The assessee, engaged in the business of stone crushing and manufacturing precast cement pipes, filed the return of income for Assessment Year 2022-23 on 05.11.2022. The Assessing Officer observed that the assessee failed to pay self-assessment tax along with the return under Section 140A, which was subsequently paid on 16.01.2023. Prosecution was initiated under Section 276C(2) for alleged willful attempt to evade payment of tax, and sanction was granted by the Principal Commissioner, following which the Magistrate issued process. In a writ petition, the assessee contended absence of willful default, stated that tax was paid with interest, and cited financial difficulty as the cause for delay.

The Court noted that although there was failure to deposit self-assessment tax on or before the date of filing the return, the issue was whether such failure constituted willful evasion. While Section 276C addresses “willful attempt to evade tax etc.”, the provisions under sub-section (1) and (2) operate distinctly. Sub-section (1) concerns evasion of tax including non-filing, whereas sub-section (2) deals specifically with non-payment of tax. The statutory scheme reflects a conscious distinction between mere failure and willful evasion. Penal provisions, being stringent in nature, require strict interpretation, and prosecution must be supported by clear averments establishing willfulness.

The Court held that the complaint failed to demonstrate willful evasion, as the assessee’s explanation of financial difficulty was not rebutted. The tax was ultimately paid, and the complaint lacked foundational material to justify criminal prosecution. Penal liability under Section 276C requires intentional evasion; mere delay or financial hardship cannot be equated with willful evasion. Continuation of prosecution would amount to abuse of process, and therefore, the proceedings were quashed.

Held: No willful evasion established; prosecution under Section 276C(2) quashed.

In favour of assessee.
AY: 2022-23
Case Law: Vilas Babanrao Kalokhe v. PCIT (Central) [2025]