Karnataka High Court Grants Relief to DK Shivakumar By Dismissing Income Tax Department Pleas

Karnataka High Court Grants Relief to DK Shivakumar By Dismissing Income Tax Department Pleas

The Karnataka High Court (HC) in the case titled Income Tax Department (Petitioner) v. D K Shivakumar (Respondent) granted relief to the respondent who is a Congress leader. The Court dismissed the Income Tax Department appeals against his discharge in tax evasion cases.

The single- judge of the HC Justice John Michael D'Cunha dismissed the petitions filed by the tax department and said that "I do not find any justifiable reason to interfere with the impugned orders. As the prosecution initiated against the respondent is bad in law and contrary to the procedure prescribed under the Code of Criminal Procedure and the provisions of the Income Tax Act."

The factual matrix of the case is that the Income Tax Department had filed three criminal revision petitions against three separate orders passed by the Special Court, exclusively established to try criminal cases against MPs/MLAs in the city, in February 2019.

The Income Tax Department filed three complaints against the respondent for allegedly evading income tax of Rs. 3.14 crore, 2.56 crore, and 7.08 crore respectively for the assessment year 2015-16, 2016-17, and 2017-18.

On 2 August 2017, a search was conducted by the Income Tax Department at various premises and the respondent was at Eagleton Resort on the Bengaluru-Mysuru Highway, near Bidadi.

It was alleged that the respondent after seeing the tax authorities tore a piece of paper and that resulted in an attempt to destroy evidence. Later, it was found that he evaded tax. Section 276C(2) of the Income Tax Act deals with the willful attempt to evade any tax, penalty, or interest chargeable or imposable or under reports of the income.

The Special Court discharged the respondent from all three cases. Challenging the same, the Income Tax department moved the HC, filing criminal revision petitions.

The Court put reliance on the judgment of the case titled Prem Dass v. Income Tax Officer, (1999) 5 SCC 241, wherein the Supreme Court held that a positive act on the part of the accused is required to be established to bring home the charge against the accused of the offence under Section 276C(2) of the Income Tax Act (IT Act).

It added, "These allegations, even if accepted as true, the same do not prima facie constitute offences under Section 276C(2) of the IT Act. Tax, penalty or interest could be evaded provided tax or penalty is chargeable or imposable in respect of the above transactions."

The HC after hearing both the parties at length and analyzing the evidence on record concluded that "There is no presumption under the law that every unaccounted transaction would lead to the imposition of tax, penalty or interest. As a result, the very prosecution launched against the respondent being premature and illegal cannot be allowed to continue".