Madras High Court Halts Imprisonment in Income Tax Prosecution Pending Appeal

Overview of the Madras High Court Decision

The Madras High Court, in B.Faiyaz Ahamed Vs ACIT, intervened in an income-tax prosecution under Sections 276C(2) read with 278E of the Income Tax Act, 1961 by suspending the rigorous imprisonment awarded by the Trial Court, while the assessee’s criminal appeal is still pending. Importantly, the Court did not interfere with the fine of ₹24,80,35,290/- imposed by the Trial Court.

The order arose out of a challenge to the decision of the Principal District and Sessions Judge, Coimbatore, who had previously refused to suspend the sentence pending appeal. The High Court reversed that approach and granted limited relief by staying only the custodial part of the sentence, subject to stringent bail conditions and regular court appearances.

Factual Matrix and Procedural Background

Prosecution and Conviction by the Trial Court

  • A complaint was lodged against the assessee alleging offences punishable under Sections 276C(2) read with 278E of the Income Tax Act, 1961.
  • After conducting a full-fledged trial, the Trial Court:
    • Convicted the assessee for the said offences.
    • Imposed a sentence of two years’ rigorous imprisonment.
    • Levied a fine of ₹24,80,35,290/-.
    • Ordered that, in default of payment of the fine, the assessee would undergo six months’ simple imprisonment.

The conviction and sentence formed the basis for initiation of appellate and subsequent suspension proceedings.

Appeal Before Sessions Court and Application for Suspension of Sentence

  • Aggrieved by the conviction and sentence, the assessee filed a criminal appeal in C.A.No.317 of 2026 before the Principal District and Sessions Judge, Coimbatore.
  • Pending the appeal, the assessee moved an application in Crl.M.P.No.1 of 2026 seeking suspension of the sentence during the pendency of the appeal.
  • The Sessions Court, via order dated 23.06.2026, dismissed the application and declined to grant suspension of sentence.

This led the assessee to approach the Madras High Court through a Criminal Original Petition challenging the decision of the Appellate Court (Sessions Court).

Contentions Before the Madras High Court

Submissions on Behalf of the Assessee

Counsel for the assessee advanced multiple grounds to justify suspension of sentence:

  1. Improper appreciation of evidence
    It was argued that the Trial Court had mechanically convicted the assessee without adequate or proper assessment of the oral and documentary evidence available on record.

  2. Existence of substantial grounds in appeal
    The assessee contended that there were strong and substantial grounds in the pending criminal appeal that could warrant interference with both the conviction and the sentence.

  3. Ongoing incarceration
    The assessee emphasized that he had already undergone incarceration following conviction, which bolstered the case for suspending further imprisonment until the appeal was adjudicated.