2020 (11) TMI 228 - HC - Income Tax

Cognizance for the offence u/s 276C(1) - enquiry by the investigation wing - unusual credit of large amount through RTGS in bank account maintained by the petitioner and funds were debited for investment in the stock market - HELD THAT - Adjudication proceedings and the criminal prosecution can be launched simultaneously and the decision in adjudication proceeding is not necessary before initiating criminal prosecution. In the case on hand, the assessment order passed by the AO has been set aside by the Income Tax Appellate Authority - Even when the appeal was pending, the authorized representative of the petitioner submitted before the sanctioning authority and it was duly considered and accorded sanction for the reason that the prosecution proceedings are separate and distinct from the assessment or reassessment proceedings. There is no requirement under the Act that the assessment proceedings should be completed before lunching prosecution. Respondent is rightly lodged the complaint as against the petitioner for the offences under Section 276C(1) of the Income Tax Act, 1961. After the order passed by the Income Tax Appellate Authority, the Assessing Officer completed the assessment proceedings, where the total demand was reworded for ₹ 40,36,84,241/- and the net amount payable was determined at ₹ 4,21,31,164/-. After adjusting the TDS amount the tax liability and the penalty stood at ₹ 1,45,23,900/- and ₹ 4,56,94,344/- respectively by an assessment order dated 28.06.2019. It is categorically established that there was a concealment of income with a view to evade the payment of taxes. Therefore, the grounds raised by the learned Senior Counsel appearing for the petitioner are not helpful to the case on hand. This Court is not inclined to quash the proceedings in E.O.C.C.No.401 of 2018 on the file of the Court of the Additional Chief Metropolitan Magistrate, Economic Offences-II, Egmore, Chennai. The petitioner is at liberty to raise all the grounds before the trial Court.

Summary

Issues Involved:
1. Basis for the complaint under Section 276C(1) of the Income Tax Act, 1961.
2. Alleged suppression of facts and improper sanction for prosecution.
3. Relevance of the assessment order being set aside by the Income Tax Appellate Authority.
4. Legality of simultaneous criminal prosecution and assessment proceedings.

Detailed Analysis:

1. Basis for the Complaint under Section 276C(1) of the Income Tax Act, 1961:

The petitioner was accused of not disclosing 165 share transactions amounting to ?155.20 crores in the return of income for the assessment year 2008-09. The taxable income from these transactions, ?52.13 crores, was not reported as capital gain. The respondent argued that the complaint was based on the concealment of share transactions and not on any assessment order. The petitioner claimed that the complaint was based on an assessment order dated 25.02.2018, which was later set aside by the Income Tax Appellate Authority.

2. Alleged Suppression of Facts and Improper Sanction for Prosecution:

The petitioner contended that the sanction for prosecution, dated 16.10.2018, was obtained by suppressing the fact that the assessment order had been set aside. The petitioner argued that the sanctioning authority did not apply its mind and granted the sanction mechanically. The respondent countered that the sanction was granted after careful consideration and that the prosecution was based on the investigation’s findings, not the assessment order.

3. Relevance of the Assessment Order Being Set Aside by the Income Tax Appellate Authority:

The petitioner argued that since the assessment order was set aside, there was no basis for the complaint. The respondent maintained that the complaint was independent of the assessment order and was based on the concealment of income. The court noted that the assessment order being set aside did not affect the prosecution, as the concealment of share transactions was admitted by the petitioner.

4. Legality of Simultaneous Criminal Prosecution and Assessment Proceedings:

The court held that criminal prosecution and assessment proceedings could proceed simultaneously. The prosecution did not need to wait for the completion of assessment proceedings. The court cited several judgments, including P. Jayappan Vs. S.K. Perumal, which supported the view that criminal prosecution could be initiated independently of assessment proceedings.

Conclusion:

The court dismissed the petition to quash the proceedings, stating that the prosecution was justified based on the concealment of share transactions. The court emphasized that criminal prosecution and assessment proceedings are distinct and can proceed simultaneously. The petitioner was allowed to raise all grounds before the trial court, and the trial was directed to be completed within six months. The personal appearance of the petitioner was dispensed with, except at specific stages of the trial.