1993 (8) TMI 8 - HC - Wealth-tax

Offences And Prosecution, Penalty Proceedings, Tenancy Rights, Wealth Tax, Wilful Attempt To Evade Tax

Summary

Issues:
1. Whether the criminal complaints filed against the petitioners should be quashed.
2. Whether the penalty levied under section 18(1)(c) of the Wealth-tax Act was justified.
3. Whether the prosecution of the petitioners under sections 35A(1) and 35D of the Wealth-tax Act was warranted.
4. Whether the criminal prosecutions against the petitioners should be quashed based on the Tribunal's findings.

Analysis:
1. The petitioners sought a writ of certiorari to quash criminal complaints filed against them and mandamus to direct the withdrawal of these complaints. The petitioners were tenants in a building owned by a company that later sold the property for redevelopment. The tenants vacated, purchased new flats, and filed wealth-tax returns without disclosing their tenancy rights as assets. The Wealth-tax Officer assessed the value of tenancy rights, leading to penalty proceedings. The Commissioner (Appeals) canceled the penalties, upheld by the Tribunal, which found the tenancy rights not includible in net wealth. The Tribunal's decision was final, and criminal complaints against the petitioners were deemed unwarranted.

2. The Wealth-tax Officer initiated penalty proceedings under section 18(1)(c) for concealing asset particulars in wealth-tax returns. The Commissioner (Appeals) overturned the penalties, stating the petitioners acted in good faith believing the asset was not taxable. The Tribunal upheld this decision, emphasizing the absence of contumacious conduct. The Tribunal's findings precluded the imposition of penalties, leading to the quashing of penalties by the Tribunal.

3. The Commissioner of Wealth-tax ordered the prosecution of the petitioners under sections 35A(1) and 35D of the Wealth-tax Act. However, the Tribunal concluded no wilful attempt to evade tax or provide false information existed. The Tribunal's decision was final, and the Department's attempts to challenge it were unsuccessful. The court held that no basis for prosecution existed as the petitioners acted in good faith, and the criminal proceedings were unwarranted.

4. The Supreme Court precedent in Uttam Chand v. ITO was cited, where criminal prosecutions were quashed based on Tribunal findings. Similarly, in this case, the Tribunal's findings negated any criminal liability on the part of the petitioners. The court ruled the criminal prosecutions against the petitioners were unsustainable and quashed them, directing the respondents to pay the petitioners' costs. The court emphasized that the petitioners should not endure the harassment of criminal prosecution when no offense was committed.