Raj Bricks Field V. Income Tax Officer

CRR/440/2002

AI Insights

The case involves M/s Raj Bricks Field and others, who were accused by the Income Tax Officer of concealing income for the assessment year 1988-89. Initially, the trial court dismissed the complaint, but the revisional court reversed this decision. The petitioners challenged the revisional court's decision in the High Court, arguing that their income had not been concealed as per the findings of the Income Tax Appellate Tribunal, which had accepted their revised return and deleted the penalty imposed. The High Court agreed with the petitioners, citing precedents that once an adjudicatory authority finds no concealment of income, criminal prosecution on such grounds is unsustainable.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 795580 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 05-02-2014
• Assessment Year: misc
• Other Referred Cases: Uttam Chand and others Vs. Income Tax Officer, Central Circle Amritsar, G.L. Didwania and another Vs. Income Tax Officer and another
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: SUMEET MAHAJAN; AMIT KOHAR
• Keywords: Concealment of income; Penalty; Prosecution; Revisional Jurisdiction; Voluntary return
• Section: 142(1); 143(2); 271(1)(c); 276 C; 277; 278-B; 245 (2) Cr.P.C

Judgement Text

"CRR No. 440 of 2002 [1] IN THE HIGH COURT OF PUNJAB AND HARYANA A T CHANDIGARH. CRR No. 440 of 2002 Date of Decision: February 5, 2014 M/s Raj Bricks Field and others …..Petitioners Vs. Income Tax Officer …..Respondent CORAM: HON’BLE MR. JUSTICE M.M.S. BEDI. -.- Present:- Mr.Sumeet Mahajan, Sr. Advocate with Mr. Amit Kohar, Advocate for the petitioners. None for the respondent. -.- M.M.S. BEDI, J. (ORAL) The petitioners have invoked the revisional jurisdiction of this Court to question the legality and propriety of order dated October 12, 2001 passed by Sessions Judge, Ludhiana, setting aside the order passed by the trial Court dated November 29, 2000. Vide order dated November 29, 2000, the trial Court had dismissed the complaint of the respondent Income Tax Officer under Sections 276 C and Section 277 read with Section 278-B of the Income Tax Act, 1961, for short ‘the Act’, pertaining to assessment year Gupta Sanjay 2014.04.09 17:11 I attest to the accuracy and integrity of this document High Court Chandigarh CRR No. 440 of 2002 [2] 1988-89. On revision petition filed by Income Tax Officer, Khanna, against the order dated November 29, 2000. It was allowed by the learned Sessions Judge vide order dated October 12, 2001. Brief facts of the case are that the petitioner is a partnership concern which filed return for the year 1988-89 declaring total income of Rs.23570/-. The Assessing Officer issued notice under Section 143 (2) and 142 (1) of the Act alongwith printed questionnaire. The petitioners filed a revised return on January 11, 1989 declaring income of Rs.113570/- with a note that revised return was being filed subject to no penalty and no prosecution. The surrender made by the petitioners was accepted by Assessing Officer as they made addition of Rs.90000/- but the Assessing Officer imposed a penalty of Rs.38765/-. The Commissioner of Income Tax (Appeals) vide order dated April 5, 1990 confirmed the order of penalty. After the order of penalty was passed by the Assessing Officer and same was confirmed by Commissioner of Income Tax (Appeals) vide order dated April 5, 1990, a complaint dated January 29, 1993 under Sections 276 C and 277 read with Section 278 B of the Act based on the order dated July 24,1989 of the Income Tax Officer was filed in the Court of Sub Divisional Judicial Magistrate, Ludhiana. Meanwhile, the petitioners had field appeal i.e. ITA No. 1192/Chandi/90 against the order dated April 5, 1990 passed by Commissioner of Income Tax (Appeals) before the Income Tax Appellate Tribunal, Chandigarh Bench. The Income Tax Appellate Tribunal, Gupta Sanjay 2014.04.09 17:11 I attest to the accuracy and integrity of this document High Court Chandigarh CRR No. 440 of 2002 [3] Chandigarh Bench vide order dated June 22, 1994 accepted the appeal by observing as follows:- “On the facts of the case we hold that return by the assessee was a voluntary return filed in good faith and before the detection of any concealment by the Assessing Officer. It was further held