2022 (12) TMI 803 - HC - Income Tax

Proceedings u/s 276-C (l)/276-D and 277 - evasion of tax for the assessment year 2006-07 - deposit and transaction in the undisclosed foreign account - Scope of instruction No. 5051, dated 07.02.1991 issued by the CBDT which prohibits prosecution of persons above 70 years of age - whether the Circular/ Instruction No. 5051 dated 07.02.1991 applies to the present case or not? - petitioner, on the ground of his old age being 80 years and medical conditions, sought exemption from personal appearance - application under Section 245(2) Cr.P.C. before the learned trial court for dropping of the proceedings on the ground of his age and on the basis of Circular/Instruction No. 5051 dated 07.02.1991 - HELD THAT - Admittedly the said foreign account was opened in the HSBC Bank, London on 20.08.1991 and not disclosed. Taking the date of birth of petitioner, as claimed by him, as 30.03.1936, this Court finds that at the time of commission of offence in the year 1991 he was more than 55 years of age. The Circular/ Instruction No. 5051 dated 07.02.1991 notes that prosecution normally be not initiated against a person who has attained the age of 70 years at the time of commission of offence. Meaning thereby, in terms of Circular/ Instruction No. 5051 dated 07.02.1991, the age at the time of commission of offence has to be taken and not when the proceedings initiated. Even though petitioner claims to have filed a revised income tax return on 16.02.2015 declaring his additional income as Rs.2,53,00440/- under the head income from other sources i.e. the maximum credit balance in the undisclosed bank account maintained in HSBC account, however, this Court cannot lose sight of the fact that on 26.09.2013 Show Cause Notice under Section 274 r/w 271 of the Act was issued against him and also that penalty under Section 271 (1) (b) of the Act for non-compliance of notice under Section 142(1) was also levied vide order dated 26.09.2013. It is only thereafter that the petitioner has chosen to file revised income tax return and by doing so, he cannot evade the judicial process of law for not disclosing his correct income and foreign account since the year 1991. As decided in Pradip Burman 2015 (12) TMI 202 - DELHI HIGH COURT as crystal clear that the petitioner had admitted to have bank accounts outside India only after the investigation by the Income Tax Department. The said foreign account was the undisclosed account and the deposits therein relates to his undisclosed income and the same needs to be examined. Thus in opinion petitioner cannot be permitted to take benefit of Circular/ Instruction No. 5051 dated 07.02.1991 to find an escape route for the wrong committed by him. Accordingly, the present petition is dismissed.

Summary

Issues Involved:
1. Legality of prosecution under Sections 276C(1), 276D, and 277 of the Income Tax Act, 1961.
2. Applicability of CBDT Circular/Instruction No. 5051 dated 07.02.1991 concerning prosecution of individuals above 70 years of age.
3. Validity of the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.
4. Petitioner's claim of non-intentional default due to lack of provision for disclosing foreign accounts before 2013.

Detailed Analysis:

1. Legality of Prosecution under Sections 276C(1), 276D, and 277:
The respondent Income Tax Office (ITO) filed a complaint alleging that the petitioner had an undisclosed account in HSBC Bank, London, with a significant balance. This led to a search and seizure operation, followed by the issuance of a notice under Section 153-A of the Income Tax Act, 1961. The petitioner's income tax return did not disclose this foreign account, leading to a penalty and subsequent prosecution. The trial court took cognizance of the offense, and the petitioner sought exemption from personal appearance due to old age and medical conditions, which was granted. However, the application to drop proceedings was dismissed.

2. Applicability of CBDT Circular/Instruction No. 5051:
The petitioner argued that prosecution should not be initiated against individuals over 70 years old, as per Instruction No. 5051 dated 07.02.1991. The petitioner was 70 years old at the time of filing the return for the assessment year 2006-07. However, the court noted that the Circular applies to the age at the time of the commission of the offense, not at the time of prosecution. Since the petitioner was 55 years old when the foreign account was opened in 1991, the Circular did not apply. The court relied on previous judgments, including Pradip Burman vs. Income Tax Office, which held that the Circular does not bar prosecution based on age at the time of commission of the offense.

3. Validity of Penalty under Section 271(1)(c):
The petitioner was penalized for not disclosing true income, with a penalty of Rs.90,45,966 under Section 271(1)(c) of the Income Tax Act, 1961. The court observed that despite the petitioner filing a revised income tax return in 2015, the initial non-disclosure of the foreign account was a deliberate attempt to evade tax. The penalties and subsequent prosecution were deemed justified.

4. Petitioner's Claim of Non-Intentional Default:
The petitioner claimed that there was no provision for disclosing foreign accounts until 2013 and that taxes were paid voluntarily upon receipt of documents during the search. However, the court noted that the petitioner initially denied having a foreign account and only acknowledged it after being confronted with evidence. The court concluded that the non-disclosure was intentional and not an oversight, thus justifying the prosecution.

Conclusion:
The court dismissed the petition, stating that the petitioner could not evade the judicial process by relying on the Circular/Instruction No. 5051 dated 07.02.1991. The penalties and prosecution were upheld, and the pending application was disposed of as infructuous.