Prosecution Cannot Be Based on Suspicion and Unauthenticated Foreign Documents Swiss Bank Account Data: Delhi High Court Quashes Criminal Complaints Against Anurag Dalmia

“Mere Appearance of a Name in Foreign Leaks Without Verifiable Evidence Cannot Trigger Prosecution”, In a significant ruling delivered Delhi High Court quashed criminal complaints instituted under Sections 276C(1)(i), 276D, and 277(1) of the Income Tax Act, 1961. Justice Neena Bansal Krishna held that “prosecution initiated solely on the basis of unauthenticated documents, with no independent incriminating material found during search proceedings, amounts to abuse of the process of law.”

Terming the prosecution as “legally untenable,” the Court highlighted that the Income Tax Appellate Tribunal (ITAT), being the final fact-finding authority, had set aside the assessment orders and consequently, the very foundation of the criminal proceedings had crumbled.

Origin of the Case: A Decade-Old Tax Reopening Based on Foreign Data Falls Apart

The saga began when the Indian tax authorities, acting upon information received from the French government under the Double Taxation Avoidance Agreement (DTAA), reopened the petitioner’s tax assessments for the years 2006-07 and 2007-08. The French authorities provided documents alleging that Mr. Anurag Dalmia was linked to several foreign bank accounts in HSBC Private Bank, Switzerland.

Interestingly, as recorded by the Court, “the petitioner had already filed his original returns, they were processed, refunds were issued, and no proceedings were pending for the said years.” Yet, eight years later, the assessments were reopened purely on the basis of these foreign leaks.

A search operation was conducted under Section 132 of the Income Tax Act, but the Court noted, “the raid yielded no incriminating material whatsoever connecting the petitioner with any undisclosed foreign asset.”

Subsequently, the Assessing Officer imposed additions, penalties, and initiated criminal complaints under the Income Tax Act. However, the ITAT, in its order dated 15th February 2018, set aside all additions, observing a complete absence of material evidence.

“No Case Exists When the Entire Foundation of Assessment Is Demolished”: Court Rebukes Tax Authorities

Justice Bansal Krishna emphatically observed, “Where assessment orders are set aside by the ITAT on the ground of absence of incriminating material, continuation of prosecution is nothing but persecution.”

Rejecting the Revenue’s claim that criminal prosecution is independent of assessment, the Court drew a sharp distinction between mere technical quashing and exoneration on facts. It held that in this case, the ITAT’s finding was clear: “there was no corroborative evidence of undisclosed foreign income or assets.”

Relying on the Supreme Court’s judgment in K.C. Builders v. Assistant Commissioner of Income Tax (2004) 2 SCC 731, the Court stated:

“Once the Appellate Tribunal arrives at a conclusion that there is no concealment of income, criminal prosecution cannot be allowed to survive.”

“Non-Signing of Consent Waiver Form Is Not a Crime in the Absence of Proven Offence”: Court Rejects Section 276D Charge

A key element of the prosecution was the petitioner’s refusal to sign a consent waiver form authorizing Indian authorities to collect Swiss bank details.

Justice Bansal Krishna observed, “Non-signing of the Consent Waiver Form, in the absence of any credible basis to link the petitioner to any Swiss bank account, cannot be construed as a criminal offence… at most, it attracted a civil penalty which has already been imposed and upheld.”

The Court reinforced the fundamental right against self-incrimination by stating,

“The state cannot coerce a citizen to incriminate himself based on unverified documents whose authenticity even the Department could not establish.”

“No Falsification, No Concealment, No Fraudulent Income – Criminal Prosecution Has No Legs to Stand On”: Delhi High Court Rules Decisively

The Court’s analysis of each charge left no room for ambiguity.

Regarding the charge of willful tax evasion under Section 276C(1)(i), the Court observed, “With the assessment itself being declared invalid due to lack of evidence, the allegation of willful evasion of tax collapses automatically.”

On the count of Section 277, alleging false statements, the Court noted, “No material evidence has been placed on record to demonstrate that the petitioner made any false declaration; the assertion of falsehood is a bald allegation without substance.”

Conclusively, Justice Bansal Krishna ruled, “The criminal complaints are founded on speculation, unauthenticated documents, and assumptions. Prosecution on such fragile grounds is antithetical to the rule of law.”

“Presumption of Guilt Cannot Arise in a Vacuum”: Court Cites Supreme Court Precedents to Protect Taxpayers’ Rights

Drawing from the Supreme Court’s ruling in Ram Jethmalani v. Union of India (2011) 8 SCC 1, the Court reminded,

“There is no presumption that every person whose name appears in a foreign account leak is guilty of tax evasion.”

The Court also invoked K.C. Builders and G.L. Didwania v. ITO (1995 Supp (2) SCC 724) to assert that once assessment and penalty proceedings are nullified by the appellate authority, prosecution becomes meaningless.

The judgment also rebuked the tax department’s argument based on procedural technicalities, remarking,

“This Court cannot turn a blind eye when the very bedrock of the criminal complaint has been found legally unsustainable.”

Quashing of Complaints to Prevent Miscarriage of Justice

In a detailed verdict extending over 120 paragraphs, Justice Bansal Krishna concluded, “In the light of the absence of any corroborative evidence or prima facie material linking the petitioner to undisclosed income or foreign assets, allowing the continuation of criminal prosecution would result in grave injustice.”

Accordingly, both criminal complaints against Mr. Anurag Dalmia—Complaint Nos. 536622/2016 and 517460/2016—were quashed.

High Court Reaffirms Limits of Prosecution Powers in Tax Cases

This judgment delivers a clear message: prosecuting taxpayers requires concrete evidence, not speculative foreign leaks or unauthenticated data dumps. It fortifies legal protections against misuse of prosecution powers under tax law and ensures that assessment proceedings and criminal liability are not weaponized against individuals without due process.

Date of Decision: 21 July 2025