2023 (1) TMI 536 - HC - Income Tax

Criminal proceedings arising out of orders of penalty - Penalty u/s 271(1)(a), 271(1)(c) and 273(b) for late filing of return for Assessment Year 1983-84 vide separate orders cancelled and allowed all appeals - criminal proceedings under Section 276-C of Income Tax Act initiated simultaneously remained in existence - HELD THAT - As decided in judgment passed by Supreme Court in K.C. Builders and anothers 2004 (1) TMI 7 - SUPREME COURT levy of penalties and prosecution under Section 276C are simultaneous. Hence, once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution under Section 276C is automatic. The appellants cannot be made to suffer and face the rigorous of criminal trial when the same cannot be sustained in the eyes of law because the entire prosecution in view of a conclusive finding of the Income Tax Tribunal that there is no concealment of income becomes devoid of jurisdiction and under Section 254 of the Act, a finding of the Appellate Tribunal supercedes the order of the Assessing Officer under Section 143(3) more so when the Assessing Officer cancelled the penalty levied. The facts of the present case are squarely covered by the judgment in K.C. Builders (supra) and the above ratio will also cover the position of law with regard to criminal proceedings arising out of orders of penalty. In view of above, the application is allowed. The orders passed by Special Chief Judicial Magistrate, Varanasi and order passed by Sessions Judge, Varanasi as well as proceedings under Sections 276, 277 of Income Tax Act, are hereby quashed.

Summary

Issues:
1. Challenge to penalty orders under Income Tax Act for late filing of return for Assessment Year 1983-84.
2. Criminal proceedings under Section 276-C of Income Tax Act initiated simultaneously with penalty orders.
3. Challenge to criminal proceedings due to non-procurement of certified copy of order quashing the proceedings.

Analysis:

1. The applicant challenged penalty orders under Sections 271(1)(a), 271(1)(c), and 273(b) of the Income Tax Act for late filing of the return for Assessment Year 1983-84. The Appellate Authority canceled the penalties and allowed all appeals. However, criminal proceedings under Section 276-C of the Income Tax Act continued despite the penalty cancellation.

2. The applicant filed an application under Section 482 in 1992 challenging the criminal proceedings. Due to the non-procurement of a certified copy of the order quashing the proceedings, the criminal proceedings persisted. Several attempts were made to trace the record of the application, but no receipt was found at the concerned court, causing delays in resolving the matter.

3. The court proceeded to pass orders on merit since the applicant approached the court in 2015, acknowledging the previous application. The applicant relied on a Supreme Court judgment in a similar case to argue that when penalties are canceled due to no concealment, the quashing of criminal prosecution is automatic. The court found that the facts of the present case align with the precedent, leading to the quashing of the criminal proceedings under Sections 276 and 277 of the Income Tax Act.

4. The Opposite Party did not dispute the facts but mentioned the lack of knowledge about the quashing of criminal proceedings in the earlier application. However, they did not contest the reliance on the Supreme Court judgment provided by the applicant. The court, considering the precedent and the circumstances of the case, allowed the application and quashed the orders and proceedings related to the criminal charges under the Income Tax Act.

5. Consequently, the orders passed by the Special Chief Judicial Magistrate and the Sessions Judge in Varanasi, along with the proceedings in a specific case under Sections 276 and 277 of the Income Tax Act, were quashed. The court accepted the report submitted by the Registrar (J) Criminal, concluding the matter without further orders.