2023 (7) TMI 1283 - HC - Income Tax

Penalty u/s 271(1)(c) - Offences u/s 276 C(1) and 277 - petitioners have not explained the source of income for incurring cash expenses - Tribunal factually found that there is no material for cash payment made by the petitioners and in these circumstances, allowed the Appeal - HELD THAT - As applying the ratio laid down in Radheshyam Kejriwal's case 2011 (2) TMI 154 - SUPREME COURT when the findings of the Income Tax Appellate Tribunal are in favour of the petitioners, a criminal prosecution on the same set of facts is not maintainable and is unsustainable and the same is liable to be quashed. Decided in favour of assessee.

Summary

Issues:
The issues involved in this case are challenging criminal proceedings u/s 276 C(1) and 277 of the Income Tax Act, 1961 for Assessment Year 2013-14, and the imposition of penalty u/s 271(1)(c) of the Income Tax Act, 1961.

Details of the Judgment:

Challenge to Criminal Proceedings:
The petitioners challenged criminal proceedings initiated against them by the respondent for not explaining the source of income for incurring cash expenses. The petitioners had appealed before the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal, which found no evidence of unaccounted cash payments by the petitioners. The Appellate Tribunal's order highlighted that the additions made by the Department were based on estimates without material evidence. Citing relevant judgments, the Senior Counsel argued that a criminal prosecution after being exonerated by the Appellate Tribunal is not maintainable.

Respondent's Submission:
The Department reassessed the petitioners for the Assessment Year 2013-14, and penalty proceedings were initiated under Section 271(1)(c) of the Income Tax Act, 1961. Despite the petitioners' successful appeal before the Appellate Tribunal, the Special Public Prosecutor contended that separate criminal proceedings are still maintainable.

Court's Analysis:
The Court examined the records and noted that the Department filed a complaint against the petitioners for not explaining the source of income for certain cash expenses. The Appellate Tribunal's order highlighted the lack of material evidence for the cash payments attributed to the petitioners. Referring to relevant legal precedents, the Court emphasized that when the findings of the Appellate Tribunal favor the petitioners, a criminal prosecution on the same set of facts becomes unsustainable.

Judgment:
Consequently, the Court quashed the criminal proceedings against the petitioners in E.O.C.No.390 of 2018 and allowed the Criminal Original Petition. The connected miscellaneous petitions were also closed as a result of this decision.