M/s. Tirumala Tirupati Constructions India (P) Ltd. V. Assistant Director of Income Tax (Investigation), UNIT-ll (2)

CRLP/2684/2022

AI Insights

The case revolves around a criminal petition filed by M/s. Tirumala Tirupati Constructions India (P) Ltd. under Section 482 of the Code of Criminal Procedure, seeking to quash the proceedings initiated against them for alleged tax evasion under the Income Tax Act, 1961. The prosecution was based on a survey conducted by the Income Tax Department, which allegedly found discrepancies in property sales and unreported income. The main legal contention was the lack of proper sanction for prosecution, as it was initiated by an Assistant Director of Income Tax instead of the authorized Deputy Director. The court examined the hierarchy and authority required to initiate such proceedings and concluded that the prosecution was not validly authorized, leading to the quashing of the charges.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 797985 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 06-09-2023
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax Vs. Spl's Siddhartha Ltd, Sheo Narain Jaiswal & Ors. Vs. ITO, Anirudh-Sinhji Karan Sinhji Vs. State of Gujarat, P.R.P. Granites Vs. Check-Post Officer/Assistant Commercial Tax Officer, State of Uttar Pradesh Vs. Singhara Singh and others, P. Jagappan Vs. S.K. Perumal
• Laws Referred To: Code of Criminal Procedure, Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: A REDDY
• Assessee Lawyers: S RAVI
• Keywords: Economic offences; Income Tax; Jurisdiction; Prosecution; Quash Proceedings; Sanction
• Section: 147; 43CA; 50C; 133A; 197; 164; 200; 276C(1); 279(1); 482; 190; 278B

Judgement Text

"M/s. Tirumala Tirupati Constructions lndia (P) Ltd. Reg. Office. H.No.. 2-2- 23122tD12, DD Colony, Shivam Road, Amberpet, Hyderabad Rep, by. i-t9 Managing Director. Sri K. P. V. Subbaiah, S/o Late. Sri K Ramaiah, {ged 6! Yearsl Occ.. Business, Address. Flat - 503, AsvisidhNovateur Nest 2 Apartments, Gouthami Enclave, Kondapur, Hyderabad. Sri K P V Subbaiah, S/o Late. Sri K. Ramaiah, Aged 65 Years, Occ. Business, Maanaging Director of M/s. Tirumala Tirupati Constructions lndia (P) Ltd Addresi. -ftat - SOS, AsvisidhNovatetirr Nest 2 Apartments, Gouthami Enclave' Kondapur' Hyderabad' ...pETrroNERs/AccusED No.'r & 2 AND Assistant Director of lncome Tax ( lnvestigation), UNIT-ll (2), Room No. 467 ' 3td Floor, Aayakar Bhavan, Basheerbagh, Hyderabad - 500029 Represented by Special Public Pr6secutor, High Court of Telangana, Hyderabad ...RESPONDENT/COMPLAINANT Petition under Section 482 of Cr.P.C praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition, the High Court may be pleased to pass an order quashing C.C. No. 263 of 2017 on the File of Special Judge for Economic Offence, Nampally, Hyderabad against the Petitioners herein. IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD WEDNESDAY ,THE SIXTH DAY OF SEPTEMBER TWO THOUSAND AND TWENTY THREE PRESENT THE HONOURABLE SMT JUSTICE G.ANUPAMA CHAKRAVARTHY CRIMIN AL PETITION NO: 2684 OF 2022 Between: l.A. NO: 2OF 2022 Petition under Section 482 of Cr.P.C praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition,the High Court may be pleased to stay all further proceedings including appearance of the Petitioner in C.C. No. 263 of 2017 on the File of Special Judge for Economic Offence, Nampally, Hyderabad insofar as the Petitioner herein is concerned . This Petition coming on for hearing,upon perusing the Memorandum of Grounds of Criminal Petition and upon hearing the arguments of Sri S Ravi Senior Counsel for Sri R.S. ASSOCIATES ,Advocate for the Petitioner and Sri A. Ramakrishna Reddy representing Smt. K. Mamata Standing Counsel for the Respondent 2 The Court made the following: ORDER THE HONOURABLE SMT G. ANUPAMA CHAKRAVI{RTHY cRIMINAL PETITION No.2684 of 2022 ORDER: This petition is filed under Section 482 of Oode of Criminal Procedure (for short 'Cr.P.C.') blr the petitioner/ accused seeking to quash the proceedings in C.C.No.263 of 2017, pending on the hle of the Spe<:ial Judge for Economic Offences, Nampally, Hyderabad. 2. The respondent herein is the complainant, r,r'ho has a complaint under Section 19O R/w. Section 2OO of Cr.l).C. for the offences punishable under Sections 276C(1) and 2788 of the Income Tax Act, 1961 (for short \"the Act\"). 3. The facts culled out from the complaint are that a survey operation under Section 133A of the Act was <;arried out on 25.05.2016 by the D.D.l.T.