M/S COMMERCIAL V. UNION OF INDIA and ANOTHER

A482/4018/1994

AI Insights

The case involves M/S Commercial, a company accused of willfully failing to furnish a Wealth Tax Return for the Assessment Year 1986-87, which led to criminal proceedings under Section 35(B) of the Wealth Tax Act, 1957. The company and its directors were initially penalized, but the penalty was later set aside by the Income Tax Appellate Tribunal based on the explanation that the delay was due to advice from auditors. Despite this, the criminal proceedings continued. The High Court, while recalling its earlier order due to the non-appearance of the applicant's counsel, ultimately rejected the application to quash the criminal proceedings, emphasizing that the Tribunal's decision on the penalty does not affect the criminal proceedings under Section 35-B, which requires a separate adjudication.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 678977 (HC-ALLAHABAD)
• Appeal Type: Others
• Pronouncement Date: 11-12-2019
• Assessment Year: misc
• Other Referred Cases: P. C. Gulati Vs. Lajyaran, K. Ramachandran vs. V. N. Rajan and another, State of Punjab vs. Davinder Pal Singh Bhullar, K.C. Builders and Another Vs. Assistant Commissioner of Income Tax
• Laws Referred To: Code of Criminal Procedure, 1973, Wealth Tax Act, 1957, Finance Act, 1983, Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: AGA; ASHISH AGRAWAL
• Assessee Lawyers: SHAKEEL AHMAD; SIDDHARTH SINGHAL
• Keywords: Assessment; Criminal Proceedings; Non-appearance; Penalty; Recall Application; Wealth tax return
• Section: 271(1)(c); 14(1); 17; 196; 34; 18(1)(a); 193; 35-B; 482; 120-B; 120-B; 420; 16(4); 40(3); 277; 278-B; 276-C(2)

