CONTINUOUS INTERNAL ASSESSMENT-1

Moot memorial for ‘Kalluri Krishan Pushkar v. Deputy commissioner of income-tax’

SUBMITTED TO SUBMITTED BY
Dr. Anindhya Tiwari KOMALPREET KAUR
ASSISTANT PROFESSOR, SEM-5 ROLL NO.-90
LAW OF TAXATION

HNLU, NAYA RAIPUR

1
 Kalluri Krishan Pushkar v. Deputy commissioner of income-tax

Before
THE HON’ABLE HIGH COURT OF ANDHRA PRADESH AND
TELANGANA
IN MATTER OF

Kalluri Krishan Palluri …………………………………….APPELLLANT

v.

DEPUTY COMMISSIONER OF INCOME TAX…………RESPONDENT

Under section 482 of Crpc, 1973 and sec. 276 of Income Tax Act, 1961

Upon submission

TO THE HON’ABLE JUSTICE OF THE HON’ABLE HIGH COURT OF

ANDHRA PRADESH AND TELANGANA

[Grab your reader’s attention with a great quote from the document or use this space to
emphasize a key point. To place this text box anywhere on the page, just drag it.]

Memorendum on behalf of the Appellant

2
 TABLE OF CONTENTS

TABLE OF
ABBREVIATIONS..................................................................................................iii INDEX OF
AUTHORITIES........................................................................................................iv I.
CASES ......................................................................................................................…….........iv
II.BOOKS AND TREATIES.............................................................................................…......iv
III. STATUTES..............................................................................................................…...........iv
STATEMENT OF JURISDICTION...........................................................................…….........v
STATEMENT OF FACTS .........................................................................................................vi
ISSUES RAISED ....................................................................................................................... vii
SUMMARY OF ARGUMENTS .......................................................................................... viii
ARGUMENTS ADVANCED........................................................................................................1

3
ABBREVIATIONS-

ABBREVIATION MEANING

CRPC CODE ON CRIMINAL PROCEDURE

IT ACT INCOME TAX ACT

$ Section

Hon’able Honourable

4
 INDEX OF AUTHORITIES

1) CASES
a) Kalluri Krishna Pushkar v Deputy Commissioner of Income Tax
b) Sujata Electrical lnfratech Private Limited v DCIT
c) SP Velayutham v The Assistant Commissioner of Income Tax
2) BOOKS AND TREATIES
a) Taxman’s Student guide to Income Tax, 69th edition
3) STATUTES
a) Income Tax Act, 1961
b) Code on Criminal Procedure, 1973

5
 STATEMENT OF JURISDICTION

The Hon’ble High court of Judicature at Andhra Pradesh and Telangana exercises
jurisdiction to hear and adjudicate over the matter under section 482 Crpc and sec 276C of
Income Tax Act, 1961.

This petition is filed under Section 482 of the Code of Criminal

Procedure (for short, 'the CrPC') by the Petitioner-Accused to quash the
proceedings in C.C.No.103 of 2014 on the file of the learned Special Judge
for Economic offences, Hyderabad, taken cognizance for the offences
punishable under Section 276C(2) of the Income Tax Act, 1961(for short,
'the Act') amended from time to time, on the complaint under Section 190
read with 200 Cr.P.C.of the 1st respondent/The Deputy Commissioner of
Income Tax, Circle-11(1) Hyderabad.

THE APPELLANTS MOST HUMBLY SUBMIT THEMSELVES TO THE

JURISDICTION OF THE HON’BLE COURT.

6
 STATEMENT OF FACTS

For the relevant year, assessee filed e-return wherein taxable income was shown at Rs. 2.10 crore
and tax and interest shown payable in the return was Rs. 68,28,133. There was TDS of Rs. 10.
lakhs and the balance tax payable was Rs. 58,15,840 that was not paid while filing of the return
of income.

Since the assessee failed to pay the admitted tax, a show-cause notice issued to him by the
complainant-DCIT or to give reasons why penalty should not be levied under section 221(1) of
the Act for the failure to pay the demand raised in time.
In response to said notice, the assessee filed a letter stating that he did contracts of the State
Government for which the tax due was shown in the assessment and he did not pay self-
assessment tax as he did not receive the bills from the State Government and he would pay the
tax dues as soon as the amounts were received from the Government.
The first respondent rejected assessee's explanation and initiated penalty proceedings. He also
launched prosecution proceedings against assessee under section 276C(2).
The assessee filed instant petition contending that since there was no deliberate or wilful attempt
of concealment of income or postponement of the tax due, the ingredients of the offence under
section 276 were not made out. It was further submitted that there was no notice of demand as
required under section 156 issued to him and there was efficacious alternative remedy under
section 226 by other modes of recovery thereby the prosecution was not sustainable and the
proceedings were liable to be quashed.