(Inv), Unit-II, Hyderabad in case of certain assessees. During the course of the survey it was found that the petitioners herein have sold the Lmd at Budvel to different parties in the Assessment Years 20 15- 2O16 and 2016-2017 at the rates belorv the val e of tht: Sub- 1 2 GAC'J c.t.P.No.26a4 o! 2022 Registrar Offrce. It is further contended that the petitioners herein have sold the properties and realized the money and did not file income tax returns and did not pay any tax for the said assessment years and the summons were issued to the petitioners to show cause as to why prosecution should not be initiated against them as the tax was willfully avoided by the petitioners for the said assessment years. 4. Basing on the said complaint, the Special Court of Economic Offences, Hyderabad registered and numbered the case as C.C.No.263 of 2Ol7 for prosecution against the petitioners for the offences punishable under Sections 276c(ll and278B oftheAct, 1961. 5. As already stated supra, challenging the . said proceedings in C.C.No.263 of 2017, the petitioners have filed this quash petition contending that the initiation of the prosecution against the petitioner is illegal and void ab-initio. 6. It is the specihc contention of the petitioners that the authorization under Section 279(1,1 of the Act was issued by 3 AAC,J crl-P.No.2ta4 oJ 2022 the Principal Director of Income Tax (Inv.), Hyderabad, to the Deputy Director of Income Tax (lnv.), Unit-ll, Hyderabad and that the Principal Director of Income Tax is not the corrpetent authority to accord sanction under Section 279(l) of the Act. Even assuming for a moment that the Deputy Dire<:tor of Income Tax is the authority to accord sanction, it has to be seen that the said sanction was to the Deputl' Dire<'tor of Income Tax. But the prosecution has been initiated 'by the Assistant Director of Income Tax, who is lou'er in rank to the Deputy Director of Income Tax. Therefore, the complilinant does not have any authorization to initiate the proser:ution and further the respondent is not having jurisdiction. 7 . The respondent has frled a detailed counter afltdavit denying all the contentions of the petitioner. It is speci[rcally stated in the counter-afhdavit that the survey operation under Section 133,4 of the Act was conducted on M/s. Tirumala Tirupati Constructions India h/t. Ltd. On 25.05.2016. During the course of the survey proceedings, it was noticed that during the financial year 2Ol4-2O15, rr,hich is relevarrt to the assessment year 2Ol5 2016, the pt:titioner 4 GAC,J ctI-P.No.26A4 of 2022 company has sold land admeasuring Ac.25.31 guntas at Budvel Village, Rajendranagar Manda.l, Ranga Reddy District, for a total sale consideration of Rs.9.115 crores as against stamp duty va-lue of Rs.62.36 crores. Accordingly, a hnal survey report was prepared and forwarded to respective Assessing Officers. Subsequently, for the financial year 2Ol4- 2015 relevant to the Assessment Year 2015-2016, scrutiny assessment under Section L47 of the Act was completed on 26.12.2079 by adopting the stamp duty value as full value of consideration received as per Section 43CA R/w Section 50C of the Act and added back the duties in the sale consideration of RS.48,69,O0,00O/- (Rupees Forty tright Crores Sixty Nine Lakhs Only) to the income tax admitted resulting in a demand of Rs.31,57,78,O25 /- (Rupees Thirty One Crores Fifty Seven Lakhs Seventy Eight Thousand Twenty Five Only). Later, a rectification was passed under Section 164 of the Act on I9.Oa.2O21 revising the total demand to Rs.3 1,74,66,956/ - (Rupees Thirty One Crores Seventy Four Lakhs Sixty Six Thousand Nine Hundred and Fifty Six Only). The survey operation was conducted on 21.05.2016 and later 5 EAC'J c.l.P.No.25a4 oJ 2022 it was noticed that during the hnancial yeats 2Ol4-2015 and 2015-2016, relevant to the assessment years 2015-2O16 and 2Ot6-2O17 , the. petitioner sold Ac.39.1 1 guntas of land at Budvel Village, Rajendranagar Mandal, Ranga Reddv ttistrict, for a total sale consideration of Rs. 11'24 crores as against the Sub-Registrar Offrce value of Rs'92.61 crores but has not disclosed the income tax from the sale of property for tzr.xation either under the head 'lncome from Capital Gains' or 'lncome from Business'. Similarly, there were cash deposits in the bank accounts of the assessee to the tune of Rs.47.7O lakhs, which remained unexplained and in the absence of bc'oks of account maintained by the assessee company is deeme'l to be the income of the company. Further, the petitioner-cornparly has not filed Income Tax Return for the assessing year 2O15 2016 within the due date prescribed under the Act, i.e. on or before 30.O9.2015. 8. . Heard Sri S. Ravi, learned Senior Counsel for the petitioners and Sri A. Ramakrishna Reddy, learned StzLnding Counsel for the respondent. 