Anitha Kumaran v. The State Rep. Bythe Deputy Commissioner Of Income Tax,Circle 6 (2)

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 04.02.2022 CORAM: THE HONOURABLE MR.JUSTICE N. SATHISH KUMAR CRL.O.P.NOS.8616 & 8617 OF 2018 &CRL.M.P.NOS.4455 TO 4458 OF 2018 1.M/s. Solar Paper Mills Limited, rep. by its Managing Director - Mr.Kumaran Kandasamy, S/o. Mr.Kandasamy, Managing Director – M/s.Solar Paper Mills Limited, No.43/1, Besant Avenue Road, Adayar, Chennai – 600 020. 2.Kumaran Kandasamy 3.Anitha Kumaran ...Petitioners in both the Crl.O.P.'s Vs The State rep. byThe Deputy Commissioner of Income Tax,Circle 6 (2),No.121, Mahatma Gandhi Road,Chennai – 600 034. ...Respondent in both the Crl.O.P.'s COMMON PRAYER : Criminal Original Petitions filed under Section482 of Cr.P.C. to call for the records in E.O.C.C.Nos.613 & 614of 2017 pending on the file of the Additional Chief MetropolitanMagistrate Court – E.O.- II, Egmore, Chennai and quash the same. These petitions have been filed to quash the charge sheetsin E.O.C.C.Nos.613 & 614 of 2017 pending on the file of the https://hcservices.ecourts.gov.in/hcservices/ Additional Chief Metropolitan Magistrate Court – E.O. - II,Egmore, Chennai filed against the petitioners for the offencepunishable under Section 276C(1) of the Income Tax Act, 1961. 2. The brief facts of the case leading to filing of theCrl.O.P.No.8616 of 2018 is that the accused company has filed areturn of income on 07.12.2006. Thereafter, an assessment Orderwas passed under Section 143(3) dated 16.03.2015 whereinadditional income under long term capital gain and income fromother sources of Rs.1,13,78,028/- was computed as income andthereafter, penalty proceedings were concluded on 29.06.2009levying the penalty of Rs.59,36,635/- and the appeal filedbefore the Commissioner and the I.T.A.T., Chennai is alsodismissed. Hence, it is the contention of the complainant thataccused have willfully attempted to conceal the income to avoidtax. Hence, the prosecution has been initiated under Section271C(1) of the Income Tax Act. 3. The subject matter of the Crl.O.P.No.8617 of 2018 is thatthe complainant has filed similarly complaint for non payment ofthe penalty. It is the contention of the respondent that theaccused has failed to pay the penalty amount within the timelimit under Section 156 of the Income Tax Act. Thereby, he isliable to be prosecuted under Section 276C(ii). 4. The learned Counsel appearing for the petitioner wouldsubmit that the Income Tax Returns for the Assessment Year 2006-07 has been filed declaring the Income and also sale of theagricultural property. Taking note of the circular in circularNo.310[F No.164/15/18-IT dated 29.07.1981, which states thatall the lands falling in the municipality of Chengalpet up to adistance of 5 kms from all sides are agricultural lands, theIncome Tax Returns have been filed setting out correct income.Therefore, exemption has been claimed on the basis of thecircular. It is to be seen that whether there is any willfulattempt to evade tax. It is further submitted that theassessing officer mainly has come to the conclusion based on thereport obtained from the Town Planning Authority. TheAssessment proceedings has been passed under Section 143(3) ofthe Income Tax Act and a sum of Rs.39,05,711/- has been demandedas tax payable. 5. It is the further contention of the learned counsel forthe the petitioner that above tax has been paid on 20.01.2009.Thereafter, a Show Cause Notice was issued for the penaltyproceedings and penalty of Rs.29,36,623/- has also been paidmuch prior to the private complaint. It is also submitted thatthere was no willful attempt in any manner whatsoever to evadethe tax or payment of tax. He has filed the Income Tax Returnsbonafidely claiming exemption taking note of the circular issued 5. It is the further contention of the learned counsel forthe the petitioner that above tax has been paid on 20.01.2009.Thereafter, a Show Cause Notice was issued for the penaltyproceedings and penalty of Rs.29,36,623/- has also been paidmuch prior to the private complaint. It is also submitted thatthere was no willful attempt in any manner whatsoever to evadethe tax or payment of tax. He has filed the Income Tax Returnsbonafidely claiming exemption taking note of the circular issued in this regard. Therefore, submitted that as the entire penaltyhas been paid whereas the complaint shows as if the amountremains unpaid. The same itself indicate non application ofmind. At any event, there is no willful attempt in any manner toevade tax or penalty. Hence, the prosecution against thepetitioners is nothing but abuse of process of law. He has alsosubmitted that as against the co-accused, this Court inCrl.O.P.Nos.8930 & 8931 of 2018 by an order dated 11.08.2021 hasquashed the prosecution. 6. The learned Counsel for the respondent submits that theaccused has failed to pay the penalty amount within the timeunder section 156 of the Income Tax Act. Thereby, he is liableto be prosecuted. In the Income Tax Returns, the property hasbeen shown as an agricultural property. Whereas in theproceedings under Section 143, it is found that the land whichwas sold is not an agricultural property. Therefore, it is aclear case of concealment. Therefore, merely because tax hasbeen paid subsequently, the same will not absolve the petitionerfrom prosecution. It is his further contention that whether thepetitioner is entitled to claim the benefit under the circularor not is to be decided only before the appeal proceedings andnot in this petition. Hence, submitted that as the accused paidthe tax that itself amounts as concealment of the income. Hence,opposed to quash the proceedings. 