Crl.p/101902/2014 Of M/S Pace Vision v. The Income-Tax Department

IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 24 DAY OF FEBRUARY, 2020 BEFORE THE HON’BLE MR. JUSTICE SURAJ GOVINDARAJ CRIMINAL PETITION NO.101902/2014 BETWEEN: M/s. PACE VISION, 3 FLOOR, SAMSUKHA COMPLEX, KHADE BAZAR, BELGAUM. REP. BY ITS PARTNER SRI NAGESH CHABRIA AND SMT. NISHA CHABBARIA. (BY SRI.KIRAN JAVALI, ADVOCATE FOR SRI V.M.SHEELVANT, SRI M.L.VANTI, SRI VINAY KOUJALAGI, AND SRI M.S.MITTALKOD, ADVS.) ……PETITIONER AND: THE INCOME-TAX DEPARTMENT BY ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, BELGAUM. (SRI PRASANNA KUMAR B.K.) …RESPONDENT (BY Y.V.RAVIRAJ, ADVOCATE) THIS CRIMINAL PETITION IS FILED 482 OF CR.P.C., SEEKING TO QUASH THE ORDER OR TAKING COGNIZANCE DATED 29.03.2014 AND INITIATION OF PROCEEDINGS PURSUANT THERETO AS AGAINST THE PETITIONER IN C.C.NO.219/2014 PENDING ON THE FILE OF THE COURT OF JMFC III COURT, BELGAUM FOR OFFENCE PUNISHABLE UNDER SECTION 276CC OF THE INCOME TAX ACT, 1961. THIS PETITION COMING ON FOR ORDERS THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner is before this Court seeking for quashing of the order taking cognizance dated 29.03.2014 and initiation of the proceedings pursuant thereto as against the petitioner in C.C.No.219/2014 pending on the file of the Court of JMFC III Court, Belgaum, for the offence punishable under Section 276CC of the Income Tax Act, 1961 (‘Act’ for brevity). 2.The background facts of the above matter are that on 29.03.2014, the respondent Income Tax Department represented by the Assistant Commissioner of Income Tax had filed a complaint under Section 200 of Code of Criminal Procedure (Cr.P.C., for brevity) against the petitioner alleging the commission of offences punishable under Section 276CC of Act, as regards non-filing of Income Tax returns in terms of Sections 139(1), 142(1) or 153 of Act, which provides for matters relating to filing of return of income. 3.It is alleged that the petitioner was a partnership firm consisting of two partners and was engaged in the business which resulted in taxable income however no return of income was filed in the year 2009-10 on or before due date. A survey was conducted under Section 133(A) of the Act and it is only thereafter on 30.08.2013 that the Income Tax returns were filed by the petitioner after a delay of 1430 days. Considering that the non-filing of the return to be deliberate willful and with an intention to avoid scrutiny by the Income Tax Department giving rise to statutory presumption under Section 278(E), the Department directed to initiate action. 4.The Department had issued a show cause notice on 28.10.2013 which was replied to by the petitioner and further reply was also submitted on 30.12.2013. In furtherance thereof the Commissioner of Income Tax, Belagavi is said to have issued the sanction in terms of Section 279 of the Act, on 12.03.2014 however in the said sanction at paragraph No.9, it is stated as under; “The prior approval of the Chief Commissioner of Income Tax, Panaji vide F.No.CCIT/PNJ/PROSECUTION/2013-14 dated 10.03.2014 for launching prosecution under Section 276CC is obtained and placed on record”. 5.On the basis of the said sanction the proceedings came to be initiated against the petitioner in C.C.Nos.219/2014, 220/2014, 221/2014, 222/2014 and 223/2014, as regards which the Magistrate took cognizance and it is this cognizance that the petitioner is aggrieved by. “The prior approval of the Chief Commissioner of Income Tax, Panaji vide F.No.CCIT/PNJ/PROSECUTION/2013-14 dated 10.03.2014 for launching prosecution under Section 276CC is obtained and placed on record”. 5.On the basis of the said sanction the proceedings came to be initiated against the petitioner in C.C.Nos.219/2014, 220/2014, 221/2014, 222/2014 and 223/2014, as regards which the Magistrate took cognizance and it is this cognizance that the petitioner is aggrieved by. 6.Sri Kiran Javali, learned counsel appearing for the petitioner contends that the sanctioning authority in terms of Section 279 for the offence as alleged against the petitioner is the Commissioner of Income Tax. Therefore, there was no need for the Commissioner to take permission or approval from the Chief Commissioner of Income Tax, Panaji, as stated in paragraph No.9 of the sanction order dated 12.03.2014. He would contend that; (i) There is no methodology prescribed or available under Section 279 or any other provision of the Act, to seek for approval from the superior authority before issuing an order of sanction. (ii) The prescribed authority under Section 279 of the Act, has to satisfy itself before sanctioning the prosecution and the sanction cannot be on the basis of the approval by a superior authority. (iii) He submits that in the event of the Chief Commissioner of Income Tax were to refuse the permission sought for by the Commissioner of Income Tax then naturally the Commissioner of Income Tax