1994 (5) TMI 9 - HC - Income Tax

Criminal Proceedings High Court Income Tax Act Prima Facie Case Wealth Tax Act Wilful Attempt To Evade Tax

Summary

Issues Involved:
1. Charge of wilful attempt to evade income-tax and wealth-tax.
2. Nature of City Sessions Court's orders in revisional jurisdiction.
3. Justification for putting assessee-accused on trial for tax evasion.

Issue-wise Detailed Analysis:

1. Charge of Wilful Attempt to Evade Income-tax and Wealth-tax:
The High Court examined whether the assessee could be charged with wilful tax evasion when the money and valuable articles found during search operations were declared as income and accepted by the Income-tax Department. The Court noted that the amounts recovered during searches were shown by the assessee as income in their returns, which were accepted by the tax authorities without initiating penalty proceedings for concealment or incorrect particulars. The Court referenced several precedents, including B. T. X. Chemicals (P.) Ltd. v. Suraj Bhan, which emphasized the necessity of proving mens rea for prosecution under section 276C of the Income-tax Act. The Court concluded that since the income was declared and accepted, there was no wilful attempt to evade taxes, thus negating the charges.

2. Nature of City Sessions Court's Orders in Revisional Jurisdiction:
The Court addressed whether the orders of the City Sessions Court, which quashed the discharge orders and directed the framing of charges, were interlocutory and thus not amenable to revisional jurisdiction under section 397(2) of the Code of Criminal Procedure, 1973. The Court referred to Amar Nath v. State of Haryana and Madhu Limaye v. State of Maharashtra, which clarified that orders substantially affecting the rights of the accused are not interlocutory. The Court determined that the orders in question were not interlocutory, as they had a significant impact on the accused's rights and could conclude the proceedings if accepted. Consequently, the revision applications were deemed maintainable.

3. Justification for Putting Assessee-accused on Trial for Tax Evasion:
The Court analyzed whether the factual and legal circumstances justified putting the assessee-accused on trial for wilful tax evasion. It was highlighted that the income and wealth declared by the assessee were accepted by the tax authorities, and no penalty proceedings for concealment or incorrect particulars were initiated. The Court referenced multiple cases, including D. N. Bhasin v. Union of India and Uttam Chand v. ITO, which supported the view that prosecution is unwarranted when the Department accepts the declared income and no penalties are imposed. The Court concluded that the learned Metropolitan Magistrate was correct in discharging the accused, as no prima facie case of wilful tax evasion was established.

Conclusion:
The High Court allowed the criminal revision applications, setting aside the revisional orders of the City Sessions Court and restoring the discharge orders of the trial Magistrate. The Court emphasized that the acceptance of the declared income by the tax authorities negated the charges of wilful tax evasion, and the orders of the City Sessions Court were not interlocutory, thus allowing the revisions.