Crlp/3146/2008 Of Sri. Ranbir Singh Bagga v. Deputy Commissioner Of Income Tax

HON'BLE SRI JUSTICE M.S.K.JAISWAL Criminal Petition No.3146 of 2008 ORDER:- This petition is filed under Section 482 Cr.P.C., for quashing allfurther proceedings in C.C.No.108 of 2007 on the file of the SpecialJudge for Economic Offences, Hyderabad, filed by the 1[st] respondentunder Section 276C of the Income-Tax Act, 1961 (hereinafter referredto as ‘the Act’). 2. The allegation of the complainant is that for the assessment year2001-02, the petitioner/accused declared his total income atRs.75,86,779/-. As per the computation sheet filed along with thereturn of the income, the total tax payable was Rs.26,26,558/- and aftergiving credit for Tax Deducted at Source amounting to Rs.25,21,903/-and advance tax of Rs.25,000/-, the assessee has to pay Rs.99,609/-under self-assessment and has to file a proof of such payment alongwith return. The petitioner/assessee has not paid the said tax and didnot file proof of payment, and hence he is treated as a defaulter. On30-03-2002, the assessee has paid Rs.6,675/-. The petitioner, byletter dated 30-03-2002 requeted to adjust Rs.99,609/- from the refunddue to Kuldeep Singh Bagga and Jasmit Singh Bagga. On 04-12-2002, the return of the income was processed and tax payable wasdetermined at Rs.1,18,525/-. Out of this amount, Rs.27,570/- wasadjusted from the refund due from Jasmit Singh Bagga andRs.35,186/- was adjusted from Kuldeep Singh Bagga. The assesseepaid the balance amount of Rs.55,769/-. The case was converted intoscrutiny and proceedings were completed under Section 143(3) of theAct on 05-03-2004 raising the additional demand of Rs.1,19,75,190/-.Subsequently, the petitioner has filed appeal before CIT (A) and theCIT (A) granted a relief and declared the demand payable to beRs.69,38,394/-. Out of this, the petitioner had paid Rs.11,88,660/- andthe demand outstanding was Rs.57,50,274/-. It is further alleged that the Commissioner of Income-Tax (C) vide letter dated 17-10-2006granted time to the assessee to pay instalments of Rs.10,00,000/- eachby 5[th] November, 2006 and 5[th] December, 2006 in respect of demandoutstanding in Bagga Group of Cases. 3. It is further alleged that though the assessee was havingsufficient resources to make payment of demand, the assessee has notpaid and attempted to evade payment of tax. Therefore, a notice underSection 276(C)(2) was issued giving three days time for reply. Thatthe assessee gave a reply on 18-04-2007 denying his liability. It isclear that the assessee is deliberately with an intention to evadepayment of tax, postponing the payment and there is wilful attempt inevading payment of tax outstanding. Hence, the complaint. 4. This complaint is sought to be quashed by thepetitioner/assessee on the ground that by no stretch of imagination itcan be said that the assessee has made any wilful attempt to evadepayment of tax. 5. It is contended that the petitioner filed the Income-Tax Returndisclosing the total income at Rs.75,86,779/- and the total tax payablewas Rs.99,609/- after giving credit to TDS. The petitioners paidRs.6,675/- on 31-03-2002 and requested to adjust Rs.99,609/- from therefund due to Kuldeep Singh Bagga and Jasmit Singh Bagga. The1[st] respondent has processed the return and determined the taxpayable at Rs.1,18,525/-. Out of this amount, Rs.27,570/- wasadjusted from the Income Tax Refund due from Jasmit Singh Baggaand Rs.35,186/- was adjusted from Kuldeep Singh Bagga and thepetitioners had paid the balance amount of Rs.55,769/-. This casewas converted into scrutiny and proceedings were completed on 05-03-204 raising the additional demand of Rs.1,19,75,190/-. Aggrievedby the said demand, the petitioner filed an appeal before the CIT (A)and the CIT (A) declared the demand payable by the assessee to beRs.69,38,934/-. Out of the said amount, the petitioner has paid Rs.11,88,660/-, and the outstanding was Rs.57,50,274/-. On theappeal filed by the petitioner, the Income Tax Appellate Tribunal partlyallowed the appeal. On 08-03-2011, the Deputy Commissioner ofIncome Tax passed a consequential order observing that the taxcredits will result in refund and no demand will exist. 