The day of 29th August 2019 witnessed high drama between the Anti Corruption Commission (ACC) and the Office of the Attorney General (OAG) over the Jatan Prasad Lal Prasad (JPLP) tax evasion case.
Prior to this the ACC had sent two reminders to the OAG to appeal the case. Two internal committees of OAG which are the sub-screening corpus and general corpus also recommended to appeal the case.
On the final day of the appeal on 29th August 2019 an ACC Commissioner and the former ACC Chairperson herself both tried to repeatedly call the former Attorney General Shera Lhendup on his mobile and even messaged him to find out about the appeal but there was no response.
ACC had said it learnt about the AG’s decision to not appeal only at the last moment after which the ACC had to rush to the Supreme Court and file its own appeal in the last hour.
The former AG at the time said ACC cannot appeal both under the Constitution and the also under the Civil and Criminal Procedure Code and so the Supreme Court should not accept the ACC’s appeal.
The Supreme Court, at the time did a review of ACC’s right to appeal the case and in a weekly meeting of justices they voted to accept the ACC appeal.
The SC decided to accept ACC’s appeal as per section 128 (3) of the ACC Act which says ‘The Commission may carry out its own prosecution of a person charged with an offence under this Act or take over the prosecution process from the Office of Attorney General when the case is: (a) Delayed without a valid reason; (b) Manipulated; or (c) Hampered by interference.”
What was also a factor was that the OAG had appealed the trial court verdict to the high court saying that the sentencing was too less. The high court bench 3 had enhanced the sentencing and fines significantly but the defendants lawyer appealed to the larger bench. The larger bench of the High Court had given a verdict similar to the trail court.
What did not make sense in the OAG’s stance to not appeal to the SC was that while it appealed the trail court verdict saying the sentencing was too less it decided to not do the same for a similar decision by the larger bench of the high court.
The supreme court did its first joint bench hearing towards the end of 2019. Then the pandemic struck in 2020 and the second hearing could not be done on the case with the lockdowns.
The second joint bench hearing was to be conducted on 30th December 2020 but the second lockdown happened.
In 2021 the hearing again got impacted as the lead judge in the case Justice Kuenlay Tshering was detained over criminal conspiracy charges.
However, the decision of the SC to accept ACC’s right to appeal the case comes as yet again another embarrassment for the OAG and a vindication of the ACC’s arguments on why the case was fit for appeal to the Supreme Court
The JPLP wholesale cum retail business in Phuentsholing was investigated in 2015 by the ACC for tax evasion. The defendant Mr. Jatan Prasad Lal Chand Prasad and his staff Mr. Rajesh Choudhary were charged for tax evasion in Phuentsholing Dungkhag Court with restitution of Nu. 126.897 million in back taxes and penalties.
The trial court ruled that the defendant should be given the deduction of direct cost and accordingly ordered the total restitution of only Nu. 14.487 million and additional Nu 7.875 million as fines.
The Office of the Attorney General (OAG) appealed to the High Court. The High Court Bench III ruled in favour of the OAG and sentenced the defended to 5 years’ non-compoundable imprisonment term in addition to restitution of Nu. 126.897 million.
The defendant moved the appeal to Larger Bench who, by and large, upheld the judgment of Phuentsholing Dungkhag Court.
After the judgment rendered by the Larger Bench, the ACC said it reviewed it and formally suggested the OAG writing two times to appeal but the Attorney General did not respond.
ACC’s grounds of appeal
The ACC had said it wanted to appeal the JPLP case to the SC based on three grounds.
The first ground according to ACC is that under section 35.1 and 35.2 of the Income Tax Act a person found guilty of tax evasion should pay a penalty on the total income with no deduction for any expenses which ACC says is a total restitution and fines of Nu 126.897 mn in this case.
This is because those guilty of tax evasion cannot claim deduction of expenses from the total revenue.
The ACC said that the larger bench allowed the deduction of direct cost from the restitution and fines part thinking it is not part of expenses.
However, ACC said that direct costs and expenses means the same thing and are used interchangeably and they pointed to the Business Income Tax form in the Income Tax Rules 2001 where direct expenses includes direct purchase and all other expenses under one head.
The ACC also highlighted that in all past tax evasion cases the the term expense also includes direct cost.
The ACC said that the second ground is that the Supreme Court in a similar OAG vs Yeshi Choden Scrap Dealer case had also not allowed the deduction of any direct costs and made her restitute the entire revenue amount along with fines and with no deductions allowed.
ACC said the ruling of the larger bench of the High Court is not in accordance with accounting principles and the precedent set by the SC.
The third ground for the ACC is that if this case is not appealed it will become a ‘case law’ or precedent for future tax evaders to get away very lightly and so tax evasion would be go up significantly as there would be no strong legal consequences.
The former AG had said that the decision to not file an appeal to the Supreme Court is based on the Rules of Procedure (RoP) of the OAG which says that if two courts give the same or similar judgment then the OAG may not file an appeal and it is up to the OAG.
ACC’s concerns and former AG’s response
The ACC in a press conference in September 2019 said that it is a matter of fact that the legal company of the defendant JPLP is Bhutan Law Service which was formerly owned by the then AG.
ACC officials at the time said that they are concerned with how this JPLP case has been handled right from the beginning.
They said this started in 2015 September with the Attorney General personally going to Phuentsholing himself and reducing the bail amount of Jatan Lal Prasad from Nu 184 mn to Nu 80 mn without consulting the ACC.
On ACC’s pointing out that he formerly owned Bhutan Law Services, the former AG had said that he had given up its ownership and handed it to the two lawyers there and severed all links with the law firm and had no dealings with it and so it is unethical on the part of ACC to now bring it up.
He had said ACC is coming up with ‘cheap assumption and presumptions’ and if this is the approach then everybody in Bhutan would be in some conflict or the other.
On the issue of the negotiation of the bail amount the AG had said that the OAG had negotiated the bail amount at Nu 80 mn which is the highest in Bhutanese history as normally bail amounts in other cases do not exceed four to five lakhs. He said it was then the decision of the court to agree to the bail at that amount and accordingly release Jatan for that amount.
He had said there is separation of powers and functions in terms of investigation and prosecution between ACC and OAG for a fair criminal justice system and so if they interfere too much then it would not be appreciated under rule of law.
In the September 2019 press meet the ACC highlighted how even in the Gyelpozhing case the OAG at the time had declined to prosecute the case and the ACC had to step in.
It said that the Trongsa case is another example where the ACC had to prosecute the case on its own after OAG’s refusal.