By TIOL News Service

NEW DELHI, FEB 09, 2019: THE issue is - Whether when the foreign bank documents indicate that credit entries are actually reversal entries, even then the provisions of Sec 276C(1) get attracted. NO is the answer of the Sessions Court.

Facts of the case

The Revenue filed a criminal complaint against the assessee, alleging an offence of wilful attempt to evade tax, penalty or interest u/s 276C(1). The other allegation was that the assessee during investigation, made a false statement on oath and thereby made himself liable for an offence u/s 277. The complaint also stated that the assessee, while furnishing the return, did not declare any foreign income/foreign investment and income from foreign assets. Also, as per the document received from the competent authorities of British Virgin Islands under 'Exchange of Information' Article of Indo BVI Tax Information Exchange Agreement (TIEA) and competent authority of Singapore under 'Exchange of Information' Article of Indo-Singapore DTAA, the assessee was a Director and also a shareholder in one M/s Hess view Strading Pte Ltd. and held a bank account with UBS AG, Singapore which contained substantial deposits. All of these details were not disclosed in the return.

The Addl. CMM however discharged the assessee from accusation and observed that the bank statement of M/s Hess view Trading Pte. Ltd. apart from showing negative balance, failed to show any deposit made by the assessee in the such account. It was also observed that the show cause notices issued by the Revenue also lacked necessary details regarding verification of assessee's claim. The Revenue challenged the order by way of revision petition.

On hearing the petition, the court held that,

++ as per the documents relied upon by the Revenue, the amount shown as credit entries are actually the reversal entries in respect of the charges initially debited by the bank. However, in view of the ultimate effect of the reversal entries which were earlier shown as debit entries, it cannot be said that these entries were actually credit entries depicting any income. Therefore, provisions of section 276C(1) are not attracted. As regards the credit entry of 200 dollars available in the statement of account, for want of sanction for prosecution in respect of the such credit entry, no charge could be framed against the assessee u/s 276C(1);

++ on having gone through the documents collected by the Revenue from the foreign agency, the contention that the documents are only photocopies, does not come to the aid of the assessee, keeping in view the stage of the litigation and the factors to be taken into consideration at the stage of charge. In view of the material relied on by the Revenue, it cannot be said that the allegation regarding the false verification of the concerned return and making of false statement on oath, are without any basis. As regards the mens rea, the assessee has put forth the argument that this aspect has to be judged. It can be so judged only after the trial and not at this stage. However, even if no prima facie case for an offence u/s 276C(1) is made out against the accused, there is sufficient material for the offence u/s 277. In view of such discussion, the order of discharge of the assessee, deserves to be set aside, when on the basis of the material available on record, prima facie case for an offence u/s 277 is made out against him.

(Click here for full Judgement)