that because of the peculiar circumstances of the case, the remaining partners who continued the business of the assessee firm after the dissolution of the assessee firm, in the absence of cooperation from the outgoing partners voluntarily surrendered an income of Rs.90000/- in the name of cash creditors on the clear understanding that no penalty would be levied or prosecution launched. The explanation submitted by the assessee is a bonafide.” Copy of the order dated June 22, 1994 has been placed on record as annexure P-2. The Commissioner of Income Tax (Appeals) filed a reference application to the Income Tax Appellate Tribunal, Chandigarh Bench, to refer the question of law arising out of the Tribunal order dated June 22, 1994 in the income tax appeal to the High Court of Punjab and Haryana for its opinion. The said reference application was dismissed by the Tribunal by order dated November 16, 1994. It was held that there was no justification for levying or confirming the penalty of Rs.38765/- under Gupta Sanjay 2014.04.09 17:11 I attest to the accuracy and integrity of this document High Court Chandigarh CRR No. 440 of 2002 [4] Section 271 (1) (c) of the Act. The said penalty was, therefore, deleted vide order annexure P-3 dated November 16, 1994. After having obtained a favourable judicatory order, the petitioners filed an application under Section 245 (2) Cr.P.C . before the Chief Judicial Magistrate, Ludhiana, for their discharge and for quashing of the complaint. The trial Court vide order dated November 29, 2000, accepted the application; dismissed the complaint filed by the respondent and discharged the petitioners. In revision petition filed by Income Tax Officer, Khanna, the order dated November 29, 2000 has been set aside. The revisional Court observed that the petitioners had originally filed return showing income of Rs.23570/- and introduced three Cash Credit, amounting to Rs.90000/- in the name of three different persons. On examination of the income tax return and relevant material i.e. cash credits, the revisional Court formed an opinion that an attempt had been made by the petitioners to evade income tax and they would be required to explain their position during the trial. Mr. Sumeet Mahajan, learned senior counsel for the petitioners has submitted that it is established on the record from the order passed by the higher authorities of Income Tax Department that the petitioners have not made any attempt to conceal the income to avoid income tax and that they are not required to explain their position during the trial. The petitioners had not concealed any income because as per the revised return voluntarily filed on January 11, 1989, there had been no concealment before the Assessing Officer. The observations of the Income Tax Appellate Gupta Sanjay 2014.04.09 17:11 I attest to the accuracy and integrity of this document High Court Chandigarh CRR No. 440 of 2002 [5] Tribunal, Chandigarh Bench have been ignored by the Sessions Judge wherein it has been held that the revised return was filed subject to there being no penalty or prosecution. The short question which is required to be determined in the present case is whether it is not an abuse of the process of the law to prosecute an assessee for concealment of income when Adjudicatory Authority of the tax Department has itself held that return of the assessee was voluntary return filed in good faith and before the detection of any concealment by the Assessing Officer. In the present case, the Income Tax Appellate Tribunal, Chandigarh Bench vide order dated June 22, 1994 had exonerated the petitioners from any allegation or charge of having concealed the income. I have heard learned counsel for the petitioners. In the present case, criminal prosecution had been launched against the petitioners on January 29, 1993 on the ground that they had concealed their income for the assessment year 1988-89. Vide order dated June 22, 1994, the Appellate Tribunal, Chandigarh Bench has held as follows:- “On the facts of the case we hold that return by the assessee was a voluntary return filed in good faith and before the detection of any concealment by the Assessing Officer.” The said order dated June 22, 1994 was upheld by the High Court. It is a settled principle of law that a decision of Adjudicatory Gupta Sanjay 2014.04.09 17:11 