Crl.p/4891/2014 Of M/S Vyalikaval House Building v. The Income Tax Department

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 14 DAY OF JUNE 2019 | BEFORE THE HON’BLE MR. JUSTICE JOHN MICHAEL CUNHA CRIMINAL PETITION NO.4891 OF 2701C/WCRIMINAL PETITION NO.4892 OF 2701 BETWEEN: 1.M/S VYALIKAVAL HOUSE BUILDING.CO OPERATIVE SOCIETY LID.CO OPERATIVE SOCIETY LID. NO.62, 9 CROSS, 7 MAIN ROAD, MALLESWARAM, BANGALORE-560 OO3.REPRESENTED BY ITS SECRETARY|REPRESENTED BY ITS SECRETARY| SRI.H.SREENIVASA. 2.SRI.H.SREENIVASA|AGED ABOUT 50 YEARS,S/O LATE HANUMANTHACHAR_SECRETARY,M/S. VYALIKAVAL HOUSE BUILDINGCO-OPERATIVE SOCIETY LITD.,NO.62, 9 CROSS, 7 MAIN ROAD,MALLESWARAM, BANGALORE-560 OO3.AGED ABOUT 50 YEARS,S/O LATE HANUMANTHACHAR_SECRETARY,M/S. VYALIKAVAL HOUSE BUILDINGCO-OPERATIVE SOCIETY LITD.,NO.62, 9 CROSS, 7 MAIN ROAD,MALLESWARAM, BANGALORE-560 OO3. 3.SRI.J.S.PANT|AGED ABOUT 638 YEARS,S/O SIDDARTH PANT,EX. VICE PRESIDENTVYALIKAVAL HOUSE BUILDING CO-OPERATIVE SOCIETY LTD.NO.62, 9 CROSS, 7 MAIN ROAD,MALLESWARAM, |BANGALORE-560 003.) ... PETITIONERS(COMMON) (By Sri.K SUMAN - ADVOCATE) 2 AND THE INCOME TAX DEPARTMENT.BY DEPUTY COMMISSIONER OF INCOME TAX.CENTRAL CIRCLE -1(1)BANGALORE-560 032.) .. RESPONDENT (COMMON) (By Sri.JEEVAN J NEERALGI - ADVOCATE) IN CRIMINAL PETITION NO.4891 OF 2014 THIS CRIMINAL PETITION IS FILED U/S. 482 CR.P.C PRAYING|TO SET ASIDE AND QUASH THE ORDER DATED:29.3.14 PASSED BYTHE COURT OF THE SPL. COURT (ECONOMIC OFFENCES), BANGALOREIN CASE NO.C.C.94/14, TAKING THE COGNIZANCE OF THE OFFENCE|AGAINST THE ACCUSED/PETRS.1 TO 3 ON THE COMPLAINT FILED BY.THE COMPLAINANT/RESPONDENT AGAINST THE PETRS.1 TO 3 UNDER.SEC. 276C(2) OF THE INCOME TAX ACT 1961 AND ALL FURTHER:PROCEEDINGS THEREON AND TO CONSEQUENTLY DISMISS THE!COMPLAINT FILED BY THE RESPONDENT HEREIN AGAINST THE!PETRS. 1 TO 3 IN C.C.NO.94/14. IN CRIMINAL PETITION NO.4897 OF 2701 THIS CRIMINAL PETITION IS FILED U/S. 482 CR.P.C PRAYING|TO SET ASIDE AND QUASH THE ORDER DATED:29.3.14 PASSED BYTHE COURT OF THE SPL. COURT (ECONOMIC OFFENCES), BANGALOREIN CASE NO.C.C.95/14, TAKING THE COGNIZANCE OF THE OFFENCE|AGAINST THE ACCUSED/PETRS.1 TO 3 ON THE COMPLAINT FILED BYTHE COMPLAINANT/RESPONDENT AGAINST THE PETRS.1 TO 3 UNDER.SEC. 276C(2) OF THE INCOME TAX ACT 1961 AND ALL FURTHER:PROCEEDINGS THEREON AND TO CONSEQUENTLY DISMISS’ THECOMPLAINT FILED BY THE RESPONDENT HEREIN AGAINST THE!PETRS. 1 TO 3 IN C.C.NO.95/14. THESE CRIMINAL PETITIONS COMING ON FOR ADMISSION|THIS DAY, THE COURT MADE THE FOLLOWING:- ORDER Petitioner No.1 is a Co-operative Society registered undertne provisions of the Karnataka Co-operative Societies Act.Petitioner No.2 is tne Secretary and petitioner No.3 is the Ex-Vice President of the said Society, in both the petitions. | 2. The premises of petitioner No.1 was subjected to searchand seizure under Section 132 of the Income Tax Act, 1961(hereinafter referred to as the Act, for brevity) on 5.7.2011.Consequent to search, assessment proceedings came to beinitiated by the Assessing Officer by issuing a notice underSection 153A of tne Act dated 27.9.2011 calling upon petitionerNo.1 to file its returns of income for the assessment years 2006-07 to 2011-12. Since there was no compliance of the aforesaidnotice, the Assessing Officer issued a show cause notice dated31.7.2013 calling upon petitioner No.1 as to why prosecution forthe offence punishable under Section 2/76CC of the Act could notbe initiated. In response to the said snow cause _ notice,petitioner No.1 filed returns of income on 8.8.2013 for theassessment years 2010-11 and 2011-12. In tne said returns, petitioner No.1 declared the total income of Rs.3,49,93,300/-and the total tax payable at Rs.10,54,420/- for the assessmentyear 2010-11 and income of Rs.3,/78,36,508/- and the taxpayable thereon at Rs.1,03,88,310/- for the assessment year2011-12 respectively. Petitioner No.1 though filed returns, failedto pay the self-assessment tax along with the return of incomeunder Section 140A of the IT Act. In the meanwhile, theproperty owned by petitioner No.1 was attacned under Section281B of tne Act. Tne attacnment was Jater lifted on conditionthat the sale proceeds of the attached property would be directlyremitted to the Department. Thereafter, petitioner No.1 sent acheque for Rs.1,25,00,000 towards self-assessment tax due forthe assessment years 2010-11 and 2011-12. On the back of theSaid cheque, it was instructed that “cneque to be presented atthe time of registration of the property”. In view of thisinstruction, Department did not encasn the said cneque.