2021 (12) TMI 879 - HC - Income Tax

Prosecution u/s 276C(1) - allegation against Petitioner is of evasion of tax and, therefore, ingredients of the offence alleged against Petitioner are, prima facie, satisfied - order of sanction at Ex. D-3 stating that Petitioner has failed to substantiate the claim of purchases to be treated as bogus - HELD THAT - It is well settled that before granting sanction the authority must have before it the necessary report and the material facts which prima facie establish the commission of offence alleged for and that the sanctioning authority would apply its mind to those facts. The order of sanction is only an administrative act and not a quasi-judicial one nor is a lis involved. Therefore, the order of sanction need not contain detailed reasons in support thereof. But the basic facts that constitute the offence must be apparent on the sanction order and the record must bear out the reasons in that regard. A perusal of the sanction order clearly indicates that the sanctioning authority appears to have applied its mind to the facts placed before it and considered them and then granted sanction. Perusal of the complaint launched against Petitioner also disclose allegations that Petitioner failed to substantiate the claim of purchases amounting to ₹ 2,74,03,016/- and the assessing officer held the purchases to be bogus and made an addition of ₹ 34,25,377/(12.5% of the bogus purchases). On Appeal by Petitioner, CIT (A) vide order dated 19.12.2016 confirmed the addition. ITAT also confirmed said order. It is stated that, therefore, Petitioner has willfully and intentionally evaded his tax liability. Taking into consideration accusations in the complaint and material on record, we are satisfied that, prima facie, the ingredients of the offences under Section 276C(1) of the said Act are satisfied. Assessee Petition dismissed.

Summary

Issues:
Challenging prosecution sanction under Section 276C(1) of the Income Tax Act, 1961 and complaint filed against the petitioner.

Detailed Analysis:

Issue 1: Challenging Prosecution Sanction
The petitioner challenged the order dated 25th January 2018 sanctioning the prosecution against him under Section 276C(1) of the Income Tax Act, 1961. The petitioner contended that the penalty exceeding &8377; 50,000 imposed under Section 271C(1) must be confirmed by the ITAT before initiating prosecution. The respondent argued that the petitioner's willful attempt to evade tax, as alleged, satisfies the ingredients of the offense under Section 276C(1). The court examined the relevant provision of the Income Tax Act and concluded that the order of sanction was granted after considering the necessary facts and material, indicating an attempt to evade tax by the petitioner.

Issue 2: Quashing of Complaint
The court referred to the case of State of Haryana v. Bhajan Lal, which provides categories of cases where the power to quash criminal proceedings can be exercised. The court noted that the allegations in the complaint against the petitioner, regarding evasion of tax, were supported by material on record. The court emphasized that at this stage, the truthfulness of the allegations cannot be evaluated, and the trial must proceed to allow the prosecution to substantiate the charges. Considering the accusations and material on record, the court found that the ingredients of the offense under Section 276C(1) were prima facie satisfied, leading to the dismissal of the petition challenging the complaint.

Conclusion:
The court dismissed the petition challenging the prosecution sanction and complaint against the petitioner under Section 276C(1) of the Income Tax Act, 1961. The court held that interference under Article 226 of the Constitution of India was not warranted at this stage, as the ingredients of the offenses were prima facie satisfied. The court emphasized the need for the trial to proceed for the prosecution to present evidence supporting the allegations made against the petitioner.