Crlp/6862/2015 Of Kalluri Krishna Pushkar v. The Deputy Commissioner Of Income Tax

*HONOURABLE Dr. JUSTICE B.SIVA SANKARA RAO +CRIMINAL PETITION No.6862 OF 2015 %Dated 15.09.2015 HONOURABLE Dr. JUSTICE B.SIVA SANKARA RAO Crl.P.No.6862 of 2015 ORDER : This petition is filed under Section 482 of the Code of CriminalProcedure (for short, ‘the CrPC’) by the Petitioner-Accused to quashthe proceedings in C.C.No.103 of 2014 on the file of the learnedSpecial Judge for Economic offences, Hyderabad, taken cognizancefor the offences punishable under Sections under Section 276© (2) ofthe Income Tax Act, 1961(for short, ‘the Act’) amended from time totime, on the complaint under Section 190 read with 200 Cr.P.C. of the 1[st] respondent/The Deputy Commissioner of Income Tax, Circle-11(1)Hyderabad. 2. The petitioner is the sole accused in the Calander Case supra.The 1[st] respondent laid the complaint with the prior sanction underSection 279(1) of the Act for his prosecution, obtained from theCommissioner of Income Tax, Hyderabad vide order dated27.03.2014. The factual background is that the petitioner filed E-returnfor the assessment year 2012-13 of dated 30.09.2012 (Section 139-Dmakes provision for filing of E-return from the Rules provided by theBoard). It is self-declaring return of Income ofRs.2,10,26,628.00(Section 140-A provides for self-assessmentwhereunder income tax is payable on the basis of return required to befurnished under Section 115 (wd) or (wh) or 139 or 142 or 148 or 153-A or 158-B, 158-C as the case may be. After taking into account theamount of tax if not already paid under the Act, any tax deducted orcollected at source, any relief of tax or deduction of tax claimed underSection 90 or 91 on account of tax paid outside India, any relief of taxclaimed under Section 90-A on account of tax paid in any specifiedterritory outside India and any tax claimed to be set off as per Section115 JA or ID;, the assessee shall be liable to pay such tax togetherwith interest payable under the provisions of the Act, for any delay infurnishing return or any default or delay in payment of advance tax,before furnishing return and the return shall be accompanied by proofof payment of such tax and interest. As per the Explanation II ofSection 141-A(i), where the amount paid by the assessee under thesub-section falls short of the aggregate of the tax interest as aforesaid,the amount so paid shall be first adjusted towards the interest payableand the balance towards the tax payable. As per the sub-section 2 of141-A after regular assessment under Sections 115 (wf) or 143 or 144or 153-A or 158-B, 158-C, has been made, any amount paid underSub-section 1 supra, shall be deemed to have been paid towards said regular(recurring) assessment or assessment as the case may be. Asper sub-Section 3 of Section 141-A if the assessee fails to pay thewhole or any part of such tax or interest or both in accordance with thesub-Section-1 supra, he shall without prejudice to any otherConsequences which he cannot incur, be deemed to be an assesseein default, in respect of the tax or interest or both remaining unpaid andall the provisions of the Act shall apply accordingly. regular(recurring) assessment or assessment as the case may be. Asper sub-Section 3 of Section 141-A if the assessee fails to pay thewhole or any part of such tax or interest or both in accordance with thesub-Section-1 supra, he shall without prejudice to any otherConsequences which he cannot incur, be deemed to be an assesseein default, in respect of the tax or interest or both remaining unpaid andall the provisions of the Act shall apply accordingly. 3 . It is pursuant to the provision for the income declared ofRs.2,10,26,628.00 the tax and interest shown payable in the returnwas Rs.68,28,133/- and there was TDS of Rs.10,12,293/- that was theonly payment as per the E-return supra and the assessee later paidRs.2 lakhs on 31.12.2015 and even therefrom the balance tax payableis Rs.58,15,840/- that was not paid while filing of the return of incomethough it was required to be. On the E-return filed by the accused asper the procedure, any amounts paid before or after receipt ofintimation from the Central Processing Centre(for short, ‘CPC’),Bangalore, under Section 143(1) of the Act, the application has to bemade under Section 154 of the Act to the C.P.C. for enabling e-processing Centre to deduct the amount paid and the accused–assessee did not make any such application even the CPC intimatedunder Section 143(1) by determining net amount payableRs.63,19,840/- including interest under Section 234 B and C. In fact, 2lakhs if deducted out of Rs.58,15,840/- the amount will be with littlevariance and he could have been applied under Section 154 of theAct, to arrive a correct figure. The accused-assessee failed to pay theadmitted tax, as such notice under Section 221(1) of the