|Contending that the petitioners have willfully and deliberatelymade an attempt to create circumstances to enable them toevade payment of tax, a complaint was lodged before the Courtfor Economic Offences, Bengaluru, seeking prosecution of the ' petitioners for the offence punishable under Section 276C(2) oftne Act. Tne Special Court took cognizance of the offence andissued summons to the petitioners. Aggrieved by the impugnedaction, the petitioners have invoked the jurisdiction of this Courtunder Section 482 of Cr.P.C. seeking to quash the impugnedproceedings.| 3. I have hneard the learned counsel! Sri.K.Suman,appearing for the petitioners and Sri.Jeevan Neeralagi, learnedStanding counsel appearing for respondent-Department andnave perused the records. 4. The contention of the learned counsel for the petitionersis that the circumstances pleaded by the respondent -Department do not disclose any intention on the part of thepetitioners to evade payment of tax. On the other hand, factsdisclosed therein reveal that, a sum of Rs.1,34,03,190 was paidon 7.8.2013 for the assessment year 2009-10 and a sum ofRs.62,00,000/- was paid on /7.8.2013 and the balance ofRs.1,03,88,310 was paid on 15.5.2014 in respect of the|assessment year 2010-11. These payments indicate that| petitioners had no intention to evade tax and hnence theprosecution of the petitioners for the alleged offence is patentlyillegal and an abuse of the process of Court. Further, hesubmitted that insofar as petitioner No.3 is concerned, there isno averment whatsoever in the complaint as to on wnat basis nenas been implicated in the aforesaid offence, which againindicates that the respondent-Department nas adopted armtwisting methods to recover the alleged tax. 5. In support of his submissions the learned counsel hasplaced reliance on the decision of the High Court of Patna in thecase of.Sushil Kumar Saboo - vs - State of Bihar and Anr.Reported in 2011(1) PLJIR 785 and the decision of the Hon bleSupreme Court in the case ofPrem Dass - vs -—- [ncome [aOfficer‘reported in (1999) 5 Supreme Court Cases 241 and witn.reference to paragraph 8 thereof, has emphasized that, “willful|attempt to evade any tax, penalty or interest chargeable or imposable under the Act under Section 276-C is a positive act onthe part of the accused which is required to be proved to bring|home the charge against the accused......Necessary mens r % therefore, is required to be established by the prosecution toattract tne provisions of Section 277°. 6. Disputing the above submissions, the learned standing|counsel appearing for the respondent-Department has pointedout tnat ali the payments were made by the _ petitionersubsequent to the lodging of the complaint and therefore, theSaid payment do not absolve the petitioners from the rigors ofSection 2/76C(2) of the Act. Even the cheque was issued with arider not to encasn the same. =Tnese circumstances, clearly|discloseMnens Fron the part of the petitioners to evade tax and)nence there is no reason to quash the proceedings. % therefore, is required to be established by the prosecution toattract tne provisions of Section 277°. 6. Disputing the above submissions, the learned standing|counsel appearing for the respondent-Department has pointedout tnat ali the payments were made by the _ petitionersubsequent to the lodging of the complaint and therefore, theSaid payment do not absolve the petitioners from the rigors ofSection 2/76C(2) of the Act. Even the cheque was issued with arider not to encasn the same. =Tnese circumstances, clearly|discloseMnens Fron the part of the petitioners to evade tax and)nence there is no reason to quash the proceedings. 