2015 (6) TMI 9 - HC - Income Tax

Prosecution launched for concealment of income under section 276C r.w.s. 279 - Held that - We direct that respondent No.2 shall decide whether or not to take action under section 279 of the Act on his own in accordance with law and without being influenced by the directions from any other source including from the CBDT including on the basis of the communications relied upon by the petitioner or otherwise. By our judgment in M/s Kudos Chemie Ltd. v. Assistant Commissioner of Income Tax (TDS), Chandigarh 2015 (5) TMI 589 - PUNJAB & HARYANA HIGH COURT , we have held that launching a prosecution is not mandatory in every case of failure provided in section 276B. The same would apply also in respect of failure under sections 276C and 277 which the petitioner is accused of in this case. Further, in the event of respondent No.2 deciding to launch the prosecution, he shall do so only by a reasoned order on all the issues raised by the petitioner. In the event of the decision of respondent No.2 being adverse to the petitioner to any extent, the same shall not be implemented for a period of four weeks after service of the same upon the petitioner.

Summary

Issues:
1. Writ petition seeking to quash a show-cause notice under sections 276C(1)/277 of the Income Tax Act, 1961 for initiating prosecution proceedings.

Analysis:

The petitioner sought a writ of certiorari to quash a show-cause notice dated 09.02.2015 under sections 276C(1)/277 of the Income Tax Act, 1961, for initiating prosecution proceedings in respect of the assessment year 2011-12. The petitioner argued that the Commissioner of Income Tax-I is the competent authority to decide on prosecution matters. However, the Central Board of Direct Taxes (CBDT) has been issuing directions compelling the Commissioner to launch prosecutions. The petitioner contended that CBDT is not the appropriate authority to issue such directions.

The court analyzed Section 279 of the Act, which mandates that a person cannot be proceeded against for certain offenses without the previous sanction of the Commissioner or appropriate authority, or if directed by the Chief Commissioner or Director General. The court clarified that CBDT is not the appropriate authority to issue such directions. The court noted the petitioner's concerns regarding correspondence between CBDT and authorities, but found that the letters did not constitute mandatory orders to launch prosecution.

The court directed respondent No.2, the Commissioner of Income Tax, to independently decide on taking action under section 279 without being influenced by directions from CBDT or any other source. The court emphasized that launching prosecution is not mandatory in every case of failure under the Act. If respondent No.2 decides to proceed with prosecution, it must be supported by a reasoned order addressing all issues raised by the petitioner. Additionally, any adverse decision must not be implemented for four weeks after being served upon the petitioner.

In conclusion, the court disposed of the writ petition with the specified terms, emphasizing the need for independent decision-making by the Commissioner of Income Tax and ensuring due process in case of prosecution proceedings.