Cwp/6136/2015 Of Liz Batra v. Commissioner Of Income Tax

IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH. Civil Writ Petition No. 6136 of 2015Date of Decision: 25.05.2015._ Petitioner Liz Batra VeTSUS Central Board of Direct Taxes through its Chairman and another ..Respondents CORAM:HON'BLE MR. JUSTICE S.J.VAZIFDAR, ACTING CHIEF JUSTICE,HON'BLE MR. JUSTICE G.S.SANDHAWALIA.,Present :Ms. Radhika Suri, Sr. Advocate withMs. Rajni Paul, Advocate, for the petitioner.Ms. Urvashi Dugga, Advocate, for the respondents. FS 2S S.I.VAZIFDAR A.C.J.(Oral) CM No. 6831 of 2015Allowed subject to all just exceptions. CWP? No. 6136 of 201 The petitioner has sought a writ of certiorari to quash aShow-cause notice dated 09.02.2015 under sections 276C(1)/277 of theIncome Tax Act, 1961 (for short ‘the Act’) for initiating prosecutionproceedings in respect of the assessment year 2011-12. | 2 |The petitioner contends that respondent No.2-Commissioner ofIncome Tax-I, Chandigarh is the authority competent to decide whether ornot to launch prosecution including for concealment of income under section2/6C read with section 279 of the Act. Despite the same, according to thepetitioner, Central Board of Direct Taxes has been issuing directionscompelling the Commissioner of Income Tax to launch prosecution. 3 |Section 279 of the Act reads as under:- <2/9. Prosecution|fo be|attheinstance|of|ChiefCommissioner or Commissioner.—|(1) A person shall not be)proceeded against for an offence under Section 2/75-A|Section 275-B], section 2/76, Section 2/6-A, Section 2/6-B, Section 2/6-BB, Section 2/6-C, Section 2/6-CC, Section 2/6-D, Section 2/7section 2//-A] or Section 278 except with the previous sanction ofthe Commissioner or Commissioner (Appeals) or the appropriateauthority: Providedthat the Chief Commissioner or, as the case may be,|Director-General may Issue such instructions or directions to theaforesaid income tax authorities as he may deem fit for institution ofproceedings under this sub-section. Explanation.—For the purposes of this section, “appropriateauthority shall have the same meaning as In clause (G) of Section269-VUA.| (1-A) A person shall not be proceeded against for an offenceunder Section 2/6-C or Section 2/77 in relation to the assessment foran assessment year In respect of which the penalty imposed orimposable on him under clause (Wi) of sub-section (1) of Section 271has been reduced or waived by an order under Section 2/3-A. 3[(2) Any offence under this Chapter may, either before or after|the institution of proceedings, be compounded by the ChiefCommissioner or Director-General.| (3) Where any proceeding has been taken against any personunder sub-section (1), any statement made or account or otherdocument produced by such person before any of the Income taxauthorities specified in clauses (a) to (() of Section 116 shall not beinadmissible as evidence for the purpose of such proceedings merelyon the ground that sucn statement was made or such account orother document was produced in the belief that the penalty Imposablewould be reduced or waived under Section 273-A or that the offenceIn respect of whicn such proceeding was taken would becompounded. 5|Explanation.—For the removal of doubts, it Is hereby declaredthat the power of the Board to issue orders, instructions or directionsunder this Act shall include and shall be deemed always to haveincluded the power to issue instructions or directions (includinginstructions or directions to obtain the previous approval of the Board)to other income tax authorities for the proper composition of offencesunder this section.]”that the power of the Board to issue orders, instructions or directionsunder this Act shall include and shall be deemed always to haveincluded the power to issue instructions or directions (includinginstructions or directions to obtain the previous approval of the Board)to other income tax authorities for the proper composition of offencesunder this section.]” 4AA person, therefore, cannot be proceeded against for the 4AA person, therefore, cannot be proceeded against for the offences mentioned therein except with the previous sanction of theCommissioner or Commissioner (Appeals) or the appropriate authority orwhere the Chief Commissioner or Director General issue instructions or|directions to do so. The Central Board of Direct Taxes (CBDT) is not theappropriate authority to issue such directions. It is not necessary to deal with Ms. Suri’s contention in detail in this regard as Ms. Dugga did not contendotherwise. 5.Ms. Suri’s apprehension is that in view of the correspondencethat ensued between the CBDT and the concerned authorities, the latter areleft with no option but to launch prosecution. For instance, she relied upon aletter dated 11.03.2013. The said letter addressed by the Member, CBDT,Special Secretary to the Government of India, to the member (L&C) CBDT,does not indicate a mandatory order or direction to launch prosecution. Theletter only suggests prosecution proceedings under sections 276C and 277.The same is pending for consideration of CIT-I, Chandigarh i.e. respondentNo.2. The letter concludes by stating that the Member (L&C) CBDT maylike to issue suitable instructions to the CCIT and CIT concerned to considerand decide this issue expeditiously so that appropriate prosecutionproceedings are initiated during this financial year. It further states that if theassessee is willing to compound the offence, the same may be considered asper the existing instructions. We do not read the letter, therefore, as an orderdirecting respondent No.2 to launch prosecution. It merely suggests the othermember to issue instructions to decide the issue expeditiously. | 6_Ms. Suri also relied upon another letter dated 16.09.2014addressed by the Deputy Commissioner of Income Tax informing the Undersecretary (inv.V) CBDT that the CIT had been requested to get relevantassessment and penalty proceedings completed expeditiously and also toprocess the case for launching prosecution/compounding for the assessmentyears 2011-12 and 2012-13. vanThis letter also is not an order or direction instructingrespondent No.2 to decide the matter in a particular manner. It is merely a direction to decide the same expeditiously as also to process the case for launching prosecution. Advising respondent No.2 to decide the matterexpeditiously and to process the matter is not the same as directing him todecide the matter in a particular manner. At the highest it can be said that thetone of the letter is such that respondent No.2 may consider it as anorder/instruction directing him to decide the issue in a particular manner. |&To leave no room tor doubt, we direct that respondent No.2shall decide whether or not to take action under section 279 of the Act on hisown in accordance with law and without being influenced by the directionsfrom any other source including from the CBDT including on the basis ofthe communications relied upon by the petitioner or otherwise. By ourjudgment dated 12.05.2015 in|M/s Kudos Chyemie Ltd. v. AssistantCommissioner of Income Tax (IDS), Chandigarh,we have held that.launching a prosecution is not mandatory in every case of failure provided insection 276B. The same would apply also in respect of failure under sections2/6C and 277 which the petitioner is accused of in this case. 9Further, in the event of respondent No.2 deciding to launch theprosecution, he shall do so only by a reasoned order on all the issues raisedby the petitioner. In the event of the decision of respondent No.2 beingadverse to the petitioner to any extent, the same shall not be implemented fora period of four weeks after service of the same upon the petitioner. The writ petition stands disposed of with the aforesaid terms. — 25.05.2015‘ravinder’ (S.J.VAZIFDAR)ACTING CHIEF JUSTICE. (G.S.SSANDHAWALIA) JUDGE