confirmed, the word employed in the section viz., “wilful attempt”, cannot be imported to mere failure to pay the tax.