2022 (8) TMI 459 - HC - Income Tax

Prosecution u/s 276-CC (ii) - evasion of tax - Delay in filing return - Income-tax Department had desired petitioner s prosecution for 72 days delay in filing the return - HELD THAT - There is not even a whisper of evasion of income-tax, whereas the learned trial Court, claiming to have perused the record, has observed that the accused (petitioner herein) has not filed his return of income for 2013-14 and has evaded the income-tax. In the opinion of this Court, the order of the cognizance shows clear misreading of the complaint and the same suffers from manifest error of law, for which it is liable to be quashed and set aside. Also correct in saying that the petitioner ought to have preferred a revision petition under Section 397 of the Code but then, considering that the petitioner and his group has filed about 80 petitions of identical nature, relegating the petitioners to file revision petition(s), that too when the order impugned suffers from palpable error of law and facts, would lead to multiplicity of litigation and passing of dockets from this Court to the Revisional Court. The preliminary objection raised by the Income-Tax Department is thus, over-ruled. Thus considering discrepancy and considering that not only the notice issued to the petitioner before granting prosecution sanction, even the complaint filed by the Department alleges delay in filing return, while eliciting prosecution under Section 276-CC (ii) of the Act of 1961, this Court is of the view that the cognizance, which has been taken for evasion of tax is ex-facie erroneous and deserves to be quashed and set aside. The order granting prosecution sanction has neither been challenged in the present petition nor can the same be permitted to be questioned before this Court in its jurisdiction under Section 482 of the Code. Because, the act of granting prosecution sanction is an administrative or statutory exercise of powers. Instant petition so also those enumerated in the appended scheduled are allowed. The cognizance order in each of the case is hereby quashed and set aside.

Summary

Issues involved:
1. Delay in filing income tax return leading to prosecution under Section 276-CC of the Income-Tax Act, 1961.
2. Misinterpretation of facts by the trial court in taking cognizance of the offense.
3. Jurisdiction of the High Court under Section 482 of the Code of Criminal Procedure.

Analysis:

Delay in filing income tax return leading to prosecution under Section 276-CC:
The petitioner, an assessee under the Income-Tax Act, 1961, faced a search and seizure operation at their premises, post which a notice under Section 153-A of the Act was issued for filing the income tax return. The petitioner, citing a delay of 72 days in filing the return, explained that the delay was due to the non-receipt of necessary documents despite requests made. The Income-Tax Department proceeded to issue a show cause notice for prosecution under Section 276-CC, which the petitioner contested, arguing that no intentional delay occurred and no tax evasion took place. The High Court noted that the department sought prosecution solely for the delay in filing the return, not for tax evasion, and found the trial court's cognizance of tax evasion to be erroneous. The Court held that the order for prosecution sanction was not challenged and could not be questioned directly, leading to the quashing of cognizance orders in all related cases.

Misinterpretation of facts by the trial court in taking cognizance of the offense:
The trial court's decision to take cognizance of tax evasion based on the delay in filing the return was deemed erroneous by the High Court. The Court highlighted that the Income-Tax Department's complaint focused on the delay in filing the return, not tax evasion. The High Court found a clear misreading of the complaint by the trial court, leading to a manifest error of law. The High Court ruled that the cognizance taken for tax evasion was incorrect and ordered the quashing of all cognizance orders in the related cases.

Jurisdiction of the High Court under Section 482 of the Code of Criminal Procedure:
The Income-Tax Department raised a preliminary objection, suggesting that the petitioner should have filed a revision petition under Section 397 of the Code instead of directly approaching the High Court under Section 482. However, considering the multiplicity of similar cases and the palpable errors in the impugned orders, the High Court overruled the objection. The High Court emphasized that the erroneous cognizance orders warranted intervention under its jurisdiction, leading to the quashing of all cognizance orders and directing the parties to appear before the trial court for further proceedings.

In conclusion, the High Court allowed the petitions, quashed the cognizance orders, and directed the parties to appear before the trial court for further proceedings, while reserving the right to challenge the prosecution sanction order in accordance with the law.