7
 ISSUES RAISED

1. Whether the petitioner/accused is guilty of wilful nonpayment in accordance with

section 276 of the IT Act ?
2. Whether, in order to bring about proceedings for prosecution under section 276C, it is
necessary to provide an additional notice of demand under section 156 , particularly in
cases where an intimation under section 143(1) was provided deciding the amount payable,
including interest?

8
 SUMMARY OF ARGUMENTS

1)NO DELIBERATE CONCEALMENT

In this submission to the honorable court, the petitioner strongly asserts that there was no
deliberate attempt to conceal income. They emphasize their commitment to transparency by
diligently submitting an e-tax return, self-declaring an income of Rs. 2,10,26,628.00, and
promptly paying income tax as required by Section 140-A.

The petitioner cites the precedent of the Telangana High Court case, Sujata Electrical lnfratech
Private Limited v DCIT, to argue that the delay in tax payment was due to financial hardships
and not tax evasion.

2)NO CRIMINAL INTENT

Regarding criminal proceedings under Section 276C (2) of the IT Act, the petitioner contends
that no criminal intent existed and emphasizes the timely filing of their income tax return.

3)NO NOTICE UNDER SEC. 156 AS NOTICE OF DEMAND WAS SERVED

The petitioner also raises concerns about the notice process, arguing that the notice served under
Section 141A became redundant after its omission in the Direct Tax Amendment Act 1987. They
assert that a notice of demand under Section 156 should have been issued after the assessing
officer's order, highlighting that Section 143(1) is for intimidating the assessee about dues, not
demanding payment.

The petitioner references Form 7 under Rule 15, which outlines penalties for non-compliance but
doesn't mention criminal proceedings. They argue that the petitioner was not afforded a fair
process as per the provisions of the Income Tax Act, 1961.

9
In summary, the petitioner firmly maintains that their actions were not aimed at concealing
income and requests the dismissal of potential criminal liability. They raise concerns about the
notice process and the lack of a notice of demand, emphasizing their desire for a fair chance to
clear their dues.

10
 ARGUMENTS ADVANCED

ISSUE 1
*LACK OF WILFUL ATTEMPT TO CONCEAL INCOME-
1) In utmost sincerity the petitioner respectfully submits before this honorable court that
there existed no deliberate endeavor on their part to conceal their income. This assertion
is firmly grounded in the fact that the petitioner diligently initiated the submission of an
e-tax return for the assessment year 2012-13.1This action, as mandated by the provisions
outlined in Section 139-D of the regulations established by the Board, unambiguously
attests to the petitioner's commitment to transparency. The said return manifestly self-
declared an income totaling Rs. 2,10,26,628.00, pursuant to the provisions stipulated in
Section 140-A, which governs self-assessment and necessitates the payment of income
tax in accordance with the furnished return.

The absence of any deliberate, intentional, or willful attempt to conceal income is a tenet
we staunchly advocate. As previously articulated, the petitioner has already discharged
their duty of income disclosure. In bolstering this stance, we cite a precedent from the
Telangana High Court: the case of Sujata Electrical lnfratech Private Limited v DCIT2 -
The High Court invalidated the Criminal Petition, citing that the delay in tax payment
was due to substantial reasons, specifically financial hardships, and did not result from a
deliberate effort to evade taxes.
A comprehensive scrutiny of the petitioner's conduct in this matter substantiates the
contention that their actions amounted to delayed or deferred tax payment. It is worth
noting that the tax, along with any accrued interest and penalties, was accepted by the tax

1 (2016) 236 Taxman 27 (AP& T) (HC),

2 5210 OF 2019, AP & T HC

11
 authority without reservation. Such a delay in payment should not be construed as a
deliberate effort to evade taxation. “The individual undertook contracts with the State
Government, and the tax liability for these contracts was included in the assessment.
However, they were unable to settle the self-assessment tax since they hadn't received
invoices from the State Government. They committed to paying the tax once they
received the funds from the Government.
Apparently due the loss of business and arrears in the market to pay back the credit
which was taken for the project left the petitioner with no option but to seek time for
payment of taxes. The income declaration of Rs. 2,10,26,628.00 was made in full
compliance with legal obligations, devoid of any intention to evade the associated tax
liability.

2) The petitioner provided to quash criminal proceedings under section 276C (2) of the IT
Act,1961-
As previously asserted, the petitioner lacked any deliberate intent to evade tax, and as
such, any potential criminal liability should be dismissed. The petitioner duly filed their
income tax e-return, disclosing their full tax liability. However, they faced difficulties in
remitting the entire self-assessment tax amount due to business losses and outstanding
government contract bills.
In SP Velayutham v The Assistant Commissioner of Income Tax3, the Madras High Court
decreed that legal action under Section 276C(2) of the Income Tax Act should not be
initiated against a taxpayer solely for delayed tax payment.It has been established that
unless there is clear intent to evade tax, charges cannot be brought against a taxpayer who
simply misses the tax deadline stipulated by the act.