could not have issued the sanction order dated 12.03.2014. (iv) The entire proceedings initiated against the petitioner are not only misconceived but are initiated at the direction of an authority who is not the sanctioning authority in terms of Section 279 of the Act i.e. the Chief Commissioner of Income Tax, is not a sanctioning authority it is only the Commissioner of Income Tax, who is the sanctioning authority. Based on the above, he would further contend that the sanction order has been issued on the basis of dictate of the superior authority and the sanction order is not the order of the Commissioner of Income Tax. 7.Per contra, Sri Y.V.Raviraj, learned counsel appearing for the Department would submit that the prior approval sought for by the Commissioner of Income Tax is only to safeguard the interest of assessee and or the persons against whom prosecution may be launched by the Department and hence the Commissioner of Income Tax by way of abundant caution had obtained prior approval from the Chief Commissioner of Income Tax. 8.At the request of both the counsels, the file relating to sanction was called for and perused. 9.On a perusal of the said file, it is seen that on 26.02.2014, the Commissioner of Income Tax wrote to the Chief Commissioner of Income Tax placing all the facts, the opinion received from the standing counsel and the re-commendation of the Commissioner of Income Tax, that it was a fit case to file prosecution under Section 276 CC of the Act. However, the Commissioner of Income Tax had further sought for accord of approval for launching prosecution under Section 276CC of the Act at the earliest. Paragraph No.9 of the said letter dated 26.02.2014 is hereunder reproduced for easy reference. “(9). In view of the above, it is submitted that it is a fit case to file prosecution under Section 276CC of the Income Tax Act, 1961. Therefore, it is requested to kindly accord approval in regard to launching of prosecution under Section 276CC of the Income Tax Act, 1961 at the earliest”. 10.Pursuant thereto a letter came to be issued by the office of the Chief Commissioner of Income Tax on 10.03.2014 addressed to Commissioner of Income Tax, Belagavi wherein the Income Tax Officer (TEK) conveyed the approval of Chief Commissioner of Income Tax, Panaji to the Commissioner of Income Tax, Belagavi for launching of prosecution under Section 276CC of the Act against two names persons, a HUF and a company. 11.It is on the basis of the said approval conveyed that the sanction order dated 12.03.2014 came to be “(9). In view of the above, it is submitted that it is a fit case to file prosecution under Section 276CC of the Income Tax Act, 1961. Therefore, it is requested to kindly accord approval in regard to launching of prosecution under Section 276CC of the Income Tax Act, 1961 at the earliest”. 10.Pursuant thereto a letter came to be issued by the office of the Chief Commissioner of Income Tax on 10.03.2014 addressed to Commissioner of Income Tax, Belagavi wherein the Income Tax Officer (TEK) conveyed the approval of Chief Commissioner of Income Tax, Panaji to the Commissioner of Income Tax, Belagavi for launching of prosecution under Section 276CC of the Act against two names persons, a HUF and a company. 11.It is on the basis of the said approval conveyed that the sanction order dated 12.03.2014 came to be issued by the Commissioner of Income Tax, which though is a verbatim reproduction of letter requiring the approval dated 26.06.2014 also contains paragraph No.9 extracted above. 12.Sri Y.V.Raviraj, learned counsel would contend that a meaningful reply of letter dated 26.12.2014 indicates that the Commissioner of Income Tax has considered all relevant parameters obtained legal opinion and on that basis has satisfied itself that prosecution has to be initiated against the petitioner and others and it is only by way of abundant caution that the approval of the Chief Commissioner of Income Tax was sought for. 13.The approval by the Chief Commissioner of Income Tax was a mere formality and in pursuance thereto on 12.03.2014 sanctioning order was passed. He further submits that a comparison of the order dated 12.03.2014 with a letter dated 26.02.2014 would indicate that the contents of both except for paragraph No.9 are identical on that basis thereof hesubmits that there is no influence exerted by the Chief Commissioner of Income Tax or Commissioner of Income Tax for initiating prosecution and or that the Commissioner of Income Tax has not been influenced by the order of the approval passed by the Chief Commissioner of Income Tax. He relies on the following judgments in support of his above contentions. (1) J.Jayalalitha Vs Asst. Commissioner of Income Tax 290 ITR 055 (Mad) at paragraph No.29. Tax 290 ITR 055 (Mad) at paragraph No.29. (2) Assistant Commissioner of Income Tax and Others Vs Velliappa Textiles Ltd and Others 263 ITR 0550 (SC) at paragraph No.8. Vs Velliappa Textiles Ltd and Others 263 ITR 0550 (SC) at paragraph No.8. 