2009 (3) TMI 52 - HC - Income Tax

Offences and prosecution - categorical finding given by Tribunal that claim of depreciation by the petitioners was genuine therefore, it does not arise for consideration that there was any evasion of tax by the petitioners subsequently, there could be no presumption of the culpable mental state or any intention of tax evasion prosecution quashed HC while exercising its inherent powers u/s 482 of Cr.P.C. is competent to do substantial justice by quashing the complaint & summoning order

Issues Involved:
1. Whether the complaint and summoning order should be quashed in light of the Income Tax Appellate Tribunal's order.
2. Whether the claim for depreciation was bogus and false.
3. Whether the petitioners had a culpable mental state.
4. Whether the criminal proceedings can continue alongside departmental adjudication.
5. Applicability of Section 279(1A) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Quashing of Complaint and Summoning Order:
The petitioners argued that the complaint and summoning order should be quashed because the Income Tax Appellate Tribunal had ruled in their favor, revoking the penalty imposed by the assessing officer. The Tribunal found that the depreciation was rightly claimed by the petitioners and directed a refund of the penalty. The High Court agreed, stating that the Tribunal's findings demonstrated no willful, intentional, or deliberate false claim by the petitioners, thus justifying the quashing of the complaint and summoning order under Section 482 of the Cr.P.C.

2. Claim for Depreciation:
The complaint alleged that the petitioners claimed a bogus and false depreciation on a machine that was not installed or used before the end of the assessment year 1989-90. However, the Tribunal found that the claim for depreciation was normal and bona fide, similar to claims made by other assessees. The Tribunal's order highlighted that the petitioners' claim was based on evidence and legal provisions, thus invalidating the allegations of a false claim.

3. Culpable Mental State:
The respondents argued that the petitioners had a culpable mental state, as required under Section 278E of the Income Tax Act. However, the High Court noted that the Tribunal's findings indicated no intention to evade tax. The Tribunal concluded that the claim for depreciation was genuine and not made with any motive to avoid tax. Therefore, the presumption of a culpable mental state was not applicable, and the continuation of the trial would be an abuse of the court's process.

4. Simultaneous Criminal Proceedings and Departmental Adjudication:
The High Court acknowledged that criminal proceedings and departmental adjudication could proceed simultaneously. However, it emphasized that once the departmental adjudication exonerates the petitioners on merits, the criminal proceedings based on the same facts should not continue. The Tribunal's exoneration of the petitioners on the grounds of a bona fide claim for depreciation rendered the criminal proceedings unnecessary and unjust.

5. Applicability of Section 279(1A) of the Income Tax Act:
The petitioners relied on Section 279(1A) of the Income Tax Act, which states that a person shall not be prosecuted for an offense under Section 276C or Section 277 if the penalty imposed on them has been reduced or waived by an order under Section 273A. The Supreme Court's interpretation in Prem Dass Vs. ITO supported this view, emphasizing that the legislative intent was to prevent prosecution in such cases. The High Court found this provision applicable, further justifying the quashing of the complaint and summoning order.

Conclusion:
The High Court, after considering the Tribunal's findings and the legal provisions, concluded that there was no basis for the criminal proceedings against the petitioners. The complaint and summoning order were quashed, and the petitions were allowed. The court emphasized the importance of substantial justice and the avoidance of unnecessary legal proceedings when the petitioners had already been exonerated by the Tribunal.

← Previous Next →