ISSUE 2
* NO NOTICE UNDER SEC. 156 AS NOTICE OF DEMAND WAS SERVED-
1) NOTICE SERVED UNDER SECTION 141A-
As stated in facts that the petitioner was served under section 141A which now stands
omitted.

3 17906 of 2017, Madras HC

12
 As it is given in the facts of the case that a notice was served under sec 141A Now since
this section is omitted by Direct tax amendment act 1987 the notice served stands
redundant.
2) NOTICE OF INTIMIDATION IS NOT ENOUGH, NOTICE OF DEMAND
SHOULD BE PROVIDED AS A PART OFTHE PROCESS
-A Notice of demand should have been served after the orders were passed by the
assessing officer even when notice of intimidation was served under section 141(3).
Notice of demand and notice of intimidation are two different things provided under
section 156 and section 143 respectively.
It is further submitted that no notice of demanded was issued to the petitioner under
section 156 after the orders of the income tax officer were passed. once the complaint
was initiated by the assessing officer post his ‘order’ an intimation of the order should
have been provided to the petitioner as a part of due process of law. As a part of the
process, after the orders were given by the officer a notice of demand was suppose to be
served to the petitioner.
It is emphasized that post the order from the officer a notice of demand under section 156
should have been served as a fair chance to clear the dues as a part of process of law.
It is argued that if it is not necessary to serve notice of demand under section 156 and that
intimidating under section 143(1) is enough then what is the point of formulating section
156?

-To support this argument the counsel submits that- The objective of srutiny assessment
under section 141(3) as provided by GOI
The objective of scrutiny assessment under sec 143(1) is to confirm that the taxpayer has
not understated the income or has not computed excessive loss or has not underpaid the
tax in any manner, the Assessing Officer carries out a detailed scrutiny of the return of
income and will satisfy himself regarding various claims, deductions, etc., made by the
taxpayer in the return of income.”4

This clarifies that the object of section 143(1) is scrutiny and not demand, therefore the
notice sent is for the purpose of only intimidating the assessee about his dues, it is

4 IT Act, 1961, Rule 15, § 156, 1961

13
 pleaded that apart from notice of intimidation sent under section 143(1), a notice for
demand of such pending amount should have been sent to the assessee warning to pay the
dues of the tax under sec 156 after the order was passed by the officer.

-It is clear from the wording of section 156 that a notice of demand is required to be
served when an order is passed for the sum payable under the act.
Notice of demand.

● 156. (1) When any tax, interest, penalty, fine or any other sum is payable in consequence
of any order passed under this Act, the Assessing Officer shall serve upon the assessee a
notice of demand in the prescribed form b 78 specifying the sum so payable.5

-Additionally, it is important to note that when we examine Form 7 under Rule 15, we see
that it outlines penalties for non-compliance with Section 156. However, what's
concerning here is that the petitioner was never afforded the opportunity to address these
penalties by invoking Section 156. Instead, a severe step of initiating criminal
prosecution was taken.

Form 7, as issued by the Government of India, does not mention anything about criminal
proceedings; it explicitly lays out penalties. By neglecting to provide the petitioner with
the chance to address these penalties under Section 156, they were deprived of a fair
process in line with the provisions of the law.

Form 7 GOI Rule 15-

4. If you do not pay the amount of the tax within the period specified above, penalty
(which may be as much as the amount of tax in arrear) may be imposed upon you after
giving you a reasonable opportunity of being heard in accordance with section 221.6

5. If you do not pay the amount within the period specified above, proceedings for the
recovery thereof will be taken in accordance with sections 222 to 227, 229 and 232 of the
Income-tax Act, 1961.7

5 Income tax act , 1961 § 156, No. 43, Act of Parliament(India)

6 IT Act, 1961, Rule 15, § 156, 1961
7 Id

14
 By the wordings of this form it is clear that further action would be taken under section
222 to 227, 229 and 232 and it does not intimidate about a chance of initiating criminal
proceeding.

Therefore, the petitioner was not given a fair chance of clearing his due according to the
procedure mentioned under Income Tax Act, 1961.

15
 PRAYER

1) It is therefore prayed before the Honourable Court that the criminal proceedings under
section 276c are quashed.
2) Petitioner is given an opportunity to clear his dues with respect to the provisions of sec
156.

All of which is humbly submitted

Sd/-
Counsel for Appellant

16