2002 (11) TMI 63 - HC - Income Tax

Offences and Prosecution - Whether it was desirable to revive the prosecution with respect to an offence more than 20 years? - Whether the respondent was entitled to notice before the prosecution was launched? - in view of certain developments which have undertaken during the pendency of the appeal, we do not consider it appropriate to set aside the order of quashing of prosecution and thereby revive the same. In compliance with the direction of the learned single judge and in the absence of an interim order by the Division Bench, the learned trial court by order dated July 17, 1990, has disposed of the prosecution. We do not consider it desirable to revive the said prosecution with respect to an offence more than 20 years old more particularly when the Commissioner of Income-tax, Udaipur, by order dated November 15, 1995, has deleted the penalty imposed on the respondent-assessee-firm under section 271(1)(c)

Summary

Issues:
1. Quashing of the order imposing penalty and rejection of waiver application.
2. Quashing of the complaint filed for launching prosecution.
3. Entitlement of the assessee to show cause notice before prosecution.

Issue 1: Quashing of the order imposing penalty and rejection of waiver application:

The respondent, a partnership firm, faced penalties and additions to income after a search found unexplained silver. Despite explanations, penalties were imposed, and appeals were dismissed. An application for waiver was rejected, leading to a notice for prosecution. The single judge refused to interfere due to pending appeals. However, the judge quashed the proceedings, noting the Department's obligation to provide a hearing before prosecution. The High Court found the single judge's decision untenable, but due to subsequent events and penalty deletion, the court partly allowed the appeal.

Issue 2: Quashing of the complaint filed for launching prosecution:

The respondent sought to quash the complaint filed for launching prosecution, arguing the Department should have provided a hearing opportunity before proceeding. The single judge agreed, emphasizing the Department's obligation to afford a hearing before opting for prosecution. Despite the High Court finding the single judge's decision untenable, the court decided not to revive the prosecution due to the penalty deletion and the age of the offense, ultimately partly allowing the appeal.

Issue 3: Entitlement of the assessee to show cause notice before prosecution:

The High Court discussed the entitlement of the assessee to a show cause notice before prosecution. Citing a previous apex court decision, it was noted that the law does not mandate a show cause notice before prosecution. The court found the single judge's decision on quashing the prosecution against the respondent untenable. Despite this, considering subsequent developments and penalty deletion, the court decided not to revive the prosecution, ultimately partly allowing the appeal.

This detailed analysis of the judgment covers the issues of quashing penalties, rejection of waiver applications, quashing of the complaint for prosecution, and the entitlement of the assessee to a show cause notice before prosecution.