2025 (1) TMI 706 - HC - Income Tax

Commission of offences u/s 276C (1) r.w.s. 277 - considering total sale consideration of land in question only part was shown to be the actual sale consideration in the sale deed and the remaining amount was found to have been paid by the purchasers to the seller in cash and in the process having evaded capital gain tax - whether the exercise of inherent power of this Court saved under Section 482 Cr. P.C. is warranted to be exercised in the instant case or not? - HELD THAT -The ambit and scope of exercise of inherent power of this Court is no more res integra and stands settled in M/s Neeharika Infrastructure Pvt. Ltd. vs. State of Maharastra ORs 2021 (4) TMI 1244 - SUPREME COURT held that the power of quashing should be exercised with circumspection in rarest of the rare cases (not to be confused with the formation in the context of death penalty) and while examining an FIR/complaint, quashing of which is sought, the Court cannot embark upon an enquiry as to reliability or genuineness or otherwise of the allegations made in the FIR/complaint and that the criminal proceedings ought not to be scuttled at the initial stage and that quashing of FIR/complaint should be an exception rather than an ordinary rule and that when the prayer for quashing of FIR/complaint is made by the accused and the Court when it exercise power u/s 482 Cr. P.C. only has to consider whether the allegations in the FIR/complaint disclose commission of a cognizable offence or not. In case in hand, the respondent herein in the impugned complaint has specifically alleged commission of offences by the petitioners herein under Sections 276C (1) and 277 of the Act of 1961. Under Section 279A of the Act of 1961, offence under Section 276C (1) read with Section 277 alongwith other offences provided therein the said section have been deemed to be cognizable offences within the meaning of Code of Criminal Procedure. This Court is not inclined to display indulgence and to exercise inherent power in the instant petition.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

Whether the inherent power of the High Court under Section 482 of the Code of Criminal Procedure (Cr. P.C.) should be exercised to quash the complaint against the petitioners.
Whether the complaint filed under Sections 276C(1) and 277 of the Income Tax Act, 1961, constitutes a cognizable offence warranting prosecution.
Whether the proceedings initiated are a misuse of the process of law and if they are manifestly attended with mala fide intentions.
Whether the prosecution is premature given that the income tax return for the financial year in question had not yet been filed.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Exercise of Inherent Power under Section 482 Cr. P.C.

Legal Framework and Precedents: Section 482 Cr. P.C. provides the High Court with inherent powers to make such orders as may be necessary to prevent abuse of process of any court or otherwise to secure the ends of justice. The Supreme Court in "M/s Neeharika Infrastructure Pvt. Ltd. vs. State of Maharashtra" emphasized that quashing should be an exception, not a rule.
Court's Interpretation and Reasoning: The court noted that the power of quashing should be exercised sparingly and only in the rarest of cases. The court cannot engage in evaluating the reliability or genuineness of the allegations at this stage.
Key Evidence and Findings: The complaint alleged cognizable offences under the Income Tax Act, which are deemed cognizable under Section 279A, thus warranting prosecution.
Application of Law to Facts: The allegations in the complaint, if taken at face value, disclose a cognizable offence, and thus, the inherent power to quash should not be exercised.
Treatment of Competing Arguments: The petitioners argued that the proceedings were a misuse of law and mala fide. However, the court held that these are matters of defense to be raised during trial and not at the quashing stage.
Conclusions: The court concluded that the inherent powers under Section 482 Cr. P.C. should not be exercised to quash the complaint at this stage.

Issue 2: Cognizability of Offences under Sections 276C(1) and 277 of the Income Tax Act

Legal Framework and Precedents: Sections 276C(1) and 277 of the Income Tax Act deal with willful attempt to evade tax and making false statements, respectively. Section 279A deems these as cognizable offences.
Court's Interpretation and Reasoning: The court found that the allegations in the complaint, which include evasion of capital gains tax, prima facie disclose cognizable offences as per the Income Tax Act.
Key Evidence and Findings: The complaint alleged that the sale consideration was underreported to evade tax, thus constituting an offence under the relevant sections.
Application of Law to Facts: Given the cognizable nature of the offences, the court held that the complaint should proceed to trial.
Treatment of Competing Arguments: The petitioners contended that the complaint was premature and based on false allegations. The court held that these arguments are to be addressed during the trial.
Conclusions: The court concluded that the complaint disclosed cognizable offences and should not be quashed at this stage.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "The power of quashing should be exercised with circumspection in rarest of the rare cases... the Court cannot embark upon an enquiry as to reliability or genuineness or otherwise of the allegations made in the FIR/complaint."
Core Principles Established: The inherent power to quash a complaint should be used sparingly and only when the allegations do not disclose any cognizable offence. The court should not interfere at the initial stage of prosecution unless there is a clear abuse of process.
Final Determinations on Each Issue: The court determined that the petitioners' arguments regarding the misuse of process and mala fide intentions are defenses to be raised at trial. The complaint should proceed as it discloses cognizable offences under the Income Tax Act.

In conclusion, the High Court of Jammu and Kashmir and Ladakh dismissed the petition, refusing to exercise its inherent powers under Section 482 Cr. P.C. to quash the complaint at this stage, allowing the prosecution to proceed.

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