Madras HC Refuses To Quash Prosecution For Alleged Wilful Tax Default

A single-judge bench of Justice M. Nirmal Kumar heard a petition challenging continued prosecution under Section 276C(2) of the Income Tax Act, 1961 and a quash petition filed under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 in Crl.O.P.No.9848 of 2026. The petition arose from a complaint that the petitioner filed a return for Assessment Year 2017-18 but did not pay the declared tax liability, and the Court was asked to determine whether mere non-payment converted into a wilful attempt to evade tax.

The Court dismissed the quash petition and summarized its decision by noting the factual matrix and the stage of trial. The Court, in its reasoning, observed: Considering the submissions and on perusal of the materials, it was seen that though the petitioner filed the return for the Assessment Year 2017-18 on 30.03.2018 declaring the tax and interest liability of Rs.5,95,616/-, but not paid the amount within the stipulated period or extended period. From the Assessment Order dated 22.12.2019, it was seen that a demand notice was issued under Section 156 of the Income Tax Act, 1961 and the total demand determined was Rs.1,91,43,523/-. The petitioner not preferred any appeal against the Assessment Order for more than six years and finally in the year 2019, with a delay of 2,211 days, filed appeal with condone delay petition. Neither the delay was condoned nor the appeal was admitted. This appeared to be an afterthought raised only after the prosecution in this case launched and progressed. The petitioner had been repeatedly absent on more than four occasions and only began participating in the trial after initiation of proclamation proceedings. The trial had then reached its final stage.

Background

The petitioner was accused of an offence under Section 276C(2) of the Income Tax Act, 1961 for an alleged wilful attempt to evade payment of tax after filing a return that declared tax and interest but deferred payment. The petitioner’s counsel argued that mere non-payment or delay did not amount to a wilful attempt and relied on earlier decisions, including S.P.Velayutham v. The Assistant Commissioner of Income Tax and M/s.G Square Layout Private Limited represented by its Directors and others v. The Deputy Commissioner of Income Tax, Central Circle-1(2), Investigating Building, Nungambakkam, Chennai-600034, where this Court had held that delay in payment could not automatically be equated with wilful default. The respondent, represented by Income Tax standing counsel, relied on the assessment order dated 22.12.2019 and the subsequent demand under Section 156 of the Income Tax Act, 1961, submitting that the total demand of Rs.1,91,43,523/- and the absence of any payment or timely appeal demonstrated a continuous and deliberate default. The respondent further relied on the sanction granted under Section 279(1) of the Income Tax Act, 1961 and the statutory presumption of culpable mental state under Section 278E of the Income Tax Act, 1961 to argue that foundational facts were established and the burden had shifted to the accused.

The Court noted that the petitioner had filed the return on 30.03.2018 declaring an admitted liability of Rs.5,95,616/- under Section 140A of the Income Tax Act, 1961 yet did not pay within the stipulated period, and later a larger demand crystallised. The petitioner had not preferred any timely appeal and had filed an appeal with a delay of 2,211 days which was not condoned or admitted, conduct that the Court treated as an afterthought once prosecution progressed. The Court observed petitioner's repeated absences during trial and that the trial was at an advanced stage when the quash petition was filed. The Court therefore held that the points raised were factual and had already been traversed during trial and that re‑agitating them in a belated quash petition could not be entertained. The petition was dismissed, with the Court making clear that its observations were limited to the disposal of the quash petition and that the trial court would decide the case on its merits "uninfluenced by this order." The Court also recorded that the prosecution had been instituted following sanction under Section 279(1) of the Income Tax Act, 1961 and that considerations under Section 278E of the Income Tax Act, 1961 were relied upon by the respondent.

Case Details:
Case No.: Crl.O.P.No.9848 of 2026
Case Title: Abdul Khader Mohammed Farook v. Deputy Commissioner of Income Tax, Corporate Circle-1[1]
Appearances: 
For the Petitioner(s): Ms.N.Lavanya
For the Respondent(s): Ms.M.Sheela, Senior Standing Counsel (Income Tax); Mr.H.Siddarth, Junior Standing Counsel (Income Tax)

Source: 2026 CaseBase(MAD) 246