Case Note & Summary
The present matter arose from a criminal writ petition filed before the High Court of Bombay at Goa under Article 226 of the Constitution of India read with Section 482 of the Code of Criminal Procedure, 1973. The petition challenged an order dated 7th November 2025 passed by the Chief Judicial Magistrate, 'A' Court at Merces, issuing process in Criminal Case No. AOA/184/2017/A, and sought quashing of the underlying complaint. The complaint was filed by the Income Tax Department through the Deputy Commissioner of Income Tax, Panaji-Goa, under Section 276-C(2) of the Income Tax Act, 1961, alleging that the first petitioner company willfully attempted to evade tax liability for Assessment Year 2012-13. The petitioners included the company, its Managing Director, and its Joint Managing Director. The crux of the dispute revolved around whether the company’s admitted failure to pay tax on time constituted a 'wilful attempt to evade' within the meaning of the penal provision, given that the entire tax demand along with penalty and interest was subsequently paid and a Nil Dues Certificate was issued. The petitioners contended that the complaint was an abuse of process because the basic ingredient of wilful attempt was missing; they highlighted that the company had declared correct income and tax liability, the assessment was rectified under Section 154 of the Act confirming the correctness, and nearly 90% of the tax was paid even before sanction to prosecute was granted. They relied on multiple precedents to argue that mere delay in payment, especially when subsequently regularized, does not amount to wilful evasion and that continuation of prosecution would be a waste of judicial time. The respondent department opposed the petition, submitting that the wilful attempt had already been committed during the relevant period when the company, despite earning income, failed to pay the admitted tax; the subsequent payment did not obliterate the offence. The department pointed out that the mining ban in Goa, cited as a reason for financial difficulty, came into effect only after the relevant financial year, and that the sanction for prosecution was granted after due analysis of records. It was argued that there is no requirement in the Income Tax Act or the Criminal Procedure Code to place subsequent rectification orders or post-complaint developments before the Magistrate at the stage of cognizance. The court heard arguments from both sides and made the rule returnable forthwith, taking up the matter for final disposal. However, the extracted portion of the judgment ends with the respondent’s submissions and does not contain the court’s analysis or final decision. Therefore, the outcome and the operative directions, if any, remain unknown from the provided text.
Headnote
A) Income Tax - Offences and Prosecutions - Wilful Attempt to Evade Tax - Income Tax Act, 1961, Section 276-C(2) - The test for wilful attempt requires a positive act of evasion; payment of tax, penalty, and interest before issuance of process and obtaining a Nil Dues Certificate may indicate absence of wilful intent, but the department contends that the wilful act was complete earlier and subsequent payment does not nullify the offence (Paras 4, 6). B) Criminal Procedure - Quashing of Criminal Complaint - Inherent Jurisdiction - Code of Criminal Procedure, 1973 - An assessee may seek quashing of a complaint for tax evasion on the ground that full payment of dues renders continuation of prosecution an abuse of process; the court must consider whether the complaint prima facie discloses the required mens rea (Paras 4-5). C) Income Tax - Rectification of Mistake - Section 154 Order - Income Tax Act, 1961, Section 154 - A rectification order accepting the correctness of the return and tax computation may be relevant to show that there was no concealment or false statement, which can rebut the allegation of wilful attempt to evade tax (Para 4(ii)). D) Income Tax - Prosecution - Effect of Subsequent Payment - Income Tax Act, 1961, Section 276-C(2) - The department’s argument that voluntary payment made after prolonged default does not erase the offence already committed raises the issue whether such payment before issuance of process can be a valid defence in quashing proceedings (Paras 6-7).
Issue of Consideration
Whether the issuance of process in the criminal complaint under Section 276-C(2) of the Income Tax Act, 1961 is sustainable when the assessee has paid the entire tax demand along with penalty and interest and obtained a Nil Dues Certificate, thereby negating the element of wilful attempt to evade tax
Law Points
- wilful attempt to evade tax requires positive act of evasion
- payment of entire tax demand with penalty and interest and issuance of nil dues certificate may negate conclusion of wilful attempt
- rectification order under section 154 confirming correct return may be relevant
- subsequent payment after default does not automatically erase offence if wilful attempt already made
- prosecution must be based on material at time of filing complaint
