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TMI Blog2021 (1) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... ject of the statute as could be discernible under Section 276 is that to maintain such complaint by the Deputy Director of Income Tax Act, the materials seized or collected during search should unerringly pointing towards the accused, not mere statemenst of some third parties and some entries made by them. To attract the offence the assessee did not do any of the act required to constitute the offence of 277 of Income Tax Act before the Deputy Director of the Income Tax Department . Whereas it is admitted that the Returns were filed before the Assessing Officer by the Assessee and the verification is also done by them while fling the return. Whether such verification are false or not has to be decided by the Assessing Officer before whom such verification has filed. Mere showing ignorance by one of the assessees by maintaining that only her husband is aware of the return such conduct cannot be construed as abetment to atrract the offence under Section 278 of the Incomt Tax Act. To attract the offence of abetment there must be materials to show that she has instigated or invites her husband to commit offence. Therefore, this court is of the view that the offence under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only helpful for corroboration, prosecution has to fail and the court has to conclude that such prosecution is without any materials. In such view of the matter this Court is of the view that the complaint filed by the Deputy Director of Income Tax is premature at this stage. Accordingly this submission is answered against the Respondent. Admissibility of Electronic Evidence - This Court is of the view that such contention become insignificance since this court has already concluded the very launching of the prosecution is not proper and the Deputy Director of prosecution is incompetent to file the complaint in a given set of facts. Though the certificate can be produced at appropriate stage as per the dictum laid down by the Apex Court in Arjun Panditrao Khotkar vs. Kailash Kushanrao Gorantyal and others [ 2020 (7) TMI 740 - SUPREME COURT] this court is of the view that since this Court has already held that the very complaint is not maintainable restrain itself to further discussion with regard to the validity and admissibility of those documents, if any finding is recorded by this Court as to the admissibility of Electronic Evidence, same will have impact on the prose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income at ₹ 69,98,410/-. In her Return of Income she has shown the sale of the said property at ₹ 3,65,80,000/- as a Long Term Capital Gain. She has also not disclosed the cash payment of ₹ 1.36 Crores in the return of income. 3. Above facts came to light in a survey under Section 133 A of the Income Tax Act carried out in the case of M/s.Advantage Strategic Consulting Private Limited and other entities on 01.12.2015 by the Income Tax Department and Enforcement Directorate. In the course of the search several hard disks were retrieved by the Income Tax Department and Enforcement Directorate. Further search and seizure also conducted in M/s.Agni Estates and Foundation Pvt. Ltd., in the year 2018 and certain Note books were seized from cashier of the purchaser company and their statements also recorded. Thereby, private complaint was filed by the Deputy Director of Income Tax Department against Mr.Karti P. Chidambaram for the offences under Section 276C(1), 277 of the Income Tax Act. Similarly another complaint was filed against Tmt. Srinidhi Karti Chidambam and Mr.Kati P.Chidambaram under Sction 276C(1), 277 and 278 of the Income Tax Act. The private compla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the prosecution was launched against the accused without any materals and only due to the political reasons. It is further submitted that the Returns of the year 2014-15 filed and completed as early as 30.12.2016. Therefore, the assessment still holds good. The proceedings under Section 148 of the Income Tax Act to reopen the assessment did not result in order of reassessment. The time limit for reassessment is also lapsed. Now it appears that the notice under Section 153(C) has been issued. Hence, it is the contention that merely on the basis of the some search said to have taken place in third party premises and statements recorded from 3rd parties the prosecution cannot be launched by the Deputy Director of Income Tax Department, who is not competent to launch the prosecution for the offences under Section 276(C) and 277 of the Income Tax Act. It is his submission that none of the ingredients to attract the offence under Section 276(C) of the Income Tax Act is made out and no materials unearthed by the searching officer or the Deputy Director. Therefore, the complaint lodged by the Deputy Director is not maintainable in the eye of law. Only the Assessing Officer who reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his further contention that the materials relied by the prosecution is not admissible in evidence. The so called print outs allegedly taken from the cloned copies are not admissible. Further, third party statements also cannot be pressed into service as against the assessee. Assessees never incriminated themselves in the statement recorded by the Department. Further, electronic records are not admissible without the originals being produced by the owners. Wherein in this case, the alleged search said to have been taken in the premises of the purchaser of the land from the assessee has not supported the prosecution. They have not even come before the Court to substantiate their version. Therefore, without any materials and with the inadmissible documents the prosecution has to fail. 6.