I attest to the accuracy and integrity of this document High Court Chandigarh CRR No. 440 of 2002 [6] Authority which in the present case was Appellate Tribunal, cannot be ignored when it has become conclusive while considering the maintainability of prosecution. In this concern, a reference can be made to a judgment of the Apex Court in Uttam Chand and others Vs. Income Tax Officer, Central Circle Amritsar, (1982) 2 SCC 543, wherein it was held as follows:- “Heard counsel, special leave granted. In view of the finding recorded by the Income Tax Appellate Tribunal that it was clear on the appraisal of the entire material on the record that Shrimati Janak Rani was a partner of the assessee firm and that the firm was a genuine firm, we do not see how the assessee can be prosecuted for filing false returns. We, accordingly, allow this appeal and quash the prosecution.” The judgment of Uttam Chand’s case (supra) was again reiterated in the judgment of Supreme Court in G.L. Didwania and another Vs. Income Tax Officer and another, 1995 Suppl. (2) SCC 724, wherein it was held as follows:- “The whole question is whether the appellant- assessee made a false statement regarding the income which according to the assessing authority has escaped assessment. So far as this issue is concerned, the finding of the Appellant Tribunal is conclusive. Therefore, as Gupta Sanjay 2014.04.09 17:11 I attest to the accuracy and integrity of this document High Court Chandigarh CRR No. 440 of 2002 [7] held in Uttam Chand's case [1982] 133 ITR 909 (S.C.), the prosecution cannot be sustained. Accordingly, the proceedings are quashed and the appeal is allowed.” In view of the judgment of Apex Court mentioned hereinabove, it is clear that once authorities under the Act return a finding that there is no concealment of income, the prosecution is not sustainable on the allegation of concealment of income. Vide order of Appellate Tribunal dated June 22, 1994, it has been held that there is no concealment and the return filed by the assessee was voluntary, filed in good faith and before the detection of any concealment. Vide said order, the penalty imposed under Section 271 (1) (c) of the Act has been set aside. The learned Magistrate had, rightly appreciated that once the Tribunal of a Department i.e. Adjudicatory Authority, holds that there is no concealment of income on part of the accused and the penalty is deleted, the very basis of the complaint is knocked down and continuation of complaint will be an abuse of the process of the Court. It is not out of place to observe here that curtailing the liberty of a person by launching prosecution against him when there is no foundation of the allegation would be an abuse of the process of the Court and would certainly be violative of Article 21 of the Constitution of India, as observed in M/s Pepsi Foods Ltd. Vs. Special Judicial Magistrate, AIR 1998 SC 128. It was a casual summoning of an accused for the purpose of a trial in a criminal case and was considered to be a serious matter. It was observed in the said judgment that no doubt that Magistrate can discharge Gupta Sanjay 2014.04.09 17:11 I attest to the accuracy and integrity of this document High Court Chandigarh CRR No. 440 of 2002 [8] the accused at any stage of the trial if he considers the charge to be groundless but that will not curtail the right of accused to approach High Court under Section 482 Cr.P.C. and Articles 227 of the Constitution of India to have the proceedings quashed against him when the complaint does not make out any case against him and still he must undergo the agony of trial. No useful purpose will be served by continuing the criminal proceedings against the petitioners on the ground of concealment of income when the Income Tax Appellate Tribunal, Chandigarh Bench has held that there has not been any concealment of income for the assessment year 1988- 89. The petition is allowed. The criminal complaint annexure P-1 dated January 29, 1993 and all the proceedings against the petitioners are hereby set aside. The order dated November 29, 2000 is upheld and the order passed by the revisional Court dated October 12, 2001 is hereby set aside. February 5, 2014 (M.M.S.BEDI) sanjay JUDGE Gupta Sanjay 2014.04.09 17:11 I attest to the accuracy and integrity of this document High Court Chandigarh "