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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 ..... ince facts and law involved in the all the four applications are common and similar in nature, they are disposed of by this common judgement. For the sake of convenience, Criminal Misc. Application No.3438 of 2004 is taken as the lead matter for deciding the issues involved. 3. Facts :- 3.1. The premises of the applicant No.1 - a Public Limited Company and its Directors (other applicants) were raided on 1.12.1995 and search was carried out by the respondent Income Tax Department under Section 132 of the Income Tax Act and the search was concluded on 5.1.1996. It appears that pursuant to a Notice under Section 158BC of the Income Tax Act, the applicant had filed return for the Block Period 1.4.1985 to 5.1.1996, declaring undisclosed income of Rs.20,31,055/- on 26.2.1996. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inaccurate particulars, nor were there any proceedings under Section 271(1)(c) with regard to penalty and, therefore, prosecution for the act of omission or commission could not be initiated. Learned Advocate Mr.Shah would draw the attention of this Court to the Notice for prosecution under Section 276C(1) and 278B of the I. T. Act issued by the respondent Department and would submit that the respondent Department had determined a total of Rs.62,61,623/- as undisclosed income, which was challenged by the applicants before the learned ITAT, Ahmedabad. Learned Advocate Mr.Shah would submit that after considering various additions and undisclosed income as computed by the Assessing Officer, the learned ITAT, Ahmedabad had, after granting certain relief, set aside certain 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving certain relief and setting aside certain additions for re-adjudication, quantified the undisclosed income for the block assessment and, therefore, it is not now open for the Department to initiate criminal prosecution under the said Sections. Learned Advocate Mr.Shah appearing for the applicants thereafter would take this Court through the complaint filed by the Department and would submit that a perusal of the complaint itself would reveal that the applicants had already submitted details of all the income, disclosed and undisclosed and barring minor errors, the applicants had never concealed any income as alleged by the Department. Learned Advocate Mr.Shah would submit that the respondent Department ought not to have clubbed the original returns for 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 impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the returns as envisaged in the law or else rigors of prosecution comes into force. Learned Advocate Mr.Raval would submit that Section 276C of the Act provides that if the assessee willfully attempts evade tax, then he can be prosecuted. According to learned Advocate Mr.Raval, the Department can go ahead with prosecution, if there was any income, which the assessee was supposed to disclose but not disclosed or he has under-reported or he has not at all reported. In the instant case, at the relevant point of time between 1995-97, the highest slab was 30% and there was a lump sum scheme to encourage willful disclosure of the income and under the block-assessment, as a lump sum, double the amount as tax was charged, which included all other components and, 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there were some undisclosed income, which was not forming part of the original returns. Mr.Raval would submit that insofar as the partners are concerned, specially when there is some averment of their involvement, the present applications cannot be considered for quashing of the complaint. Relying upon the decision of this Court in case of N. R. Agarwal Industries Ltd. Vs. JCIT, reported in (2019) 416 ITR 578 (Guj), more particularly concluding paragraphs 26 and 27, Mr.Raval would submit that the Court has not been taken to Section 278E in that case, wherein the Court had observed that there was no deliberate attempt on the part of the parties. Mr.Raval would submit that if the submission made by learned Advocate Mr.Shah is to be considered in the trial 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief had also been granted. Thus, it would appear that initially five applications had been moved by the petitioners and whereas up to some time, the applications were heard together and whereas it would appear that Criminal Misc. Application No.3437 of 2004 got detagged and was heard separately and decided by the learned Coordinate Bench vide an order dated 26.10.2018. 10. As far as the facts are concerned, it would appear that as in the present case, a search had been carried out on the business premises of the group Companies of one M/s.N. R. Agrawal Group. The said fact being noticeable from the paragraph of the Criminal Complaint in the present applications, whereas similar averments appear to have been made as in the Complaint impugned 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and resident of directors on 1.12.1995, at the relevant point of time a new Chapter XVIB was introduced in the Act, 1961 which provided special procedure for search cases with effect from 1.7.1995 and was applicable in cases of raid carried out between 1.7.1995 to 1.1.1997. That relevant Section 158-BF provided that no interest under the provisions of Section 234A, 234B or 234C or penalty under the provisions of Clause (C) of Sub-section (1) of Section 271 or Section 271A or Section 271B shall be levied or imposed upon the assessee in respect of the undisclosed income determined in the block assessment. 7. That above provision was made inapplicable after 1.1.1997 by virtue of newly inserted Section 158 BF(A) of the Act 1961. That 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 caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r document or transaction repaying wholly or partly income or property which has not been or would not have been disclosed for the purposes of the Act. Therefore, what the assessee had already disclosed or would have disclosed is not to be treated as undisclosed income. Besides, reference was made to Chapter XIV-B of the Act, whereby the undisclosed income incorporated into the scheme with effect from 1.7.1995 to 30.12.1996 was deleted and, accordingly, search was required to be assessed separately, for which budget note for the year 1995-96 were also relied on. The assessee tried to justify that the block assessment period was, therefore, a single unit of assessment year comprising a period of ten years and, hence, the income 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 Legislatur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271 (A), 271-B of the Act. That there is no mention of Section 276-C in Section 158BF of the Act and, as a matter of fact, a careful reading of Section 276-C transpires that if a person willfully admits to evade any tax, penalty or interest chargeable or imposable under the Act, 1961 then only prosecution can be launched." (Emphasis supplied) 11. From the above discussion, it clearly appears to this Court that the issue involved in the present group of applications and Criminal Misc. Application No.3437 of 2004 decided by the learned Coordinate Bench of this Court appears to be substantially similar and whereas under such circumstances, the law laid down by the learned Coordinate Bench would also cover the issue in question 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 13.1. 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 between 1.7.1995 to 1.1.1997, the necessary con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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