In a significant ruling, the Delhi High Court has upheld the initiation of prosecution under the Income-tax Act in a case involving alleged tax evasion amounting to ₹348 crores, while categorically rejecting the constitutional challenge to the CBDT Circulars governing prosecution.

The case arose out of search and seizure proceedings, wherein the petitioner was also arrested by the Enforcement Directorate (ED) and, subsequently, by the Economic Offences Wing (EOW), Chhattisgarh on 16.01.2024. The petitioner assailed the initiation of prosecution under the Income-tax Act on multiple grounds, all of which were squarely rejected by the High Court.

Under CBDT Circulars issued in 2019 and 2020, it is provided that where the amount of tax sought to be evaded exceeds ₹25 lakhs, prosecution should ordinarily be launched only after confirmation of penalty by the Income Tax Appellate Tribunal (ITAT). However, the said Circulars carve out a specific exception for cases covered under Sections 132, 132A and 133A of the Income-tax Act, permitting initiation of prosecution at any stage of proceedings before the Income-tax Authorities, subject to prior approval of the Principal Commissioner of Income Tax (PCIT).

Considering that the present case involved alleged tax evasion to the extent of ₹348 crores, the High Court rejected the contention of the Senior Advocate appearing for the petitioner that the impugned orders lacked cogent reasons for initiating prosecution in the absence of confirmation of penalty by the ITAT. The Court held that the statutory and administrative framework clearly empowered the authorities to proceed with prosecution in search-related cases of such magnitude.

The High Court further dismissed the constitutional challenge mounted against the CBDT Circulars on the ground that they were “manifestly arbitrary” and violative of Article 14 of the Constitution of India. The Court found no merit in the argument and held that the Circulars are founded on a rational classification and provide adequate safeguards, including the requirement of prior approval by senior अधिकारियों.

Addressing the petitioner’s argument that the liberty of the individual was jeopardised due to alleged unguided and unbridled powers vested in the Income-tax Authorities, the High Court emphasized the specific factual background of the case and the sheer magnitude of the alleged tax evasion. The Court observed that the exercise of power in the present case could not be termed arbitrary or disproportionate.

On the contention that additions under Sections 69 and 69A were based merely on entries found in loose papers, the High Court held that such an argument raises questions of fact, which are required to be adjudicated by the competent authority in appropriate proceedings and cannot be a ground to interdict prosecution at the threshold.

Accordingly, the Delhi High Court dismissed the writ petition and upheld the initiation of prosecution under Section 276C of the Income-tax Act against the petitioner. In doing so, the Court also rejected the petitioner’s reliance on several judgments of the Supreme Court and various High Courts, including the recent decision of the Supreme Court in Vijay Krishnaswami alias Krishnaswami Vijaykumar v. The Deputy Director of Income Tax (Investigation), 2025 INSC 1048.

The judgment was rendered in Saumya Chaurasia v. Union of India & Others [TS-1622-HC-2025 (DEL)] on 08.12.2025, covering Assessment Years 2011-12, 2012-13, 2014-15, 2017-18, 2019-20, 2020-21 and 2022-23, and was decided in favour of the Revenue.