(d) In support of his contentions, the learned Senior Counsel Mr.Kapil Sibal relied on the following judgments : 1. Basir-Ul-Huq and others Vs. The State of West Bengal, Nur- Ul-Hudav, The State of West Bengal [1953 AIR 293] 2. Lalji Haridas Vs. State of Maharashtra and another [1964 AIR 1154] 3. Babita Lila and another Vs. Union of India [2016 (9) Supreme Court Cases 647] 4. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd wife. Such view of the matter, the officer who have no way connected with the passing Assessment Order cannot come to the conclusion that there is false verification or false evidence and abetment of such offence. Hence the complaint is not maintainable. 7(c) It is the further submission of the learned Senior Counsel that the very complaint lodged by the Deputy Director of Income Tax Department indicates that no false statement made before him. Therefore, the very complaint lodged by the Deputy Director of Income Tax Department should not have been taken cognizance by court below. Being a search officer he cannot make a complaint for filing false return. It is his contention that to show that there is a wilful suppression or false declaraion, the prosecution must show that the loss should have occasioned to Government. In the absence of any finding in that regard, the prosecution cannot be maintainable for the alleged false returns. It is his contention that the capital gain also can be set off as against capital loss. Therefore, merely on the basis of some third party statements, which also not substantiated by the so called maker of the statement, the trial court ought not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s placed by learned Senior Counsel Mr.Kapil Sibal. 8(a). The learned Senior Counsel Mr.N.R.Elango appearing for the 2nd Petitioner in Crl.R.C.No.511 of 2020 submitted that in the First Law Commission Report, reasons were given as to why the Income Tax Department officer is to be treated as a Civil Court under Section 136 of the Income Tax Act. In fact the Law Commission has recommended for including Chapter XXVI of the Code of Criminal Procedure. Whereas Chapter XXVI has not been included in the Act only for the purpose to reduce the work of the officer to record a finding with regard to the Interest of justice require to lodge a complaint . Whereas, the appeal in the Appellate Tribunals such Chapter XXVI was included. Merely because Chapter XXVI is not in the Section 136 of the Incom Tax Act, it cannot be said that the different authority can file a complaint for the alleged false declaration, false statement etc., Hence, his contention is that the defacto complainant in the given cases never recorded any finding as to the nature of the concealment of income or false declaration. Without any finding, the very prosecution itself is not maintainable by the different authority, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther, it is their contention that the complaint is not for the offence under Section 193 or 195 of the I.P.C. It is lodged for the specific offence under the Income Tax Act, which is permissible under law and the petitioners during the examination under Section 131 of the Income Tax Act have not given any explanation with regard to the seized materials from the third parties. According to the learned standing counsels there is no bar to proceed under Sections 276, 277 and 278 of the Income Tax Act without IPC offences, which has been held in various judgements. It is their further conention that the notice issued under Section 148 of the Income Tax Act has not been lapsed as contended by the Petitioners in fact same has been abated since the notice under Section153 was issued. Hence it is their submission that once the materials were unearthed during search proceedings conducted by such officer. Suchsearch also deemed to be judicial proceedings. The statement recorded under Section 132(4) of the Income Tax is admissible in evidence. Therefore, submitted that the prosecution is very well maintainable. 