Act, wasissued to him on 10.02.2014 by the complainant-DCIT to produce thedetails of tax paid if it has already been paid or to give reasons whypenalty should not be levied under Section 221(1) of the Act for thefailure to pay the demand raised in time. In response to it, the accused-assessee filed a letter dated 21.02.2014 stating that he did contracts ofthe State Government for which the tax due shown in the assessment and he did not pay self-assessment tax as he did not receive the billsfrom the State Government and he will pay the tax dues as soon as theamounts received from the Government. and he did not pay self-assessment tax as he did not receive the billsfrom the State Government and he will pay the tax dues as soon as theamounts received from the Government. 4. Pursuant to which the accused–assessee was summonedunder Section 131 of the Act and after his appearance, statement wasrecorded on 28.02.2014 regarding pending tax dues, that too, hereceived 14.25crores in the financial year 2011-12 for the work done tothe Government and his statement in this regard was he received butundisputedly utilized for business expenditure with intent to pay the taxafter receiving the balance dues from the Government. In fact, Section140(A) of the Act referred supra no way enables to delay or postponethe payment but for to pay whatever payable while furnishing return ifnot paid before as advance tax. It is therefrom the complaint ismaintained with the permission obtained supra for the offence underSection 276(C)(2) of the Act saying the tax due but for more than ayear without any valid reasons even received substantial amounts forthe contract works done. In the complaint it is averred from para-10onwards pursuant to the above that the assessee, having receivedmore than 14.25crores for the works done though shown or claimedsome balance still due for the works done, he has shown profit of2,10,26,628/- for the assessment year-2012-13 (financial year 2011-12) he should have planned to pay the advance tax which he did notand at least with the return of self-assessment that not even paidthough required to be as per Section 140(A) of the Act and the non-payment even after issuance of notice under Section 221(1) of the Act,claimed is nothing but default and consequently a penalty order waspassed on 05.03.2014 imposing penalty of Rs.6,31,389/- and showcause notice for initiation of prosecution under Section 276(C)(2) of theAct dated 18.03.2014 was served on him and in his letter to it dated24.03.2014 he responded by requesting not to take action against himby submitting that he can make payment as and when he receives thecontract bills. It is averred in the complaint that this is the roose for the past two years as explanation receiving from him without paymenteven received substantial amount of contract bills and it is manifestedthat he willfully evaded the payment of the tax as per the provisions ofthe Act and committed offence punishable under Section 276(C)(2) ofthe Act, with deliberate default in not clearing tax dues that too, evenafter received of notice under Section 221(1) of the Act. It is averredthat as per Section 278(e) of the Act, the Court shall presume aculpable mental status on the part of the accused, hence sought fortaking the complaint on file to punish the accused according to law. Itwas filed of dated 28.03.2014 and the learned Magistrate underSection 200 of Cr.P.C., from the complaint filed by the publicservant(2[nd] respondent-DCIT) referring to the enclosures takencognizance of the case and it is pursuant to the summons he filed thequash petition. 5. The contentions in the grounds of the petition to quash saidprosecution proceedings taken cognizance against the accused by thelearned Judge, are that there is no deliberate or intentional or willfulattempt of concealment of income or postponement of the tax due, thatthere is no loss to the revenue and the ingredients of the offence underSection 276 of the Act not made out any offence and there is no noticeof demand as required under Section 156 of the Act issued to him andthere is efficacious alternative remedy under Section 226 of the Act byother modes of recovery thereby the prosecution is not sustainable andthe proceedings are liable to be quashed. 6. The learned counsel for the quash petitioner/accused drawnattention of the Court to the provisions covered by Sections 156, 226and 227 of the Act and also relied upon the expression of the ApexCourt in K.C.Builders Vs. Assistant Commissioner of IncomeTax[[1]]= Supreme SC 103 of two Judge Bench. 7. Section 221 speaks of penalty payable when tax is in default or 6. The learned counsel for the quash petitioner/accused drawnattention of the Court to the provisions covered by Sections 156, 226and 227 of the Act and also relied upon the expression of the ApexCourt in K.C.Builders Vs. Assistant Commissioner of IncomeTax[[1]]= Supreme SC 103 of two Judge Bench. 