6. It is further submitted that a cursory glance of the provisions ofSection 276C of the Act reveal that the said provision for punishing anassessee who is guilty of evasion of tax is designed to prosecuteassessees who have either not disclosed any accurate particulars ofincome or concealed material particulars of income. The explanationappended to Section 276C of the Act shows the objective behind thesaid provision to punish the assessee who is guilty of tax evasion. Prosecution is entirely different from the process of recovery which iscontemplated in Schedule II of the Act. It is submitted that theprovisions of Section 276C of the Act are para materia with Order XXIof C.P.C., laying down elaborate procedure for recovery of taxes whichare quantified and assessed in the hands of the assessee. TheDepartment has all the powers of a civil Court virtually to attach andsale movable as also immovable property belonging to the defaultingassessee. Even the provision of detention of an assessee to civilimprisonment is provided. Therefore, it is submitted that when thereturns are filed and tax was paid within the permitted time or if there isany dispute, launching criminal prosecution under Section 276C isonerous without taking recourse to the other provisions of the Act. Therefore, launching of the criminal prosecution is nothing butsubjecting the assessee to needless harassment and hence all furtherproceedings in the calendar case may be quashed. 7. In that view of the matter, what is required to be seen is as towhether the petitioner/assessee has conducted himself in the mannerwhich could fall within the ambit of Section 276C of the Act so as toprosecute him in a criminal Court and whether he can be termed as aperson who wilfully attempted to evade any tax, penalty or interest. Section 276C of the Act reads as under:- “Wilful attempt to evade tax, etc. (1)If a person wilfully attempts in any mannerwhatsoever to evade any tax, penalty or interestchargeable or imposable under this Act, he shall,without prejudice to any penalty that may beimposable on him under any other provision of thisAct, be punishable –whatsoever to evade any tax, penalty or interestchargeable or imposable under this Act, he shall,without prejudice to any penalty that may beimposable on him under any other provision of thisAct, be punishable – (i)in a case where the amount sought to beevaded exceeds twenty-five hundredthousand rupees, with rigorousimprisonment for term which shall not beless than six months but which may extendto seven years and with fine; (ii)in any other case, with rigorousimprisonment for a term which shall not beless than three months but which mayextend to two years and with fine.imprisonment for a term which shall not beless than three months but which mayextend to two years and with fine. (2)If a person wilfully attempts in any mannerwhatsoever to evade the payment of any tax, penaltyor interest under this Act, he shall, without prejudiceto any penalty that may be imposable on him underany other provision of this Act, be punishable withrigorous imprisonment for a term which shall not beless than three months but which may extend to twoyears and shall, in the discretion of the Court, alsobe liable to fine.whatsoever to evade the payment of any tax, penaltyor interest under this Act, he shall, without prejudiceto any penalty that may be imposable on him underany other provision of this Act, be punishable withrigorous imprisonment for a term which shall not beless than three months but which may extend to twoyears and shall, in the discretion of the Court, alsobe liable to fine. (2)If a person wilfully attempts in any mannerwhatsoever to evade the payment of any tax, penaltyor interest under this Act, he shall, without prejudiceto any penalty that may be imposable on him underany other provision of this Act, be punishable withrigorous imprisonment for a term which shall not beless than three months but which may extend to twoyears and shall, in the discretion of the Court, alsobe liable to fine.whatsoever to evade the payment of any tax, penaltyor interest under this Act, he shall, without prejudiceto any penalty that may be imposable on him underany other provision of this Act, be punishable withrigorous imprisonment for a term which shall not beless than three months but which may extend to twoyears and shall, in the discretion of the Court, alsobe liable to fine. Explanation – For the purposes of this Section, a wilfulattempt to evade any tax, penalty or interest chargeableor imposable under this Act or the payment thereof shallinclude a case where any person –attempt to evade any tax, penalty or interest chargeableor imposable under this Act or the payment thereof shallinclude a case where any person – (i)has in his possession or control anybooks of account or other documents(being books of account or otherdocuments relevant to any proceedingunder this Act) containing a false entry orstatement; orbooks of account or other documents(being books of account or otherdocuments relevant to any proceedingunder this Act) containing a false entry orstatement; or (ii)makes or causes to be made any falseentry or statement in such books of accountor other documents; orentry or statement in such books of accountor other documents; or (iii)wilfully omits or causes to be omitted anyrelevant entry or statement in such books ofrelevant entry or statement in such books of account or other documents; or(iv)causes any other circumstance to existwhich will have the effect of enabling suchperson to evade any tax, penalty or interestchargeable or imposable under this Act orthe payment thereof.” 