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2018 (3) TMI 51 - HC - Income TaxPenalties levied u/s 271(1)(c) - prosecution u/s 276C - concealment of income - Held that - The basis for initiating proceedings under the Income-tax laws by imposing penalty and on the criminal side by lodging criminal complaint is the same. ITAT has taken into account all the facts and circumstances of the case, plea and explanation furnished by the petitioner and the case of the Department, whereupon it has been held that the petitioner did not conceal the income. The cause for initiating criminal proceedings was alleged concealment of income and consequent order of penalty. The cause itself stands eliminated and dislodged vide judgment of the ITAT. In such circumstances, the consequences (criminal complaint) cannot be allowed to survive. The Department has accepted that income had not been concealed, therefore, there is no occasion or logic either in law or in facts to prosecute the petitioner at the instance of the Income-tax Department for the alleged concealment of income for evading Income-tax. ITAT has set aside the order of penalty and held that the petitioner had not concealed her income, under the Income-tax laws. The impugned complaint has been filed also under Income-tax laws. It would be an exercise in futility to allow prosecution of the petitioner, because in the face of the Income-tax Appellate Tribunal judgment dated May 29, 2009 the petitioner would be entitled to acquittal at a later stage in trial proceedings. Therefore, also this petition deserves to be allowed.
Issues Involved:
1. Quashing of Complaint Case No. 1305 of 2007 under sections 276C(1) and 277 of the Income-tax Act, 1961. 2. Validity of penalty proceedings under section 271(1)(c) of the Income-tax Act. 3. Impact of Income-tax Appellate Tribunal's judgment on the criminal proceedings. 4. Applicability of the Supreme Court judgment in K. C. Builders v. Asst. CIT. Detailed Analysis: 1. Quashing of Complaint Case No. 1305 of 2007: The petitioner sought to quash Complaint Case No. 1305 of 2007 under sections 276C(1) and 277 of the Income-tax Act, 1961, pending in the court of Special Chief Judicial Magistrate (Economic Offences), Lucknow. The complaint alleged that the petitioner concealed income to evade tax, leading to the imposition of a penalty. 2. Validity of Penalty Proceedings: The petitioner, a partner in M/s. Shyam Traders, filed her income return for the assessment year 2002-03. The assessing authority added ?20,64,598 as income from undisclosed sources. Aggrieved, the petitioner appealed to the Commissioner of Income-tax (Appeals), which was dismissed. Subsequently, a penalty of ?10,00,000 was levied under section 271(1)(c). The petitioner appealed against the penalty to the Income-tax Appellate Tribunal (ITAT). 3. Impact of ITAT's Judgment: The ITAT, in its judgment dated May 29, 2009, concluded that the petitioner had not concealed income or furnished inaccurate particulars. The ITAT allowed the appeal, stating, "no penalty was leviable in the present case." The affidavit from the Income-tax Officer confirmed that the ITAT's judgment had attained finality, and no further litigation was pending. The Department had issued a refund to the petitioner. 4. Applicability of K. C. Builders v. Asst. CIT: The Supreme Court in K. C. Builders v. Asst. CIT held that once penalties under section 271(1)(c) are cancelled, prosecution under section 276C is automatically quashed. The Court stated, "the entire prosecution in view of a conclusive finding of the Income-tax Appellate Tribunal that there is no concealment of income becomes devoid of jurisdiction." Conclusion: The High Court observed that the criminal complaint was based on the premise of income concealment and resultant penalty, which the ITAT had set aside. The Court noted that allowing criminal proceedings to continue would be futile, as the petitioner would be entitled to acquittal due to the ITAT's judgment. Consequently, the petition was allowed, and Complaint Case No. 1305 of 2007 was quashed. Final Judgment: The petition is allowed. Complaint Case No. 1305 of 2007, under sections 276C(1) and 277 of the Income-tax Act, 1961, pending in the court of the Special Chief Judicial Magistrate (Economic Offences), Lucknow, is hereby quashed.
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