7. Section 221 speaks of penalty payable when tax is in default or deemed to be in default by the assessee, in addition to the amount ofarrears and interest however the penalty shall not exceed the amountof tax in arrears and before levying any such penalty, assessee shallbe given a reasonable opportunity of being heard to show if the defaultwas for the good and sufficient reasons, in such a case, no penaltyshall be levied. Once show cause notice issued even before levy ofpenalty tax paid that will not absolve liability for penalty to beimposed. Thus, Section 221 only speaks of penalty but notprosecution. Section 220 of the Act deals with any amount other thanadvance tax specified payable in the notice of demand under Section156 shall be paid within 30 days of service of notice at the place and tothe person mentioned therein. If the amount specified in the notice ofdemand under Section 156 of the Act not paid within the period of 30days supra, the assessee shall be liable to pay 1%p.a. interest. It isnow to be seen in support of the contention of the accused as to anynotice contemplated by Section 156 is required to be given beforelaunching prosecution. As referred supra, a reading of Sections 220and 221 deals with penalty and not prosecution. It is only beforeimposing penalty, a notice under Section 221 and 156 of the Act thatare required to be given. For better appreciation, it is just to reproducesection 156 which deals with notice of demand. It reads when any tax,interest, penalty, fine or any other sum is payable in consequence ofany order passed under this Act, officer shall serve upon theasseessee a notice of demand in the prescribed form specified thesum so payable. Provided that whether any sum is the determined tobe payable by the assessee or by the deductor under Section 143(1)or 200-A(1) of the Act, the intimation under those sub sections shall bedeemed to be a notice of demand for the purpose of this Section. 8. A reading of Section 156 reproduced referred supra clearlyindicates notice of demand contemplated is for the tax etc., payable inconsequence of any order passed under the Act. Here, the case onhand it is self-assessment by e-filing showing the tax paid and tax due and even after the CPC, Bangalore intimated under Section 143(1),there is no application made under Section 154 to the CPC. In fact, theintimation was also sent under Section 143(1) determining the amountpayable including the interest as per document No.4 referred in thecomplaint. Section 156 proviso speaks the sum determined to bepayable under Section 143(1) and its intimation shall be deemed to bea notice under Section 156 as notice of demand. The contention of thelearned counsel for the petitioner of no notice separately given underSection 156 of the At thereby no legs to stand, not only for the reasonof it is a deemed notice from the above but also for the reason, no suchnotice is required for the prosecution but for to the penalty to levy orimpose, as the case may be. and even after the CPC, Bangalore intimated under Section 143(1),there is no application made under Section 154 to the CPC. In fact, theintimation was also sent under Section 143(1) determining the amountpayable including the interest as per document No.4 referred in thecomplaint. Section 156 proviso speaks the sum determined to bepayable under Section 143(1) and its intimation shall be deemed to bea notice under Section 156 as notice of demand. The contention of thelearned counsel for the petitioner of no notice separately given underSection 156 of the At thereby no legs to stand, not only for the reasonof it is a deemed notice from the above but also for the reason, no suchnotice is required for the prosecution but for to the penalty to levy orimpose, as the case may be. 9. Coming to Section 226 of the Act, as one of the contentions isthat there are other modes for recovery and the prosecution cannotsustain. As per Section 226 read with 222 of the Act, for the assesseein default or deemed to be in default in making payment of tax, the TaxRecovering Officer may draw a statement in prescribed form specifyingarrears due and shall proceed to recover by mentioning the modeswith reference to the rules laid down in the II schedule either byattachment from the sale of movable and immovable property of theassessee or arrest of assessee and his detention in prison or byappointing a receiver by management of the properties of theasseessee for realization. What section 226 says is whether any suchcertificate is drawn under Section 222 of the Act supra, the AssessingOfficer may recover the tax by any of the modes provided viz. wherecertificate drawn under Section 222, without prejudice to the othermodes of recovery under Section 222, the Recovering Officer mayrecover any one or other modes if the assessee is in receipt