Firms evading tax must be punished with criminal action: Madras High Court

CHENNAI: Expressing concern over the growing trend of evasion of taxes, the Madras High Court has stated that tax-evading firms must be punished with criminal action and substantial penalties.

“It is saddening to note that tax evasion has been mushrooming in our state/country day-by-day, which is purely illegal and such evasion includes hiding of true income and portrayal of false income, not reporting cash flow, etc.”, a division bench of Justices S Vaidyanathan and C Saravanan said recently while dismissing petitions filed by a Tirupur-based hotelier challenging orders of TN Sales Tax Appellate Tribunal.

The bench affirmed, “The companies/firms/entities which evade payment of tax are liable to be punished under criminal charges with substantial penalties.”

Saying that taxes are the “main sources of income” for the government to go for “welfare schemes” for the people and fund “developmental projects”, the judges noted that the tax-paying companies equally find ways and means to evade leaving the State and the nation face massive problems.

Quoting a report of the national restaurant association of India stating the hotel business is fast growing in the world and is expected to reach INR 5.99 lakh crore by 2022-23, they lamented that despite such growth owners of hotels/restaurants are not inclined to pay taxes which are meant for the public.

Finding the appellate tribunal has rightly analysed the evidence on record and restored the findings of the original authority (commercial tax officer), and there is no perversity in its findings, the division bench dismissed the petitions.

The petitions were filed by filed S Deenadayalan, a partner of Tirupur Sree Annapoorna Hotel, against the order of the appellate tribunal which upheld the conjoint assessment of taxable turnover to the tune of Rs. 66.60 lakh and Rs. 14.35 lakh respectively for the hotel and the sweet stall for the year 1995-96 by clubbing both entities.

Saying that there is a famous saying by Abraham Lincoln that "You can fool some of the people all of the time, and all of the people some of the time, but you cannot fool all of the people all of the time", the bench said the petitioner-hotel had attempted to swindle the Exchequer’s money by evading tax but cannot escape.