Op(Crl.) v. Assistantcommissioner Of Income Tax : (2004) 2 Scc 731 In Support Ofhis Contention

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI WEDNESDAY, THE 23RD DAY OF OCTOBER 2019 / 1ST KARTHIKA, 1941 OP(Crl.).No.400 OF 2019 CC NO.65/2015 OF ADDITIONAL CHIEF JUDICIAL MAGISTRATE(E&O),ERNAKULAM PETITIONER/S: 1M/S.BEAVER ESTATES PVT.LTDPUTHURAN PLAZA, K.P.C.C.JUNCTION, KOCHI-682011 REPRESENTED BY ITS PRINCIPAL OFFICER, MR.B.R.AJIT 2B.R.AJITAGED 64 YEARSS/O.KESAVAN B.UNNITHAN, PRINCIPAL OFFICER, M/S.BEAVERESTATES P. LTD., PUTHURAN PLAZA, K.P.C.C.JUNCTION, KOCHI-682011 BY ADV. SRI.DALE P.KURIEN RESPONDENTS: 1THE ASSISTANT COMMISSIONER OF INCOME TAXCORPORATE CIRCLE 1(1), CORPORATION RANGE-1, IVTH FLOOR, CENTRAL REVENUE BUILDINGS, I.S.PRESS ROAD, KOCHI-682018 2THE COMMISSIONER OF INCOME TAX(APPEALS)-IGIRINAGAR 1ST CROSS ROAD, PANAMPILLY NAGAR, KOCHI-682020 3STATE OF KEALAREPRESENTED BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM, KOCHI-682031 R1 BY SRI JOSE JOSEPH, SC,IT R3 BY PUBLIC PROSECUTOR THIS OP (CRIMINAL) HAVING BEEN FINALLY HEARD ON 09.10.2019,THE COURT ON 23.10.2019 DELIVERED THE FOLLOWING: R.NARAYANA PISHARADI, J ************************O.P.(Crl.) No.400 of 2019 --------------------------------------------- Dated this the 23[rd] day of October, 2019 O R D E R This original petition is filed under Article 227 of the Constitutionof India. The prayer in this petition is to issue a direction to theAdditional Chief Judicial Magistrate's Court (Economic Offences),Ernakulam to keep in abeyance all further proceedings in the caseC.C.No.65/2015 of that court till the disposal of the appeal filed by thepetitioners in the matter before the Commissioner of Income Tax(Appeals). 2. The petitioners are the accused in the aforesaid case. The first petitioner is a company. The second petitioner is the ManagingDirector of the first petitioner company. The case C.C.No.65/2015 isbased on the complaint filed against them by the AssistantCommissioner of Income Tax alleging that they had made wilfulattempt to evade tax and that they have committed the offencepunishable under Section 276C(1) of the Income Tax Act, 1961(hereinafter referred to as 'the Act'). 3. The plea of the petitioners is that they have filed appeal beforethe statutory authority challenging the assessment of tax and that thedecision in the appeal has got bearing on the prosecution against themand therefore, the criminal proceedings pending against them may bekept in abeyance till the disposal of the aforesaid appeal. 4. Heard learned counsel for the petitioners and the learnedStanding Counsel for Government of India (Taxes) and the learnedPublic Prosecutor. 5. Learned counsel for the petitioners contended that, if the statutory appeal filed by the petitioners under the Act is allowed, itwould knock down the very basis of the prosecution against them andtherefore, the criminal proceedings may be ordered to be kept inabeyance. Learned counsel for the petitioners has relied upon thedecision of the Apex Court inK.C.Builders v. AssistantCommissioner of Income Tax : (2004) 2 SCC 731 in support ofhis contention. 6. There is force in the aforesaid contention. K.C.Builders(supra) was a case of concealment of income where penalty wasimposed on the assessee by the assessing authority. The prosecutionagainst the assessee was under Sections 276C(2) and 278B of the Actand Sections 193, 196 and 420 and 120B of the Indian Penal Code. statutory appeal filed by the petitioners under the Act is allowed, itwould knock down the very basis of the prosecution against them andtherefore, the criminal proceedings may be ordered to be kept inabeyance. Learned counsel for the petitioners has relied upon thedecision of the Apex Court inK.C.Builders v. AssistantCommissioner of Income Tax : (2004) 2 SCC 731 in support ofhis contention. 6. There is force in the aforesaid contention. K.C.Builders(supra) was a case of concealment of income where penalty wasimposed on the assessee by the assessing authority. The prosecutionagainst the assessee was under Sections 276C(2) and 278B of the Actand Sections 193, 196 and 420 and 120B of the Indian Penal Code. Section 276C of the Act provides the punishment for wilful attempt toevade tax, penalty or interest. Section 278B of the Act provides foroffences by companies. In K.C.Builders (supra), the Apex Court hasheld that levy of penalties and prosecution under Section 276C of theAct are simultaneous and hence, once the penalties are cancelled onthe ground that there is no concealment, the quashing of prosecutionunder Section 276C of the Act is automatic. In the instant case, theprosecution is under Section 276C(1) of the Act for wilful attempt toevade tax. The decision of the statutory appellate authority regardingthe assessment and computation of tax would have bearing on theprosecution against the petitioners. 