of anychargeable under the Head of salaries may require person paying sumto deduct from the payment subject to exemption under Section 60 ofthe Code of Civil Procedure and where money is due to the asseesseerequiring person who falls due to pay and recover or otherwise applied to the Court in whose custody money belongs to the assessee forpayment out of the same or otherwise if authorized by any order ofrecovery as arrears of tax due by distraining and sale of immovableproperty as laid down in III schedule. In fact, it is not a bar to theprosecution from the other modes of recovery available for the tax orinterest or penalty it is for the following reason from reading Section276©(2) of the Act:- 276C (1) If a person wilfully attempts in any manner whatsoeverto evade[74]any tax, penalty or interest chargeable or imposable underthis Act, he shall, without prejudice to any penalty that may beimposable on him under any other provision of this Act, be punishable, — (i) in a case where the amount sought to be evadedexceeds [75][twenty-five] hundred thousand rupees, with rigorousimprisonment for a term which shall not be less than six monthsbut which may extend to seven years and with fine;exceeds [75][twenty-five] hundred thousand rupees, with rigorousimprisonment for a term which shall not be less than six monthsbut which may extend to seven years and with fine; (ii) in any other case, with rigorous imprisonment for a term whichshall not be less than three months but which may extendto[76][two] years and with fine.shall not be less than three months but which may extendto[76][two] years and with fine. (2) If a person wilfully attempts in any manner whatsoever to evade thepayment of any tax, penalty or interest under this Act, he shall, withoutprejudice to any penalty that may be imposable on him under anyother provision of this Act, be punishable with rigorous imprisonmentfor a term which shall not be less than three months but which mayextend to[76][two] years and shall, in the discretion of the court, also beliable to fine. (ii) in any other case, with rigorous imprisonment for a term whichshall not be less than three months but which may extendto[76][two] years and with fine.shall not be less than three months but which may extendto[76][two] years and with fine. (2) If a person wilfully attempts in any manner whatsoever to evade thepayment of any tax, penalty or interest under this Act, he shall, withoutprejudice to any penalty that may be imposable on him under anyother provision of this Act, be punishable with rigorous imprisonmentfor a term which shall not be less than three months but which mayextend to[76][two] years and shall, in the discretion of the court, also beliable to fine. Explanation.—For the purposes of this section, a wilful attempt toevade any tax, penalty or interest chargeable or imposable under thisAct or the payment thereof shall include a case where any person— (i) has in his possession or control any books of account or otherdocuments (being books of account or other documents relevantto any proceeding under this Act) containing a false entry orstatement; ordocuments (being books of account or other documents relevantto any proceeding under this Act) containing a false entry orstatement; or (ii) makes or causes to be made any false entry or statement in suchbooks of account or other documents; orbooks of account or other documents; or (iii) wilfully omits or causes to be omitted any relevant entry orstatement in such books of account or other documents; orstatement in such books of account or other documents; or (iv) causes any other circumstance to exist which will have the effectof enabling such person to evade any tax, penalty or interestchargeable or imposable under this Act or the payment thereof.]of enabling such person to evade any tax, penalty or interestchargeable or imposable under this Act or the payment thereof.] 10. A reading of Section 276© (1) and (2) shows its wording whichis material to answer the same referred supra is crystal clear thatwithout prejudice to any penalty which is imposable under any of theprovisions of this Act for the tax or penalty or interest due under the Actevading that to be chargeable or imposable under the Act and he shallbe punishable. 