2018 (8) TMI 2074 - HC - Income Tax

Offences punishable u/s 276-C(2) 278-B of the Income Tax Act - petitioners failed to comply with the requirement under Section 140-A of the Act it directly amounts to wilful evasion of the tax liability though admitted as the self-assessed tax - HELD THAT - From the definitions of Tax Evasion any act done to avoid payment of tax by illegal means either intentionally understating the income or overstating the deductions and exemptions to avoid the maximum tax liability legally due to the revenue. If the definitions of Tax Evasion referred supra are applied to the present facts of the case the petitioners though admitted the tax liability by filing a revised return on 03.03.2015 they are under obligation to comply with the mandatory requirement under Section 140-A of the Act. Obviously for different reasons the petitioners did not choose to comply with the mandatory requirement under Section 140-A of the Act even till date but raised several contentions claiming additional expenditure of Rs. 54 lakhs out of Rs. 66 lakhs disclosed in the revised return which is filed on 03.03.2015. But the Income Tax Officer did not accept it. However the Commissioner of Appeals passed an order which is extracted in the earlier paragraphs and aggrieved by the Warranty Service Charges (WSC) appeal is pending before the Tribunal. Till date the petitioners did not pay the tax due to the revenue and having filed revised return admitting the tax liability it can be certainly held to be wilful evasion of tax as it is a conscious deliberate and calculated act of the petitioners in failing to pay the tax directly adhering to Section 140-A of the Income Tax Act prima facie. When the petitioners prima facie committed an offence under Section 276(C)(2) of the Act the proceedings at this stage more particularly when major part of trial is completed in C.C.No.200 of 2016 on the file of Special Judge for Economic Offences at Hyderabad the same cannot be quashed. Since powers of this Court are limited and power under Section 482 Cr.P.C has to be exercised only in exceptional circumstances only to give effect to the orders passed by the Court and to prevent abuse of process of the Court or to meet the ends of justice. In view of the guidelines laid down by the Apex Court in Bhajan Lal s case 1990 (11) TMI 386 - SUPREME COURT if the facts on its face value are accepted it constitutes an offence prima facie if proved. The Court cannot interfere except when the Court comes to a conclusion that it is an out come of abuse of process of law. The allegations made in the chargesheet and other material filed along with the petition including the attempts made by these petitioners would constitute offences punishable under Sections 276-C(2) 278-B of the Act. But the contention of the learned counsel for the petitioners is that the cause of action is ceased to subsist for continuation of proceedings in view of the order passed by the Commissioner of Appeals is without any substance. Therefore the grounds urged in this petition are not sufficient to quash the proceedings at this stage in C.C.No.200 of 2016 on the file of Special Judge for Economic Offences at Hyderabad. Moreover the allegations made in the charge-sheet coupled with the material produced prima facie disclosed commission of offences by these petitioners punishable under Sections 276-C(2) 278-B of the Act. We find no ground to quash the proceedings on the file of Special Judge for Economic Offences at Hyderabad registered for the offences punishable under Sections 276-C(2) 278-B.

Summary

Issues Involved:

1. Quashing of proceedings in C.C.No.200 of 2016.
2. Compliance with Section 140-A of the Income Tax Act.
3. Wilful evasion of tax under Section 276-C(2) of the Income Tax Act.
4. Impact of pending appeal before the Income Tax Appellate Tribunal on criminal proceedings.
5. Application of inherent powers under Section 482 Cr.P.C.

Issue-Wise Analysis:

1. Quashing of Proceedings in C.C.No.200 of 2016:
The petitioners sought to quash the proceedings in C.C.No.200 of 2016, arguing that the complaint was an abuse of the court process. They contended that the cause of action for the complaint ceased to exist after the Commissioner of Income Tax (Appeals) partly allowed their appeal. The court, however, found that the Commissioner did not conclusively resolve all issues but directed the Assessment Officer to verify certain claims. Therefore, the criminal proceedings could not be quashed solely based on the partial allowance of the appeal.

2. Compliance with Section 140-A of the Income Tax Act:
The court highlighted the mandatory nature of Section 140-A, which requires the assessee to pay the tax on the self-assessed income within thirty days of furnishing the return. The petitioners admitted their failure to pay the self-assessment tax of Rs. 24,04,150/- on the revised income of Rs. 68,49,092/-. The court noted that the petitioners' failure to comply with Section 140-A constituted a deliberate and conscious default.

3. Wilful Evasion of Tax under Section 276-C(2) of the Income Tax Act:
The court examined whether the petitioners' actions amounted to wilful evasion of tax under Section 276-C(2). It was noted that the petitioners did not pay the admitted tax liability even after filing the revised return and receiving show cause notices. The court concluded that the petitioners' failure to pay the self-assessed tax was a wilful attempt to evade tax, meeting the criteria for tax evasion as defined in various legal sources.

4. Impact of Pending Appeal before the Income Tax Appellate Tribunal on Criminal Proceedings:
The petitioners argued that the pending appeal before the Income Tax Appellate Tribunal should stay the criminal proceedings. The court referred to precedents where criminal proceedings were stayed until the resolution of tax appeals. However, in this case, the court directed the Special Judge for Economic Offences to complete the trial but refrain from pronouncing the judgment until the appeal was disposed of by the Tribunal.

5. Application of Inherent Powers under Section 482 Cr.P.C.:
The court discussed the scope of its inherent powers under Section 482 Cr.P.C., emphasizing that these powers should be exercised sparingly to prevent abuse of process and to secure the ends of justice. The court cited the guidelines from State of Haryana v. Bhajan Lal, noting that the allegations in the charge sheet prima facie disclosed the commission of an offence. Therefore, the court found no grounds to quash the proceedings under its inherent powers.

Conclusion:
The criminal petition to quash the proceedings in C.C.No.200 of 2016 was dismissed. The court directed the Special Judge for Economic Offences to complete the trial but not pronounce the judgment until the Income Tax Appellate Tribunal disposed of the pending appeal. The court also requested the Tribunal to expedite the appeal's resolution.