Judgement Text

"1 Court No. - 34 Criminal Misc. Recall Application No. 151245 of 2016 IN Case :- APPLICATION U/S 482 No. - 4018 of 1994 Applicant :- M/S Commercial Opposite Party :- Union Of India And Another Counsel for Applicant :- Shakeel Ahmad,Siddharth Singhal Counsel for Opposite Party :- A.G.A.,Ashish Agrawal Hon'ble Sudhir Agarwal,J. 1. This is an application seeking recall of order dated 12.04.2016. 2. Cause shown for non-appearance is sufficient. 3. Order dated 12.04.2016 is hereby recalled. 4. The application, accordingly, stands allowed. Order Date :- 11.12.2019 Siddhant Sahu 2 Court No. - 34 Case :- APPLICATION U/S 482 No. - 4018 of 1994 Applicant :- M/S Commercial Opposite Party :- Union Of India And Another Counsel for Applicant :- Shakeel Ahmad,Siddharth Singhal Counsel for Opposite Party :- A.G.A.,Ashish Agrawal Hon'ble Sudhir Agarwal,J. 1. Heard Sri Siddharth Singhal, learned counsel for applicant and learned A.G.A. for State of U.P. 2. Applicant has invoked jurisdiction of this Court under Section 482 of Code of Criminal Procedure, 1973 (hereinafter referred to as \"Cr.P.C.\") with a prayer to quash proceedings of Criminal Case No. 249 of 1994, pending in the Court of learned Special Chief Judicial Magistrate, Allahabad, under Sections 35(B) of Wealth Tax Act, 1957 (hereinafter referred to as “Act, 1957”) relating to Assessment Year (hereinafter referred to as “A.Y.”) 1986-87. 3. Facts, in brief, giving rise to present application are that Assistant Commissioner, Income Tax/ Assistant Commissioner Wealth Tax Central Circle, Allahabad (hereinafter referred to as “complainant”) filed a complaint dated 31.03.1994 under Section 35B of Act, 1957 against accused M/s Commercial Auto Sales Private Limited, 18 Kanpur Road, Police Station Civil Lines, Allahabad (hereinafter referred to as “accused-Company”) and two of its Directors namely, Anil Gupta and B.M. Gupta. It was stated in the complaint that accused Company was a limited Company during A.Y. 1986-87 and accused opposite parties- 2 and 3 were Directors of said Company. They were in-charge and responsible to the Company for conduct of its business, acts, commission and omissions etc. Accused Company was supposed to file return of wealth as required under Section 14(1) of Act, 1957 on or before 30.06.1986 but they failed willfully to furnish Wealth Tax Return (hereinafter referred to as “W.T. Return”). A notice under Section 17 of Act, 1957 was issued on 3 06.03.1991 requiring accused opposite parties to furnish W.T. Return within 35 days of the receipt of notice. Accused opposite parties still willfully failed to furnish W.T. Return in time despite service of notice issued under Section 17(1) of Act, 1957. Thereafter, a notice under Section 16(4) of Act, 1957 was issued on 27.08.1991 still opposite parties failed to comply with said notice. Ultimately, W.T. Retrun was filed on 30.12.1991 declaring net worth of Rs.1,03,580/- and it was verified by Anil Gupta as Director. Assessing Officer assessed wealth of accused opposite parties at Rs.4,10,460/- and determined net tax of Rs.8,209/- vide assessment order dated 21.01.1992. Appeal preferred by accused opposite parties before Commissioner of Wealth Tax (hereinafter referred to as “CWT”) was dismissed. Thus, accused opposite parties willfully failed to furnish W.T. Return in due time, hence committed offence under Section 35-B of Act, 1957. Applicant claimed that delay in filing W.T. Return was due to non-availability of applicant namely, B.N. Gupta who was out of station and also on account of advice tendered by Auditors that assessments are not liable to levy of wealth tax. 4. A recall application along with an order passed by Income Tax Appellate Tribunal, 'A' Bench, Allahabad (hereinafter referred to as “Tribunal”) in Wealth Tax Appeal Nos. 184 to 188(A)(d) of 1993 has been filed. Aforesaid appeals were filed against imposition of penalty of Rs.10,835/- in respect of delay in filing return for A.Y. 1986-87 including other penalty orders of A.Ys. 1984-85, 1985-86, 1987-88 and 1988-89. Tribunal has found that delay was explained stating that it was on account of advice given by Auditor and accepting it a valid explanation, Tribunal vide judgement dated 30.06.1997 held that penalty imposed under Section 40(3) of Finance Act, 1983 (hereinafter referred to as “Act, 1983”) was not justified, therefore, it has allowed appeals. Order of Tribunal shows that W.T. Return assessed by Assessment Officer was affirmed in appeal still the reason for imposition of penalty, explained by Assessee, was accepted. 4 5. Be that as it may, record shows that this application came up for consideration before Court on 12.04.2016 when none appeared on behalf of applicant before Court though Respondent-Department was represented through counsel and after perusal of record, Court found no reason to interfere particularly when applicant has right to move discharge application before Magistrate, hence, dismissed this application vide judgement dated 12.04.2016. 6. Sri Siddhartha Singhal, Advocate has filed his Vakalatnama on 02.05.2016 along with Criminal Misc. Recall Application No. 151245 of 2016 for recall of order dated 12.04.2016. Recall application is also signed by Sri Shakeel Ahmad, Advocate. 7. However, Supreme Court in P. C. Gulati Vs. Lajyaran, AIR 1996 SC 595, K. Ramachandran vs. V. N. Rajan and another, 2009 (14) SCC 569 and State of Punjab vs. Davinder Pal Singh Bhullar, AIR 2012 SC 364 has made it clear that once a criminal matter has been decided, no application for recall is maintainable. 8. Despite the fact that recall application is not maintainable still I have allowed the same and proceed to consider matter on merit so that applicant may not have any grievance that he has been non suited merely on technical grounds. 9. It is evident from record that assessment was filed belatedly. Said assessment has been confirmed in appeal. It is a different thing that penalty imposed by Department under Section 18(1)(a) of Act, 1957 for the A.Y. 1986-87 for delayed filing of return has been set aside in appeal but that provision is different than Section 35-B where the question whether there is any willful delay in filing return has to be examined by a different Adjudicatory Forum. The view taken by departmental authority under Section 18(1)(a) by itself is not binding on Magistrate who has to examine the matter whether commission of offence under Section 35-B of Act, 1957 is made out or not. Tribunal 5 while allowing appeal in the matter of penalty under Section 18(1)(a) of Act, 1957 relied on Section 40(3) of Act, 1983 and accepted explanation given by assessee, still there is nothing on record to show that order passed by Departmental Authority in the matter of penalty would be binding on Magistrate who is a different authority competent to look into the matter. Therefore, even otherwise, I do not find any merit in the submission that order of Tribunal passed in respect of penalty under Section 18(1)(b) of Act, 1957 will automatically result in quashing of proceedings initiated for commission of offence under Section 35-B as nothing has been placed before this Court to show that order passed by Authority in respect of offence under Section 18(1)(a) is binding on the Authority who has to examine and adjudicate on the question of offence under Section 35-B i.e. a Criminal Court. 