Taxpayer cannot be prosecuted for false ITR filing in absence of sanction & complaint under Income Tax Act

While quashing the criminal proceedings initiated for filing false return of income alleged to be punishable under Sections 109, 177, 192, 196, 417, 420, 463, 464, read with Section 34 of the IPC as per the Police’s Final Report, the Karnataka High Court held that the cognizance taken by the Magistrate based on the final report submitted by the police is without authority of law.

The High Court also clarified that the Magistrate can take cognizance only based on the complaint by the authorized officer after obtaining sanction from the competent Authority, and not on basis of final report submitted by the police under Section 178 of CrPC.

A Single Judge Bench of Justice Hemant Chandangoudar observed that as per the provision of Section 279 of the Income Tax Act, a person shall not be proceeded with an offence under Section 278 and 279 except with a prior sanction of competent authority specified therein.

Advocate S.S. Mamadapur appeared for the Assessee while the Revenue was represented by Advocate Y.V. Raviraj.

Briefly, the Petitioners, in connivance with each other, were alleged to have filed false income tax returns claiming refunds from the Income Tax Department.

After considering the submission, the Bench noted that as per Section 280B(b), a Special Court can take cognizance of such offences only upon a complaint made by the authorized person.

The Bench further observed from a conjoint reading of Sections 279 and 280B that the Special Court can take cognizance of the offences punishable under Chapter-XXII “only upon a previous sanction granted by the Authority on a complaint by an authorized officer”.

Accordingly, the Bench held that continuation of such criminal proceeding initiated without proper authority will be an abuse of process of law, and therefore, quashed the criminal proceedings.

Cause Title: Vishwanath C. Tarali vs. State of Karnataka and Ors. [Criminal Petition No. 200847 of 2022 / 2023-Enterslice-17-HC-Kar-IT]

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