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TMI Blog1989 (7) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... r the sale of a residential plot stating that A-3 paid Rs. 1,00,000 to A-2 on September 25, 1986, under the said agreement and the balance amount of Rs. 80,000 was accumulations of A-1's professional income. As per section 132(5) of the Income-tax Act (hereinafter referred to as "the Act"), the income-tax authorities have to pass an order within four months from the date of the seizure estimating the liabilities, tax, penalties, etc., and also pass an order retaining the amounts seized. The matter was posted on January 16, 1987, and summons was issued to A-3 ; but A-3 did not appear. Thereafter, the order dated January 22, 1987, was passed under section 132(5) of the Act by the, Income-tax Officer, 'B' Ward (Circle 1), Hyderabad, stating that since the tax/interest/penalty, etc., were payable by the assessee, for the seized amount of Rs. 1,80,000, the said amount was retained and no part of it could be released to the assessee and that the order was passed with the previous approval of the Inspecting Assistant Commissioner of Income-tax, Range 1, Hyderabad. In para 16 of the said order of the Income-tax Officer, it is stated that the officer wanted to see the original agreement as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anwhile, on the basis of the sanction order dated March 26, 1987, passed by the Commissioner for prosecution of the respondents herein, the Income-tax Officer filed a complaint on March 31, 1987, against the respondents herein alleging the offences under sections 174 and 175 of the Income-tax Act and section 193, Indian Penal Code. The court below took cognizance of the case against the respondents herein. Thereupon, the respondents herein filed Criminal Miscellaneous Petition No. 2425 of 1987. The court below, after hearing both the parties and going into the rules, observed that the Commissioner did not apply-his mind properly; that he did not give any opportunity, to the respondents herein before giving sanction order for prosecution ; that the complaint is premature as the respondents herein did not even file their return for the assessment year 1987-88 and, therefore, discharged the respondents. Against that order, the present revision is filed by the Income-tax Officer Learned counsel for the petitioner submitted that the court below has erred in saying that the Commissioner has not applied his mind while directing the prosecution and further submitted that the observation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty or interest chargeable or imposable under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable, . . . " Thus, as per the above section, if any person Wilfully attempts to evade tax in any manner, he is liable for punishment. But in this case, admittedly, no return was filed and the respondents had time to file the return up to July 31, 1987. Apart from that, the Commissioner of Income-tax, in his order dated October 28, 1988, passed under section 132(12) of the Act, observed that all the contentions of the respondents can be raised at the time of the regular assessment and directed the Income-tax Officer to consider the same in the final order. But, however, before the Income-tax Officer passed such an order, the complaint was filed. The question whether the amount of Rs. 1,00,000 belongs to A-2 which she realised by the sale of plot under the agreement dated September 25, 1986, is to be decided in the regular assessment proceedings as directed by the Commissioner of Income-tax. Therefore, when once that question has to be decided in the regular assessment, the question, whether the alleged a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that case, the accused assessee filed his return for the assessment year 1977-78 in January, 1978, disclosing some income along with accounts. In August, 1981, a search was conducted in the house of the assessee under section 132 of the Act, which revealed suppression of income and accounts not disclosed by the assessee in the return. Therefore, a complaint was filed against him before the Additional Chief Judicial Magistrate (Economic Offences), Madurai, under sections 276C and 277 of the Act and under sections 193 and 196, Indian Penal Code, alleging that he had deliberately filed a false return. Thereupon, the assessee filed petitions under section 482, Criminal Procedure Code, before the Madras High Court for quashing the prosecution proceedings launched against him on the ground that the same were premature as the reassessment was pending. The Madras High Court dismissed those petitions. Then, the assessee filed a petition under article 136 of the Constitution of India before the Supreme Court. The question which arose before the Supreme Court was whether prosecutions under sections 276 and 277 of the Act and under sections 193 and 196, Indian Penal Code, instituted by the Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Officer. The assessee invoked the inherent powers of the High Court under section 482, Criminal Procedure Code, to quash the prosecution on the ground that the assessment on the basis of which prosecution had been launched had been set aside. The Madras High Court, by relying upon the decision of the Supreme Court in Jayappan's case [1984] 149 ITR 696, dismissed the petition filed