Isabella Mariam

The High Court of Delhi Division Bench of Justice V. Kameswar Rao and Justice Vinod Kumar dismissed a writ petition challenging income-tax prosecution sanctions and the CBDT’s prosecution guidelines and allowed the prosecution process to continue on the strength of approval granted by the Principal Commissioner of Income Tax. The dispute arose from sanction notices authorising criminal complaints for alleged wilful tax evasion, where the taxpayer argued that prior administrative clearance from a collegium of two CCIT/DGIT-rank officers was necessary. The Bench clarified that such collegium approval operates only for cases below the ₹25 lakh threshold, and that where the alleged evasion exceeds ₹25 lakh, the competent authority to approve initiation is the sanctioning authority, not the collegium.

The writ petition arose from sanction orders issued by the Principal Commissioner of Income Tax authorising initiation of prosecution against the petitioner for alleged wilful tax evasion across multiple assessment years. The petitioner challenged the sanction notices issued under the Income Tax Act and assailed the validity of a Central Board of Direct Taxes circular governing prosecution guidelines.

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The petitioner contended that search and seizure operations conducted at her residence led to assessments under statutory provisions, which culminated in substantial tax demands. Appeals against the assessment orders were stated to be pending before the appellate authority. During this period, sanction was accorded for prosecution, and criminal complaints were filed before the competent criminal court.

The petitioner argued that prosecution could not be initiated without prior approval of a collegium of senior officers and that such action was premature during pendency of appellate proceedings. It was also contended that the CBDT circular permitting prosecution was arbitrary and unconstitutional.

The respondents opposed the petition, stating that the alleged tax evasion exceeded the prescribed monetary threshold and that the sanctioning authority was competent to approve prosecution. They maintained that the circulars were validly issued and that pendency of appeals did not bar criminal prosecution.

The dispute before the Court concerned the validity of the sanction orders and the constitutional challenge to the CBDT circular. The Court examined the scope and applicability of the CBDT circulars governing prosecution for tax offences. It observed that “there is no dispute that the amount sought to be evaded or taxed on under reported income is more than Rs.25 lacs.”

While analysing the circular dated 09.09.2019, the Court recorded that “In a case pertaining to Section 276(C)(1) of the Act, where the tax evaded exceeded Rs.25 lacs, the approving authority in such a case would be the sanctioning authority, i.e. PCIT…it is in cases where the evaded amount is Rs.25 lacs or below, the prosecution shall be proceeded with after the administrative approval of the collegium of two CCIT/DGIT rank officers…where tax which would have been evaded is more than Rs. 25 lacs in such cases the approving authority is the sanctioning authority. No pre-conditions have been attached while taking action in cases where the evasion is more than Rs.25 lacs.

With respect to the subsequent circular dated 23.01.2020, the Bench stated that it “only clarifies the circular dated 09.09.2019” and does not alter the approval mechanism for cases exceeding the monetary threshold. The Court further observed that “the said circular does not make any amendment to paragraph no.4 and the annexure thereof.”

Addressing the argument regarding pendency of appeals, the Court noted that “Section 275 of the Act does not bar any initiation of prosecution proceedings in cases where appeals are pending.” It was also recorded that “there is no precondition for imposition of penalty which is a prerequisite for initiation of prosecution proceedings.”

On the constitutional challenge, the Court observed that “such a plea cannot be accepted as there is a clear demarcation contemplated in terms of circular dated 09.09.2019 as followed by circular dated 23.01.2020.” The Bench further stated that “the circular dated 23.01.2020 has to be considered as a clarification to be read as part of the circular dated 09.09.2019.”

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The Court also recorded that “the petitioner has not contested the fact that the amount under investigation is above Rs.25 lacs or that the competent authority has not granted its approval.” On precedents cited by the petitioner, the Bench observed that they were “distinguishable on facts” and did not assist the petitioner’s case.

Overall, the Court found no infirmity in the sanction process or the circulars governing prosecution. The Court directed that “we do not find any merit in this petition and the same is dismissed. The pending applications are dismissed as infructuous.”

Advocates Representing the Parties

For the Petitioner: Mr. Balbir Singh, Senior Advocate with Mr. Anshul Rai, Advocate, and Mr. Harshwardhan, Advocate

For the Respondents: Mr. Ruchir Bhatia, Senior Standing Counsel, and Mr. Anant Mann, Junior Standing Counsel for Revenue; Mr. Premtosh K. Mishra, Central Government Standing Counsel, with Mr. Sarthak Anand, Mr. Prarabdh Tiwari, Mr. Anurag Tiwari, and Mr. Shrey Sharma, Advocates for Union of India

Case Title: Saumya Chaurasia v. Union of India & Others

Neutral Citation: 2025: DHC:11004-DB                                                                               

Case Number: W.P.(C) 8191/2025

Bench: Justice V. Kameswar Rao, Justice Vinod Kumar