BEAVER ESTATES PVT.LTD V. THE ASSISTANT COMMISSIONER OF INCOME TAX

OP(Crl.)/400/2019

AI Insights

The case involves M/s. Beaver Estates Pvt. Ltd. and its principal officer, B.R. Ajit, who are the petitioners accused of attempting to evade tax under Section 276C(1) of the Income Tax Act, 1961. The prosecution was based on a complaint by the Assistant Commissioner of Income Tax. The petitioners sought to stay the criminal proceedings pending the outcome of their appeal against the tax assessment, arguing that the appeal's decision would impact the prosecution's basis. The court considered precedents and the potential impact of the appellate decision on the criminal proceedings, ultimately deciding to stay the proceedings.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 754585 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 23-10-2019
• Assessment Year: misc
• Other Referred Cases: K.C. Builders v. Assistant Commissioner of Income Tax, Commissioner of Income Tax v. Bhupen Champak Lal Dalal, Sasi Enterprises v. Assistant Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH; PUBLIC PROSECUTOR
• Assessee Lawyers: DALE KURIEN
• Keywords: Assessment of tax; Criminal Proceedings; Prosecution; Wilful attempt to evade tax
• Section: 196; 276C(1); 193; 276C(2); 420; 120B; 278B

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI WEDNESDAY, THE 23RD DAY OF OCTOBER 2019 / 1ST KARTHIKA, 1941 OP(Crl.).No.400 OF 2019 CC NO.65/2015 OF ADDITIONAL CHIEF JUDICIAL MAGISTRATE (E&O),ERNAKULAM PETITIONER/S: 1 M/S.BEAVER ESTATES PVT.LTD PUTHURAN PLAZA, K.P.C.C.JUNCTION, KOCHI-682011 REPRESENTED BY ITS PRINCIPAL OFFICER, MR.B.R.AJIT 2 B.R.AJIT AGED 64 YEARS S/O.KESAVAN B.UNNITHAN, PRINCIPAL OFFICER, M/S.BEAVER ESTATES P. LTD., PUTHURAN PLAZA, K.P.C.C.JUNCTION, KOCHI-682011 BY ADV. SRI.DALE P.KURIEN RESPONDENTS: 1 THE ASSISTANT COMMISSIONER OF INCOME TAX CORPORATE CIRCLE 1(1), CORPORATION RANGE-1, IVTH FLOOR, CENTRAL REVENUE BUILDINGS, I.S.PRESS ROAD, KOCHI-682018 2 THE COMMISSIONER OF INCOME TAX(APPEALS)-I GIRINAGAR 1ST CROSS ROAD, PANAMPILLY NAGAR, KOCHI- 682020 3 STATE OF KEALA REPRESENTED BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM, KOCHI-682031 R1 BY SRI JOSE JOSEPH, SC,IT R3 BY PUBLIC PROSECUTOR THIS OP (CRIMINAL) HAVING BEEN FINALLY HEARD ON 09.10.2019, THE COURT ON 23.10.2019 DELIVERED THE FOLLOWING: OP(Crl.).No.400 OF 2019 2 R.NARAYANA PISHARADI, J ************************ O.P.(Crl.) No.400 of 2019 --------------------------------------------- Dated this the 23rd day of October, 2019 O R D E R This original petition is filed under Article 227 of the Constitution of India. The prayer in this petition is to issue a direction to the Additional Chief Judicial Magistrate's Court (Economic Offences), Ernakulam to keep in abeyance all further proceedings in the case C.C.No.65/2015 of that court till the disposal of the appeal filed by the petitioners in the matter before the Commissioner of Income Tax (Appeals). 2. The petitioners are the accused in the aforesaid case. The first petitioner is a company. The second petitioner is the Managing Director of the first petitioner company. The case C.C.No.65/2015 is based on the complaint filed against them by the Assistant Commissioner of Income Tax alleging that they had made wilful attempt to evade tax and that they have committed the offence punishable under Section 276C(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). OP(Crl.).No.400 OF 2019 3 3. The plea of the petitioners is that they have filed appeal before the statutory authority challenging the assessment of tax and that the decision in the appeal has got bearing on the prosecution against them and therefore, the criminal proceedings pending against them may be kept in abeyance till the disposal of the aforesaid appeal. 4. Heard learned counsel for the petitioners and the learned Standing Counsel for Government of India (Taxes) and the learned Public Prosecutor. 5. Learned counsel for the petitioners contended that, if the statutory appeal filed by the petitioners under the Act is allowed, it would knock down the very basis of the prosecution against them and therefore, the criminal proceedings may be ordered to be kept in abeyance. Learned counsel for the petitioners has relied upon the decision of the Apex Court in K.C.Builders v. Assistant Commissioner of Income Tax : (2004) 2 SCC 731 in support of his contention. 6. There is force in the aforesaid contention. K.C.Builders (supra) was a case of concealment of income where penalty was imposed on the assessee by the assessing authority. The prosecution against the assessee was under Sections 276C(2) and 278B of the Act and Sections 193, 196 and 420 and 120B of the Indian Penal Code. OP(Crl.).No.400 OF 2019 4 Section 276C of the Act provides the punishment for wilful attempt to evade tax, penalty or interest. Section 278B of the Act provides for offences by companies. In K.C.Builders (supra), the Apex Court has held that levy of penalties and prosecution under Section 276C of the Act are simultaneous and hence, once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution under Section 276C of the Act is automatic. In the instant case, the prosecution is under Section 276C(1) of the Act for wilful attempt to evade tax. The decision of the statutory appellate authority regarding the assessment and computation of tax would have bearing on the prosecution against the petitioners. 