7. I have perused the materials particularly complaint. 8. In the entire complaint, except contending that theaccused willfully attempted to conceal the income so as to evadethe tax following the demand and the amount remained unpaid, noother particulars, whatsoever have been stated in the complaintindicating the manner in which petitioner made willful attemptto evade the tax or payment of tax or penalty. From thecomplaint and the submissions of both sides, it is seen that themain grievance of the Department is that while filing thereturns, the petitioners have shown the property as anagricultural property. However, the same is not an agriculturalproperty. Therefore, there is a concealment and an attempt toevade the tax. 9. The main contention of the learned Counsel for thepetitioner is that Income Tax Returns for the Assessment Year2006-07 has been filed showing the correct particulars of theincome derived from the sale of the property and it is alsostated that such return was filed taking note of the circular incircular No.310[F No.164/15/18-IT , in Chengalpet Districtareas up to the distance of five kilometres from all thedirections in Chengalpet has to be treated as agricultural land.Therefore, merely because exemption has been claimed only based on the circular and returns have been filed setting out thecorrect income. It has to be seen whether there is a willfulattempt in any manner whatsoever to evade any tax. In theproceedings under Section 143, the assessing officer mainly cameto the conclusion based on the report obtained from the TownPlanning Authority, and the relevant portion of the report readsas follows: “The Engineer verified the survey numbers inthe town planning master Book, and said that thelands come under urbanisation lands and allactivities can be made in these lands exceptpollution related activities. There is no needof conversion certificate from agricultural landto non-agricultural land, for these zones.” on the circular and returns have been filed setting out thecorrect income. It has to be seen whether there is a willfulattempt in any manner whatsoever to evade any tax. In theproceedings under Section 143, the assessing officer mainly cameto the conclusion based on the report obtained from the TownPlanning Authority, and the relevant portion of the report readsas follows: “The Engineer verified the survey numbers inthe town planning master Book, and said that thelands come under urbanisation lands and allactivities can be made in these lands exceptpollution related activities. There is no needof conversion certificate from agricultural landto non-agricultural land, for these zones.” The above report itself makes it clear that to conclude that theproperty is not an agricultural property, the reason assignedwas that the Assessee has not produced the lease deed. Exceptthat there is no other material to conclude that the propertyis not an agricultural property. Even the report from the TownPlanning Authority itself shows that there is no need ofconversion certificate from the agricultural land to non-agricultural land. Above report itself clearly shows that theproperty has been originally classified as an agricultural land.Though this finding is not a germane for consideration and thisCourt cannot sit as an appellate authority over the assessingauthorities order. Such findings are also relevant to decidewhether the petitioners have made any willful attempt whatsoeverto evade the tax or to payment of any tax or penalty. Section276C reads as follows: “Wilful attempt to evade tax, etc. 276C – (1) If a person wilfully attempts inany manner whatsoever to evade any tax, penalty orinterest chargeable or imposable under this Act,he shall, without prejudice to any penalty thatmay be imposable on him under any other provisionof this Act, be punishable - (i) in a case where the amount sought to beevaded exceeds one hundred thousand rupees, withrigorous imprisonment for a term which shall notbe less than six months but which may extend toseven years and with fine; (ii) in any other case, with rigorousimprisonment for a term which shall not be lessthan three months but which may extend to threeyears and with fine. (2) If a person wilfully attempts in anymanner whatsoever to evade the payment of any tax,penalty or interest under this Act, he shall,without prejudice to any penalty that may beimposable on him under any other provision of thisAct, be punishable with rigorous imprisonment fora term which shall not be less than three monthsbut which may extend to three years and shall, inthe discretion of the court, also be liable tofine. Explanation – For the purposes of thissection, a willful attempt to evade any tax,penalty or interest chargeable or imposable underthis Act or the payment threof shall include acase where any person - (i) has in his possession or control anybooks of account or other documents (being booksof account or other documents relevant to anyproceeding under this Act) containing a falseentry or statement; or(ii) makes or causes to be made any falseentry or statement in such books of account orother documents; or (iii) wilfully omits or causes to be omittedany relevant entry or statement in