The Bombay High Court has quashed a criminal prosecution launched against a taxpayer for allegedly failing to file income tax returns within the prescribed time, holding that continuing the case would amount to an abuse of the legal process. The Court found that after assessment, the taxpayer was actually entitled to a refund of ₹1,64,340 and that the prosecution could not continue in light of the protection available under Section 276CC of the Income Tax Act.
Background of the Case
The petition was filed by Rajesh Somandas Sachdev, who challenged Criminal Complaint No. SW/535/2018 pending before the Additional Chief Metropolitan Magistrate, Ballard Pier, Mumbai. The complaint had been filed after he failed to submit his income tax return for the Assessment Year 2014–15 within the statutory time.
According to the record, the Income Tax Department issued a notice under Section 148 of the Income Tax Act on September 18, 2017, directing the petitioner to file his return. When the return was still not filed, the Department initiated criminal prosecution on March 7, 2018, alleging failure to furnish returns under Section 276CC of the Act.
The petitioner later filed his income tax return on September 10, 2018. The return disclosed that Tax Deducted at Source (TDS) of ₹2,54,788 had already been deducted and, after assessment, he was found entitled to a refund of ₹1,64,340. The assessment order accepted the return without dispute.
Petitioner's Stand
The petitioner argued that although the return had been filed after the statutory deadline, his case was covered by the proviso to Section 276CC of the Income Tax Act. He submitted that because he was entitled to a refund rather than owing tax, criminal prosecution was not legally sustainable.
Reliance was placed on the Supreme Court's decision in Guru Nanak Enterprises v. Income-tax Officer and two judgments of the Madras High Court supporting the same legal principle.
Department's Response
The Income Tax Department contended that the benefit of the proviso did not apply because the return had been filed only after a notice under Section 148 and after criminal proceedings had already begun. According to the Department, the offence under Section 276CC had already been completed due to the failure to file the return within the prescribed time.
However, during the hearing, the Department acknowledged that the assessment ultimately showed the petitioner was entitled to a refund of ₹1,64,340.
Court's Observation
Justice Madhav J. Jamdar examined Section 276CC and noted that its proviso protects taxpayers from prosecution where, after adjustment of advance tax and tax deducted at source, the tax payable falls below the statutory threshold. The Court observed that the object of the provision is to avoid criminal prosecution where no real tax liability survives.
Referring to the Supreme Court's ruling in Guru Nanak Enterprises, the Court observed that prosecution becomes unwarranted when the statutory conditions of the proviso are satisfied.
The bench observed,
"The criminal prosecution is wholly unwarranted and the same would amount to an abuse of the process of law."
The Court also noted that while granting sanction for prosecution, the Commissioner of Income Tax had failed to consider that TDS amounting to ₹2,54,788 had already been deducted, resulting in no loss to the Revenue and, in fact, a refund becoming payable to the petitioner.
Court's Decision
After considering the facts and the applicable law, the Bombay High Court held that the petitioner's case was squarely covered by the Supreme Court's judgment in Guru Nanak Enterprises. Since the assessment established that the petitioner was entitled to a refund and no tax remained payable, continuation of the criminal complaint was unjustified.
The Court therefore quashed the prosecution pending against the petitioner and disposed of the writ petition.
Case Details
Case Title: Rajesh Somandas Sachdev v. Income Tax Officer & Ors.
Case Number: Writ Petition No. 5692 of 2025
Judge: Justice Madhav J. Jamdar
Decision Date: July 22, 2026