7. Learned counsel for the petitioners has also relied upon thedecision of the Supreme Court in Commissioner of Income Tax v.Bhupen Champak Lal Dalal : AIR 2001 SC 1096, wherein it hasbeen held as follows: “The prosecution in criminal law and proceedings arisingunder the Act are undoubtedly independent proceedingsand, therefore, there is no impediment in law for thecriminal proceedings to proceed even during the pendencyof the proceedings under the Act. However, a wholesomerule will have to be adopted in matters of this naturewhere courts have taken the view that when theconclusions arrived at by the appellate authorities have a relevance and bearing upon the conclusions to be reachedin the case necessarily one authority will have to await theoutcome of the other authority”. 8. The decision in Bhupen Champak Lal Dalal (supra) has also got application in the instant case because the decision of thestatutory appellate authority regarding the assessment andcomputation of tax would have bearing on the prosecution against thepetitioners for wilful attempt to evade tax. 9. Learned standing counsel for the first and the secondrespondents has invited the attention of this Court to the decision of the Apex Court in Sasi Enterprises v. Assistant Commissioner ofIncome Tax : (2014) 5 SCC 139, wherein it has been held asfollows: “We also find no basis in the contention of the learnedsenior counsel for the appellant that pendency of theappellate proceedings is a relevant factor for not initiatingprosecution proceedings under Section 276CC of the Act.Section 276CC contemplates that an offence is committedon the non-filing of the return and it is totally unrelated tothe pendency of assessment proceedings except forsecond part of the offence for determination of thesentence of the offence, the department may resort tobest judgment assessment or otherwise to past years todetermine the extent of the breach. ..... If it was theintention of the legislature to hold up the prosecutionproceedings till the assessment proceedings are completed by way of appeal or otherwise the same would have beenprovided in Section 276CC itself. Therefore, the contentionof the learned senior counsel for the appellant that noprosecution could be initiated till the culmination ofassessment proceedings, especially in a case where theappellant had not filed the return as per Section 139(1) ofthe Act or following the notices issued under Section 142or Section 148 does not arise”. by way of appeal or otherwise the same would have beenprovided in Section 276CC itself. Therefore, the contentionof the learned senior counsel for the appellant that noprosecution could be initiated till the culmination ofassessment proceedings, especially in a case where theappellant had not filed the return as per Section 139(1) ofthe Act or following the notices issued under Section 142or Section 148 does not arise”. 10. The decision in Sasi Enterprises (supra) has got noapplication to the present case because the prosecution against thepetitioners is for committing the offence under Section 276C of the Actand not for the offence under Section 276CC of the Act. 11. True, today itself, I have dismissed two other petitions filed for identical relief. But, in those petitions, the prosecutionagainst the petitioners is under Section 276CC of the Act andnot under Section 276C of the Act. 12. In the aforesaid circumstances, in the light of the decision ofthe Apex Court in Bhupen Champak Lal Dalal (supra), I find thatthis is a fit case where the supervisory jurisdiction of this Court underArticle 227 of the Constitution should be invoked to issue appropriatedirection to the lower court. 13. In the result, the petition is allowed. The Additional Chief JudicialMagistrate (Economic Offences), Ernakulam is directed to keep inabeyance all further proceedings against the petitioners in the caseC.C.No.65/2015 of that court till the disposal of I.T.A.No.28/R-1/CIT(A)-II/15-16 filed by them before the Commissioner of IncomeTax (Appeals),Kochi. jsr Sd/-R.NARAYANA PISHARADI, JUDGE APPENDIX PETITIONER'S EXHIBITS: EXHIBIT P1TRUE COPY OF THE ASSESSMENT ORDER DATED 29.3.201429.3.2014 EXHIBIT P2TRUE COPY OF THE COMPLAINT PENDING BEFORE THE ADDITIONAL CHIEF JUDICIAL MAGISTRATE COURT(E.O) AT ERNAKULAM, DATED 01.09.1014THE ADDITIONAL CHIEF JUDICIAL MAGISTRATE COURT(E.O) AT ERNAKULAM, DATED 01.09.1014 EXHIBIT P3TRUE COPY OF MEMORANDUM OF APPEAL DATED 26.4.2014 FILED BEFORE CIT (APPEALS)26.4.2014 FILED BEFORE CIT (APPEALS) EXHIBIT P4TRUE COPY OF THE HEARING NOTES BEFORE CIT (APPEALS) DATED 1.11.2016(APPEALS) DATED 1.11.2016 EXHIBIT P5TRUE COPY OF THE DECISION REPORTED IN 265 ITR 562(SC) CITED K.C.BUILDERS AND ANOTHER V.ACITITR 562(SC) CITED K.C.BUILDERS AND ANOTHER V.ACIT EXHIBIT P6TRUE COPY OF THE DECISION REPORTED IN 288 ITR 134(KER). EDAYANAL CONSTRUCTIONS VT.ITOITR 134(KER). EDAYANAL CONSTRUCTIONS VT.ITO EXHIBIT P7TRUE COPY OF THE DECISION REPORTED IN 248 ITR 830(SC) CITED CIT VS.BHUPAN CHAMPAK LALDALAL AND ANOTHER VS.CITITR 830(SC) CITED CIT VS.BHUPAN CHAMPAK LALDALAL AND ANOTHER VS.CIT EXHIBIT P8TRUE COPY OF THE DECISION REPORTED IN 2009 (2) KLT 948(KER).CITED K.S.NANDAKUMAR VS 1.T.O(2) KLT 948(KER).CITED K.S.NANDAKUMAR VS 1.T.O EXHIBIT P9TRUE COPY OF DISCHARGED SUMMARY FROM AMRITHA HOSPITAL, ERNAKULAM DATED 02.09.2019AMRITHA HOSPITAL, ERNAKULAM DATED 02.09.2019 EXHIBIT P10COPY OF THE MEDICAL CERTIFICATE FROM AMRITHA HOSPITAL EDAPPAY DATED 19/09/2019.AMRITHA HOSPITAL EDAPPAY DATED 19/09/2019. RESPONDENTS EXHIBITS: NIL TRUE COPY