The High Court’s bench III yesterday ordered Jatan Lal Prasad, the owner of Jatan Prasad Lal Prasad (JPLP) enterprise in Phuentsholing to pay Nu 126.897 million (M) for tax evasion between 2011 and 2014.
He also has to serve five years in prison, which is non-compoundable.
The judgment stated that the defendant had not exercised the rights of taxpayer in normal course of filing tax returns given in the Income Tax Act of Bhutan 2001.
Chapter IV section 10.1 of the Act, states that for ascertaining the taxable income, deductions for expenses incurred wholly and solely for the purpose of the business shall be allowed from the gross income in accordance with the Act’s provisions.
An individual taxpayer, as per the Act, has 15 days from the date of filing to make changes to the details of the tax returns with the revenue and customs department.
The section on fines and penalties states that a fine equivalent to twice the tax amount sought to be evaded in addition to tax due shall be imposed on concealment of the particulars of income or furnishing inaccurate particulars of income and that the expenses related to income under this section shall be disallowed as deductions.
The court ruled that the defendant could not write-off to deduct Nu 12.773M as expenditure from its taxable income of Nu 129.957M.
The court ordered the defendant to pay the amount within a month from the date of the judgment.
The case was appealed directly to the High Court as the Chukha dzongkhag court’s drangpon presided over the case at the Phuentsholing drungkhag court.
Phuentsholing drungkhag court judgment handed in July last year ruled that proprietor of JPLP departmental store has to pay Nu 14.487M against the evaded tax worth Nu 184M in four years from 2011 to 2014.
The Office of the Attorney General (OAG) filed charges against him in September 2015. OAG determined that the defendant JPLP was liable for tax evasion worth Nu 184M under Section 35.1 and 35.2 of Income Tax Act (ITA), 2001. The prosecutor charged the defendant under Section 283 and 284 of the Penal Code.
However, the court sentenced the defendant under Anti-Corruption Commission (ACC) Act 2011 using “last in time” rule under ACC Act, 2011.
Lalchand Prasad was released on bail amount of Nu 80M by OAG on September 16, 2015 after the ACC detained him for three months and denied his bail as nobody was willing to come forward as his guarantor and pay Nu 184M.
The ITA act also states that a person shall be held liable to fines and penalties for default committed by him under the provisions of the Act.
The court also cited provisions on prosecution which states the offender would be imprisoned for willful act or omission to deduct tax at source or pay tax to the government, willful attempt to evade tax or failure to pay fines, penalty or interest imposed under the Act, willful act or omission to file income tax return; willful act or omission to produce books of accounts and documents or making a false statement or deliver false accounts.
While the Act does not grade the degree of imprisonment, the penalties would fall under the Bhutan Penal Code. But the code also states that the offence of tax evasion shall be a value-based sentencing.
The court stated that the charge that the defendant evaded tax was proven beyond reasonable doubt.
The offence graded as value based under this Code shall be a felony of the third degree, if the value or the amounts involved in the crime exceed the total amount of the daily minimum national wage rate at the time of the crime for a period of thirty years (Nu 1.35M) or more.
As per Penal Code and ITA 2001 provisions, the court ordered a non-compoundable imprisonment sentence of five years.
The Office of the Attorney General appealed on three decisions of the drungkhag court. The High Court altered two decisions, one completely and upheld another one.
The court upheld the decision not to sentence the second defendant, who was charged for aiding and abetting, who is at large since the time of investigation.