such books ofaccount or other documents; or (iv) causes any other circumstance to existwhich will have the effect of enabling such personto evade any tax, penalty or interest chargeableor imposable under this Act or the paymentthereof.” (i) has in his possession or control anybooks of account or other documents (being booksof account or other documents relevant to anyproceeding under this Act) containing a falseentry or statement; or(ii) makes or causes to be made any falseentry or statement in such books of account orother documents; or (iii) wilfully omits or causes to be omittedany relevant entry or statement in such books ofaccount or other documents; or (iv) causes any other circumstance to existwhich will have the effect of enabling such personto evade any tax, penalty or interest chargeableor imposable under this Act or the paymentthereof.” 10. The above explanation further makes it clear that if anyof the circumstances narrated in the explanation is unearthed ormade by the accused then such conduct certainly will fall withinthe ambit of willful attempt to evade any tax or penalty. Thefact remains that in the returns filed by the accused, there wasno suppression of facts. He has set out the value of theproperty sold and claimed only exemption based on the circularwhich also indicate that the land areas up to the distance offive kilometres in all directions from the municipality ofChengalpet are agricultural properties. Based on the abovecircular, the return has been filed. Therefore, in any event,claiming exemption based on the circular orders issued from timeto time by the Central Government by way of notification, suchact cannot be construed to mean an willful attempt in any mannerwhatsoever to evade income tax or payment of tax or penalty. 11. It is not disputed that the petitioners also challengedthe initiation of the penalty before the commissioner and theappellate tribunal which went against them. It is also relevant https://hcservices.ecourts.gov.in/hcservices/ to note that the tax determined by the assessing authorities fora sum of Rs.39,05,711/- has been paid by the petitioners on20.01.2009 itself. In the mean while, the penalty proceedingshas been initiated by the Department and a sum of Rs.29,36,675/-has been imposed on the petitioner. After the dismissal of theappeal, the Show Cause Notice was issued by the Department on22.06.2017 for demanding the penalty imposed on them. Pursuantto the Show Cause Notice, the penalty imposed is also paid bythe assessee. It is to be noted that such payments are madebefore filing of prosecution before the Courts. As far as thetax is concerned, the same was paid on 20.01.2009 itself andpenalty also paid subsequent to the Show Cause Notice issued.Whereas, the complaint proceed as if the tax and penalty remainsunpaid. Same indicate that there was no willful attemptwhatsoever in any manner to evade the tax or payment of tax.The respondent has mechanically filed the complaint, withouteven ascertaining whether the amount of tax has been paid ornot. But as per the admitted facts as narrated above, tax aswell as penalty has been paid much prior to the initiation ofthe prosecution. Be that as it may. 12. As indicated above to prosecute a person for theoffence under Section 276C(1), there must be willful attempt inany manner by the accused for the evasion of the tax or paymentof tax. Therefore merely because of the exemption claimedbased on the Board circular, sale of property shown asagricultural property pursuant to such circular, this Court isof the view that mere claiming of such exemption based on thenotification of the Central Government merely because theassessment order was passed later not agreeing that, it cannotbe said that there is a willful attempt. If the entire amount orincome has not been shown or anything has been unearthed latereither by inspection or search or enquiry, then it can be saidthat there was an attempt to conceal or evade the tax. But here,in the present case, correct particulars have been set out whatwas sought is only exemption as per the notification. 13. Therefore, this Court is of the view that theprosecution has not applied their mind and offence under Section276C and also Section 276C(2) is made out. Hence, prosecutionagainst the petitioners is nothing but futile exercise. It isalso relevant to note that as against the other co-accused, thisCourt has quashed the proceedings as early as on 11.08.2021.Till date, the said order has not been challenged. Therefore,the same is also binding on the revenue. At any event, theprosecution is not maintainable as against the petitioners. 14. Accordingly, these Criminal Original Petitions areallowed and the charge sheets in E.O.C.C.Nos.613 & 614 of 2017pending on the file of the Additional Chief Metropolitan Magistrate Court – E.O. - II, Egmore, Chennai filed against thepetitioners for the offence punishable under Section 276C(1) ofthe Income Tax Act, 1961 are quashed. Consequently, theconnected miscellaneous petitions are closed. Sd/- Assistant Registrar(CS-VIII) // True Copy // vrc / kbs Sub Assistant Registrar To 1.The Additional Chief Metropolitan Magistrate Court – E.O.- II, Egmore, Chennai. 2.The Deputy Commissioner of Income Tax, Circle 6 (2), No.121, Mahatma Gandhi Road, Chennai – 600 034. +1cc to the Special Public Prosecutor for Income Tax, Sr.No.7753 Crl.O.P.Nos.8616 & 8617 of 2018 &Crl.M.P.Nos.4455 to 4458 of 2018 NR(CO)RVM(18/03/2022)