2022 (7) TMI 799 - HC - Income Tax

Prosecution u/s 276CC and 276C (1) - criminal prosecution on alleged evasion of Tax - right to get offence compounded - difference between the income declared by the assessee and the assessment made by the Department for each Financial Years - HELD THAT - The self assessment tax on declared income was paid only after initiation of enquiry proceedings that too concealing substantial part of the income. In such circumstances, several lakh of rupees had been evaded with willful intention. This Court is of the view that there is enough materials to proceed against the petitioner for non-filing of Return in time which is punishable u/s 276CC and for filing the Return belatedly with suppressed income, which is punishable under Section 276C(1). Since Section 278E gives a presumption to lay prosecution in case of non-filing of Return within the time limit and suppression of income in the Return filed is with malafide intention to evade Tax, the Court cannot by exercising its power under Section 482 of Cr.P.C., quash the proceedings presuming the contrary. The malafide projected in these petitions does not carry any merit, since the Department has caused notice to the assessee and the representative of the petitioner and participated and given an explanation which is found not satisfactory leading to launching the prosecution. The absence of assessee in India or the communication gap between herself and her representative cannot be a ground to quash the prosecution. Further compounding offence under IT Act is not an absolute right vested in the assessee. The compounding of cases based on facts and merits of each case where the assessee disclose the true and actual income but file it belatedly cannot be equated to the case where the assessee undisclosed the true and actual income also files the returns belatedly. Hence this court holds no merit in these petitions, in view of the presumption clause. Therefore, these Criminal Original Petitions are dismissed.

Issues Involved:
1. Prosecution under Section 276CC of the Income Tax Act, 1961.
2. Prosecution under Section 276C(1) of the Income Tax Act, 1961.
3. Validity of the show cause notice and service thereof.
4. Allegation of malafide prosecution.
5. Impact of pendency of departmental appeal on criminal prosecution.
6. Compounding of offenses under the Income Tax Act.

Issue-wise Detailed Analysis:

1. Prosecution under Section 276CC of the Income Tax Act, 1961:
The petitioner failed to file her Return of Income for the Assessment Years 2011 to 2016 within the prescribed time, making her liable for prosecution under Section 276CC of the Income Tax Act, 1961. The Income Tax Department argued that the petitioner had a taxable income but did not file her returns on time, which constitutes an offense under this section.

2. Prosecution under Section 276C(1) of the Income Tax Act, 1961:
The petitioner was also prosecuted under Section 276C(1) for willfully attempting to evade tax, penalty, and interest chargeable. The enquiry revealed that there was an attempt to evade tax willfully, and the petitioner failed to pay the tax due before the due date of filing the return of income.

3. Validity of the show cause notice and service thereof:
The petitioner contended that the show cause notice was not properly served on her and that her representative did not receive a copy of the notice. The court found that the Department had caused notice to the assessee and her representative, who participated and provided an explanation that was found unsatisfactory, leading to the prosecution.

4. Allegation of malafide prosecution:
The petitioner alleged that the prosecution was launched with malafide intentions after receiving the entire tax due. She argued that she only became aware of the prosecution through the media and that the show cause notice was not properly served. The court dismissed these allegations, stating that the absence of the assessee in India or communication gaps cannot be grounds to quash the prosecution.

5. Impact of pendency of departmental appeal on criminal prosecution:
The petitioner argued that the assessment made by the Department was under challenge before the appellate authority, and hence, the prosecution should not proceed. The court referred to the Supreme Court judgment in P. Jayappan v. S.K. Perumal, which held that the pendency of reassessment proceedings cannot bar the institution of criminal prosecution for offenses under Section 276C or 277 of the Act.

6. Compounding of offenses under the Income Tax Act:
The petitioner contended that the Department had compounded the offenses for the assessment years 2010-2011 and 2011-2012 and should have applied the same logic to the remaining cases. The court noted that compounding offenses under the IT Act is not an absolute right vested in the assessee and depends on the facts and merits of each case. The court found no merit in the petitioner's argument, as the undisclosed income and belated filing of returns with suppressed income justified the prosecution.

Conclusion:
The court found sufficient materials to proceed against the petitioner for non-filing of returns in time under Section 276CC and for filing belated returns with suppressed income under Section 276C(1) of the Income Tax Act, 1961. The court dismissed the Criminal Original Petitions and the connected Miscellaneous Petitions, upholding the prosecution's actions.

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