6 GAC'J crl.P.No.2584 of 2022 9. It is the specihc contention of the learned Senior Counsel that there shall be sanction under Sectio n 279(ll of the Act. As per the said sanction, dated 3O.O3.2O17, the Principal Director of Income Tax (lnv.), Hyderabad issued sanction under Sectio n 279(Il to the Deputy Director of Income Tax (Inv.), Unit - II, Hyderabad to file a complaint before the Special Judge for Economic Offences, Hyderabad against the petitioner-company. But the complaint was filed by the Assistant Director of Income Tax (lnv.), Unit-ll, Aayakar Bhavan, Basheerbagh, Hyderabad, towhom the said sanction has not been granted, which is a grave irregularily as per the Act. Therefore, he prays to quash the impugned proceedings. 10. On perusal of Section 279(ll of the Act would show that the sanction has to be accorded by an officer at the level of Chief Commissioner of Income Tax/ Director General of Income Tax. However, in the present case the sanction has been accorded by the Frincipal Director of Income Tax, who is Iower in rank than the Chief Commissioner of Income Tax, and even assuming for a moment that the Principal Director :7 I i I 7 GAC,J crl.P.No.r'6A4 of 2022 of Income Tax is the authority to accord sanction, the sanction clearly discloses that it was accorded to the Deputy Director of Income Tax but not Assistant Director of Income Tax. As stated supra, in the present case it is the As;sistant Director of Income Tax, who has preferred the complaint, is lower in rank to the Deputy Director of Income Tax. 1 1 . On the other hand, it is the specific contention of the learned standing counsel that, as per Section 319(1)(a) of the Act, every person being company or firm, shall, on or before due date, furnish a return on its income during the previous year in the prescribed form and verified in the pres;cribed manner and setting forth any such other particulars a.s may be prescribed. And as the petitioner-company has nc,t filed the returns of the income tax for the assessing year 2015- 2016 within the stipulated time, the authorities have every right to initiate prosecution against the petitioner-compi:rny. 12. It is further contended by the learned counsel firr the respondent that except the sanction of the Principal Commissioner of Income Tax, there cannot be any ,i /y' 8 . GAC'J C.LP.No.26A4 of 2022 prosecution and in the present case, the Principal Director of Income Tax (Inv.) has issued sanction and as per Section 2(16) of the Act, Commissioner means the person appointed to be the Commissioner of Income Tax or the Director of Income Tax or a Principal Commissioner of lncome Tax or a Principal Director of Income Tax under sub-section ( 1) of Section 117, there is no error or irregularity by issuance of sanction by the Principal Director of Income Tax. 13. It is also contended by the learned Standing Counsel that in the present case, initially, the sanction was issued to the Deputy Director of Income Tax for launching prosecution proceedings against the petitioner company. Meanwhile, during the interregnum period of processing the case for prosecution, there was a change in the incumbency due to Annual General Transfers of the Officers and in his place an Assistant Director of Income Tax was posted, who had filed the prosecution complaint in the Court of la'*,. 14. It is the specific contention of the learned Standing Counsel that the duties performed by the Deputy Director of 9 GAC,J crt.P.No.26a4 of 2022 Income Tax as well as Assistant Director of Income Tax are one ald the same, excepting that a senior officer will be termed as Deputy Director of Income Ta-x and a junio;: ofhcer as Assistant Director of Income Tax. Therefore, there is no error or irregularity in the present case for latLnching prosecution against the petitioner-company by the As.sistant Director of Income Tax. 15. The learned Senior Counsel for the petitioners in order to support his contentions, relied on the following judgrnents. 15. I The judgment of the Delhi High Court in the <:ase of Cotnmissioner of Income Tox Vs. Spl's Siddha rtha Ltdr and brought to the notice of this Court paragraph Nos 8 and 9 which reads ag under: \"8. Thus, if authority is given expressly by affirmative words upon a defined defined condition, the expression of that condition excludes the doing of the Act authorised under other circumstances than those as defined. It is also established principle of law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/ her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be \"independent\" and not ,'borrowed\" or ,,dictated,, 1 MANU lyD l7 t6s /201r l 1() GAC'J crt-P-No.26A4 ol 2022 satisfaction. Law in this regard is now sell- settled. In Sheo Narain Jaiswal & Ors. Vs. ITO,176 ITR 35 (Pat.), it was held: Where the Assessing Officer does not himself exercise his jurisdiction under Section 14 but merely acts at the behest of any superior authority, it must be held that assumption of jurisdiction was bad for nonsatisfaction of the condition precedent. 