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2023 (9) TMI 115 - HC - Income TaxProsecution u/s 276C(1) - willful default of payment of tax - penalty proceeding was also initiated u/s 271(1)(c) - assessee is alleged to have attempted to evade the tax liability by furnishing inaccurate particulars of income leads to concealment of income - HELD THAT - A criminal prosecution for an offence under a special statute must not be initiated as a matter of course where the prosecution would involve intricate questions of interpretation of the Income Tax Act. The object of launching criminal prosecution for willful default in complying with the provisions of the Income Tax Act is to prevent evasion of tax. See GOPALJI SHAW case 1988 (3) TMI 41 - CALCUTTA HIGH COURT The Hon'ble Supreme Court in G.L. Didwania another 1993 (11) TMI 3 - SUPREME COURT has held that if the appellate tribunal has set aside the order of penalty, how the criminal proceeding can be sustained. Thus once penalty order is set aside, it will be presumed that there is no concealment and quashing of prosecution under Section 276C(1) of the Income Tax Act is automatic. The petitioner cannot be allowed to suffer and to face criminal trial and the same cannot sustain in the eyes of law. There is no doubt that penalty proceeding and prosecution can go simultaneously in the facts and circumstances of the cases, however, in the case in hand, the penalty proceeding has already been set aside in view of the appellate order. The Court finds that in view of the above judgments, the case of the petitioner is fit to be allowed. Further, if the penalty proceeding has been set aside, mens rea is one of the essential ingredient of a criminal offence. Petition allowed.
Issues Involved:
1. Quashing of entire criminal proceedings. 2. Legitimacy of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961. 3. Applicability of Supreme Court judgments in similar cases. 4. Mens rea as an essential ingredient of criminal offense under Section 276C(1) of the Income Tax Act, 1961. Summary: 1. Quashing of Entire Criminal Proceedings: The petitioner sought to quash the entire criminal proceedings, including the orders dated 30.05.2016 and 15.07.2017, in connection with C/2 Case No.684 of 2016, pending in the court of the learned Special Judge (Economic Offence) cum Civil Judge (Sr. Div.)-II, Jamshedpur. 2. Legitimacy of Penalty Proceedings: The complaint alleged that the petitioner concealed income of Rs. 1,82,146/- and provided inaccurate details, leading to penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was confirmed by the Commissioner of Income Tax (Appeal), Jamshedpur, but was later set aside by the appellate tribunal in ITA No.117/Ran/2016. The petitioner argued that with the penalty order set aside, the foundation of the criminal prosecution was void. 3. Applicability of Supreme Court Judgments: The petitioner referenced the Supreme Court judgment in K.C. Builders and another v. Assistant Commissioner of Income Tax, asserting that once the penalty is set aside, the criminal prosecution cannot be sustained. The court also considered other relevant judgments, including G.L. Didwania & another v. Income-Tax Officer & another, and Gopal Ji Shaw v. Income Tax Officer, which emphasized that criminal prosecution should not be initiated where intricate questions of interpretation of the Income Tax Act are involved. 4. Mens Rea as an Essential Ingredient: The court examined the necessity of mens rea in criminal offenses under Section 276C(1) of the Income Tax Act, 1961. It was noted that without the element of mens rea, which implies willful default, the prosecution cannot proceed. The court referenced the Supreme Court's view that penalty proceedings and prosecution can go simultaneously, but if the penalty order is set aside, it indicates no concealment, making the prosecution invalid. Conclusion: The court concluded that with the penalty order set aside by the appellate tribunal, there is no basis for the criminal prosecution under Section 276C(1) of the Income Tax Act, 1961. Hence, the entire criminal proceedings, including the orders dated 30.05.2016 and 15.07.2017, were quashed, and the petition was allowed and disposed of.
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