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TMI Blog2022 (9) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... d on a particular date subsequent thereto, certain documents have been seized. The petitioner has not filed return on time. It is also an admitted fact that the petitioner has filed the return along with interest, which has been accepted by the authority concerned. The subsequent protective assessment has been laid upon the petitioner, which was the subject matter before the first appellate authority, which has exonerated entire further assessment of the petitioner vide order dated 03.07.2019, which has been brought on record by way of filing supplementary affidavit. This is a case arising out of the Special Act statute. Admittedly, no penalty proceeding has been initiated against the petitioner. There is provision of initiation of penalty proceeding. However, the Department has not chosen to invoke Section 271(1)(A) under the statute. When the amount in question along with the interest has already been paid, no sentence can be imposed under that provision unless the element of mens rea is established and the intention of the Legislature is that the penalty should serve as a deterrent. In the Act, it has been provided how to proceed if a particular assessee is not filing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party no.2 has filed the complaint case being C.O. Case No.01 of 2016 before the court of the learned Special Judge, Economic Offence, Dhanbad against the petitioner under Section 276CC of the Income Tax Act, 1961 pertaining to the Assessment Year 2013-14 alleging therein that a search was conducted in the case of accused on 19.02.2014 and subsequent case and his case was centralized with the Commissioner of Income Tax, Dhanbad vide order dated 27.08.2014. The accused Suresh Kumar Agarwal was an assessee in his individual capacity within the meaning of Income Tax. The income of Suresh Kumar Agarwal was taxable within the meaning of Income Tax Act for the relevant assessment year 2013-14 and as such he had to file his income tax return in due time i.e. within 15 days of receipt of notice under Section 153A dated 04.09.2014 before the Income Tax Department, Central Circle, Dhanbad. The accused was fully aware of the fact that he had to file his Income Tax return in due time. He willfully, deliberately, knowingly and having mens rea in his mind failed, neglected and avoided to file his Income Tax return for the assessment year 2013-14 within 15 days of notice under Section 153A dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax (Central), Patna vide letter dated 02.11.2015 granted sanction under Section 279(1) of the Act for launching prosecution under Section 276CC of the Income Tax Act. 4. Mr. D.V. Pathy, learned counsel for the petitioner submits that the delay in filing the return was not intentional. He further submits that delay in filing the return was occurred due to death in the family and also not getting photo copies of the papers and documents, which have been seized by the Income Tax Department when the premises of the petitioner was searched. He also submits that the return was filed and tax in accordance therewith has been paid along with interest. The addition made by the respondent Assessing Officer in such assessment was also deleted in full by the first appellate authority, namely, the Commissioner of Income Tax (Appeal) and no tax is due. He further submits that the petitioner has not received any notice in the second appeal. He further submits that while a protective assessment is permissible, a protective recovery is not. No penalty can be imposed in case of a protective assessment. He further elaborates his argument by way of submitting that since no penalty for delay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prosecution has been launched and the learned Metropolitan Magistrate has taken cognizance of the same, this court should not at this stage quash the proceeding. If the Department cannot prove the case, the petitioner will be acquitted. He has Submitted that the facts disclose an offence which should be tried by the learned Metropolitan Magistrate. I am, however, unable to accept the contentions of Mr. Bhattacharjee. A criminal prosecution for an offence under a special statute must not be initiated as a matter of course where the prosecution would involve intricate questions of interpretation of the Income Tax Act. The Department should not rush with the prosecution without any determination by the Income-tax Officer of the liability of the accused-assessee which is sought to be made the basis for prosecution. In this case, though penalty proceeding under Section 271(1)(a) was initiated against the petitioner for delay in filing the return, no order has been passed. In other words, the Income-tax Officer did not find any reason to penalise the petitioner for delay in filing the return. In Dooars Transport's case [1986] 162 ITR 383, this court held that once inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of launching criminal prosecution for willful default in complying with the provisions of the Income Tax Act is to prevent evasion of tax. 7. Learned counsel for the petitioner further submits that willful failure on the part of the defaulter and the nature of penalty was again the subject matter before the Hon'ble Supreme Court in the case of Gujrat Travancore Agency v. Commissioner of Income-Tax, Kerala , reported in [1989] 177 ITR 455. 8. Relevant paragraphs of the said judgment are quoted herein below: Learned counsel for the assessee has addressed an exhaustive argument before us on the question whether a penalty imposed under s. 271(1)(a) of the Act involves the element of mens rea and in support of his submission that it does he has placed before us several cases decided by this Court and the High Courts in Order to demonstrate that the proceedings by way of penalty under s. 271(1)(a) of the Act are quasi criminal in nature and that therefore the element of mens rea is a mandatory requirement before a penalty can be imposed under s. 271(1)(a). We are relieved of the necessity of referring to all those decisions. Indeed, many of them were considered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not required to be proved in the proceedings taken by the Income tax Officer under s. 271(1)(a) of the Income-tax Act against the assessee for the assessment years 1965-66 and 1966-67. 9. By way of referring this judgment, learned counsel for the petitioner submits that the Hon'ble Supreme Court has held that in most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. He submits that in the case in hand, no penalty has been imposed under the provisions of the statute. 