11(a). With regard to the electronic evidence, it is the contention that certi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same cannot be once again urged in the revision petition. Though much reliance has been placed by Senior Counsels on the judgment Harish Dahiya @ Harish Another vs. Teh State of Punjab and Ors. [2019 SCC Online Sc 1452] wherein the Apex Court has held that refusing to discharge the Appellants on the ground that the application to quash the entire prosecution already dismissed is not correct such order suffers from abdication of jurisdiction. In the above judgement the Apex Court has held that since the ground for quashing criminal proceedings and reasons for allowing the applications for discharge preferred by the accused are completely different. Order of refusal to discharge is set aside and the matter is remitted back. In the above case makes it clear that the discharge was sought on the entirely different grounds. Therefore, this Court is of the view that the two of the grounds raised before this Court were already decided in the O.P. However, it is fairly submitted by both sides that that the other grounds namely inadmissibility of electronic evidence and the competency of the Deputy Director of the Income Tax, to lodge the prosecution was not raised in earlier occasion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Petitioners in Crl.R.C.No.511 of 2020. 15. It is useful to refer Section 276 C(1) and 276C(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 that 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 six months but which may extend to seven years and with fine; (ii) in any other case, with rigorous imprisonment for a term which shall 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urvey under Section 133(A) was carried out in the case of M/s. Advantage Strategic Consulting Pvt. Ltd., and other entities on 01.12.2015 and the so called excel sheets containing certain entries with regard to sale of the properties said to have been unearthed by the department and the department were aware of these documents as early as in the year 2015. Thereafter, the search said to have been carried out in M/s Agni Estates and Foundation Pvt. Ltd., the so called purchaser of the property on 5.7.2018. It is relevant to note that the complaint is totally silent about the fact that whether the assessees, i.e., the accused are either director or control over the said firms. Whereas in the evidence in the pre-stage congnizance it is introduced that the different entity said to have been searched and the materials were seized. That apart the entire reading of the complaint makes it clear that the accused never incriminated themselves in the statements recorded by the raiding officers at any point of time. When the officers confronted the accused Karthi Chidambaram he denied the complicity and maintained that what was the Return filed by him is correct and the statements recorded fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee during the assessment proceeding is false, has to be recorded by the officer concerned in the reasseement proceedings. Without finding recorded, this Court is of the view that the prosecution cannot be launched by merely on the basis of some statements said to have been recorded from third parties. 21. Even Income Tax search proceedings also held to be a judicial proceedings and such authority deemed to be a judicial authority within the meaning of Section 193 and 196 of I.P.C. as held in Bapitha Lila and Another vs. Union of India [(2016) 9 SCC 647] Now it is the contention of the prosecution that on the basis of the false statement and under reporting the sale component, the prosecution has launched. It is to be noted that both the assessees never incriminated before the raiding officer or the Deputy Director during the search. What was stated in the statement that, one of the assessees reiterated his Returns filed earlier is correct and denied the prosecution version. The spouse of the one of the assessees has given a statement to the effect that all transaction is known to her husband only. Such statement cannot be construed to be a false statement even before the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision. Prosecution stand is that since some materials have seized in connection with the under Reporting by the accused, prosecution is very well maintainble. In Basir-Ul-Huq and Ors. vs. The State of West Bengal [1953 AIR 293] the Honourable Supreme Court has held as follows: Though, in our judgment, section 195 does not bar the trial of an accused person for a distinct offence disclosed by the same facts and which is not included within the ambit of that section, it has also to be borne in mind that the provisions of that section cannot be evaded by resorting to devices or camouflages. The test whether there is evasion of the section or not is whether the facts disclose primarily and essentially an offence for which a complaint of the court or of the public servant is required. In other words, the provisions of the section cannot be evaded by the device of charging a person with ail offence to which that section does not apply and then convicting him of an offence to which it does, upon the ground that such latter offence is a minor offence of the same character, or by describing the offence as being one punishable under some other section of the Indian penal Code,, thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 131 proceedings. 