2004 (4) TMI 26 - HC - Income Tax

Penalty - concealment of some amount in return of income - complaint filed against the petitioner under sections 276C and 277 petitioner contend that if in appeal, the order of penalty is set aside by the appellate authority or the Tribunal, while setting aside the finding recorded by the assessing authority about the making of false statement in respect of the income-tax return, then the criminal proceedings launched on the same ground can no longer be sustained - This petition is allowed and the complaint under sections 276C and 277 and all the consequential proceedings are hereby quashed. It is, however, made clear that in case the assessing authority imposes a penalty in the matter remanded by the Tribunal, it will be open for the Department to file a fresh complaint against the petitioner in accordance with law

Summary

Issues:
Petition under section 482 of the Code of Criminal Procedure for quashing of complaint dated March 30, 1992, filed by the Assistant Commissioner of Income-tax under sections 276C and 277 of the Income-tax Act, 1961 for concealment of income in the return for the assessment year 1981-82.

Analysis:
The petitioner filed a petition under section 482 of the Code of Criminal Procedure seeking to quash the complaint filed by the Assistant Commissioner of Income-tax for concealing income in the return for the assessment year 1981-82. The assessing authority imposed a penalty under section 271(1)(c) of the Income-tax Act, which was confirmed but reduced by the Commissioner of Income-tax (Appeals). Subsequently, the Income-tax Appellate Tribunal set aside the penalty and remanded the matter to the Income-tax Officer for a fresh decision. The petitioner argued that as no fresh order of penalty had been passed after the remand, the prosecution should be quashed. The petitioner relied on Supreme Court judgments stating that if penalties are cancelled due to no concealment, criminal proceedings cannot be sustained. The counsel for the respondent did not dispute this position but requested liberty to initiate proceedings if a penalty is imposed in the future.

The High Court allowed the petition and quashed the complaint and all consequential proceedings. However, it clarified that if a penalty is imposed by the assessing authority in the matter remanded by the Tribunal, the Department can file a fresh complaint in accordance with the law. The judgment emphasized that once penalties are cancelled due to no concealment, criminal prosecution becomes devoid of jurisdiction. It highlighted that requiring the assessee to face a criminal trial after a conclusive finding of no concealment would be an idle formality. The judgment aligned with the principles established by the Supreme Court regarding simultaneous levy of penalties and prosecution under the Income-tax Act.

In conclusion, the High Court's judgment provided relief to the petitioner by quashing the complaint and all related proceedings. It underscored the importance of aligning penalties and criminal prosecutions with findings of concealment to ensure fairness and avoid unnecessary legal actions.