2008 (8) TMI 132 - HC - Income Tax

Prosecution - petitioner very fairly stated that she was made victim of mischief by one A. K. Chatterjee, who filed her return through her signature and wrongly claimed refund and she immediately deposited the whole amount of refund along with interest with the Department imeediately after receiving SCN for prosecution - From these facts, it can very well be said that the petitioner had no required mens rea for commission of the offence - criminal prosecution is hereby quashed.

Summary

Issues Involved:
Petition to quash order taking cognizance of the offence under section 277 of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Allegations and Background
The petitioner filed an application to quash the order dated August 7, 2004, taking cognizance of the offence under section 277 of the Income-tax Act. The petitioner, an LIC agent, filed an income tax return for the assessment year 2001-02, claiming a refund based on a purported TDS certificate from LIC. It was later found that the TDS certificate submitted was forged, leading to allegations of false statements and fraudulent claims.

Issue 2: Mens Rea in Prosecution
The petitioner's counsel argued that "mens rea" is essential for prosecuting an individual under section 277 of the Income-tax Act. It was contended that the petitioner, upon receiving a notice to show cause, promptly deposited the disputed amount with interest, indicating a lack of intent to commit an offence. The petitioner's actions, including returning the refund amount, were cited as evidence of no mens rea on her part.

Issue 3: Interpretation of Section 277
The court examined the provisions of section 277 of the Income-tax Act, emphasizing the significance of mens rea in determining liability under the section. The section stipulates that a person must knowingly make false statements to be punishable. The court highlighted that the existence of mens rea is a fundamental requirement for prosecution under this section, emphasizing the legislative intent behind the inclusion of specific language related to knowledge or belief in falsity.

Issue 4: Abuse of Process of Law
Considering the circumstances, including the petitioner's immediate action upon receiving the notice to show cause, the court concluded that the petitioner lacked the requisite mens rea for the alleged offence. The court deemed the continuation of criminal prosecution against the petitioner as an abuse of the court's process and law. Consequently, the court allowed the application, quashing the order taking cognizance of the offence under section 277 of the Income-tax Act and terminating the criminal prosecution against the petitioner.

In conclusion, the judgment focused on the importance of mens rea in prosecuting offences under the Income-tax Act, highlighting the need for a deliberate intent to commit an offence. The court's decision to quash the order and halt the prosecution was based on the lack of mens rea demonstrated by the petitioner's prompt actions upon being notified, emphasizing fairness and the prevention of abuse of legal processes.