2019 (4) TMI 297 - HC - Income Tax

Prosecution u/s 276 - willful concealment of income and evasion of tax - the petitioner had challenged the aforesaid sanction order dated 21.3.2006 which was quashed by order dated 21.3.2006 with a direction that competent authority is not precluded to re-examine the matter - HELD That - Once the sanction order has been quashed by this Court in a writ petition filed by the petitioner, the criminal compliant filed against him on the basis of the sanction order dated 21.3.2006 does not survive. It is also important to note here that the Central Board of Direct Taxes (CBDT) issued a circular dated 7.2.1991 and it has directed that no prosecution is to be initiated under Section 276-C(1) of the Ac if the income sought to be evaded is less than ₹ 25,000/-. In the present case, on remand from the Income Tax Appellate Tribunal, the penalty has been imposed only of ₹ 4,000/-, which is much below of ₹ 25,000/- - entire criminal proceedings against the petitioner are quashed

Summary

Issues involved:
Quashing of criminal complaint under Section 276-C(1) read with Section 277 of the Income Tax Act, 1961 based on alleged willful concealment of income and evasion of tax.

Detailed Analysis:

1. Background of the Case:
The petitioner filed a petition under Section 482 Cr.P.C. seeking to quash a criminal complaint against them under Section 276-C(1) read with Section 277 of the Income Tax Act, 1961 for alleged willful concealment of income and tax evasion. The petitioner's income was assessed under Section 143(C) of the Act for the Assessment Year 1998-1999, with a total income of ?4,82,440.

2. Penalty Imposition and Appeals:
The assessing officer imposed a penalty of ?91,000 under Section 271(1)(c) of the Act, which was challenged by the petitioner before the Commissioner of Income Tax (Appeal) and subsequently before the Income Tax Appellate Tribunal. The Tribunal partly allowed the appeal and remanded the matter back to the assessing officer for re-computation. Eventually, a penalty of ?4,000 was imposed under Section 276(1)(C) of the Act, which the petitioner paid.

3. Sanction for Criminal Complaint:
The Commissioner of Income Tax (Central) granted sanction for filing a criminal complaint against the petitioner under Section 276-C(1) read with Section 277 of the Act for willful concealment of income and tax evasion. The petitioner challenged this sanction order in a writ petition, which was allowed by the Court, quashing the sanction order but allowing for re-examination by the competent authority.

4. Quashing of Criminal Complaint:
The High Court noted that once the sanction order was quashed by the Court, the criminal complaint based on that sanction did not survive. Additionally, a circular by the Central Board of Direct Taxes directed that no prosecution should be initiated under Section 276-C(1) if the evaded income was less than ?25,000. As the penalty imposed on the petitioner was only ?4,000, well below the ?25,000 threshold, the Court deemed the criminal complaint against the petitioner should be quashed.

5. Final Judgment:
In conclusion, the High Court allowed the petition, quashing the criminal proceedings against the petitioner under Section 276-C(1) read with Section 277 of the Income Tax Act, which were pending in the Court of Special Chief Judicial Magistrate (Economic Offence), Lucknow.