2021 (7) TMI 960 - HC - Income Tax

Bogus claim of Deduction u/s 35(i)(ii) - Criminal Petition is filed under Section 482 of the Code of Criminal Procedure, 1973 - offences alleged against the petitioner herein are under Sections 409, 420, 464, 465, 466, 468 and 471 read with 120-B of IPC - HELD THAT - Prima facie, there are serious allegations against the petitioner herein. There are several triable issues. The total tax advantage derived was around ₹ 22.43 Crores which would have accrued to the Government. Thus, Government is deprived to the said extent. It is loss to public exchequer. The petitioner has not voluntarily forgone the claim of exemption claimed on the basis of false donation certificate received by him and when he was asked to prove the genuineness of the said certificate during the assessment procedure, then only the petitioner agreed to forgo such exemption. Thus, the petitioner has to prove his innocence by facing trial. The contention of the petitioner that there is no mens rea is also triable issue in view of the facts stated. It is apt to refer to the decision rendered in Kamal Shivaji Pokarnekar v. The State of Maharashtra 2019 (2) TMI 1894 - SUPREME COURT wherein the Apex Court has categorically held that quashing criminal proceedings was called for only in a case where complaint did not disclose any offence, or was frivolous, vexatious, or oppressive. If allegations set out in complaint did not constitute offence of which cognizance had been taken by Magistrate, it was open to High Court to quash same - The Court has to consider whether complaint discloses that prima facie, offences that were alleged against Respondents. Correctness or otherwise of said allegations had to be decided only in trial. At initial stage of issuance of process, it was not open to Courts to stifle proceedings by entering into merits of the contentions made on behalf of Accused. Criminal complaints could not be quashed only on ground that, allegations made therein appear to be of a civil nature. If ingredients of offence alleged against Accused were prima facie made out in complaint, criminal proceeding shall not be interdicted. In Skoda Auto Volkswagen India Private Limited Vs. The State of Uttar Pradesh and Ors 2020 (11) TMI 994 - SUPREME COURT the Hon ble Apex Court referring to the various judgments rendered by it categorically held that the High Courts in exercise of its inherent powers under Section 482 of Cr.P.C has to quash the proceedings in criminal cases in rarest of rare cases with extreme caution. In view of law laid down by the Hon ble Apex Court and in view of the above said discussion, as there are serious allegations against the petitioner herein and there are several triable issues, this Court is not inclined to quash the proceedings and the petitioner failed to make out any case to quash the said proceedings. Therefore, this Criminal Petition is liable to be dismissed.

Summary

Issues:
Quashing of criminal proceedings under Section 482 of Cr.P.C based on allegations of tax evasion and submission of fake certificates for tax exemptions.

Analysis:
The petitioner, Accused No.11, filed a Criminal Petition under Section 482 of Cr.P.C seeking to quash proceedings in C.C.No.8140 of 2020, where he was charged under Sections 409, 420, 464, 465, 466, 468, and 471 read with 120-B of IPC. The allegations involved the petitioner donating an amount and claiming tax exemptions through fake certificates under the Income Tax Act. The petitioner's defense highlighted his reputation as a philanthropist and his belief in the legitimacy of the donations made to the entity registered with the Income Tax Department. The defense argued against vicarious liability, stating that the donations were made by the company he managed, not by him individually. The defense also emphasized the petitioner's withdrawal of donations, submission of revised returns, and payment of tax, claiming lack of mens rea in the alleged offenses.

The defense contended that the Magistrate mechanically took cognizance of the offenses without explaining the petitioner's role, citing a principle from a previous High Court judgment. The defense further argued that the allegations in the charge sheet lacked the necessary ingredients for the offenses against the petitioner. On the other hand, the 2nd respondent argued that the petitioner admitted guilt by withdrawing donations and submitting fresh returns, indicating his involvement in the offenses. The 2nd respondent emphasized the petitioner's claimed tax exemption based on a fabricated certificate and the need for trial to prove innocence, dismissing the defense of vicarious liability.

The Court noted the conflicting submissions and acknowledged the triable issue regarding the authenticity of the tax exemption certificate. It highlighted specific allegations against the petitioner, including participation in a criminal conspiracy to evade taxes, resulting in substantial tax advantage and loss to the government. The Court observed that the petitioner's actions, including the withdrawal of bogus claims only after departmental action, indicated a planned effort to evade taxes rather than a genuine mistake. The Court cited the Hon'ble Supreme Court's decision on quashing criminal proceedings, emphasizing that complaints disclosing criminal offenses should proceed to trial, with defenses and facts to be established during the legal process.

Considering the seriousness of the allegations, the Court declined to quash the proceedings in C.C.No.8410 of 2020, as there were several triable issues and the petitioner failed to demonstrate grounds for dismissal. Referring to legal precedents, the Court underscored the need for extreme caution in quashing criminal proceedings under Section 482 of Cr.P.C, particularly in cases with serious allegations and triable issues. Ultimately, the Criminal Petition was dismissed, and any related miscellaneous petitions were closed accordingly.