M/S Raj Bricks Field And Others v. Income Tax Officer

[1] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CRR No. 440 of 2002 Date of Decision: February 5, 2014 M/s Raj Bricks Field and others …..Petitioners Vs. Income Tax Officer …..Respondent CORAM:HON’BLE MR. JUSTICE M.M.S. BEDI. -.- Present:-Mr.Sumeet Mahajan, Sr. Advocate withMr. Amit Kohar, Advocate for the petitioners. None for the respondent. -.- M.M.S. BEDI, J. (ORAL) The petitioners have invoked the revisional jurisdiction of thisCourt to question the legality and propriety of order dated October 12, 2001passed by Sessions Judge, Ludhiana, setting aside the order passed by thetrial Court dated November 29, 2000. Vide order dated November 29, 2000,the trial Court had dismissed the complaint of the respondent Income TaxOfficer under Sections 276 C and Section 277 read with Section 278-B ofthe Income Tax Act, 1961, for short ‘the Act’, pertaining to assessment year 1988-89. On revision petition filed by Income Tax Officer, Khanna, againstthe order dated November 29, 2000. It was allowed by the learned SessionsJudge vide order dated October 12, 2001. Brief facts of the case are that the petitioner is a partnershipconcern which filed return for the year 1988-89 declaring total income ofRs.23570/-. The Assessing Officer issued notice under Section 143 (2) and142 (1) of the Act alongwith printed questionnaire. The petitioners filed arevised return on January 11, 1989 declaring income of Rs.113570/- with anote that revised return was being filed subject to no penalty and noprosecution. The surrender made by the petitioners was accepted byAssessing Officer as they made addition of Rs.90000/- but the AssessingOfficer imposed a penalty of Rs.38765/-. The Commissioner of Income Tax(Appeals) vide order dated April 5, 1990 confirmed the order of penalty.After the order of penalty was passed by the Assessing Officer and samewas confirmed by Commissioner of Income Tax (Appeals) vide order datedApril 5, 1990, a complaint dated January 29, 1993 under Sections 276 C and277 read with Section 278 B of the Act based on the order dated July24,1989 of the Income Tax Officer was filed in the Court of Sub DivisionalJudicial Magistrate, Ludhiana. Meanwhile, the petitioners had field appeal i.e. ITA No.1192/Chandi/90 against the order dated April 5, 1990 passed byCommissioner of Income Tax (Appeals) before the Income Tax AppellateTribunal, Chandigarh Bench. The Income Tax Appellate Tribunal, Chandigarh Bench vide order dated June 22, 1994 accepted the appeal byobserving as follows:- “On the facts of the case we hold that return by theassessee was a voluntary return filed in good faith andbefore the detection of any concealment by the AssessingOfficer. It was further held that because of the peculiarcircumstances of the case, the remaining partners whocontinued the business of the assessee firm after thedissolution of the assessee firm, in the absence ofcooperation from the outgoing partners voluntarilysurrendered an income of Rs.90000/- in the name of cashcreditors on the clear understanding that no penaltywould be levied or prosecution launched. Theexplanation submitted by the assessee is a bonafide.”Copy of the order dated June 22, 1994 has been placed onrecord as annexure P-2. The Commissioner of Income Tax (Appeals) filed a referenceapplication to the Income Tax Appellate Tribunal, Chandigarh Bench, torefer the question of law arising out of the Tribunal order dated June 22,1994 in the income tax appeal to the High Court of Punjab and Haryana forits opinion. The said reference application was dismissed by the Tribunalby order dated November 16, 1994. It was held that there was nojustification for levying or confirming the penalty of Rs.38765/- under The Commissioner of Income Tax (Appeals) filed a referenceapplication to the Income Tax Appellate Tribunal, Chandigarh Bench, torefer the question of law arising out of the Tribunal order dated June 22,1994 in the income tax appeal to the High Court of Punjab and Haryana forits opinion. The said reference application was dismissed by the Tribunalby order dated November 16, 1994. It was held that there was nojustification for levying or confirming the penalty of Rs.38765/- under Section 271 (1) (c) of the Act. The said penalty was, therefore, deleted videorder annexure P-3 dated November 16, 1994. After having obtained afavourable judicatory order, the petitioners filed an application underSection 245 (2) Cr.P.C. before the Chief Judicial Magistrate, Ludhiana, fortheir discharge and for quashing of the complaint. The trial Court videorder dated November 29, 2000, accepted the application; dismissed thecomplaint filed by the respondent and discharged the petitioners. In revision petition filed by Income Tax Officer, Khanna, theorder dated November 29, 2000 has been set aside. The revisional Courtobserved that the petitioners had originally filed return showing income ofRs.23570/- and introduced three Cash Credit, amounting to Rs.90000/- inthe name of three different persons. On examination of the income taxreturn and relevant material i.e. cash credits, the revisional Court formed anopinion that an attempt had been made by the petitioners to evade incometax and they would be required to explain their position during the trial. Mr. Sumeet Mahajan, learned senior counsel for the petitioners has submitted that it is established on the record from the order passed bythe higher authorities of Income Tax Department that the petitioners havenot made any attempt to conceal the income to avoid income tax and thatthey are not required to explain their position during the trial. Thepetitioners had not concealed any income because as per the revised returnvoluntarily filed on January 11, 1989, there had been no concealment beforethe Assessing Officer. The observations of the Income Tax Appellate Tribunal, Chandigarh Bench have been ignored by the Sessions Judgewherein it has been held that the revised return was filed subject to therebeing no penalty or prosecution. The short question which is required to be determined in thepresent case is whether it is not an abuse of the process of the law toprosecute an