Income Tax Act | Criminal Complaint For Tax Evasion Filed During Pendency Of Reassessment Proceedings Not Premature: Delhi High Court

The bench of Justice Neena Bansal Krishna cited P. Jayappan vs. S.K. Perumal, First Income Tax Officer [1984] where it was held that pendency of re-assessment proceedings cannot act as a bar to the institution of criminal prosecution for the offences under Section 276-C or Section 277 Income Tax Act.

“The proceedings conducted under Section 153(A) by the Assessing Officer are different and do not pertain to the jurisdiction of the Investigating Unit for the purpose of investigations,” it held.

Petitioner was facing prosecution for evading tax on income generated by providing accommodation entries to various traders. Aggrieved, it approached the High Court.

The first contention raised was that the Sanction was granted by the Principal Director (Inv.)-I for launch of Prosecution, when in fact Section 279(1) of the Act authorizes only Principal Commissioner or Commissioner or Commissioner (Appeals) as the appropriate Authority within the meaning of Section 279-C UA.

For context, Section 279 of the Income Tax Act provides that the Complaint for the offence under Section 275A/275B/276/276A/276B/277A/278 Income Tax Act cannot be filed except with the previous sanction of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

The High Court held that a combined reading Section 2(16) which defines Commissioner and Section 116 which gives a list of Income-tax Authorities, make it clear that Commissioner means and includes the Director and Principal Director of Income Tax.

It cited D.K. Shivkumar vs. Income Tax Department (2020) where it was held that Commissioner would include Director and Principal Director of Income Tax.

The second ground of challenge was that the Criminal Complaint was filed by the Deputy Director of Income Tax (Inv.) who had no jurisdiction to do so.

The High Court however perused the proviso to Section 279 and observed, “Complaint can be filed by any Officer who may be notified by the Principal Director General in this regard. To say at this stage that the Deputy Director had no authority to file the Complaint, is premature and no such inference can be drawn that the Complaint has been filed by a person not duly authorised.”

The third ground of challenge was that the Sanction Order was vague in so much as it did not specify if the Sanction had been granted under Section 276-C(1) or 276 (2).

The Court rejected this argument on noting that the Sanction Order reproduced entire Section 276(1).

“The very fact that the entire Section 276 (1) has been reproduced and thereafter, Sanction granted clearly implies that the Sanction is under Section 276 (1) Income Tax Act. The argument on the Sanction being without application of mind or vague is not tenable on record,” it said.

Lastly, it was contended that the Complaint was premature as the Assessment of the income for the relevant Financial Year was yet to be finalized.

It was argued that the question of evasion of tax did not arise on the date of filing of Complaint since the evasion of tax was not determined on the date of filing of Criminal Complaints.

However, dubbing this argument as “not tenable” in law, the Court dismissed the plea.

Appearance: Mr. Rahul Singh and Mr. Yashvardhan Bisht, Advocates for Petitioner; Mr. Sanjay Kumar, SSC with Ms. Monica Benjamin, JSC, Ms. Easha Kadian, JSC with Ms. Nancy Jain, Advocates for Respondent

Case title: Raj Kumar Kedia v. Income Tax Office

Citation: 2025 LiveLaw (Del) 955

Case no.: CRL. M.C. 219/2018

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