14.Heard learned counsel for both the parties and perused the documents. 15.The question that would arise for consideration of this Court in the above facts and circumstances of the case is; “Whether the sanction order dated 12.03.2014 is one which could be said to have been influenced by the superior authority and or whether the procedure followed by the Commissioner of Income Tax, is not in accordance with applicable law? 16.The sanctioning authority under Section 279 of the Income Tax Act, is either the Principal Commissioner or the Commissioner or Commissioner appeals. Though the heading to the said provision refers to Principal Chief Commissioner or Chief Commissioner Section 279(1) does not make any reference to the Chief Commissioner. The proviso however refers to the powers of the Principal Chief Commissioner or Chief Commissioner to issue such instructions or directions to the authorities as he may deem fit for institution of proceedings under this Section. “Whether the sanction order dated 12.03.2014 is one which could be said to have been influenced by the superior authority and or whether the procedure followed by the Commissioner of Income Tax, is not in accordance with applicable law? 16.The sanctioning authority under Section 279 of the Income Tax Act, is either the Principal Commissioner or the Commissioner or Commissioner appeals. Though the heading to the said provision refers to Principal Chief Commissioner or Chief Commissioner Section 279(1) does not make any reference to the Chief Commissioner. The proviso however refers to the powers of the Principal Chief Commissioner or Chief Commissioner to issue such instructions or directions to the authorities as he may deem fit for institution of proceedings under this Section. 17.The sanctioning authority being the Commissioner of Income Tax there was no need for the said Commissioner of Income Tax to have written to the Chief Commissioner of Income Tax to seek for approval. Having so written in the event of the Chief Commissioner of Income Tax refusing the permission sought for, the entire exercise of the Commissioner of Income Tax would be rendered superfluous in that, though the order dated 26.02.2014 would indicate the subjective satisfaction of the Commissioner of Income Tax. The satisfaction would be dependent on the approval of the Chief Commissioner of Income Tax in that only if the Chief Commissioner of Income Tax accorded approval for prosecution than the satisfaction of the Commissioner of Income Tax could be considered and acted upon by sanctioning prosecution. However, if the Chief Commissioner of Income Tax were to refuse permission then the Commissioner of Income Tax though satisfied could not initiate any proceedings due to the non approval by the Chief Commissioner of Income Tax. 18.In view of the same, the contention of Sri Kiran Javali, that the prosecution has been initiated and sanction order came to be passed on 12.03.2014 being influenced by the Chief Commissioner of Income Tax, though may not be entirely correct but however does merit consideration since no sanction could be given and prosecutioninitiated if the Chief Commissioner of Income Tax refused permission, the order dated 12.03.2014, can therefore be said to be an order of the Chief Commissioner of Income Tax, rather than the Commissioner of Income Tax. The Chief Commissioner of Income Tax is not the sanctioning authority. 19.Further more even the approval dated 10.02.2014 does not indicate any application of mind by the Chief Commissioner of Income Tax nor is it signed by the Chief Commissioner of Income Tax. Hence, even if it were to be assumed that Chief Commissioner of Income Tax was the sanctioning authority there is no subjective satisfaction by the Chief Commissioner of Income Tax for granting such sanction. 20.In view of the above reasoning, the process and procedure and methodology followed by the Commissioner of Income Tax being not that as contemplated under Section 279 of the Act. The sanction order being passed with prior approval for the Chief Commissioner of Income Tax, the same is not tenable in law and the entire proceedings initiated thereafter including those in C.C.No.219/2014 cannot be countenanced in law. Therefore, the sanction letter dated 12.03.2014 and the proceedings in C.C.No.219/2014 pending on the file of the JMFC III Belagavi are hereby quashed. 21.Sri Y.V.Raviraj, learned counsel for the Income Tax Department, at this juncture seeks for liberty to initiate fresh proceedings against the petitioner and other related entities. No such liberty is required since there is no limitation period. The sanctioning order being quashed only on technical grounds and not on merits. The respondent would be free to initiate any proceedings as may be advised in accordance with law. Accordingly, the petition is disposed of. Sd/- JUDGE