26. In the above case search operation was conducted at the residence of the appellants /husband and wife, at both Bhopal and Aurangabad, and statements were recorded on oath under Section 131 of the Income Tax Act. In such a statement they made a statement to the effect that they have no locker either in individual names or jointly in any bank. Later, it transpired that they did have a safe deposit locker at Aurangabad, thereafter complaint was registered by the Deputy Director of Income Tax, Bhopal. One of the issues in the above case before the Apex Court is whether the Deputy Director of Income Tax, Bhopal was competent to lodge the complaint under Section 195 Cr.P.C.against the appellant/accused making a false statement on oath during the search operation carried by the Income Tax authorities. The Apex Court considering the various judgments particularly in Lalji Haridass vs. State of Maharashtra [AIR 1964 SC 1154] and held that Section 195 Cr.P.C.is an exception to the ordinary rule and further held that the Deputy Director before whom no such statement was made. The only statement was recorded by the searching officer. Therefore, the Deptuty Director has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Another [1995 Supp (2) SCC 724] the Honourable Supreme Court has held as follows: 4. In the instant case, the crux of the matter is attracted and whether the prosecution can be sustained in view of the order passed by the Tribunal. As noted above, the assessing authority held that the appellant-assessee made a false statement in respect of income of Young India and Transport Company and that finding has been set aside by the Income-tax Appellate Tribunal. If that is the position then we are unable to see as to how criminal proceedings can be sustained. P.Jayappan's case (Supra) has also referred in the above judgment. 31. In Commissioner of Income Tax, Mumbai vs. Bhupen Champal Lal Dalal Another [(2001) 3 SCC 459] the Apex Court has held as follows: 3. The prosecution in criminal law and proceedings arising under the Act are undoubtedly independent proceedings and, therefore, there is no impediment in law for the criminal proceedings to proceed even during the pendency of the proceedings under the Act. However, a wholesome rule will have to be adopted in matters of this nature where courts have taken the view that when the conclusions arrived at by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio which can be culled out from these decisions can broadly be stated as follows :- (i) Adjudication proceeding and criminal prosecution can be launched simultaneously; (ii) Decision in adjudication proceeding is not necessary before initiating criminal prosecution; (iii) Adjudication proceeding and criminal proceeding are independent in nature to each other; (iv) The finding against the person facing prosecution in the adjudication proceeding is not binding on the proceeding for criminal prosecution; (v) Adjudication proceeding by the Enforcement Directorate is not prosecution by a competent court of law to attract the provisions of Article 20 (2) of the Constitution or Section 300 of the Code of Criminal Procedure; (vi) The finding in the adjudication proceeding in favour of the person facing trial for identical violation will depend upon the nature of finding. If the exoneration in adjudication proceeding is on technical ground and not on merit, prosecution may continue; and (vii) In case of exoneration, however, on merits where allegation is found to be not sustainable at all and person held innocent, criminal prosecution on the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e strong materials collected from the accused the prosecution launched. 39. In Commissioner of Income Tax vs. Kabul Chawla [(2016) 380 ITR 573 (Delhi)] the Division Bench of Delhi High Court, after considering the various judgments summaries a legal position as follows: 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court has to frame charges without going to the minor details. Absolutely, there is no dispute with regard to the position stated in the above judgement. Whereas in a given case as already discussed in entirety of complaint there is no material available. It is only formation of opinion by the Deputy Director of Income Tax. Further it is not the case of the prosecution that any incriminating materials unearthed by the prosecution from the accused to proceed under Section 276(C) of the Income Tax Act. In Jayappan Case, incriminating evidence including statements under Section 132(4) of the Income Tax Act was recorded from the accused. Other cases relied upon by the Revenue also incriminating materials seized from the accued and statements under Section 132(4) of the Income Tax Act also recorded. Such circumstances the courts held that prosecution under Section 276(C) and 277 of the Income Tax Act can be proceeded independently irrespective of any assessment or reassessment orders. Whereas in this case no material seized from accused nor any incriminating statements were recorded from accused to contend that same is admissible under Section 132(4) of the Income Tax Act. Mere denial o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act, 1961 (the Act), and to remove any doubts on the intent to address serious cases effectively, this circular is issued . 