Quick Summary
The Supreme Court has delivered a stern message to the Income Tax Department, quashing prosecution proceedings against assessee Vijay Krishnaswami and imposing a Rs 2 lakh cost on the Revenue for acting in "blatant disregard" of binding Central Board of Direct Taxes (CBDT) circulars. A bench of Justices J.K. Maheshwari and Vijay Bishnoi slammed the Department for "wilful non-compliance", holding that such conduct undermines fairness, consistency, and accountability in tax administration. Bac
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FAQ :
The Supreme Court quashed the prosecution because the Income Tax Department failed to follow binding CBDT circulars, which stipulated that prosecution should only proceed after confirmation of concealment by the Income Tax Appellate Tribunal (ITAT).
The Income Tax Department was fined £200,000 (Rs 2 lakh) by the Supreme Court.
CBDT circulars are directives issued by the Central Board of Direct Taxes that are binding on tax authorities, providing guidance on the application of tax laws.
The case involved a search operation where unaccounted cash was seized. Prosecution was initiated for alleged tax evasion, but the assessee later approached the Settlement Commission, which granted immunity from penalty.
The ruling reinforces that CBDT circulars are binding on the Revenue and that prosecution cannot proceed if these circulars are disregarded, strengthening taxpayer protection against arbitrary actions.
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