9. The Apex Court in the case of Anirudh-Sinhji Karan Sinhji Cinhii ladeia Jadeja Vs. State of Gujarat, MANU/SC/O473/1995 (19951 5 SCC 302 has held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If discretion is exercised under the direclion or in compliance with some higher authorities instruction, then it will be a case of lailure to exercise discretion altogether. \" As per the above precedent it is evident that if a statutory authority has been vested with jurisdiction, he has to exercise it accordingly and if discretion is exercised under the directions or in compliance of some higher authority's instruction, then it would be a case of failure to exercise discretion altogether. 15.2 The judgment of the Madras High Court in the case of P.R.P. Granltes Vs. Check-Post OfJicer/Assistant Cornmercial Iax OlJicer, Puzhal Check-Post(Incoming), ..-., 11 GAC,J c.LP.No.26a4 or 2022 Chennai2 and brought to the notice of this Court paragraph No.15 r.r,hich reads as under: \" 15. Tl're respondent is hereby directed to release the goods along with the vehicles, which are the subjt:ct matter of the G.D. Nos. 1329, 1330 and 13111 of 2OO3-2OO4 dated August 16, 2OO3 forthwith on t.re petitioner furnishing an undertaking that tl-re subject goods will not be parted with or alienated f or a period of six months within which period the respondent can take any action, if so warranted, in accordance with law for recovery of any tax legally liable from the petitioner. I am constraineJ _o conclude this order with a note of caution to ttre authorities under the Act to the effect that ar.y action taken by the authorities must have th.e sanctior-t of law and supported by provisions of [avz. Otherwise,. the same would amount to illegal action and harassment of unwary public for eitraneous reasons, which is not authorised under any law anl cannot be the intention of the law makers. With this observation the writ petitions are allowed.\" As per the above said proposition, the authority which has initiated the prosecution must have sanction of law. Otherwise, it amounts to illegal action. 15.3 The learned Senior Counsel for the petitioner fu.rther relied on the judgment of the Hon'ble Apex Court in the case of Sate of uttar pradesh ys. Singhara Singh crnd 2 2003 SCC Onl-int: Mad 1O45 t2 cAc,J CrI.P.No.26A4 oJ 2022 others3 and brought to the notice of this Court paragraph No.8, which reads as under: \"8. The rule adopted in Taylor v. Taylor is well recognised and is founded on sound principle. Its result is that if a statute has conferred a power to do an act and has laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in any other manner than that which has bene prescribed. The principle behind the rule is that if this were not so, the statutory provision might as well not have been enacted. A Magistrate, therefore, cannot in the course of investigation record a confession except in the manner laid down in Section 164. The power to rccord the confession had obviously been given so that the confession might be proved by the record of it made in the manner laid down. If proof of the confession by other means was permissible, the whole provision of Section 164 including the safeguards contained in it for the protection of accused persons would be rendered nugatory. The section, therefore, by conferring on Magistrates the power to record statements or confessions, by necessary implication, prohibited as Magistrate from giving oral evidence of the statements or confessions made to him.\" The ratio formulated. as per the above precedent is that if a statute has conferred a power to act and has laid down the method, any power must be exercised discreetly, which prohibits doing of act in any another manner. Which means, if a sanction has been granted to the Deputy 3 (t964]' 4 SCR 485 I I I i 13 GAC,J crt.P.No.26a4 ol 2022 director to launch prosecution against the petitioner- company, it is for the Deputy Director alone to launch the prosecution but not the Assistant Director. 15.4 The judgment of the Hon'ble Apex Court in the case of Suresh Kumar Bhikanncho,nd. Jain Vs, Pandctg Ajag Bhushan and Others +and brought to the notice of this Court paragraph No.24 which reads as under: '24. In Matajog's case, 1995 (21 SCR 92S the Constitution Bench held that the complaint may n()t disclose all the facts to decide the question of applicability of Section 197, but facts subsequently coming either on police or judicial inquiry or even in the course of prosecution evidence may establish the necessity for sanction. In S.B. Saha's case (1979 (4) SC() 177 , the court observed that instead of confining itself t,t the allegations in the complarnt the Magistrate can tak,l into account all the materials on the record at the tim,: when the question is raised and falls for consideration. In Pukhraj's case, (supra) this court observed that whether sanction is necessary or not may depend fr-orrr stage to stage. In