1993 (11) TMI 3 - SC - Income Tax

Whether the appellant-assessee made a false statement regarding the income which according to the assessing authority has escaped assessment - since finding of ITO that assessee made a false statement had been set aside by tribunal, Criminal proceedings cannot be sustained

Summary

Issues:
1. Assessment of income under the Income-tax Act for the appellant.
2. Validity of the assessment and reopening of the assessment under sections 147 and 148.
3. Allegations of intentional concealment of income and launching of prosecution.
4. Appeal before the Income-tax Appellate Tribunal and its decision.
5. Dismissal of criminal proceedings by the magistrate and subsequent appeal to the High Court under section 482 of the Criminal Procedure Code.
6. Consideration of the Tribunal's order as evidence in criminal proceedings.
7. Quashing of criminal proceedings based on the Tribunal's findings.

Analysis:
1. The appellant, as an assessee, filed his return of income for the assessment year 1960-61, showing income from firms in Delhi and Bombay. The assessing authority initially determined the income to be Rs. 35,699, including income from a firm involving minor children of the appellant. Subsequently, under sections 147 and 148 of the Income-tax Act, the assessment was reopened, and the income was assessed at Rs. 52,634, attributing income from another firm to the appellant.

2. The Income-tax Appellate Tribunal allowed the appellant's appeal, holding that there was insufficient evidence to establish the appellant as the owner of the entire business. The Tribunal concluded that the assessing authority erred in attributing income from the firm to the appellant, leading to the deletion of Rs. 23,134 from the total income of the assessee.

3. Following the Tribunal's decision, the appellant sought to drop criminal proceedings initiated against him. The magistrate, however, dismissed the application, stating that the prosecution had the right to present evidence, with the Tribunal's order being considered as evidence. The High Court subsequently rejected the appellant's application under section 482 of the Criminal Procedure Code.

4. The appellant contended that the prosecution was based on false declarations regarding the ownership of income from a particular firm, which was contradicted by the Tribunal's findings. Citing precedents, the appellant argued that since the Tribunal set aside the assessing authority's conclusions, the basis for the complaint was invalidated, warranting the quashing of proceedings in the interest of justice.

5. The Department argued that the genuineness of the firm remained unresolved, justifying the continuation of the proceedings. However, the Supreme Court disagreed, emphasizing that the Tribunal's conclusive finding on the false statement regarding escaped income rendered the prosecution unsustainable. Relying on precedent, the Court quashed the proceedings, allowing the appeal in favor of the appellant.