8. A bare reading of the above provision, unambiguouslydemonstrate that the said provision can be invoked without prejudiceto any penalty that may be imposable but in order to attract thestringent provisions of criminal prosecution what is required is thatthere should be a wilful attempt to evade any tax, penalty or interest. The explanation appended to the Section, as seen above, makes itclear as to what acts of an assessee can be brought within the ambit ofa person guilty of wilful attempt to evade any tax. 9. The explanation provides for four categories of acts whichencompasses the conduct to come within the ambit of wilful attempt. 10. Learned Counsel appearing for the petitioner/assesseestrenuously submitted that in the case in hand, the assessee has filedthe return declaring his income and also the tax payable by him. Uponprocessing the return, which is filed under Section 139 of the Act, ifthere is any defect, the Assessing Officer can call upon the assesseeto rectify the defects, if any, noticed. Section 143 of the Act providesfor assessment and after computing the same, an intimation shall besent to the assessee specifying the sum determined to be payable orthe amount of refund due to assessee. The penalties imposable, forfailure to furnish return, comply with notices, concealment of incomeetc., is incorporated in Chapter XXI of the Act. Section 271 stipulatesthat if the Assessing Officer is satisfied that any person has failed tocomply with notice, under sub-section (2) of Section 115WD, or undersub-section (2) of Section 115WE, or under sub-section (1) of Section142 or sub-section (2) of Section 143, or fails to comply with a directionissued under sub-section (2A) of Section 142, or has concealed the particulars of his income or furnished inaccurate particulars of suchincome, can be directed to pay the penalty as contemplated underSection 271 of the Act. Under the same Chapter, there is Section276C which provides for criminal prosecution. When Section 271 ofthe Act takes care of an assessee who has failed to comply with thedemand notice, or has concealed the particulars of his income orfurnished inaccurate particulars of income, Section 276C deals with aperson who wilfully attempts in any manner whatsoever to evade anytax. There is no gain saying the fact that Section 271 of the Act has tobe invoked in respect of assesses who, by the Assessing Officer, isfound to have made a wilful attempt to evade any tax, penalty orinterest. The underlying principle is manifest. There may be instanceswhere an assessee furnished inaccurate particulars or conceals someparticulars of the income but files the return and pays the tax asdetermined by him has to be treated under Section 271 of the Act byimposing penalties as against a person who wilfully attempts to evadepayment of any tax. Wilful evasion of the tax is more serious thanconcealing a particular income. Therefore, the former has to be dealtwith under Section 276C of the Act whereas the latter has to be dealtwith under Section 271 of the Act. 11. How the honest assesses and tax evaders are to be dealt withcan be noticed from different provisions of the Act. For instance w.e.f.,01-04-1989, Section 143 (1-A) of the Act is introduced and the objectthereof is the prevention of evasion of tax. By introduction of thisSection, persons who have filed returns in which they have sought toevade the tax properly payable by them is meant to have a deterrenteffect and hefty amount of 20% as additional income tax is payable onthe difference between what is declared in the return and what isassessed to tax. However, for launching criminal prosecution, whichby any standards is more stringent and harsh than any other provisionsof the Act even severe than Parts I to VI of Schedule-II of the Act, thebasic requirement is the satisfaction of the Revenue that there was wilful attempt to evade tax. It is no doubt true that prosecution underSection 276C of the Act is without prejudice to any penalty that may beimposable on an assessee but the authorities should take notice of thefollowing observations of the Constitution Bench of the Supreme Courtmade as long back as in 1957 in the decision reported in PANNALAL BINJRAJ v. UNION OF INDIA[[1]]viz., “A humane and considerateadministration of the relevant provisions of the Income Tax Act wouldgo a long way in allaying the apprehensions of the assessees and ifthat is done in true spirit, no assessee will be in a position to chargethe revenue with administering the provisions of the Act with an evileye and unequal hand.” 12. Learned Counsel appearing for the petitioner has relied upon adecision of the Supreme Court reported in K.C.BUILDERS AND ANR. V. THE ASSISTANT COMMISSIONER OF INCOME TAX[[2]]. 