2019 (11) TMI 216 - HC - Income Tax

Stay of criminal proceedings against the petitioners in the competent court - assessee wilfully not filed the return of income tax for the assessment year 2007-08 within the prescribed time - commitment of offence punishable under Section 276CC - HELD THAT - In the instant case, the prosecution is u/s 276CC of the Act for wilful failure to file returns within due time. It does not depend on the assessment of tax. The decision in Sasi Enterprises 2014 (2) TMI 19 - SUPREME COURT squarely applies to the facts of the present case. Therefore, I find that this is not fit case in which the supervisory jurisdiction of this Court under Article 227 of the Constitution should be invoked to stay the criminal proceedings against the petitioners in the competent court. Petitioners has argued at length on the merits of the complaint filed against them. This is not a petition for quashing the proceedings against the petitioners. Therefore, it is not necessary to advert to those contentions.

Summary

Issues:
1. Whether criminal proceedings can be kept in abeyance pending the disposal of an appeal challenging tax assessment?
2. Relevance of appellate authority's decision on prosecution in tax evasion cases.
3. Interpretation of statutory provisions regarding prosecution and assessment proceedings.

Analysis:
Issue 1: The petitioners sought direction to keep criminal proceedings in abeyance until the disposal of their appeal challenging tax assessment. The petitioners argued that the decision in the appeal would impact the prosecution against them. The court considered the plea in light of relevant legal precedents.

Issue 2: The court analyzed the relevance of the appellate authority's decision on prosecution in tax evasion cases. Referring to the case of K.C.Builders, the court noted that penalties and prosecution under the Income Tax Act are interconnected. The decision in the appeal challenging tax assessment could affect the prosecution under Section 276C(1) of the Act.

Issue 3: The court examined the interpretation of statutory provisions concerning prosecution and assessment proceedings. While the petitioners relied on legal precedents supporting their argument to keep criminal proceedings in abeyance, the respondents cited a different judgment emphasizing the independence of criminal and assessment proceedings.

The court referred to the decision in Commissioner of Income Tax v. Bhupen Champak Lal Dalal, highlighting the need for a balanced approach when the conclusions of appellate authorities impact ongoing criminal proceedings. The court distinguished the present case from Sasi Enterprises, clarifying that the prosecution in this case was under Section 276C and not 276CC of the Act.

Considering the arguments and legal precedents, the court invoked its supervisory jurisdiction under Article 227 of the Constitution to issue a direction. The court allowed the petition, directing the lower court to keep all further proceedings in abeyance until the disposal of the petitioners' appeal before the Commissioner of Income Tax (Appeals).

In conclusion, the judgment addressed the complex interplay between tax assessment appeals and criminal prosecutions in cases of tax evasion. The court's decision balanced the interests of the petitioners with legal principles governing prosecution and assessment proceedings under the Income Tax Act.