OAG appeals to High Court against JPLP case judgement

High Court

The Office of the Attorney General (OAG) has appealed to the High Court against the judgement passed by the Phuentshogling Dungkhag Court on the tax evasion case involving the owner of M/s Jatan Prasad Lalchand Prasad (JPLP), an Indian grocery store operating in Phuentshogling.

 The OAG, in its appeal letter to the High Court, stated that while it respects the decision of the dungkhag court, it feels the court has erred in considering deduction of purchases (Direct Costs) associated in the evaded income of the defendant, which is expressly barred by the Income Tax Act, 2001.

The OAG also stated that there is a need to determine under which acts such defendants are to be convicted. “The subordinate court held the Anti-Corruption Act 2011 (ACA) as the Specific Act and other relevant acts as the General Act, and ordered the defendant to pay a fine of twice the tax amount evaded as per ACA,” it stated.

The state prosecutor added that it is of the view that the section in the ACA, which defines tax offence, is inexplicit, whereas the provision in the Penal Code of Bhutan is explicit to convict defendants guilty of tax evasion.

Describing the Phuentsholing Dungkhag Court’s decision as an outcome of misinterpretation of the relevant acts, the OAG stated that it is important to appeal against it. If not, the case would set a bad precedent and the result, the OAG said, would be the country will never have a true tax payer. It added the case will encourage business operators to breed similar criminal offences.

“And also, it will bring serious inconveniences to the tax collecting agencies,” it added.

Background on the case

The OAG initiated the prosecution against the owner of JPLP for tax evasion after finding out that he had intentionally furnished inaccurate income while filing annual returns for four years from 2011 to 2014.

While comparing the income he filed at the Regional Revenue and Customs Office (RRCO) in Phuentshogling and the data maintained in the two software systems by the defendant, it was discovered that he had over-stated the purchases of the year 2011 and under reported the sales of 2012, 2013 and 2014.

The Phuentsholing Dungkhag court, where the case was heard, convicted the Indian businessman and ordered him to pay over Nu 14 m as penalty for evading tax.  In the judgement passed on July 20, the court also asked him to pay over Nu 7 m in lieu of imprisonment.

The OAG actually had asked the court to order the defendant to restitute to the state Nu 184 m after imposing fines and penalties on the evaded income as per the Income Tax Act, 2001. It also requested that the defendant be held liable under Section 283 and 284 of the Penal Code of Bhutan.

However, the defendant contended that there is no purchase over-statement to the tune of Nu. 49 m for year 2011. For year 2014, sales amounting to Nu 3m have been also recorded twice, meaning double entry. The OAG verified and considered as contended by the defendant. So, the revised or consolidated claim of OAG was Nu 126 m, Nu 58 m less from its initial claim.

But the defendant again contended that the purchase associated in the evaded tax amount (Nu 126 m) must be considered deductions. To this, the OAG had asserted that once the tax evasion is established, such consideration is barred by the Income Tax Act, 2001.

However, the dungkhag court, considered the deductions as contended by the defendant and ordered him to restitute only Nu 14 m.

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