Prosecution under Section 276C(2) Unsustainable When Entire Tax Paid Before Filing of Complaint

 

Madras High Court in G Square Layout Pvt. Ltd. v. DCIT (Crl.O.P.No.22880 of 2025)

Facts:

1.  The assessed filed its belated return for AY 2023-24 on 31st December 2023, admitting self-assessment tax of ₹ 8.72 crore but did not pay it on filing.

2.  The Department issued notices on 8th October 2024 and 8th November 2024, followed by a show-cause notice on 2nd December 2024 proposing prosecution under s. 276C(2).

3.  The assessee then paid ₹ 3.85 crore on 19th December 2024 and ₹ 4.87 crore on 13th January 2025, thereby clearing the admitted liability.

4.  Prosecution complaint was filed on 22nd January 2025 (with sanction from the Commissioner) after the assessee made the payment

Core Legal Question

Whether prosecution under s. 276C(2) can be sustained when the assessee has paid the entire admitted tax before filing of the complaint and before cognisance is taken?

Hon Madras HC held as below:

1.  Section 276C(2) requires a positive act of evasion. Merely filing a return without immediate payment, later made good, is not “attempt to evade”.

2.  The entire tax was paid by 13 Jan 2025, whereas the complaint was filed only on 22 Jan 2025. Hence, on the date of complaint, no tax arrear existed.

3.  Since the assessee had discharged the entire self-assessment tax before filing of the complaint, and there was no material indicating a wilful attempt to evade, the proceedings under s. 276C(2) are hereby quashed.

The copy of the order is as under:

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