PCIT Sanction Sufficient For Tax Evasion Exceeding Rs. 25 Lakhs; No Need for Collegium Approval: Delhi HC

The Delhi High Court while upholding the validity of Circular No. 5/2020 dated 23.01.2020 issued by Central Board of Direct Taxes (CBDT) which provided for launch of prosecution in deserving cases at any stage of the proceeding, held that the appropriate authority for initiating the prosecution proceedings would be the sanctioning authority i.e., the PCIT and not the collegium of two CCIT/DGIT rank officers since the tax to be evaded exceeds Rs. 25 Lakhs. The bench of Justice V. Kameswar Rao and Justice Vinod Kumar has dismissed a writ petition challenging the Income Tax Department’s decision to launch prosecution in a major tax-evasion case involving alleged concealed income across multiple assessment years. The bench upheld the validity of sanction orders issued under Section 279(1) of the Income Tax Act and rejected the plea to strike down CBDT Circular No. 5/2020, which governs prosecution criteria for tax offences. The Income Tax Department conducted a search and seizure operation in February 2020 at the petitioner’s residence in Bhilai, Chhattisgarh. Following the search, centralised assessment proceedings were initiated, culminating in assessment orders for several years from AY 2011-12 to 2022-23. The assessments resulted in an aggregate tax demand exceeding Rs. 348 crore, including additions under Sections 69 and 69A based on loose papers, diary entries, WhatsApp chats, and alleged benami investments. The petitioner filed statutory appeals before the Commissioner of Income Tax (Appeals) but did not deposit 20% of the demand as required for stay under CBDT norms, prompting recovery measures. During this period, the petitioner also faced multiple FIRs, investigation by the Enforcement Directorate (ED), and proceedings under the Bhartiya Nagarik Suraksha Sanhita (BNSS). The petitioner sought to quash sanction notices dated February 10, 11, and 19, 2025, authorizing prosecution under Sections 276C (wilful attempt to evade tax) and 278E (presumption of culpable mental state).The petitioner argued that CBDT Circulars of 2019 and 2020 mandate prosecution only after the penalty is confirmed by the ITAT, especially where the quantum of disputed tax is large. The sanction was allegedly issued mechanically without reasons and without considering the pendency of appeals. Circular No. 5/2020 was claimed to be arbitrary and violative of Article 14, giving unbridled discretion to authorities. Mr. Ruchit Bhatia, the counsel for the CBDT has contended that the alleged tax evasion far exceeded the Rs. 25-lakh threshold, meaning only the PCIT’s sanction was required, not approval of a collegium. CBDT Circular 5/2020 allows prosecution at any stage, especially in cases arising from search operations. Section 275 does not bar prosecution during pendency of appeals. The petitioner had not cooperated with recovery and had not discharged statutory dues despite repeated opportunities. The Court rejected each of the arguments, observing that since the alleged evaded tax was far above ₹25 lakh, the approving authority was the sanctioning authority (PCIT), and no collegium approval was necessary. The Bench held that the circular allows prosecution to be launched “ordinarily” after penalty confirmation, but it also permits prosecution at any stage for serious cases, including search cases. The Court found no ambiguity or arbitrariness. The Court cited established Supreme Court precedents that criminal prosecution under tax laws may proceed independent of appellate proceedings. The plea claiming violation of Article 14 was dismissed, with the Court holding that the circular provides a rational classification to avoid prosecuting small cases while ensuring strict action in large-scale evasion. The Court declined to interfere with the merits of such additions, stating these must be examined by appellate authorities, not in a writ seeking to block prosecution. Concluding that no procedural or legal infirmity existed in the prosecution sanction, the Bench dismissed the writ petition along with all pending applications. Case Details Case Title: Saumya Chaurasia Versus Union Of India & Others Case No.: W.P.(C) 8191/2025 CM APPL. 35871/2025 CM APPL. 64534/2025 Date: 08.12.2025 Counsel For Petitioner: Balbir Singh, Sr. Advocate Counsel For Respondent: Ruchir Bhatia, SSC Click Here To Read Order Read More: DGGI | Meerut Court Refuses Bail To Person Accused Of Availing Fraudulent ITC Through Non-Existent Firm

PCIT Sanction Sufficient For Tax Evasion Exceeding Rs. 25 Lakhs; No Need for Collegium Approval: Delhi HC

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