Delhi High Court | WP(C) 8191/2025 | Dec 8, 2025**
1. Core Issue:- Whether, for prosecution under Section 276C(1) (wilful attempt to evade tax) and Section 278E (presumption of culpable mental state), where the amount of tax sought to be evaded exceeds ₹25 lakh, the sanction of PCIT alone is sufficient, or whether approval of a Collegium of two CCIT/DGIT officers is mandatory in terms of CBDT Circular No. 24/2019 dated 09.09.2019 and Circular No. 5/2020 dated 23.01.2020.The petitioner submitted that even in high-value cases, prosecution can not be launched unless penalty is confirmed by ITAT and Collegium approval is obtained.
2. Statutory Provisions
Section 276C(1):- Punishes wilful attempt to evade tax, penalty or interest or attempt to under-report income and it applies where there is a deliberate attempt at tax evasion.
Section 278E:- Introduces a legal presumption of culpable mental state, shifting the burden on the accused to prove absence of intention. Provides for a legal presumption regarding culpable mental state, thereby shifting the burden of proof to the accused to disprove intention.
Section 279(1):- Prosecution under Chapter XXII requires previous sanction of:
PCIT/CCIT/CIT(A)/Appropriate Authority.
Section 275:- Deals with limitation for penalty; petitioner incorrectly argued that prosecution cannot be launched while appeal is pending.
Relevant CBDT Circulars & Interpretation
A. Circular No. 24/2019 (09.09.2019) – Core Framework:-For Offences under Section 276C(1):
•If amount sought to be evaded ≤ ₹25 lakh:
•Prosecution shall not be launched except with:
•Previous administrative approval of a Collegium of two CCIT/DGIT officers, and
•After confirmation of penalty by ITAT.
•If amount sought to be evaded > ₹25 lakh:
•Sanctioning Authority (PCIT/CIT) alone can approve prosecution.
•No requirement for Collegium approval.
•No mandatory waiting for ITAT penalty confirmation.
Circular’s purpose: reduce prosecution in small, non-serious cases.
B. Circular No. 5/2020 (23.01.2020) – Clarificatory
Key clarifications:
1.“Ordinarily” prosecution should follow ITAT penalty confirmation,
but this applies only to cases ≤ ₹25 lakh.
2.In search / survey / serious cases, prosecution may be launched at any stage, subject to collegium approval only where tax evasion ≤ ₹25 lakh.
3.Circular applies only where complaint is yet to be filed after 09.09.2019.
Arguments
A. Petitioner’s Arguments
1.Sanction invalid because:
No Collegium approval under Circulars 2019 & 2020;
Penalty not confirmed by ITAT.
Prosecution during pendency of CIT(A) appeals is impermissible.
Additions under Sections 69 and 69A are based on loose papers; relying on:
CIT v. Ravi Kumar (2007) 294 ITR 78 (P&H) (addition under s.69A requires physical recovery of valuables).
Circular 5/2020 is arbitrary, lacking criteria—violates Article 14.
Relied on:
Indian Express Newspapers v. Union of India (1985) 1 SCC 641
State of Punjab v. Khan Chand (1974) 1 SCC 549
Search assessments should have been under 153A, not 153C.
Sanction orders allegedly non-speaking and mechanical.
B. Revenue’s Arguments
Tax evasion exceeds ₹348 crore → Collegium approval not required.
PCIT is competent authority.
Circulars clearly differentiate cases above and below ₹25 lakh.
No legal bar under Section 275 or otherwise to launch prosecution during pendency of appeal.
Relied on:
P. Jayappan v. S.K. Perumal (1984) 149 ITR 696 (SC)-Criminal prosecution independent of assessment appeal.
Circular 5/2020 is valid; petitioner misinterpreted it.
Search yielded incriminating materials; additions were based on seized evidence.
Sanction was properly granted after due application of mind by PCIT.
5. Cases Relied Upon (List)
By Petitioner
CIT v. Ravi Kumar (2007) 294 ITR 78 (P&H)
Indian Express Newspapers v. UOI (1985) 1 SCC 641
State of Punjab v. Khan Chand (1974) 1 SCC 549
Miraj Digvijay Shah v. PCIT (Calcutta HC, 12.07.2023)
Banwari Lal Agarwal v. UOI (Calcutta HC, 24.07.2023)
Vijay Krishnaswamy v. DDIT (2025 INSC 1048)
By Revenue
P. Jayappan v. S.K. Perumal (1984) 149 ITR 696 (SC)
Saumya Chaurasia v. Directorate of Enforcement (2023 INSC 1073)
Raj Kumar Kedia v. ITO (2025) 176 taxmann.com 857 (Delhi HC)
Court’s Findings
Sanction by PCIT is valid; collegium approval not required
The tax sought to be evaded exceeds ₹25 lakh by a huge margin (₹348 crore).
Under Circular 24/2019 (read with Circular 5/2020), only PCIT sanction is required.
Collegium approval + ITAT penalty confirmation apply only to small cases ≤ ₹25 lakh.
Circular 5/2020 is clarificatory; not ultra vires
Distinction between high-value and low-value cases is rational.
No violation of Article 14.
Prosecution need not await penalty confirmation / appeal outcome
Relying on Jayappan (SC), prosecution is independent of appeal.
Section 275 does not impose bar.
Additions under Sections 69/69A are factual
These must be tested before CIT(A)/ITAT, not in writ jurisdiction.
Sanction orders not mechanical
Court found no non-application of mind.
Magnitude of tax evasion justified prosecution.
Challenges to jurisdiction under 153C / DIN / assessment errors
These issues are factual and cannot be basis to quash prosecution at threshold.
Final Decision (Ratio)
Writ Petition dismissed.Sanction issued by PCIT under Section 279(1) is lawful and sufficient.CBDT Circulars 24/2019 and 5/2020 do not require collegium approval for cases exceeding ₹25 lakh.
Prosecution under section 276C(1) and 278E was correctly initiated.
High-value evasion cases (>₹25 lakh) can be prosecuted at any stage with PCIT sanction alone.
By,
Ajay Kumar Agarwal, FCA
Sr. Partner
Ajay K. Agarwal & Associates Chartered Accountants, New Delhi
(N.B: All statements, opinions, and analysis presented in this article represent the independent personal views of the author and do not necessarily reflect the views of publication or its editorial team.)