10. Learned counsel for the petitioner submits that willful failure of payment of tax was also the subject matter before the Andhra Pradesh High Court in the case of Income-Tax Officer v. Autofil others , reported in [1990] 184 ITR 47 (AP) . 11. Relevant paragraph of the said judgment is quoted herein below: Therefore, wilfulness contemplates some element of evil motive and want to justification. In CIT v. Patram Dass Raja Ram Beri [1981] 132 ITR 671, a Full Bench of the Punjab and Haryana High Court, considering the term wilful failure occurring in section 276CC of the Income-tax Act, held that willfulness certainly brings in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt is not justified in dismissing the criminal revision vide its judgment ignoring the settled law as laid down by this Court that the finding of the appellate Tribunal was conclusive and the prosecution cannot be sustained since the penalty after having been cancelled by the complainant following the appellate Tribunal's order, no offence survives under the Income Tax Act and thus quashing of prosecution is automatic. In the instant case, the penalties levied under Section 271(1)(c) were cancelled by the respondent by giving effect to the order of the Income Tax Appellate Tribunal in I.T.A. Nos. 3129-3132. It is settled law that levy of penalties and prosecution under Section 276C are simultaneous. Hence, once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution under Section 276C is automatic. In our opinion, the appellants cannot be made to suffer and face the rigorous of criminal trial when the same cannot be sustained in the eyes of law because the entire prosecution in view of a conclusive finding of the Income Tax Tribunal that there is no concealment of income becomes devoid of jurisdiction and under Section 254 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the appellate authority supersedes the order of the Assessing Officer under Section 143(3) and more so when the Assessing Officer cancelled the penalty levied. 17. Learned counsel for the petitioner further submits that protective measure because of similar penalty was the subject matter before the Punjab and Haryana High Court in the case of Commissioner of Income- Tax, Patiala-II v. Behari Lal Pyare Lal , reported in [1983] 141 ITR 32 (P H). 18. Relevant paragraph of the said judgment is quoted herein below: The penalty was imposed by the IAC as a protective measure because a similar penalty had already been imposed on the two partners for concealment of the said income. The Tribunal found that, under law, a protective order of assessment can be passed but not of penalty. The learned counsel for the Revenue was unable to challenge this view of the Tribunal and frankly conceded that he was not able to cite any provision of law or decided case which warranted a protective order of penalty. That apart, no finding was recorded by the IAC that there was any wilful concealment of the income and in the absence of such a finding, the order of penalty would be unsustainabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding sanction under Section 279(1) of the Act to prosecute the petitioner for willful attempt to fail to file the return of income even after expiry of due time as fixed by the notice under Section 153A of the Act. She further submits that a letter for initiation of prosecution under Section 276CC of the Act was issued by the office of the Principal Commissioner of Income Tax (Central), Patna dated 10.08.2015 and in response to that, a letter was written on behalf of the petitioner on 13.08.2015 requested to provide 30 days time on the ground that the petitioner is out of station on account of death of his cousin. She submits that this was the first response by the petitioner. She further submits that the request of the petitioner was accepted vide letter dated 11.09.2015 and the date was fixed for next compliance on 18.09.2015, however, the petitioner failed to furnish any explanation in this regard. She also submits that a final show cause dated 29.09.2015 for initiating prosecution under Section 276CC of the Act was issued to the petitioner by the Principal Commissioner of Income Tax (Central), Patna giving last opportunity to the petitioner to show cause as to why sanction unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the petitioner submits that it has been admitted that since time for assessment was going to be lapsed as prescribed under the statute, the authority has proceeded to file the case against the petitioner. He further submits that in light of Section 144 of the Act, the authority concerned is competent to proceed even ex-parte for recovery of the income tax, in accordance with law. On these grounds, he submits that to allow the criminal proceedings to continue will amount to abuse of process of law. 22. In view of the above facts and considering the submissions of the learned counsel for the parties, the Court has gone through the materials on the record and also examined the judgments relied by the learned counsel for the petitioner. It is an admitted fact that the petitioner's premises was searched on a particular date subsequent thereto, certain documents have been seized. The petitioner has not filed return on time. The detail of dates and facts have been noted herein above in the arguments of Ms. Amrita Sinha, learned counsel for the opposite parties. It is also an admitted fact that the petitioner has filed the return along with interest, which has been accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n most of the cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. 27. In the case in hand, the first appellate authority has set aside the further assessment and it is an admitted fact as to whether the criminal proceedings can be sustained or not. In the similar circumstance, in the case of G.L. Didwania (supra) , the Hon'ble Supreme Court has held that if that is the position then the Court is unable to see as to how criminal proceedings can be sustained. The same view was again taken in the case of K.C. Builders (supra). 28. The argument of Ms. Amrita Sinha, learned counsel for the opposite parties about willful delay in filing the return has been considered by the Calcutta High Court in the case of Gopal Ji Shaw (supra). Identical is the situation here as the authority concerned has accepted the return along with interest filed by the petitioner and subsequently the first appellate authority has set aside the further assessment. 29. As a cumulative effect of the above facts, reasons and analysis, to allow the criminal proceedings to continue will amount to abuse of process of law. Accordingly, the entire cr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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