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Vijay Krishnaswami @ Krishnaswami Vijayakumar v. The Deputy Director of Income Tax (Investigation)

Criminal Appeal · 2025 INSC 1048Decided 28 Aug 2025
Crl.A. No.-003777-003779-2025 (arising out of SLP (Crl.) Nos. 3618-3620 of 2024)
Justice J.K. Maheshwari · Justice Vijay Bishnoi

Background

In April 2016, a tax search at the appellant's residence uncovered unaccounted cash of nearly Rs. 4.94 crore. Tax authorities later sanctioned and filed a criminal complaint against him under Section 276C(1) of the Income Tax Act for wilfully evading tax for assessment year 2017-18. Separately, the appellant approached the Settlement Commission, disclosed the additional income, and in November 2019 was granted immunity from penalty (though not immunity from prosecution, since the criminal case was already pending before the Madras High Court). The High Court then dismissed his plea to quash the prosecution.

Decision Breakdown

The Supreme Court held that under Section 245-I of the Income Tax Act, the Settlement Commission's finding, that the appellant's disclosure was not tainted by any suppression of facts, was conclusive and binding. It also found that the tax authorities had launched the prosecution in violation of the Finance Ministry's own binding 2008 circular on when prosecutions should be filed, and that persisting with the case even after the Settlement Commission's order amounted to an abuse of the legal process. The Court criticized both the Revenue's disregard of its own guidelines and the High Court's failure to properly weigh these facts, quashed the prosecution entirely, and imposed costs of Rs. 2,00,000 on the Revenue.

Lesson Learnt

Tax authorities are bound by their own departmental circulars and guidelines when deciding to prosecute, and a conclusive, unchallenged finding by the Settlement Commission that there was no concealment of facts can defeat a later prosecution for wilful tax evasion on the same facts.

Official source (sci.gov.in)View Judgment (PDF)

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