2003 (5) TMI 8 - HC - Income Tax

Petitioners have filed this petition u/s 482 of the Code of Criminal Procedure for quashing the complaint u/s 276C and 277 of the Income-tax Act, 1961 filed against them as also the summoning order passed by the learned Chief Judicial Magistrate - In the case in hand, it is evident that the circulars issued by the income-tax authorities themselves provide an immunity from prosecution where the assessee admits the truth and pays the taxes properly. Nothing has been shown from the circular that the case would not be covered in the event of concealment. - Therefore, having regard to the fact that the case of the petitioners is covered by the instructions and clarifications - Besides, the penalty imposed on the petitioners has been set aside by the Tribunal. Therefore, it cannot be said that the petitioners are not entitled to be absolved from criminal prosecution in view of the concealment, which concealment in fact entitles them to immunity from prosecution - As such it is to be taken that the offences attributed to the petitioners have been compounded and the continuation of criminal prosecution would be an exercise in futility - Petition is allowed and the complaint and the summoning order are quashed.

Summary

Issues Involved:
1. Quashing of the complaint under sections 276C and 277 of the Income-tax Act, 1961.
2. Validity of the summoning order dated September 17, 1987.
3. Application of the amnesty scheme and immunity from prosecution.
4. Impact of revised returns and penalty proceedings on criminal prosecution.

Detailed Analysis:

1. Quashing of the Complaint under Sections 276C and 277 of the Income-tax Act, 1961:
The petitioners sought the quashing of the complaint filed against them for alleged offenses under sections 276C and 277 of the Income-tax Act, 1961. These sections pertain to willful attempts to evade tax and making false statements in verification, respectively. The complaint was based on discrepancies in the firm's stock of girders, which led to an accusation of suppressed income amounting to Rs. 55,752.

2. Validity of the Summoning Order Dated September 17, 1987:
The Chief Judicial Magistrate, Amritsar, issued a summoning order on September 17, 1987, after finding sufficient grounds to proceed against the petitioners under the aforementioned sections. The petitioners contended that this order should be quashed due to the subsequent developments and clarifications under the amnesty scheme.

3. Application of the Amnesty Scheme and Immunity from Prosecution:
The petitioners argued that the revised return filed during the amnesty scheme period should provide them immunity from prosecution. They cited Circular No. 441 and other related circulars, which clarified that full and true disclosure of income would entitle the assessee to immunity from prosecution and penalty. The court noted that the revised return was filed before March 31, 1986, and the Income-tax Officer accepted it, framing the assessment on the same day.

4. Impact of Revised Returns and Penalty Proceedings on Criminal Prosecution:
The petitioners highlighted that the penalty imposed by the Income-tax Officer for concealment was set aside by the Income-tax Appellate Tribunal, Amritsar Bench, on September 3, 1993. The Tribunal observed that the assessee cooperated fully and surrendered the concealed income in accordance with the assessing officer's calculations. The Tribunal's decision and the circulars indicated that the petitioners should be immune from prosecution due to their voluntary disclosure and payment of taxes.

The court considered the clarifications in the circulars, particularly the answers to questions regarding immunity from penalty and prosecution. It was evident that the circulars provided immunity from prosecution where the assessee made a true and full disclosure of income. The court also referred to section 279(2) of the Act, which allows for the compounding of offenses, and noted that the petitioners' case fell within the scope of the circulars and instructions issued by the Board.

Conclusion:
The court concluded that the continuation of criminal prosecution against the petitioners would be futile, given the immunity provided under the amnesty scheme and the Tribunal's decision setting aside the penalty. Consequently, the petition was allowed, and the complaint and summoning order dated September 17, 1987, were quashed.