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TMI Blog2023 (3) TMI 1057X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicable on the ground that the heads on which incomes were not disclosed were different than the heads of undisclosed incomes in the present case, therefore, the same may not be applicable. In the considered opinion of this Court, the Criminal Complaint has been filed by the Department inter alia alleging commission of offences punishable under Section 276C, Section 277 read with Section 278B of the Act. A bare perusal of Section 276(1) would reveal that punishment is to be imposed for willful attempt to evade tax, penalty or interest and whereas the heads of income under which there has been any alleged willful attempt as per the Scheme of the Section does not hold any special relevance. In this regard it would also be relevant to note that while it is undoubtedly true that the learned Coordinate Bench of this Court had made observations with regard to the heads of income in the judgement dated 26.10.2018, but at the same time what would be necessary to note is the fact that having decided the preliminary issue as regards there being no power vested with the Income Tax Department to launch a prosecution with regard to undisclosed income for block assessment for the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 996. The Assessing Officer vide an order dated 31.1.1997, determined the undisclosed income at Rs.62,61,623/-. The applicants herein filed an Appeal before the Income Tax Appellate Tribunal ( ITAT for short) and vide order dated 18.5.1998, the Tribunal had granted certain reliefs and whereas few additions have been set aside for re-adjudication. It appears that pursuant to the re-adjudication, the undisclosed income was computed as Rs.23,36,144/-. 3.2. The applicants thereafter received a show-cause notice from the Department, asking it to show cause as to why the applicants should not be prosecuted for not showing the amount of Rs.20,31,055/- in the returns under Section 139 of the Act for the respective years. The applicants submitted their reply dated 7.1.1999 to the show cause notice inter alia contending that Block Assessment Period is a single unit of Assessment comprising a period of 10 years and hence, income taxed in a Block Assessment could not be stated to be related to any particular year, that there was no finding of any concealment in the regular assessment orders and, therefore, there could not be any prosecution in respect of the regular assessment, more particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain additions for re-adjudication, resulting in revision of the undisclosed income as Rs.23,36,144/-. Learned Advocate Mr.Shah would further submit that after filing return for the undisclosed income of Rs.20,31,055/- as block assessment, an amount to the tune of Rs.3,05,089/- would be the difference and in spite of the same, the respondent Department had issued the above Notice dated 30.11.1998 under Section 276C(1) and 278B of the I. T. Act for prosecution for an undisclosed amount of Rs.20,31,055/- on the ground that the said amount was not shown in the original return, which is not permissible. 4.2. Learned Advocate Mr.Shah would submit that the original return for every financial year and return for block period of ten years for undisclosed income are different and separate, and whereas the respondent Authorities are trying to put the undisclosed income of the block period in the original return so as to make the applicants liable for prosecution. 4.3. Learned Advocate Mr.Shah would thereafter submit that at the relevant point of time, Section 158BF of the I.T. Act was applicable to the cases of raid between 1.7.1995 to 1.1.1997. According to learned Advocate, as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r individual financial years with the block assessment, as both the assessments stand on different footing. Learned Advocate Mr.Shah would draw the attention of this Court to Chapter XIV-B of the IT Act, more particularly Section 158B, the definition of block assessment, computation of undisclosed income etc., to fortify his arguments. Having regard to such submissions, learned Advocate would request this Court to quash the impugned complaints. 5. Per contra learned Advocate Mr.Nikunt Raval for the Department would submit that the block assessment, which is over and above the regular assessment is not an amnesty scheme, which was granted to the Assessee and, therefore, once returns were filed and accepted, he could not say Section 276C/278B would not apply ipso facto, unless there is some evidence. Learned Advocate Mr.Raval would submit that after returns under Section 139 of the Act, the Assessing Officer has two alternatives; (I) if he is not satisfied with the returns filed by the assessee, he issues notice under Section 143(2) of the Act, for more information to justify the deduction. Thereafter, he passes the order under Section 143(3), and if there is no response, he can p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, separate penalty proceeding was not there. Learned Advocate Mr.Raval would submit that Section 271 provides for penalty for concealment of income and he would further submit that as there was no penalty imposed during 1995-97 in terms of the said Section and mere factum of penalty not being imposed does not mean that prosecution cannot be initiated, as prosecution is an independent action. Learned Advocate would submit that the present case is at a stage of complaint and Section 278E presumes that the defence must discharge the burden of there being no mens rea more particularly since the provision presumes such existence against the accused. Learned Advocate Mr.Raval would submit that once there is prima facie case that there was some undisclosed income, and assessee did not file return or under-reported, it is up to the assessee to prove that the under-reported income or undisclosed income was not deliberate and such aspect is a matter of trial. Mr.Raval refers to complaint, more particularly paragraph 3 onwards (Page 13-14 of Criminal Misc. Application No.3438 of 2004) in support of his submission. Learned Advocate Mr.Raval would further draw the attention of this C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial proceedings, one can say that he would be absolutely right in doing so, but at the stage of complaint, as the present case, such averments are not substantially enough or to say, at this stage, we have no sufficient proof of mens rea, which would fall flat on the face of what the provisions require. 