2. Prosecution is a criminal proceeding. Therefore, based upon evidence gathered, offence and crime as defined in the relevant provision of the Act, the offence has to be proved beyond reasonable doubt. To ensure that only deserving cases get prosecuted the Central Board of Direct Taxes in exercise of powers under section 119 of the Act lays down the following criteria for launching prosecution in respect of the following categories of offences. (i) Offences u/s 276B: Failure to pay tax to the credit of Central Government under Chapter XII-D or XVII-B. Cases where non-payment of tax deducted at source is ₹ 25 Lakhs or below, and the delay in deposit is less than 60 days from the due date, shall not be processed for prosecution in normal circumstances. In case of exceptional cases like, habitual defaulters, based on particular facts and circumstances of each case, prosecution may be initiated only with the previous administrative approval of the Collegium of two CCTT/DGIT rank officers as mentioned in Para 3. (ii) Offences u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector to the Government of India 44. It is stated in the circular that the prosecution under Section 276(C)(1) shall be launched only after the confirmation of the order imposing penalty by the Income Tax Appellate Tribunal. Further, Circular No.5 of 2020 dated 23.01.2020 also modified in Circular No.24 of 2019, wherein it is stated as follows: 2. ... ... ... Accordingly, the existibng para 2(iii) of the aforementioned Circular is mentioned as under:- iii. Offences u/s 276C(1): Wilful attempt to evade tax, etc., Cases where the amount sought to be evaded or tax on under-reported income is ₹ 25 lakhs or below, shall not be processed for prosecution except with the previous administrative approval of the Collegium of two CCIT/DGIT rank officers as mentioned in Para 3. Further, the prosecution under this section shall be launched ordinarily after the confirmation of the order imposing penalty by the Income Tax Appellate Tribunal. Further prosectuion in other cases, including cases covered u/s 132/132A/133A, may be launched at any stage of the proceedings before an Income-Tax authority, with the previous approval of the Collegium of two CCIT/DGIT ran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady indicated, there must be material to show that there was wilful attempt to evade tax, penalty, interest or under report etc., Admittedly, Returns have been filed before the Assessing Officer. Merely because search has been conducted and some third parties statements were recorded and further they have also not been examined, this Court is of the view that unless a finding recorded by the Assessing Officer as to wilful attempt to evade tax or filing false verification, the complaint filed by the Deputy Director is not maintainable. Only the Assessment Officer shall reassess the total income of six Assessment year, then Assessing Authority take note of the income disclosed in the earlier report any undisclosed income found during the search and find out what is the total income each year and pass an Assessment Order. When such finding is given and the Assessing Officer come to such conclusion that there is under report or the wilful attempt to evade tax or penalty, it is well within the power of the Assessment Office to proceed against the accused for penal action. There cannot be any bar for the Department to take a penal action after reassessment order is passed. Merely becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accused signed the statement while recording statement under Section 131 of the Income Tax Act, such statement can be construed as verification. No false statement whatsoever given before the Deputy Director to contend that he is competent to launch the complaint. Mere keeping silent does not amount to giving a false evidence, merely the accused or assessees did not accept every accusation made against them such conduct cannot be taken by the Department to contend that they committed an offence. If the contention of the prosecution that when the accused confronted with the statement of third parties they did not explain properly such conduct amounts to false statement before the Deputy Director, therefore the complaint is maintainable is accepted the same will lead to serious consequences. If such contention is accepted by the Court of Law, it is easy for the authorities to summon any assessee under section 131 of the Income Tax Act and make accusations against them when accused or assessee denies, then it is easy for the authorities for launching prosecution against anybody as per their like and dislike. Therefore, such contention by the prosecution that false statement made whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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