under section 482, Criminal Procedure Code. This decision is also not applicable to the present case as, in that case, the return was, already filed and the assessment was completed. Another decision relied upon by learned counsel is that of the Delhi High Court in Electric Construction and Equipment Co. Ltd. v. N. Kumar [1989] 177 ITR 16, which is also similar to the cases referred to above and in that case also, the decision of the Supreme Court in Jayappan's case [1984] 149 ITR 696 was relied upon. That decision is also not applicable to the present case. In view of the facts of the present case referred to above, as the respondents have to file a return and the genuineness of the agreement of sale has to be decided in the regular assessment as directed by the Commissioner of Income-tax, the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance-Act, 1988, with effect from April 1, 1989. Prior to its substitution, sub-section (1), as substituted by the Taxation Laws (Amendment) Act, 1975, with effect from October 1, 1975, and later on amended by the Income-tax (Second Amendment) Act, 1981, with effect from July 11, 1981, the Finance Act, 1982, with effect from July 1, 1982, and the Taxation Laws (Amendment) Act, 1984, with effect from April 1, 1984, stood as under: "(1) A person shall not be proceeded against for an offence under section 275A, section 276A, section 276AA, section 276B, section 276C, Section 276CC, section 276D, section 276DD, section 276E, section 277, section 278 or section 278A except at the instance of the Chief Commissioner or Commissioner." As per the unamended section, the person shall not be proceeded against for an offence under section 279(1) except at the instance of the Chief Commissioner or the Commissioner. As per the above provision, any prosecution must be at the instance of the Chief Commissioner or the Commissioner. It is contended that the words "at the instance of the Commissioner" mean the Commissioner's mere direction, which is sufficient. In this case, there is such a dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aliah (T. S.) v. Rangachari (T. S.), ITO [1969] 72 ITR 787. In that case a prosecution was launched. An objection was taken that the prosecution was illegal as the complaint was not filed by the Inspecting Assistant Commissioner. Section 53 of the 1922 Act only requires that person shall not be proceeded against for an offence under section 51 or section-52 of the 1922 Act "except at the instance of the Inspecting Assistant Commissioner". The complaint was filed on the authority of the Inspecting Assistant Commissioner. But it was signed by another officer and, therefore, the objection was taken that it was not properly filed. There is no statutory requirement that the complaint petition must be filed by the Inspecting Assistant Commissioner. The Supreme Court, while interpreting the clause "at the instance" occurring in section 53 of the 1922 Act, held that it only means "on his authority" and it is, therefore, sufficient compliance with the statutory requirement if the complaint petition is filed "on the authority" of the Inspecting Assistant Commissioner. The Supreme Court also held there that if the complaint is filed on the authority of the Inspecting Assistant Commissioner, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y other provision of the Act, be liable for the offence. To appreciate the contention, it is relevant to refer to section 276c(1)and (2) of the Income-tax Act: "276C. Wilful attempt to evade tax, etc. - (1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, he shall, without prejudice to any penalty may be imposable on him under any other provision of this Act, be punishable, (i) in a case where the amount sought to be evaded exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three with fine. (ii) in any other case, with rigorous imprisonment for a term which not be less than three months but which may extend to three years and with fine. (2) If a person wilfully attempts in any manner whatsoever to evade the payment of any tax, penalty or interest under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd circumstances of each case. In the instant case, there was ample time to Me the return and there was chance to the respondent to explain about the amount seized by adducing cogent and convincing evidence. Even before Filing the return, it cannot be anticipated that he would not explain and, accordingly, it cannot be presumed that the respondent attempted to evade tax, etc. Thus, even before the act of attempt to evade is started, on a mere anticipation or contemplation that there was possibility of accruing liability after finalisation of regular assessment proceedings, it cannot be said that the respondent is liable for conviction under section 276C(1) of the Act. It is next contended that, as per the Explanation to section 276C(1) of the Act, once the amount of Rs. 1,80,000 was found in the possession of the respondents, they must be construed to have attempted to commit the offence. It must be noted that the Explanation cannot come to the rescue of the Department. Even to constitute an offence as per the above Explanation, there must be a specific finding by the Department in regard to the amount seized during the regular assessment proceedings. In the present case, there ..... 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