Home › Income-Tax Act › Anurag Dalmia v. Income Tax Office ( 2025) 176 taxmann.com 771 ( Delhi)( HC)

Anurag Dalmia v. Income Tax Office ( 2025) 176 taxmann.com 771 ( Delhi)( HC)

Income-tax Act, 1961
S. 276C : Offences and prosecutions – Wilful attempt to evade tax – Strictures – Citizens should not be dragged into prosecution without concrete evidence – Failure to produce books of accounts- documents- False statement- Verification – HSBC, Switzerland- Unauthenticated documents from a third party – Alleged foreign bank accounts – Fraud – Unauthenticated information under DTAA – Search conducted – No incriminating material found – Identity not established – Assessment reopened – Penalty imposed – ITAT quashed reassessment – No prima facie case – Reopening held unjustified – Prosecution quashed – Repeated harassment due to baseless allegations – Quashing of criminal complaints upheld- DTAA -India – Switzerland ( French) . [ S.5, 69, 90, 132(4), 153A, 271(1)(b), 276C(1)(i), 276D, 277(1), 278E,Criminal Procedure Code , 1973 , S. 482, 483, Art, 26 Art . 227 ]

The petitioner, Anurag Dalmia, challenged two criminal complaints filed under Sections 276C(1)(i), 276D, and 277(1) of the Income- tax Act, 1961 , arising from an assessment order dated 23.03.2015 based on information received under the Double Taxation Avoidance Agreement (DTAA) from the French Government. The information suggested the petitioner held undisclosed bank accounts in HSBC, Switzerland. A search under Section 132 was conducted on 20.01.2012, but yielded no incriminating material. The petitioner consistently denied the allegations and refused to sign a consent-waiver form to allow Swiss authorities to share information. Despite lack of evidence, the Assessing Officer made additions to income under Section 69, which were upheld by the CIT(A) but subsequently set aside by the ITAT on 15.02.2018. The ITAT held that no incriminating material had been found to justify the additions or penalties. The petitioner argued that once the ITAT had quashed the assessment order, the foundation of the criminal prosecution ceased to exist. The respondent countered that the criminal prosecution was independent of assessment proceedings.

 

  1. Whether the information received from France under DTAA can be relied upon to initiate criminal case against the accused?
  2. Whether on the basis of the aforesaid information, could the Assessee be compelled to sign the Consent Waiver Form?
  3. Whether the Criminal Complaints under Sections 276(1), 276D, and 277(1) of the IT Act can be sustained when the Assessment Order has been set aside by ITAT for want of incriminating material?

The High Court held that the entire prosecution was based on unauthenticated documents from a third party (French Government) without corroboration from Swiss authorities or any material recovered during search. The assessment order had been quashed not merely on technical grounds but for want of incriminating evidence. The refusal to sign the consent waiver form, without credible underlying basis, could not be criminalised.

The Bench relied heavily on various judgments:

  • C. Builders v. ACIT , (2004) 2 SCC 731, where the Supreme Court held that once the basis for penalty or assessment is set aside by the appellate authority, the prosecution based on such assessment cannot be sustained.
  • L. Didwania v. ITO (1997) 224 ITR 687 (SC), where it was held that once the finding of concealment is overturned by the Tribunal, prosecution under Section 276C fails automatically.
  • Ram Jethmalani v. UOI (2011) 8 SCC 1, which held that the mere appearance of names in unauthenticated foreign bank data does not justify legal action without proper verification or evidence.
  • Jayappan v. S.K. Perumal, (1984) 149 ITR 696 (SC), affirming that criminal prosecution and assessment proceedings are distinct, but prosecution cannot survive where the assessment itself is held to be baseless.
  • Best Infrastructure (India) Pvt. Ltd. v. DDIT, (2017) 397 ITR 82 (Delhi)(HC) , which held that additions in search-based assessments under Section 153A require incriminating material found during search itself.

The Hon’ble Court also observed that, “State seeking to prosecute an individual must first establish a prima facie case. Mere presence of a name in unauthenticated foreign documents cannot be used to ruin a citizen’s peace or liberty.”

 The High Court found no prima facie case against the petitioner. The unauthenticated documents and failure to sign consent form could not sustain prosecution in the absence of independent, corroborated evidence.  The complaints were quashed and the petitions allowed.  Mrs. Jayanti Dalmia v. Dy. CIT (2022) 139 taxmann.com 54 ( Delhi)( HC) (para 84 ), Distinguished.