Once Sanction Is Given To A Particular Authority Wilful Tax Evasion Prosecution Has To Be Launched By Him Alone: Telangana High Court

The Telangana High Court has overturned the assessee's wilful tax evasion prosecution before the Special Judge for Economic Offences.

The bench of Justice G. Anupama Chakravarthy has observed that once the sanction has been given to a particular authority, i.e., the Deputy Director of Income Tax, the prosecution has to be launched by him alone and not by the Assistant Director of Income Tax, who did not have the power to launch the prosecution proceedings.

The petitioner, under Section 482 of the Code of Criminal Procedure, sought to quash the proceedings pending on the file of the Special Judge for Economic Offences, Nampally, Hyderabad.

The respondent is the complainant, who has a complaint under Section 190 R/w. Section 200 of Cr.P.C. for the offences punishable under Sections 276C(1) and 278B of the Income Tax Act, 1961.

A survey operation under Section 133A was carried out on May 25, 2016, by the D.D.I.T. (Inv), Unit-II, Hyderabad, in the case of certain assessees. During the course of the survey, it was found that the petitioners have sold the land at Budvel to different parties in the Assessment Years 2015–2016 and 2016–2017 at rates below the value of the Sub-Registrar Office. The petitioners have sold the properties, realized the money, did not file income tax returns, and did not pay any tax. The summons were issued to the petitioners to show cause as to why prosecution should not be initiated against them as the tax was willfully avoided by the petitioners.

The petitioners contended that the authorization under Section 279(1) was issued by the Principal Director of Income Tax to the Deputy Director of Income Tax and that the Principal Director of Income Tax is not the competent authority to accord sanction under Section 279(1). Even assuming for a moment that the Deputy Director of Income Tax is the authority to accord sanction, it has to be seen that the sanction was to the Deputy Director of Income Tax. But the prosecution has been initiated by the Assistant Director of Income Tax, who is lower in rank than the Deputy Director of Income Tax. Therefore, the complainant does not have any authorization to initiate the prosecution, and furthermore, the respondent does not have jurisdiction.

The department contended that the Deputy Director of Income Tax is a senior officer and the Assistant Director of Income Tax is a junior officer, and both were doing the same duties.

The court, while rejecting the contention of the department, held that the sanction is accorded to the Deputy Director of Income Tax for initiating prosecution and not to the Assistant Director of Income Tax.

The court quashed the proceedings against the petitioner/accused on the file of the Special Judge for Economic Offences, Nampally, Hyderabad.

Counsel For Petitioner: S. Ravi

Counsel For Respondent: A. Ramakrishna Reddy

Case Title: Tirumala Tirupati Constructions India Pvt. Ltd. Versus ACIT

Case No.: Criminal Petition No.2684 of 2022

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