Section 276C(1): Prosecution for Wilful attempt to evade tax cannot be initiated until the ITAT confirms levy of penalty

(i) As per departmental circular dated 24.04.2008, Prosecution Manual, 2009, and CBDT’s circular dated 09.09.2019, prosecution under Section u/s 276C(1) shall be launched only after the confirmation of the order imposing penalty by the Income Tax Appellate Tribunal.

(ii) It is unambiguous that that the circulars issued by the Revenue are binding on the authorities, and can tone down the rigour of the statutory provision.

(iii) On the date of lodging the prosecution, the finding of concealment of income or imposition of the penalty of more than Rs. 50,000/- has not been recorded by the ITAT. Nothing has been brought on record to show that any wilful attempt to evade the payment of tax by assessee was made. No explanation has been put forth by Revenue to demonstrate as to why PDIT or DDIT did not comply the procedure while lodging prosecution in this case. Therefore, the act of the authority in continuing prosecution is
in blatant disregard to their own binding circular dated 24.04.2008 and in defiance to the guidelines of the Department

(iv) It was the duty of the PDIT and DDIT to look into the facts that in absence of any findings of imposition of penalty due to concealment of fact, the said prosecution cannot be proved against the assessee. It seems, even after passing the order by the Settlement Commission on 26.11.2019, it was brought to the notice of the High Court, but the authorities were persistent to pursue the prosecution without looking into the procedural lapses on their part. Such an act cannot be construed in right perspective and the Revenue have acted in blatant disregard to binding statutory instructions. Such willful non-compliance of their own directives reflects a serious lapse, and undermines the principles of fairness, consistency, and accountability, which in any manner cannot be treated to be justified or lawful.