2018 (1) TMI 901 - HC - Income Tax

Relied upon documents furnished to the petitioner - reasoned order disposing of the Show cause Notice must be passed - Held that - Issue of show cause notice and reply is an internal mechanism, which is normally adopted by the Income Tax Department before they examine whether or not to initiate and file prosecution under the Act. There is no statutory compulsion or mandate for the same. This enables the person concerned to give and project his point of view, which is considered and examined by the authorities before they decide to launch prosecution and by the competent authority which grants sanction under Section 279 of the Act. We are, at this stage, not required to go into the question and answer whether or not the petitioner has committed any offence and therefore should or should not be prosecuted. As per the respondents, the issue relates to foreign bank accounts and whether income or amounts mentioned therein represent undisclosed income, etc. These are matters for the authorities to decide on the basis of documents available. The sanctioning authority would also decide whether or not to grant sanction. List of witness and documents would be examined keeping in view allegations made in the written complaint. In case cognizance and summoning order is passed, the person aggrieved can challenge the summoning/cognizance order in accordance with law. A pre-emptory order at this stage examining merits and de-merits on whether or not prosecution should be filed, would not be correct and warranted. As noted that during the course of hearing, controversy had arisen whether the show cause notice issued is under the Black Money Act. We need not go into this aspect for the aforestated reasons.

Summary

Issues:
1. Quashing of show cause notice
2. Adequate opportunity for petitioner to respond
3. Supply of material and documents to petitioner
4. Stay on proceedings and filing of final reply
5. Direction not to initiate prosecution before assessment

Analysis:
1. The petitioner sought a writ to quash a show cause notice or, alternatively, to direct the respondents to provide adequate opportunity for response before initiating prosecution. The petitioner relied on a previous order directing authorities to supply documents referred to in the notice. The respondent confirmed furnishing documents, including statements and digital data seized during a search.

2. The petitioner alleged non-receipt of documents mentioned in a letter and discrepancies in dates. The respondent clarified that documents were provided to the petitioner's parents, not directly to the petitioner. The petitioner demanded authentication of documents and emphasized the need for a reasoned order to dispose of the show cause notice.

3. The court noted that issuing a show cause notice and allowing a reply is an internal mechanism, not a statutory mandate. Referring to a Supreme Court case, the court highlighted that no provision requires a hearing before launching prosecution. The court emphasized that assessing whether an offense was committed and deciding on prosecution are matters for authorities based on available documents.

4. The court declined to intervene in the decision-making process regarding prosecution, emphasizing that it is the authorities' prerogative to determine the timing of prosecution relative to assessment proceedings. The court explained the subsequent legal steps after filing a complaint, including the court's consideration of summoning orders and challenges to summoning/cognizance orders.

5. The court dismissed the writ petition, clarifying that no opinion on the merits was expressed. The court did not delve into the controversy surrounding the Black Money Act's applicability to the show cause notice. The judgment emphasized the importance of allowing the authorities to follow due process in deciding on prosecution without premature interference based on the merits.