2016 (4) TMI 220 - HC - Income Tax

Offenses punishable under Sections 276C(1) and 277 of Income Tax Act 1961 - non-disclosure of fixed deposits - Held that - In this case there is non-disclosure of fixed deposits of ₹ 9.62 crores and the interest earned on it for three consecutive financial years. It is only when the authorities came to know about the concealment and the authorities issued notice the petitioner filed revised returns and paid the tax. Had it not been detected by the income tax authorities, the said income would not have come to limelight. Be that as it may, the Magistrate has taken cognizance for the offences under Sections 276C(1) and 277 of the Income Tax Act, 1961. The petitioner appeared before the Magistrate, the evidence has commenced. If at all the petitioner has to establish his innocence during the course of the trial. Therefore, it cannot be said that the continuation of the proceedings would amount to abuse of process of the Court.

Summary

Issues:
Proceedings to quash initiated against the petitioner for offences under Sections 276C(1) and 277 of Income Tax Act 1961.

Analysis:
The petitioner, accused in C.C.No.339/2014, filed a petition to quash proceedings initiated against him for non-disclosure of fixed deposits and interest earned. The complaint alleged that the petitioner willfully did not disclose income from fixed deposits, leading to an addition of income by the Assessing Officer. The petitioner contended that the non-disclosure was unintentional and filed revised returns upon realizing the mistake. The Income Tax Department argued that the substantial undisclosed income indicated the petitioner's culpable mental state. The petitioner's varying identities in fixed deposits raised suspicion, and the revised returns were filed only after detection by authorities, not voluntarily.

The High Court noted the petitioner's involvement in various firms and companies, finding it implausible that he was unaware of the substantial fixed deposits. The court highlighted the presumption of culpable mental state under Section 278E of the Act, shifting the burden to the petitioner to prove otherwise. Despite the petitioner's claim of immediate rectification upon discovery, the court emphasized that the revised returns were filed post-detection by tax authorities, not as a voluntary disclosure. The court differentiated the present case from a precedent where non-payment of tax was the issue, emphasizing the deliberate concealment of income in this instance.

Ultimately, the court dismissed the petition, emphasizing that the petitioner's innocence must be established during trial proceedings. The continuation of the case was deemed necessary to determine the petitioner's culpability under Sections 276C(1) and 277 of the Income Tax Act. The court concluded that the proceedings were not an abuse of the court's process, denying the petitioner's request to quash the charges.