7. Learned counsel for the petitioners has also relied upon the decision of the Supreme Court in Commissioner of Income Tax v. Bhupen Champak Lal Dalal : AIR 2001 SC 1096, wherein it has been held as follows: “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 the appellate authorities have a OP(Crl.).No.400 OF 2019 5 relevance and bearing upon the conclusions to be reached in the case necessarily one authority will have to await the outcome of the other authority”. 8. The decision in Bhupen Champak Lal Dalal (supra) has also got application in the instant case because the decision of the statutory appellate authority regarding the assessment and computation of tax would have bearing on the prosecution against the petitioners for wilful attempt to evade tax. 9. Learned standing counsel for the first and the second respondents has invited the attention of this Court to the decision of the Apex Court in Sasi Enterprises v. Assistant Commissioner of Income Tax : (2014) 5 SCC 139, wherein it has been held as follows: “We also find no basis in the contention of the learned senior counsel for the appellant that pendency of the appellate proceedings is a relevant factor for not initiating prosecution proceedings under Section 276CC of the Act. Section 276CC contemplates that an offence is committed on the non-filing of the return and it is totally unrelated to the pendency of assessment proceedings except for second part of the offence for determination of the sentence of the offence, the department may resort to best judgment assessment or otherwise to past years to determine the extent of the breach. ..... If it was the intention of the legislature to hold up the prosecution proceedings till the assessment proceedings are completed OP(Crl.).No.400 OF 2019 6 by way of appeal or otherwise the same would have been provided in Section 276CC itself. Therefore, the contention of the learned senior counsel for the appellant that no prosecution could be initiated till the culmination of assessment proceedings, especially in a case where the appellant had not filed the return as per Section 139(1) of the Act or following the notices issued under Section 142 or Section 148 does not arise”. 10. The decision in Sasi Enterprises (supra) has got no application to the present case because the prosecution against the petitioners is for committing the offence under Section 276C of the Act and not for the offence under Section 276CC of the Act. 11. True, today itself, I have dismissed two other petitions filed for identical relief. But, in those petitions, the prosecution against the petitioners is under Section 276CC of the Act and not under Section 276C of the Act. 12. In the aforesaid circumstances, in the light of the decision of the Apex Court in Bhupen Champak Lal Dalal (supra), I find that this is a fit case where the supervisory jurisdiction of this Court under Article 227 of the Constitution should be invoked to issue appropriate direction to the lower court. OP(Crl.).No.400 OF 2019 7 13. In the result, the petition is allowed. The Additional Chief Judicial Magistrate (Economic Offences), Ernakulam is directed to keep in abeyance all further proceedings against the petitioners in the case C.C.No.65/2015 of that court till the disposal of I.T.A.No.28/R- 1/CIT(A)-II/15-16 filed by them before the Commissioner of Income Tax (Appeals),Kochi. Sd/-R.NARAYANA PISHARADI, JUDGE jsr OP(Crl.).No.400 OF 2019 8 APPENDIX PETITIONER'S EXHIBITS: EXHIBIT P1 TRUE COPY OF THE ASSESSMENT ORDER DATED 29.3.2014 EXHIBIT P2 TRUE COPY OF THE COMPLAINT PENDING BEFORE THE ADDITIONAL CHIEF JUDICIAL MAGISTRATE COURT(E.O) AT ERNAKULAM, DATED 01.09.1014 EXHIBIT P3 TRUE COPY OF MEMORANDUM OF APPEAL DATED 26.4.2014 FILED BEFORE CIT (APPEALS) EXHIBIT P4 TRUE COPY OF THE HEARING NOTES BEFORE CIT (APPEALS) DATED 1.11.2016 EXHIBIT P5 TRUE COPY OF THE DECISION REPORTED IN 265 ITR 562(SC) CITED K.C.BUILDERS AND ANOTHER V.ACIT EXHIBIT P6 TRUE COPY OF THE DECISION REPORTED IN 288 ITR 134(KER). EDAYANAL CONSTRUCTIONS VT.ITO EXHIBIT P7 TRUE COPY OF THE DECISION REPORTED IN 248 ITR 830(SC) CITED CIT VS.BHUPAN CHAMPAK LAL DALAL AND ANOTHER VS.CIT EXHIBIT P8 TRUE COPY OF THE DECISION REPORTED IN 2009 (2) KLT 948(KER).CITED K.S.NANDAKUMAR VS 1.T.O EXHIBIT P9 TRUE COPY OF DISCHARGED SUMMARY FROM AMRITHA HOSPITAL, ERNAKULAM DATED 02.09.2019 EXHIBIT P10 COPY OF THE MEDICAL CERTIFICATE FROM AMRITHA HOSPITAL EDAPPAY DATED 19/09/2019. RESPONDENTS EXHIBITS: NIL TRUE COPY P.A TO JUDGE LSN "