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Issues Involved: Application u/s 482 of the Code of Criminal Procedure challenging order of cognizance u/s 276C of the Income-tax Act for refusal to disclose source of income.
Summary: The judgment by SUDHIR KUMAR KATRIAR J. dealt with an application u/s 482 challenging an order of cognizance passed by the Special Court of Economic Offences, Muzaffarpur, against the partners of a partnership business known as Patna Guinea House. The complaint alleged that the partners disclosed a sum in their returns but refused to disclose the source of income, leading to penalty proceedings u/s 271(1)(c) of the Act. The penalty amount was reduced on appeal, and the complaint was filed with prior sanction of the Commissioner of Income-tax, Patna. The impugned order of cognizance was assailed on the grounds that the prosecution was misconceived and beyond the scope of section 276C(1) of the Act. The judgment highlighted that the prosecution was for refusal to disclose the source of income, not for failure to disclose taxable income resulting in evasion of tax. It emphasized that prosecution u/s 276C(1) can only occur if there is a wilful attempt to evade tax, penalty, or interest chargeable under the Act. The assessment and quantification of payable tax, penalty, or interest is the duty of the assessing authority, not the basis for prosecution under this section. Furthermore, the judgment referenced a revisional order reducing the penalty amount and a circular by the Government of India providing immunity from prosecution for income escaping assessment up to a certain limit. It cited previous judgments to support the quashing of prosecution when the basis for prosecution is set aside by a superior court. Ultimately, the quashing petition was allowed, setting aside the impugned order of cognizance and quashing the entire proceeding against the firm and its partners. The judgment noted the transfer of the prosecution to the newly constituted Special Court for Economic Offences in Patna. In conclusion, the judgment provided a detailed analysis of the legal provisions and precedents relevant to the case, ultimately leading to the quashing of the prosecution against the partners of the partnership business.
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