11. The saving provision of without prejudice to any penalty that tobe imposable, the prosecution when sustainable, the modes ofrecovery is to the tax, interest and penalty for the non-payment that isnot the only recourse for nothing to say without exhausting,prosecution won’t survive. The only point is left to be answered fromthe contentions raised by the learned counsel for the quash-petitioner/accused is whether there is any willful non-payment on thepart of the petitioner/accused. No doubt in his replies particularly onedated 21.02.2014 for the notice issued under Section 221(1) read with220 and the other dated 24.03.2014 for the show cause notice issuedbefore initiation of the prosecution under Section 276©() of the Act isnot to initiate action and that he would make payment as and when hereceives contract bills. As discussed supra, out of the works done byhim for the assessment year 2012-13(financial year 2011-12) of morethan 14.25crores received out of the total works the value even notbefore the Court and shown of it a profit of Rs.2,10,260.628 for whichthe tax payable of Rs.68,28,133/- and the TDS deduction only ofRs.10,12,293/- on his own showing by 30.09.2012 after e-returndeclaration of him and the subsequent payment only Rs.2,00,000/-(rupees two lakhs only) on 31.12.2010 even taken when receivedmore than 14 crores and payable only 68lakhs and odd for the 56lakhs and odd due, it is the case of the complainant that for more thana year after the amount due he has not paid which is nothing but willfulact. 12.Now coming to the presumption under Section 278(E) of the Act 12.Now coming to the presumption under Section 278(E) of the Act the Court shall presume the existences of such mental status on thepart of the accused in the prosecution for the offence under the Act, butit shall be defence for the accused to prove the fact that he had nosuch mental status with respect to the act charged as an offence in thatprosecution. Therefore, once the Court shall presume, the burden is onthe accused under the reverse onus clause to prove it bypreponderance of probabilities while facing the trial as part of hisdefence to rebut the presumption but he cannot pretend that there is noculpable much less willful non-payment or willful evading of the taxand interest and penalty. 13. Now coming to the accusation he places reliance of K.C.Builders(supra) entire reading of the judgment where the prosecutionlaunched for the offences under Section 276(2), 276(B) of the Act and120-B, 134,193,196 and 420 IPC on the allegations of conspiracyentered into between the accused in their filing of false returns ofincome before the Department which led to concealment of income toevade tax from the variation to the original return vis-à-vis to modifyreturn. They preferred appeal before the Income Tax AppellateTribunal(for short, the ‘Tribunal’) on the consolidated order passed bythe Tribunal for the assessment years 1983-84, 1986-87 but theTribunal found additions were on the basis of settlement between theassessees and the Department and represents voluntary offer made bythe assessee and by applying principle of law laid down in SirShadilal Sugar and General Mills Limited Vs. the CIT Delhi[[2]]-the Apex Court held that there was no concealment of income by theassessee and accordingly the penalties were cancelled and allowedthe appeals. Thereupon, the appellant-assessee moved an applicationbefore the Additional Chief Metropolitan Magistrate, (E.O.II), Egmore,Chennai in M.P.No.614 of 1996 in C.C.No.425 of 1990 for adjourningthe proceedings to enable them to move necessary petition and filecopy of the order of the Tribunal dated 24.10.1996 which allowed theappeals preferred by the A.1 against levying of penalty and the learned Magistrate permitted to mark the order of the tribunal in evidence at theappropriate stage of trial from no objection of prosecution. Giving effectto the order in ITAT’s order in ITA Nos.3129-3132, the penalties leviedunder Section 271(1)© of the Act, were cancelled by the Department. In the meantime the Revenue Department filed application underSection 256(1) of the Act for reference of the question of law which hadarisen from the order of the ITAT and the same was rejected.Thereupon, the appellant-assessee preferred a Criminal Revisionbefore the Hon’ble High Court for setting aside the order of theAdditional Chief Metropolitan Magistrate dated 21.071997 and thesingle judge of the Madras High Court rejected said Revision holdingthat the order of the ITAT was not applicable as not marked as defencedocument whereas the fact remains that order was passed at asubsequent date. The High Court referring to the expression of the Apex Court in K.T.M.S. Mohammed Vs. Union of India[[3]]held thatthe observation therein helps to the appellant to the extent that the trialCourt should have given due regard to the order of the ITAT from theerroneous definition of the order was not exhibited though it waspassed subsequently for its earlier marking does not arise. It is in thefactual background by formulating 5 questions by the Apex Court viz: a) Whether penalty imposed under Section 271(1)© of theIncome Tax Act and prosecution under Section 276C of the Act,are simultaneous? b) Whether the criminal prosecution gets quashed automaticallywhen the Income Tax Appellate Tribunal which is the final Courton facts comes to the conclusion that there is no concealment ofincome, since no offence survives under the Income Tax Actthereafter? Apex