5.4. Learned Advocate Mr.Raval would submit that insofar as decision of learned Coordinate Bench in Criminal Misc. Application No.3437 of 2004, the Court in the said case referred to, the stock holding which was not disclosed and in the instant case, there are commission charges, licencing charges, stock holdings, and various other commissions. Learned Advocate would submit that since there was material difference insofar as the heads of income which were not disclosed, the findings of the learned Coordinate Bench would not be applicable. Learned Advocate would further submit that the ratio of that judgement can not be applied to the facts of the present case, more particularly Section 278E was not considered by the Court while passing the said decision. 6. Learned Advocate Mr.Shah, in rejoinder, would submit that insofar as the decisions, referred to by the learned Advocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned in Criminal Misc. Application No.3437 of 2004, more particularly as noted by the learned Coordinate Bench in the judgement concerned. It would appear that pursuant to the search in question, a notice under Section 158BC of Income Tax Act had been issued and whereas return for block period from 1.4.1985 to 5.1.1996 declaring undisclosed income of Rs.20,31,055/- was filed on 26.2.1996. It appears that the Assessing Officer had passed a block assessment order on 31.1.1997 assessing the undisclosed income at Rs.62,61,623/-. It appears that in case of the decision in Criminal Misc. Application No.3437 of 2004, the Assessing Officer had not believed the block assessment filed by the applicant assessee therein. It would appear that as in case of the present lead application i.e. Criminal Misc. Application No.3438 of 2004, as well as in the other applications, the assessment had not been believed by the Assessing Officer, as can be seen from different assessment orders and whereas all the assessment orders were subject matter of challenge before the learned Income Tax Appellate Tribunal, Ahmedabad Bench. It would appear that the learned ITAT had granted certain reliefs and whereas a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at petitioner no.1 filed a block return showing income of rupees-nil for the period 1.4.1985 to 5.1.1996 and the Assessing Officer passed a block assessment order on 31.1.1997 and computed the income of Rs.3,33,000/-. In appeal, the Tribunal passed an order on 18.5.1998 reducing the income to Rs.2,33,100/- and, thus, it was finally assessed income. Since above order attained finality, notice dated 30.11.1998 was received by the petitioner no.1 to show cause as to why the petitioner should not be prosecuted for not showing any returns under Section 139 of the Act 1961, for the respective years, the income of Rs.2,33,000/- sustained by the Tribunal. A reply dated 7.1.1999 was filed by the petitioner to the show cause notice and submitted that in regular assessments for the assessment years falling in the block period, the returns were accepted by the then assessing officer and all the assessments were of loss and there was no finding of any concealment in the regular assessment orders and, therefore, no prosecution can be lodged or instituted in respect of regular assessment, particularly, when provisions of Section 158BF was inoperative. Thus, according to learned counsel for the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax in the block assessment would not be said to be relating to the particular year of regular year of assessment. It was with this objective only the concept of block assessment was introduced. The assessee also relied on various other provisions. By relying on comparison of provisions for block assessment for the period 1.7.1995 to 31.12.1996 and similar provisions which were made effective from 1.1.1997, the prosecution was never intended by the Legislature, it was clear according to assessee that the period covering the search of the assessee for which no time limit was prescribed for filing the returns of income tax in Form No.2B under Section 158BC of the Act, which was amended by introducing Section 158BC (a) (ii) of the Act from 1.1.1997. At the same time, there was no provision for payment of tax which was amended by introducing Section 158BFA from 1.1.1997 and, therefore, during the period from 1.7.1995 to 31.12.1996, the tax was to be paid at the time of determination of income irrespective of the date of filing the return of undisclosed income and irrespective of the amount of undisclosed income. It was also clear that had there been any intention of levying any penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the present group of applications. 12. It would be pertinent to mention here that the learned Advocate appearing on behalf of the respondent Department had attempted to argue that attention of learned Coordinate Bench had not been drawn to Section 278E and, therefore, the law laid down by the learned Coordinate Bench may not be binding on this Court, in the considered opinion of this Court, such a submission cannot be countenanced. As far as the contention of Mr.Raval that a particular section or provision was not brought to the notice of the Court, though the same was not reflected in the order, normally it is deemed and presumed that the Court had considered it. It would be relevant to mention here that the learned Coordinate Bench had inter alia held that upon introduction of Section 158BFA and Section 158BC(a)(ii) and Section 276CCC from 1.1.1997, the legislature had envisaged prosecution for willful failure to furnish return of income in search cases, and whereas in absence of a specific provision between the period from 1.7.1995 to 1.1.1997, it could be inferred that the legislature had intended to grant immunity in such type of cases. Essentially what has been emph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undoubtedly true that the learned Coordinate Bench of this Court had made observations with regard to the heads of income in the judgement dated 26.10.2018, but at the same time what would be necessary to note is the fact that having decided the preliminary issue as regards there being no power vested with the Income Tax Department to launch a prosecution with regard to undisclosed income for block assessment for the period between 1.7.1995 to 1.1.1997, the necessary consequence would be quashment of the Complaints. The latter observations would not have made any difference to the final finding on the issue. Under such circumstances, in the considered opinion of this Court, the fact of heads on which income had not been disclosed being different and distinct in the present group of cases and the decision by the learned Coordinate Bench in Criminal Misc. Application No.3437 of 2004 would not be of any material consequence and hence, the said submissions is also not countenanced. 14. In view of the above discussion, more particularly since this Court has come to a conclusion that the decision of the learned Coordinate Bench dated 26.10.2018 in Criminal Misc. Application No.3437 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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