The Supreme Court sentenced the owner of the Jatan Prasad Lalchand Prasad (JPLP) departmental store in Phuentsholing, Lalchand Prasad, to five years in prison for tax evasion last week.
The Supreme Court also ordered Lalchand Prasad to refund Nu 154.61 million (M) to the government within a month from the day of judgment. The court ruled that his prison term was non-compoundable.
The Supreme Court found out that JPLP had evaded Nu 38.98M worth of tax between 2011 and 2014. Including the penalty for concealment and 24 percent per annum interest for late payment, the refund amount became 154.61M.
In 2015, the Office of the Attorney General (OAG) charged JPLP 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 (Amendment) of Bhutan 2011.
Section 35.1 of the ITA 2001 states: “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.”
Section 35.2 of the ITA 2001 states: “Expenses related to income under Section 35.1 shall be disallowed as deductions.”
The Anti-Corruption Commission (ACC) detained Lalchand Prasad on June 17, 2015 on suspicion of tax evasion. Following the investigation, the OAG filed a case against Lalchand Prasad and owners of four other business entities from the town at the Phuentsholing drungkhag court on September 4 that year. Lalchand Prasad was charged for tax evasion, deflection of goods, false invoicing and declaration of goods.
However, Lalchand Prasad was released on a bail amount of Nu 80M by the 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.
Phuentsholing drungkhag court’s judgment in July 2018 ruled out that JPLP has to pay Nu 14.487M against the evaded tax worth Nu 184M in four years from 2011 to 2014.
After the drungkhag court, 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.
ACC stated that JPLP’s tax evasion was Nu 26.12M in 2014, Nu 4.44M in 2013, Nu 9.12M in 2012 and Nu 14.97M in 2011.
ACC also stated that the amount of tax evaded each year exceeds the daily national minimum wage of 30 years, Nu 1.35M is prescribed under section 18(a) of the Penal Code and due to this, his tax evasion crime fell under third-degree felony.
During the drungkhag court proceedings, the defendant submitted that his company was liable for fines and penalties of Nu 8.69M and not Nu 184M as submitted by the OAG.
However, OAG representatives explained that the taxable amount after fines and penalties was determined from what the ACC discovered and what the defendant had declared to the customs office in Phuentsholing.
Upon finding that the OAG had made a double entry and overstated the purchase amount, the court deducted Nu 49M. However, the OAG’s new findings showed that JPLP was still liable for tax evasion amounting to Nu 126.89M, which included purchase cost.
After the High court’s larger bench judgment in 2019, ACC prosecuted the case. ACC was not satisfied with the High Court’s larger bench judgment which altered the judgment of the lower courts. Moreover, the OAG didn’t appeal further.