2023 (11) TMI 1234 - HC - Income Tax

Proceedings pending on the file of Additional Chief Metropolitan Magistrate for the offence punishable u/s 277 - under-reporting the sales and expenses - accused approached before Settlement Commission who had granted immunity from prosecution under the Income Tax Act and as per Section 245I the order passed by the Settlement Commission shall be conclusive, thus seeked to quash the proceedings pending on the file of Additional Chief Metropolitan Magistrate (E.O.II) Egmore, Chennai HELD THAT - Admittedly, the petitioners filed an application before the Settlement Commission as per Section 245C of the Income Tax Act, on 22.01.2018. Whereas, the prosecution was initiated two years before viz., 17.11.2016 itself. Therefore, the provisions under Section 245I of the Income Tax Act is not applicable. Further, the prosecution proceedings under Income Tax Act were launched two years before and the factum of pending prosecution was not brought to the notice of the Settlement Commission made by the petitioners that too in the year 2018. Further, the petitioners concealed the fact of such pending prosecution for the offence u/s 277 of the Income Tax Act and obtained immunity in respect of prosecution as the same was not brought to the knowledge of the Settlement Commission. That apart, as against the immunity granted by the Settlement Commission, the respondent filed an appeal and it is pending before the Board. Therefore, the grounds raised by the petitioners cannot be considered and this Court is not inclined to quash the proceedings in E.O.C.C.Nos.185 to 189 of 2016 pending on the file of Additional Chief Metropolitan Magistrate (E.O.II) Egmore, Chennai.

Summary

Issues Involved:
The judgment involves the quashing of proceedings in E.O.C.C.Nos.185 to 189 of 2016 pending for the offence under Section 277 of the Income Tax Act, 1961.

Details of the Judgment:

Issue 1: Allegations of Underreporting Sales and Expenses
The complaint alleges that the accused, a company engaged in the restaurant business, underreported sales and expenses, evading tax by not maintaining proper books of accounts. A search revealed discrepancies between reported and actual sales figures, leading to a charge under Section 277 of the Income Tax Act.

Issue 2: Admission of Undisclosed Income
The accused admitted to undisclosed income for various assessment years, indicating false and incorrect original income tax returns. The prosecution was initiated for willfully under-reporting income, constituting an offence under Section 277 of the Income Tax Act.

Issue 3: Settlement Commission Proceedings
The accused approached the Settlement Commission, disclosing income and paying taxes. The Settlement Commission granted immunity from prosecution for settled assessment years. However, the prosecution had already been initiated before the Settlement Commission application, rendering the immunity inapplicable as per Section 245H(1) of the Income Tax Act.

Issue 4: Prosecution and Pending Appeal
The Special Public Prosecutor argued that incriminating materials support the prosecution under Section 277 of the Income Tax Act, despite the Settlement Commission proceedings. The fact of pending prosecution was not disclosed to the Settlement Commission, and an appeal against the immunity granted is pending before the Board.

Conclusion:
The Court dismissed the Criminal Original Petitions, upholding the continuation of proceedings in E.O.C.C.Nos.185 to 189 of 2016. The judgment emphasizes the importance of full disclosure and compliance with Settlement Commission provisions in tax evasion cases.