2007 (9) TMI 206 - HC - Income Tax

Tribunal had allowed assessee s appeal and quashed penalty imposed for (concealment of income) but proceedings were pending While the appeal was pending before tribunal, the dept. initiated criminal proceedings against petitioners held that once the order had been cancelled by tribunal, the finding of appellate tribunal was conclusive and the prosecution could not be sustained and was to be quashed

Summary

Issues:
1. Quashing of proceedings launched by the Income-tax Department in Criminal Case No. 251/92 and 252/92.
2. Setting aside the order passed by the Addl. Chief Metropolitan Magistrate issuing summons upon the petitioners in the criminal cases.

Analysis:

Issue 1: Quashing of Proceedings
The petitioners, original accused, filed Special Criminal Application No. 1273 of 1992 and Special Criminal Application No. 1274 of 1992 seeking to quash the proceedings initiated by the Income-tax Department in Criminal Case No. 251/92 and 252/92. The cases involved charges under sections 177, 193, 196, and 199 of the IPC, as well as sections 276(1) and 277 of the Income-tax Act, 1961. The accused argued that the Tribunal had already allowed the appeal of the petitioner-company, setting aside the penalty order. Citing legal precedents, including the case of K. C. Builders, the petitioners contended that once the penalty order was cancelled, no offence remained under the Income-tax Act. The learned advocate for the petitioners emphasized that the absence of dishonest and fraudulent intention negated the commission of an offence under section 420 of the IPC. The Department did not dispute the setting aside of the penalty order by the Tribunal, leading to the conclusion that the prosecution could not be sustained.

Issue 2: Setting Aside Summons
The petitioners challenged the order of the Addl. Chief Metropolitan Magistrate dated March 27, 1992, issuing summons in the criminal cases. Relying on the judgment in the case of K. C. Builders and Virtual Soft Systems Ltd., the Court held that once the Tribunal had quashed the penalty order, the prosecution could not be sustained. Following the legal principles established by the Supreme Court, the Court concluded that the findings of the Appellate Tribunal were conclusive, and therefore, the criminal complaints and the summoning orders were quashed and set aside. The Court emphasized that dragging the matter to criminal courts after adjudication by the Tribunal was unwarranted unless the actions of the appellants were deemed culpable.

In conclusion, the High Court of Gujarat, in a judgment delivered by M.R. Shah J., quashed the criminal complaints in Case Nos. 251/92 and 252/92, as well as the summoning orders passed by the Addl. Chief Metropolitan Magistrate. The decision was based on the Tribunal's setting aside of the penalty order, following legal precedents indicating that once the penalty was cancelled, no offence remained under the Income-tax Act. The Court emphasized the conclusive nature of the Tribunal's findings and the absence of fraudulent intent, leading to the dismissal of the criminal proceedings against the petitioners.