Court in K.T.M.S. Mohammed Vs. Union of India[[3]]held thatthe observation therein helps to the appellant to the extent that the trialCourt should have given due regard to the order of the ITAT from theerroneous definition of the order was not exhibited though it waspassed subsequently for its earlier marking does not arise. It is in thefactual background by formulating 5 questions by the Apex Court viz: a) Whether penalty imposed under Section 271(1)© of theIncome Tax Act and prosecution under Section 276C of the Act,are simultaneous? b) Whether the criminal prosecution gets quashed automaticallywhen the Income Tax Appellate Tribunal which is the final Courton facts comes to the conclusion that there is no concealment ofincome, since no offence survives under the Income Tax Actthereafter? c) Whether the High Court was justified in dismissing theCriminal Revision Petition vide its impugned order ignoring thesettled law as laid down by this Court that the finding of theAppellate Tribunal was conclusive and the prosecution cannotbe sustained since the penalty after having been cancelled bythe complainant following the Income Tax Appellate Tribunal’s Order no offence survives under the Income Tax Act, and thus thequashing of the prosecution is automatic? d) Whether the finding of the Income Tax Appellate Tribunal isbinding upon the Criminal Court in view of the fact that the ChiefCommissioner and the Assessing Officer who initiated theprosecution under Section 276C(1) had no right to overrule theorder of the Income Tax Appellate Tribunal. More so when theIncome Tax Officer’ giving the effect to the order cancelled thepenalty levied under Section 271(1)©? e) Whether the High Court’s order is liable to be set aside in viewof the errors apparent on record? It is ultimately held that the penalty proceedings and prosecutionproceedings are clearly independent and that the result of proceedingsdoes not bind and Criminal Court has to independently judge on theevidence placed before it. It further held that it is the settled law thatlevy of penalties and prosecution under Section 276C aresimultaneous and once penalties are cancelled on that ground there isno concealment, the prosecution for concealment is liable to bequashed automatically and thereby held the prosecution will notsurvive and is liable to be quashed thereby the High Court heldcommitted an error. 14. Here, it is not the case of the accused/petitioner that penaltyproceedings are quashed or set aside and thereby automatically theprosecution is liable to be quashed. It is not even his case that eventhere is any finding by any Tribunal of no willful default on the part ofhim despite presumption against him with a burden on him underreverse onus clause to say consequently that finding is binding on thecriminal Court with the analogy of law laid down in R.K.Builders(supra)para-26 to quash the prosecution thereby the decision relied has noapplication for the factual matrix referred supra. 15. In fact, it is though not mentioned in the original quash petitionabout the trial Court’s order, after hearing both sides as a privatewarrant procedure framed charges against the accused and the accused was examined, in the course of hearing it is filed as additionalmaterial. On perusal of the charges framed by the trial Court also itnowhere requires any interference from what is referred surpa. 16. Having regard to the above there are no grounds to quash theprosecution proceedings in C.C.No.103 of 2014 on the file of thelearned Special Judge for Economic offences, Hyderabad whichreached stage for commencement of trial before the learned SpecialJudge. But for to say the observation herein no way much less, thecharges framed by the trial Court, influence the trial Judge in decidingthe criminal cases on its own merits from the ultimate appreciation ofthe evidence oral and documentary on record. 17. Accordingly, the Criminal Petition is dismissed. Miscellaneouspetitions, if any pending, in this Criminal Petition shall stand closed. 16. Having regard to the above there are no grounds to quash theprosecution proceedings in C.C.No.103 of 2014 on the file of thelearned Special Judge for Economic offences, Hyderabad whichreached stage for commencement of trial before the learned SpecialJudge. But for to say the observation herein no way much less, thecharges framed by the trial Court, influence the trial Judge in decidingthe criminal cases on its own merits from the ultimate appreciation ofthe evidence oral and documentary on record. 17. Accordingly, the Criminal Petition is dismissed. Miscellaneouspetitions, if any pending, in this Criminal Petition shall stand closed. Date: 15.09.2015L.R.Copy to be marked.Vvr ____________________________ Dr. B. SIVA SANKARA RAO, J [1]2004(2) SC 7312004(2) SC 731 [2](1987) 168 ITR 705(1987) 168 ITR 705 [3](1992) 197 ITR 196(1992) 197 ITR 196