Facts of the Case

The petitioner, Anurag Dalmia, filed his income tax returns for Assessment Years 2006-07 and 2007-08 declaring his income, which were accepted under Section 143(1) and refunds were issued. In 2011, the Income Tax Department received information from the Government of France under the Double Taxation Avoidance Agreement alleging that the petitioner was linked to certain HSBC Bank accounts in Switzerland. Based on this information, a search under Section 132 was conducted on 20.01.2012; however, no incriminating material was found.

Subsequently, reassessment proceedings were initiated under Section 153A and an assessment order dated 23.03.2015 was passed making additions under Section 69 and imposing penalty. Criminal complaints were also filed under Sections 276C(1)(i), 276D and 277 of the Income-tax Act alleging wilful tax evasion, non-compliance with notices, non-signing of consent waiver forms, and false verification. The CIT(A) upheld the assessment, but the ITAT, by order dated 15.02.2018, set aside the assessment and deleted the additions and penalties holding that no incriminating material was found and the additions were based solely on unauthenticated information.

Issues Involved

Whether criminal prosecution under Sections 276C, 276D and 277 of the Income-tax Act can be sustained when the assessment order forming the sole basis of prosecution has been set aside by the ITAT for lack of incriminating material, whether unauthenticated DTAA information can form the basis of criminal prosecution, and whether refusal to sign consent waiver forms can independently attract criminal liability.

Petitioner’s Arguments

The petitioner contended that the criminal complaints were entirely founded on the assessment order dated 23.03.2015, which stood quashed by the ITAT. It was argued that the information received under DTAA was unauthenticated, unverified and not corroborated by any evidence recovered during search. The petitioner submitted that non-signing of consent waiver forms could at best attract penalty under Section 271(1)(b), which had already been imposed, but could not justify criminal prosecution. Reliance was placed on Supreme Court and High Court judgments holding that once the highest fact-finding authority exonerates the assessee, criminal proceedings on the same allegations cannot survive.

Respondent’s Arguments

The Revenue argued that assessment proceedings and criminal prosecution are independent and that setting aside of assessment does not automatically nullify prosecution. It was contended that the ITAT had set aside the assessment on technical grounds and that offences under Sections 276C, 276D and 277 could still be examined independently by the criminal court. The Revenue also argued that non-signing of consent waiver forms and non-compliance with statutory notices constituted separate offences.

Court Order / Findings

The Delhi High Court examined the entire factual matrix and the ITAT’s order in detail. The Court held that the sole basis for reassessment and prosecution was unauthenticated information received from the French Government under DTAA, which was never verified by Swiss authorities and was not supported by any incriminating material recovered during search. The Court noted that the ITAT had set aside the assessment not merely on technical grounds but after examining the absence of incriminating material and lack of evidentiary value of the DTAA information.

The Court further held that refusal to sign consent waiver forms, in the absence of any authenticated evidence of foreign bank accounts, could not be treated as an act of concealment or wilful evasion, particularly when penalty under Section 271 had already been imposed. Applying the principles laid down in K.C. Builders, G.L. Didwania and other binding precedents, the Court concluded that no prima facie case was made out under Sections 276C, 276D or 277.

Important Clarification

The High Court clarified that unauthenticated information received from a third country under DTAA, without independent verification or corroborative evidence, cannot form the basis of criminal prosecution. Where assessments for completed years are reopened and set aside due to absence of incriminating material, continuation of criminal proceedings on the same allegations amounts to abuse of process of law.

Final Outcome

Both criminal complaints against the petitioner were quashed. The petitions under Sections 482 and 483 CrPC were allowed, and all proceedings arising out of Criminal Complaints No. 536622/2016 and 517460/2016 stood terminated.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769594413_ANURAGDALMIAVsINCOMETAXOFFICE.pdf 

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.