2017 (11) TMI 1608 - HC - Income Tax

Jurisdiction for initiating prosecution proceedings u/s 276C(1) - Wilful attempt to evade tax, etc. - unaccounted cash seized during search u/s 132 - concealment of income and filing of false statements in the return of income - small tax evaders versus large tax evaders - Held that - This Court is of the considered view that the present writ petition is premature. Firstly, the impugned proceedings is only a show cause notice and therefore, the petitioner has to respond to the same and it cannot be questioned in a writ petition. The sheet anchor of the submissions of the learned counsel for the petitioner is by referring to Section 279(1) of the Act. The Proviso under Section 279(1) of the Act enumerates officers, who may issue such directions or instructions to the authorities, who have been enumerated under Section 279(1) of the Act. Therefore, to say that the respondent has no jurisdiction even to issue the show cause notice is a plea, which is stated to be rejected. - Decided against assessee.

Summary

Issues:
Challenge to show cause notice under Section 276C(1) of the Income Tax Act, 1961.

Analysis:
The petitioner filed a writ petition challenging a show cause notice dated 31.10.2017, prior to the initiation of prosecution proceedings under Section 276C(1) of the Income Tax Act, 1961. The notice stated that unaccounted cash was seized during a search operation at the petitioner's residence. The petitioner admitted to earning unaccounted income through various activities but declared -NIL- income in the return for the assessment year 2017-18.

The respondent alleged willful concealment of income by the petitioner and directed the petitioner to show cause why prosecution should not be initiated under relevant sections of the Act and the Indian Penal Code. The petitioner was granted time to respond by 21.11.2017. The respondent emphasized that prosecution can be launched without waiting for assessment proceedings to be completed, citing a Supreme Court decision.

The petitioner contended that the show cause notice was without jurisdiction as it was issued by an authority not enumerated in Section 279(1) of the Act. The petitioner argued that since the returns were yet to be processed and no tax demand quantified, the notice was premature. The petitioner relied on Supreme Court decisions to support the argument that proceedings should await the outcome of assessment proceedings.

The Senior Standing Counsel for the Revenue argued that the writ petition was premature and not maintainable. He stated that the show cause notice provided an opportunity for the petitioner to respond, and the proceedings would be initiated in accordance with the law after considering the petitioner's objections. He cited a Supreme Court decision to support the view that personal hearing before granting sanction for prosecution was not required.

The Court held that the writ petition was premature as the proceedings were at the show cause notice stage, and the petitioner needed to respond before challenging it. The Court rejected the petitioner's jurisdictional argument, stating that the respondent had the authority to issue the notice. The Court emphasized that the petitioner could raise defenses if prosecution proceedings were initiated later. The Court upheld the validity of the show cause notice, dismissing the writ petition and connected applications.