assessee for concealment of income when AdjudicatoryAuthority of the tax Department has itself held that return of the assesseewas voluntary return filed in good faith and before the detection of anyconcealment by the Assessing Officer. In the present case, the Income Tax Appellate Tribunal,Chandigarh Bench vide order dated June 22, 1994 had exonerated thepetitioners from any allegation or charge of having concealed the income. I have heard learned counsel for the petitioners. In the presentcase, criminal prosecution had been launched against the petitioners onJanuary 29, 1993 on the ground that they had concealed their income for theassessment year 1988-89. Vide order dated June 22, 1994, the AppellateTribunal, Chandigarh Bench has held as follows:- “On the facts of the case we hold that return by theassessee was a voluntary return filed in good faith andbefore the detection of any concealment by the AssessingOfficer.” The said order dated June 22, 1994 was upheld by the HighCourt. It is a settled principle of law that a decision of Adjudicatory Authority which in the present case was Appellate Tribunal, cannot beignored when it has become conclusive while considering themaintainability of prosecution. In this concern, a reference can be made to ajudgment of the Apex Court in Uttam Chand and others Vs. Income Tax Officer, Central Circle Amritsar, (1982) 2 SCC 543, wherein it was heldas follows:- “On the facts of the case we hold that return by theassessee was a voluntary return filed in good faith andbefore the detection of any concealment by the AssessingOfficer.” The said order dated June 22, 1994 was upheld by the HighCourt. It is a settled principle of law that a decision of Adjudicatory Authority which in the present case was Appellate Tribunal, cannot beignored when it has become conclusive while considering themaintainability of prosecution. In this concern, a reference can be made to ajudgment of the Apex Court in Uttam Chand and others Vs. Income Tax Officer, Central Circle Amritsar, (1982) 2 SCC 543, wherein it was heldas follows:- “Heard counsel, special leave granted. In view ofthe finding recorded by the Income Tax AppellateTribunal that it was clear on the appraisal of the entirematerial on the record that Shrimati Janak Rani was apartner of the assessee firm and that the firm was agenuine firm, we do not see how the assessee can beprosecuted for filing false returns. We, accordingly,allow this appeal and quash the prosecution.” The judgment of Uttam Chand’s case (supra) was againreiterated in the judgment of Supreme Court in G.L. Didwania andanother Vs. Income Tax Officer and another, 1995 Suppl. (2) SCC 724,wherein it was held as follows:- “The whole question is whether the appellant-assessee made a false statement regarding the incomewhich according to the assessing authority has escapedassessment. So far as this issue is concerned, the findingof the Appellant Tribunal is conclusive. Therefore, as [7] held in Uttam Chand's case [1982] 133 ITR 909 (S.C.),the prosecution cannot be sustained. Accordingly, theproceedings are quashed and the appeal is allowed.”In view of the judgment of Apex Court mentioned hereinabove,it is clear that once authorities under the Act return a finding that there is noconcealment of income, the prosecution is not sustainable on the allegationof concealment of income. Vide order of Appellate Tribunal dated June 22,1994, it has been held that there is no concealment and the return filed bythe assessee was voluntary, filed in good faith and before the detection ofany concealment. Vide said order, the penalty imposed under Section 271(1) (c) of the Act has been set aside. The learned Magistrate had, rightlyappreciated that once the Tribunal of a Department i.e. AdjudicatoryAuthority, holds that there is no concealment of income on part of theaccused and the penalty is deleted, the very basis of the complaint isknocked down and continuation of complaint will be an abuse of theprocess of the Court. It is not out of place to observe here that curtailing theliberty of a person by launching prosecution against him when there is nofoundation of the allegation would be an abuse of the process of the Courtand would certainly be violative of Article 21 of the Constitution of India,as observed in M/s Pepsi Foods Ltd. Vs. Special Judicial Magistrate, AIR1998 SC 128. It was a casual summoning of an accused for the purpose of atrial in a criminal case and was considered to be a serious matter. It wasobserved in the said judgment that no doubt that Magistrate can discharge the accused at any stage of the trial if he considers the charge to begroundless but that will not curtail the right of accused to approach HighCourt under Section 482 Cr.P.C. and Articles 227 of the Constitution ofIndia to have the proceedings quashed against him when the complaint doesnot make out any case against him and still he must undergo the agony oftrial. No useful purpose will be served by continuing the criminalproceedings against the petitioners on the ground of concealment of incomewhen the Income Tax Appellate Tribunal, Chandigarh Bench has held thatthere has not been any concealment of income for the assessment year 1988-89. the accused at any stage of the trial if he considers the charge to begroundless but that will not curtail the right of accused to approach HighCourt under Section 482 Cr.P.C. and Articles 227 of the Constitution ofIndia to have the proceedings quashed against him when the complaint doesnot make out any case against him and still he must undergo the agony oftrial. No useful purpose will be served by continuing the criminalproceedings against the petitioners on the ground of concealment of incomewhen the Income Tax Appellate Tribunal, Chandigarh Bench has held thatthere has not been any concealment of income for the assessment year 1988-89. The petition is allowed. The criminal complaint annexure P-1dated January 29, 1993 and all the proceedings against the petitioners arehereby set aside. The order dated November 29, 2000 is upheld and theorder passed by the revisional Court dated October 12, 2001 is hereby setaside. February 5, 2014 sanjay (M.M.S.BEDI) JUDGE