13. In the case before the Apex Court, the assessee wasunsuccessful in his attempts to get the proceedings launched in acriminal Court quashed under the provisions of Sections 397 and 401Cr.P.C. The trial Court and the High Court rejected the prayer of theassessee and hence the matter went to the Supreme Court. Afterelaborately referring to the case law on the subject, the Supreme Courtmade the following observations in paragraph Nos.16, 17, 26, 27, 28,29 and 34, which have a bearing to the facts of the case in hand andultimately quashed the criminal case registered against the assessee:- 12. Learned Counsel appearing for the petitioner has relied upon adecision of the Supreme Court reported in K.C.BUILDERS AND ANR. V. THE ASSISTANT COMMISSIONER OF INCOME TAX[[2]]. 13. In the case before the Apex Court, the assessee wasunsuccessful in his attempts to get the proceedings launched in acriminal Court quashed under the provisions of Sections 397 and 401Cr.P.C. The trial Court and the High Court rejected the prayer of theassessee and hence the matter went to the Supreme Court. Afterelaborately referring to the case law on the subject, the Supreme Courtmade the following observations in paragraph Nos.16, 17, 26, 27, 28,29 and 34, which have a bearing to the facts of the case in hand andultimately quashed the criminal case registered against the assessee:- “16. The word “concealment” inherently carriedwith it the element of mens rea. Therefore, the mere factthat some figure or some particulars have been disclosedby itself, even if takes out the case from the purview ofnon-disclosure, it cannot by itself take out the case fromthe purview of furnishing inaccurate particulars. Mereomission from the return of an item of receipt does neitheramount to concealment nor deliberate furnishing ofinaccurate particulars of income unless and until there issome evidence to show or some circumstances found from which it can be gathered that the omission wasattributable to an intention or desire in the part of theassessee to hide or conceal the income so as to avoidthe imposition of tax thereon. In order that a penaltyunder Section 271(1)(iii) may be imposed it has to beproved that the assessee has consciously made theconcealment or furnished inaccurate particulars of hisincome. Where the additions made in the assessmentorder, on the basis of which penalty for concealment waslevied, are deleted, there remains no basis at all forlevying the penalty for concealment and, therefore, insuch a case no such penalty can survive and the same isliable to be cancelled as in the instant case. Ordinarily,penalty cannot stand if the assessment itself is set aside. Where an order of assessment or reassessment on thebasis of which penalty has been levied on the assesseehas itself been finally set aside or cancelled by theTribunal or otherwise, the penalty cannot stand by itselfand the same is liable to be cancelled as in the instantcase ordered by the Tribunal and later cancellation ofpenalty by the authorities. 17. Section 276C of the Act deals with wilfulattempt to evade tax, etc. Section 277 deals with falsestatement in verification, etc. and Section 278B dealswith the offences by companies. 26. The above Judgment squarely applies to thefacts and circumstances of the case on hand. In thiscase also, similarly, the application was moved by theassessee before the Magistrate to drop the criminalproceedings which were dismissed by the Magistrateand the High Court also on a petition filed under Sections397 and 401 of the Code of Criminal Procedure, 1973 torevise the order of the Additional Chief MetropolitanMagistrate has also dismissed the same and refused torefer to the order passed by the competent Tribunal. Asheld by this Court, the High Court is not justified indismissing the criminal revision vide its Judgmentignoring the settled law as laid won by this Court that thefinding of the appellate Tribunal was conclusive and theprosecution cannot be sustained since the penalty afterhaving been cancelled by the complainant following theappellate Tribunal’s order, no offence survives under the Income Tax Act and thus quashing of prosecution isautomatic. 