Supreme Court Stays Criminal Proceedings Against DMK MP Kathir Anand Initiated By Income Tax Department

The Supreme Court on Monday stayed the criminal proceedings initiated against DMK MP Kathir Anand by the Income Tax Department for delayed filing of Income Tax returns and alleged tax evasion, after the Madras High Court refused to quash the said proceedings against him in July.

A division bench of Justice Hrishikesh Roy and Justice Pankaj Mithal stayed the criminal proceedings while considering an appeal filed against the order of the Madras High Court that had refused to quash the criminal complaint filed by the Income Tax Department against Anand under Sections 276CC (failure to file return of income) and 276C(2) (wilful attempt to evade payment of tax) of the Income Tax Act, 1961 for Assessment Year 2013-14.

The Apex Court recorded the submission of Sr. Adv. S Ganesh and Sr. Adv. P Wilson appearing for Kathir Anand, that he had on his own volition filed his returns for the Assessment Year 2013-14, with some delay. But the returns were filed well before the impugned assessment order dated 24th March, 2016 issued by the IT Department, it was contended.

The Top Court also took note of the Petitioner's submission that the 2016 assessment order corresponds to the same self assessed tax and the interest which he had already remitted on late filing of his returns. Despite this, the IT department granted sanction for his prosecution with the observation that there is a statutory presumption against him under Section 278E of the IT Act, the Petitioner argued.

"It is submitted that there is no mens rea/ intention to evade tax as the return and the payable tax with interest, was paid well before the assessment order and the return furnished by the assessee, was also accepted by the assessing officer", the Top Court recorded the Petitioner's submission, while staying the proceedings against him.

The appeal was filed by Anand, challenging an order of the Madras High Court passed on 11.07.2023 which had refused to quash the criminal complaint lodged by the Income Tax department against him before the First Class Judicial Magistrate, Vellore in 2016 for having allegedly not filed his returns for the Assessment Year 2013-14.

The Appellant had filed his Income Tax Return for the Assessment Year 2013-14 on 29.03.2015 which he argues is within the extended period for filing as per section 139(4) of the Income Tax Act,1961. After the dues and refunds from the IT Department, the Petitioner paid tax with interests amounting to Rs.1,04,94,056/- on 14.03.2016.

The Appellant's plea states that he received the show cause notice issued by the Department on 16.03.2016 to which he replied stating that the delay was circumstantial and not intentional. He contends in his plea before the Apex Court that without considering the reply to the show cause notice the Assistant Commissioner of Income Tax sought for sanction for prosecution from the Principal Commissioner of Income Tax, which was granted.

The Appellant in his plea has submitted that there was no wilful default or evasion of tax since he himself had voluntarily come forward to file the Income Tax Return disclosing the tax liability and thereafter paid the tax amount along with interest. 

The Madras High Court while refusing to exercise its powers under Section 482 of the Cr.PC had observed that:

“The term 'wilfully fails to furnish in due time' as contained in Section 276CC of the Act takes within its fold the due time that has been fixed under Section 139(1) of the Act and not the extended time provided under Section 139(4) of the Act. Therefore, the mere filing of return during the extended time will not come to the aid of the petitioner to escape from the criminal prosecution.”

The Madras High Court while referring to Section 278E and whether there was wilfulness on the part of the petitioner in filing the returns with delay,  had said that it can only be considered at the time of trial. 

“…the issue as to whether there was wilfulness in not filing the returns on time and not paying the tax on time, is only a matter of fact, which can be ascertained only through appreciation of evidence. In the light of this provision, this Court, exercising its jurisdiction under Section 482 of the Code, cannot presume innocence or absence of wilfulness on the part of the petitioner. On the other hand, what can be presumed is only culpable mental status and the onus is upon the petitioner to prove the contrary and that can be done only at the time of trial.”

Case Title: D.M.Kathir Anand V. N.S.Phanidharan and Another, SLP (Crl) No. 9567 of 2023

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