1987 (3) TMI 18 - HC - Income Tax

Summary

Issues Involved:
1. Whether prosecution for offences under sections 276C and 277 of the Income-tax Act and sections 193 and 196 of the Indian Penal Code is maintainable despite the Income-tax Appellate Tribunal's decision.
2. Whether the findings of the Income-tax Appellate Tribunal bind the criminal court.
3. Whether the revised returns filed by the petitioner-firm can prevent criminal prosecution.
4. Whether the institution of criminal proceedings constitutes an abuse of the process of the court.

Issue-wise Detailed Analysis:

1. Prosecution for Offences under Sections 276C and 277 of the Income-tax Act and Sections 193 and 196 of the IPC:
The petitioner-firm argued that criminal proceedings should not continue because the Income-tax Appellate Tribunal found bona fides in the non-disclosure of income and upheld the revised returns. However, the court held that there is no provision in law preventing prosecution for the offences in question even if revised statements were filed in time and accepted by the Department. Section 279 of the Income-tax Act allows prosecution at the instance of the Commissioner and does not bar proceedings if penalties have been waived or reduced under section 273A.

2. Binding Nature of Income-tax Appellate Tribunal's Findings on the Criminal Court:
The court noted that the findings of the Income-tax Appellate Tribunal are not binding on the criminal court. The criminal court must independently judge the case based on the evidence presented before it. The Supreme Court's decision in P. Jayappan v. S. K. Perumal clarified that the pendency of reassessment proceedings does not bar criminal prosecution for offences under sections 276C and 277 of the Act.

3. Effect of Filing Revised Returns:
The petitioner-firm contended that the revised returns were filed within the statutory period and accepted, which should preclude criminal prosecution. However, the court emphasized that the filing of revised returns after the issuance of a notice of concealment does not absolve the petitioner from the original offence. The criminal court must assess whether false statements were made in the original returns, irrespective of the acceptance of revised returns.

4. Abuse of Process of the Court:
The court examined whether the institution of criminal proceedings constituted an abuse of the process of the court. It referenced the Supreme Court's observations in Sharda Prasad Sinha v. State of Bihar and Municipal Corporation of Delhi v. Ram Kishan Rohtagi, which allow quashing proceedings if the allegations do not constitute any offence. However, in this case, the court found that the facts stated in the complaint disclosed a prima facie case. The court also considered the Karnataka High Court's decision in Balaji Oil Traders v. ITO but ultimately held that the finality of the penalty proceedings by the Income-tax Appellate Tribunal does not bar criminal prosecution.

Conclusion:
The court concluded that the institution of criminal proceedings does not amount to an abuse of the process of the court. The finality of the penalty proceedings by the Income-tax Appellate Tribunal or the pendency of reassessment proceedings cannot act as a bar to the institution or continuation of criminal prosecution for offences under sections 276C and 277 of the Income-tax Act. Consequently, the petitions to quash the proceedings were dismissed.