7. I have given my anxious consideration to the rival,submissions made at the bar and have carefully scrutinsed thematerial on record. Undisputedly, petitioners are sought to beprosecuted under Section 2/76C(2) of the Act. The Section readsas under :- ‘2/6C (2) If a person willfully attempts in anymanner whatsoever to evade the payment of anytax, penalty or interest under tnis Act, he snail,witnout prejudice to any penalty that may be imposable on him under any otner provision of thisAct, be punishable with rigorous imprisonment for aterm whicn shall not be less than three months butwnhicn may extend to two years and snall, in theaiscretion of court, aiso be liable to fine.” 8. The gist of the offence under Section 276C(2) of the Actis the willful attempt to evade any tax, penalty or interestChargeable or imposable under the Act. What is made.punisnabie under this Section is an “attempt to evade taxpenalty or interest” and not the actual evasion of tax. ‘Attempt’Is nownere defined in tne Act or in the Indian Penal Code. Inlegal echelons attempt is understood as a “movement towardsthe commission of the intended crime’. It is doing “something inthe direction of commission of offence”. Viewed in that sense, inorder to render the accused guilty of “attempt to evade tax’ itmust be shown that he has done some positive act with anintention to evade tax. 9. In the instant case, the only circumstance relied on by|the respondent in support of the charge levelled against thepetitioners is that, even though accused filed the returns, yet, it failed to pay the self-assessment tax along with the returns.This circumstance even if accepted as true, the same does notconstitute the offence under Section 2/76C (2) of the Act. Theact of filing the returns by itself cannot be construed as anattempt to evade tax, rather the submission of the returns wouldSuggest that petitioner No.1 had voluntarily declared hisintention to pay tax. The act of submitting returns is notconnected witn the evasion of tax. It is only an act which isclosely connected with the intended crime, that can be construedas an act in attempt of the intended offence. In the backdrop ofthis legal principle, the Hon'ble Supreme Court in the case ofPrem Dass -— vs — [ncome Tax Officecited supra, nas held tnat a)positive act on the part of the accused is required to beestablished to bring home the charge against the accused for theoffence under Section 2/76C(2) of the Act. | 10.In the case on hand, conduct of petitioner No.1|making payments in terms of the returns filed by him, thoughdelayed and made after coercive steps were taken by theDepartment do not lead to the inference that the said paymentswere made in an attempt to evade tax declared in the returns filed by him. Delayed payments, under the provisions of the Act,may call for imposition of penalty or interest, but by no stretchof imagination, the delay in payment could be construed as anattempt to evade tax so as to entail prosecution of thepetitioners for the alleged offence under Section 276C(2) of theAct. In that view of the matter, the prosecution initiated againstthe petitioners, in my considered opinion, is ilegal andtantamount to abuse of process of Court and is liable to bequashed. — 10.In the case on hand, conduct of petitioner No.1|making payments in terms of the returns filed by him, thoughdelayed and made after coercive steps were taken by theDepartment do not lead to the inference that the said paymentswere made in an attempt to evade tax declared in the returns filed by him. Delayed payments, under the provisions of the Act,may call for imposition of penalty or interest, but by no stretchof imagination, the delay in payment could be construed as anattempt to evade tax so as to entail prosecution of thepetitioners for the alleged offence under Section 276C(2) of theAct. In that view of the matter, the prosecution initiated againstthe petitioners, in my considered opinion, is ilegal andtantamount to abuse of process of Court and is liable to bequashed. — For the aforesaid reasons, petitions are allowed. Theproceedings initiated against the petitioners in C.C.No.94/2014and C.C.No.95/2014 pending before the Special Court (EconomicOffences) Bengaluru are quasned. It is made clear that thisorder shall not come in the way of the Department takingnecessary steps for recovery of the tax, if any, due and payableby the petitioners in accordance with law. Sd/- | JUDGE. rs