The Karnataka High Court directed the Income Tax Department to consider provisioning of a facility in its software to upload ITR with actual amount paid and for the system to accept the returns even though the complete amounts had not been paid.
The petitioner, M/s Confident projects is a Company carrying on the business of construction of apartments and development and sale of plots.
Mr. K.V. Aravind, Senior Standing Counsel for the Income Tax Department submitted that it is not evasion as normally understood, but the evasion on account of misstatement or a wrong statement made with a malafide purpose that an offence under Section 277 of the Act is committed and it is only on account of the said misstatement that the offence of evasion of tax under Section 276 (C) (2) of the Act has been committed.
Mr. Aravind further added that the misstatement being the foundation of the criminal prosecution against the petitioner-Company and there being no defence to the same, more so when admittedly, neither the petitioner company had money nor that the Company has made payment of money, the petitioner-Company could not have uploaded income tax returns mentioning the BSR Code and the amount said to have been paid.
On the other hand, Mr. Vivek Holla, counsel for the petitioners submitted that there are no particular allegations which have been made against any of the Directors of the Company in the complaint and all the allegations made are omnibus allegations and therefore, all the Directors have been roped in as accused without any basis and on this ground also, the petition is required to be allowed.
The issues raised in this case was Whether for an offence to be said to be committed under Section 277 of the Income Tax Act, the misstatement is required to be willful to prosecute the assessee and whether there is a misstatement or willful misstatement by the petitioners in the present proceedings.
The single judge bench of Justice Suraj Govindaraj said that if at all the petitioner-Company wanted to default on payment, the petitioner- Company could have not even filed its returns and/or filed its return without payment of monies earlier. The fact that the petitioner-Company has made payments would indicate and establish the bonafides of the petitioner-Company. It is also not disputed that the Petitioner company borrowed money to make payment of the Income tax due, since the amounts accounted on the basis of the accrual system of accounting was not received by the Petitioner company.
The court held that it was and is required for the Income Tax Department who has provided the facility for an assessee to upload its returns with the actual amount paid and for the system to accept the said returns even though the complete amounts had not been paid.
“The assessee in the present case has been forced to upload the returns by mentioning that the entire amount had been paid since without doing so the returns would not have been accepted by the software system set up by the Income Tax Department. Therefore, in my considered view the said statement made has been forced upon the assessee by the Income Tax Department and cannot be said to be a misstatement within the meaning and definition thereof under Section 277 of the Income Tax Act,” the court said.
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