HC Upholds Prosecution Sanctions: Large-Scale Tax Evasion Cases Need No Collegium Approval, Says Court

Saumya Chaurasia challenged multiple sanction orders issued in February 2025 authorising prosecution against her under Sections 276C and 278E of the Income Tax Act for several assessment years. She argued that the sanctions violated CBDT Circulars Nos. 24/2019 and 5/2020, contending that prosecution could only be launched after the penalty was confirmed by the ITAT and with prior approval of a collegium of two senior tax officers. The assessee also highlighted ongoing criminal proceedings, pendency of appeals before the CIT(A), alleged procedural defects in assessment orders, and constitutional concerns over the circulars.

The Revenue countered that searches had revealed substantial tax evasion exceeding Rs. 348 crores, that assessments were completed lawfully, and that under the circulars, cases involving evasion above Rs. 25 lakhs require only the PCIT’s sanction, already obtained in this case.

Issue Before Court: Whether prosecution sanctions issued under Section 279(1) were invalid for lack of collegium approval and whether CBDT Circular No. 5/2020 was arbitrary or unconstitutional.

HC’s Decision: The Delhi High Court rejected the petitioner’s interpretation of the CBDT circulars, holding that the requirement of prior approval from a collegium of two CCIT/DGIT officers applies only to cases involving tax evasion of Rs, 25 lakhs or below. Where alleged evasion exceeds that threshold the sanctioning authority is only the PCIT, and no collegium approval is required. The Court found that Circular No. 5/2020 merely clarifies the 2019 circular and does not amend the framework for high-value cases. It further held that prosecution need not await penalty confirmation by the ITAT when evasion exceeds Rs. 25 lakhs, since the circular’s language conditions such safeguards only for small-value matters. The sanction orders therefore contained no legal infirmity.

The Court held that the circulars create a clear and rational distinction based on the magnitude of tax evasion. The petitioner’s broader objections were treated as factual issues appropriate for adjudication before appellate authorities and not grounds to restrain prosecution. Case law cited by the petitioner was distinguished as factually dissimilar. Since approval had been validly granted by the PCIT and the circulars were neither arbitrary nor violative of Article 14, the Court upheld the prosecution sanctions and dismissed the petition.

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