27. In the instant case, the penalties levied underSection 271(1)(c) were cancelled by the respondent bygiving effect to the order of the Income Tax AppellateTribunal in I.T.A.Nos.3129-3132. It is settled law thatlevy, of penalties and prosecution under Section276C are simultaneous.Hence, once the penaltiesare cancelled on the ground that there is noconcealment, the quashing of prosecution underSection 276C is automatic. Income Tax Act and thus quashing of prosecution isautomatic. 27. In the instant case, the penalties levied underSection 271(1)(c) were cancelled by the respondent bygiving effect to the order of the Income Tax AppellateTribunal in I.T.A.Nos.3129-3132. It is settled law thatlevy, of penalties and prosecution under Section276C are simultaneous.Hence, once the penaltiesare cancelled on the ground that there is noconcealment, the quashing of prosecution underSection 276C is automatic. 28. In our opinion, the appellants cannot be madeto suffer and face the rigorous of criminal trial when thesame cannot be sustained in the eyes of law because theentire prosecution in view of a conclusive finding of theIncome tax Tribunal that there is no concealment ofincome becomes devoid of jurisdiction and underSection 254 of the Act, a finding of the Appellate Tribunalsupercedes the order of the Assessing Officer underSection 143(3) more so when the Assessing Officercancelled the penalty levied. 29. In our view, once the finding of concealmentand subsequent levy of penalties under Section 271(1)(c)of the Act has been struck down by the Tribunal, theAssessing Officer has no other alternative except tocorrect his order under Section 154 of the Act as per thedirections of the Tribunal. As already noticed, thesubject matter of the complaint before this Court isconcealment of income arrived at on the basis of thefinding of the Assessing Officer, if the Tribunal hasset aside the order of concealment and penalties,there is no concealment in the eyes of law and,therefore, the prosecution cannot be proceeded withby the complainant and further proceedings will beillegal and without jurisdiction.The AssistantCommissioner of Income Tax cannot proceed with theprosecution even after the order of concealment hasbeen set aside by the Tribunal. When the Tribunal hasset aside the levy of penalty, the criminal proceedingsagainst the appellants cannot survive for furtherconsideration. In our view, the High Court has taken theview that the charges have been framed and the matter is in the stage of further cross-examination and, therefore,the prosecution may proceed with the trial. In ouropinion, the view taken by the learned Magistrate and theHigh Court is fallacious. In our view, if the trial is allowedto proceed further after the order of the Tribunal and theconsequent cancellation of penalty, it will be an idle andempty formality to require the appellants to have theorder of Tribunal exhibited as a defence documentinasmuch as the passing of the order as aforementionedis unsustainable and unquestionable. 30. It is a well-established principle that the matterwhich has been adjudicated and settled by the Tribunalneed not be dragged into the criminal Courts unless anduntil the act of the appellants could have been describedas culpable.” 14. Bearing in mind the above principles enunciated by theSupreme Court and in view of the submissions made by the learnedsenior Counsel appearing for the petitioner, what could be stated isthat continuing the criminal prosecution of the petitioner/assessee willbe subjecting the assessee to needless harassment in view of thefacts and circumstances noted hereunder:- In the instant case, the complaint is that a demand outstanding isRs.57,50,274/- and the assessee has not responded to the noticesissued by the complainant. In so far as the demand in the case isconcerned, amounting to Rs.57,50,274/-, it is admitted that on 08-03-2011 the Deputy Commissioner of Income Tax passed an orderobserving that the tax credits will result in refund and no demand willexist. Proof thereof is produced. It is not disputed. In that view of the matter, all further proceedings are liable to bequashed. 15. In the result, the Criminal Petition is allowed quashing all furtherproceedings in C.C.No.108 of 2007 on the file of the Special Judge forEconomic Offences at Hyderabad against the petitioner/accused. Miscellaneous petitions, if any, pending in this Criminal Petitionshall stand closed. September, 2015 smr In that view of the matter, all further proceedings are liable to bequashed. 15. In the result, the Criminal Petition is allowed quashing all furtherproceedings in C.C.No.108 of 2007 on the file of the Special Judge forEconomic Offences at Hyderabad against the petitioner/accused. Miscellaneous petitions, if any, pending in this Criminal Petitionshall stand closed. September, 2015 smr [1]AIR 1957 SC 397[2](2004) 2 SCC 731 ___________________ M.S.K.Jaiswal, J