Matajog's case the Constitution BenctL had further. observed that the necessity for sanction ma1, reveal itself in the course of the progress of the case imc it would be open to the accused to place the material on record during the course of trial for showing u,hat his duty was and also the acts complained of were so inter related with his official duty so as to attract the protection afforded by Section 197 of the Code of Criminal Procedure. This being the position it would be unreasonable to hold that accused even though might have really acted in discharge of his olficial duty ior which the complaints have been todged yet he will have to wait till the stage under sub section (4) Section 246 of I o 11BSa1 t Supreme Court Cases 2O5 L4 GAC'J crl.P-No.26a4 oI 2022 s, the Code reaches or at least till he will be able to bring in relevant materials while cross exarnining the prosecution witnesses. On the other had it would be iogical to hold that the matter being one dealing with the jurisdiction o[ the court to take cognisance, the accused would be entitled to produce the relevant and material documents which can be admitted into evidence without formal proof, for the limited consideration of the court whether the necessar5r ingredients to attract Section 197 of the Code have been established or not. The question of applicabitity of Section 197 of the Code and the consequential ouster of jurisdiction of the court to take cognisance without a valid sanction is genetically difierent from the plea of the accused that the averments in the complaint do not make out an offence and as such the order of cognisance ald/or the criminal proceedings be quashed- In the aforesaid premises were are of the considered opinion that in accused is not debarred lrom producing the relevant documentary materials which can be legaliy looked into without aly formal proof, in support of the stald that the acts complained of were committed in exercise of his jurisdiction or purported jurisdiction as a public servant in discharge of his official duty thereby requiring sanction of the appropriate authority.\" As per the above precedent, it is no longer a dispute as indicated by the Hon'ble Apex Court in several cases that the question of sanction can be considered at any stage of the proceedings' 16. On the other hand, the learned Standing Counsel for Income Tax relied on the judgment of the Hon'ble Apex Court in the case of P. Jagappan Vs' S'K' Perumal, First I l , - l5 GAC,J crl.P.Na.26a4 ol2022 f?Os. The ratio formulated in the said judgmen', is that reassessment proceedings cannot act as bar for init-iation of criminal prosecution and there cannot be q'rash of proceedings under Section 482 of Cr.P.C. The above citation is not applicable to the facts ald circumstances of the case, as the petitioner is challenging the fact that the respondent No, 1 did not have any power to launch the pror;ecution proceedings as the sanction was granted to the Deputy Director 17. Perusal of the entire record, rival contentions cf both the parties and the precedents relied upon by thern, it is evident that once sanction has been given to a particular authority, i.e., the Deputy Director of Income Tax, the prosecution has to be launched by him alone and not by the Assistant Director of Income Tax, who did not hzLve the power to launch the prosecution proceedings. Thoup,h it is the contention of the learned Stalding Counsel f,rr the respondent that the Deputy Director of Income Tax is a I s [19841 19 Ta-xman 1 (SC) I $ \"1 ii n n. c I L ] r ,ri Eri ,t I iit f it ii it;.t iii 16 GAC,.' c.I.P.No.25a4 of 2022 senior officer and the Assistant Director of Income Tax is a junior officer and both were doing the same duties, the said contention cannot be taken into consideration as in the present case, the sanction is accorded to the Deputy Director of lncome Tax for initiating prosecution and not to the Assistant Director of Income Tax. 18. In view of the above discussion, this Court is of the considered opinion that it is a fit case to quash the proceedings against the petitioner. 19. Accordingly, the Crimina-l Petition is allowed and the proceedings against the petitioner/ accused in C.C.No.263 of 2Ol7 on the file of the Special Judge for Economic Offences, Nampally, Hyderabad, are hereby quashed. Miscellaneous applications pending, if any, shall stand closed. Sd/. AV.S. PRASAD //rRUE coPY// AsslsrtuEclsrRAR r SECTION OFFICER Tol 'iii f.l Tde Special Jidge for Economic Offence, Nampally, Hyderabad. . 2.1 The Assistant Director of lncome Tax ( lnvestigation , Unit -ll (2), Room i No. 467 , 3'd Floor, Aayakar Bhavan, Bisheerblgh, Hyderabad'. \" 3.i One CC to M/s. R.S. ASSOCIATES, Advocate IOPUCI j, i ' 4.i Oire CC to Smt. K. MAMATA, S.C. for I.T. Dept. 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