10. Learned counsel for applicant has placed reliance on Supreme Court's judgement in K.C. Builders and Another Vs. Assistant Commissioner of Income Tax 2004 (2) SCC 731. I have gone through aforesaid judgement very carefully and finds therein that M/s K.C. Builders (hereinafter referred to as “appellant”) a partnership firm, was engaged in the business of construction and sale of flats. Construction of some projects were started in 1981-82 and completed in 1986-87. Appellant filed Return of Income therein. Cost of construction was shown as under:- Assessment Year Amount 1983-84 Rs. 4,72,860/- 1984-85 Rs. 5,77,590/- 1985-86 Rs.7,28,531/- 1986-87 Rs.7,03,002/- 11. Subsequently, appellant filed revised Returns as per approved Valuer's report for A.Ys. 1983-84 to 1986-87 on 04.11.1987 as earlier cost of construction was found defective as under:- 6 Assessment Year Amount 1983-84 Rs. 8,76,000/- 1984-85 Rs. 5,42,000/- 1985-86 Rs. 13,47,229/- 1986-87 Rs. 10,37,920/- 12. Income Tax Authorities accepted revised returns and assessments were completed. Assessing Authority considered difference original return and revised income as concealed income, hence, levied penalty under Section 271(1)(c) of Income Tax Act, 1961 (hereinafter referred to as “Act, 1961”) for all four assessment years. In the appeal preferred against penalty imposed on the concealment of income, order of penalty was confirmed by Commissioner of Income Tax (Appeal) (hereinafter referred to as “CIT(A)”). Thereafter, four complaints were filed in the Court of Additional Chief Metropolitan Magistrate, Egmore, Chennai for offences under Section 276-C(2), 277 and 278-B of Act, 1961 read with Sections 120-B, 34, 193, 196, 420 IPC. Complaint, in brief, said that there was a conspiracy between appellants so as to file false Returns of Income which led to concealment of income to evade tax. In the meantime, appellants preferred appeal before Tribunal against consolidated order dated 18.07.1990 passed by CIT(A) for A.Ys. 1983-84 to 1986-87. It was contended that there was no material to show any concealment of income by appellant. Tribunal after verifying records, found that additions were on the basis of settlement between Assessees and Income Tax Department and represented voluntary offer by Assessee. In the circumstance, Tribunal held that there was no concealment of income by Assessee. Accordingly, penalty was cancelled and Tribunal allowed appeal. Appellant then moved an application before Magistrate concerned requesting to adjourn proceedings and then filed a criminal revision which was rejected. Matter came to Supreme Court. Court formulated following questions as referred to in para-8 of judgement:- 7 “(a) Whether a penalty imposed under Section 271(1)(c) of the Income Tax Act and prosecution under Section 276-C of the Income Tax Act are simultaneous? (b) Whether the criminal prosecution gets quashed automatically when the Income Tax Appellate Tribunal which is the final court on the facts comes to the conclusion that there is no concealment of income, since no offence survives under the Income Tax Act thereafter? (c) Whether the High Court was justified in dismissing the criminal revision petition vide its impugned order 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 Income Tax Appellate Tribunal's order no offence survives under the Income Tax Act and thus the quashing of the prosecution is automatic? (d) Whether the finding of the Income Tax Appellate Tribunal is binding upon the criminal court in view of the fact that the Chief Commissioner and the assessing officer who initiated the prosecution under Section 276-C(1) had no right to overrule the order of the Income Tax Appellate Tribunal? More so when the Income Tax Officer giving the effect to the order cancelled the penalty levied under Section 271(1)(c)? (e) Whether the High Court's order is liable to be set aside in view of the errors apparent on record?” 13. Court held that Section 276(C) deals with an offence of willful attempt to evade tax; Section 277 deals with false statement in verification etc., and Section 278B deals with offences by company. Since Tribunal found that there was no concealment of income and order of penalty was quashed, prosecution under Section 276C would also automatically come to an end. Court held, when a criminal trial cannot proceed, it cannot be allowed to continue as that will amount to abuse of process of law. In this regard, relevant observations made in paras- 24 and 25 are reproduced hereunder:- “24. In the instant case, the penalties levied under Section 271(1)(c) were cancelled by the respondent by giving effect to 8 the order of the Income Tax Appellate Tribunal in ITAs Nos. 3129-32. 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. 25. 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 the Act, a finding of the Appellate Tribunal supersedes the order of the Assessing Officer under Section 143(3) more so when the Assessing Officer cancelled the penalty levied.” 14. Court also held that charge of conspiracy was not proved and various offences under the provisions of IPC were also not satisfied, hence, proceedings were liable to be set aside. In this regard, relevant observations made in paras- 29 and 31 read as under:- “29. In this instant case, the charge of conspiracy has not been proved to bring home the charge of conspiracy within the ambit of Section 120-B of I.P.C. It is also settled law that for establishing the offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or misrepresentation. From his making failure to keep up promise subsequently, such a culpable intention right at the beginning, that is, at the time when the promise was made cannot be presumed. As there was absence of dishonest and fraudulent intention, the question of committing offence under Section 420 of the I.P.C. does not arise. 31. It is a well-established principle that the matter which has been adjudicated and settled by the Tribunal need not be dragged into the criminal courts unless and until the act of the appellants could have been described as culpable.” 15. In the present case, it has not been found that Assessee was not liable to submit W.T. Return in the relevant A.Y.. In my view, for the case in hand, applicant cannot take advantage of aforesaid judgement of Tribunal and it cannot be said that complaint filed in the case in 9 hand would automatically cease after setting aside penalty imposed for the A.Ys. 1986-87. 16. No other point has been argued. 17. Application lacks merit and is accordingly rejected. Order Date :- 11.12.2019 Siddhant Sahu "