SANJAY GUPTA V. UNION OF INDIA and ANOTHER

A482/3885/1994

AI Insights

The case involves Sanjay Gupta, the applicant, who sought to quash criminal proceedings against him for allegedly failing to file a Wealth Tax Return for the assessment year 1991-92. The proceedings were initiated under Section 35(B) of the Wealth Tax Act, 1957, by the Assistant Commissioner of Wealth Tax, Allahabad. The applicant argued that penalties for non-filing had been quashed by a tribunal in a related matter for different assessment years (1984-85 to 1988-89), and thus, similar relief should apply to the current proceedings. However, the court dismissed this argument, noting that the tribunal's decision did not pertain to the assessment year in question and that the applicant had indeed failed to file the required return on time, constituting a violation of the Wealth Tax Act.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 743136 (HC-ALLAHABAD)
• Appeal Type: Others
• Pronouncement Date: 11-12-2019
• Assessment Year: misc
• Other Referred Cases: K.C. Builders and Another Vs. Assistant Commissioner of Income Tax
• Laws Referred To: Code of Criminal Procedure, 1973, Wealth Tax Act, 1957
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: AGA; ASHISH AGRAWAL; R K UPADHAYA; SHEKHAR SRIVASTAVA
• Assessee Lawyers: SHAKEEL AHMAD; SIDDHARTH SINGHAL
• Keywords: Criminal Proceedings; Non-filing; Wealth tax return; Penalty Quash
• Section: 14(1); 35B; 17(1); 482

Judgement Text

"1 Court No. - 34 Criminal Misc. Recall Application No. 151242 of 2016 IN Case :- APPLICATION U/S 482 No. - 3885 of 1994 Applicant :- Sanjay Gupta Opposite Party :- Union Of India And Another Counsel for Applicant :- Shakeel Ahmad, Siddharth Singhal Counsel for Opposite Party :- A.G.A.,Ashish Agrawal,R.K.Upadhaya,Shekhar Srivastava 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. - 3885 of 1994 Applicant :- Sanjay Gupta Opposite Party :- Union Of India And Another Counsel for Applicant :- Shakeel Ahmad, Siddharth Singhal Counsel for Opposite Party :- A.G.A., Ashish Agrawal, R.K.Upadhaya, Shekhar Srivastava 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 Nos. 241 of 1994, 242 of 1994 and 243 of 1994, under Sections 35(B) of Wealth Tax Act, 1957, pending in the Court of learned Special Chief Judicial Magistrate, Allahabad. 3. Learned counsel for applicant states that penalty proceedings have been subsequently quashed and that being so, criminal proceedings cannot be maintained. 4. 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 Wealth Tax Act, 1957 (hereinafter referred to as “Act, 1957”) alleging that applicant Sanjay Gupta was to furnish Wealth Tax Return (hereinafter referred to as “W.T. Return”) for Assessment Year (hereinafter referred to as “A.Y.”) 1991-92 on or before 31.03.1991 under Section 14(1) of Act, 1957 but he failed to furnish W.T. Return within time prescribed. Wealth Tax Officer (hereinafter referred to as “WTO”) detected the fact that applicant Sanjay Gupta was holding 5800 equity shares of M/s Bajaj Auto Limited and despite wealth 3 being within taxable limit, he had not declared the same to department, voluntarily. Hence, notice was issued to him under Section 17(1) of Act, 1957 on 28.04.1992. The said notice was served upon applicant on 05.05.1992 and he was required to file W.T. Return within 35 days of receipt of the notice. Applicant still failed to furnish W.T. Return till 08.06.1992. Another notice was issued under Section 16(4) of Act, 1957 to applicant on 09.06.1992. Ultimately, applicant submitted W.T. Return declaring his wealth at Rs. 24,40,300/- on 09.02.1993. This assessment was completed on 16.03.1993 determining applicant's wealth at Rs. 26,48,000/-. Thereagainst, applicant preferred appeal before Commissioner of Wealth Tax (hereinafter referred to as “CWT”) who allowed relief of Rs.1,86,175/-. Thereafter, applicant paid wealth tax as determined by CWT. 5. Alleging that lapse on the part of applicant was deliberate and willful, a notice was given to applicant under Section 17(1) of Act, 1957. It is said that applicant has violated statutory provisions and committed an offence under Section 35B of Act, 1957. 6. Section 35B of Act, 1957 reads as under:- “35B. Failure to furnish returns of net wealth. – If a person wilfully fails to furnish in due time the return of his net wealth which he is required to furnish under sub-section (1) of section 14 or by notice given under sub-section (2) of section 14 or under sub- section (1) of section 17, he shall be punishable; (i) in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine; (ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine: 4 Provided that a person shall not be proceeded against under this section for failure to furnish in due time the return of net wealth under sub-section (1) of section 14 – (i) for any assessment year commencing prior to the 1st day of April, 1975; or (ii) for any assessment year commencing on or after the 1st day of April, 1975, if – (a) the return is furnished by him before the expiry of the assessment year; or (b) the tax payable by him on his net wealth determined on regular assessment does not exceed three thousand rupees.” (Emphasis Added) 7. Applicant has filed rejoinder affidavit 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 wherein levy of penalty under Section 18(1)(a) of Act, 1957 was challenged in respect of A.Ys. 1984-85 to 1988-89. Tribunal allowed appeal on the ground that in view of Section 40(3) of Finance Act, 1983 (hereinafter referred to as “Act, 1983”). Assessee was not supposed to file W.T. Return and accepting above explanation, Tribunal held that applicant- assessee should not have been imposed any penalty. Relevant paras- 14 and 15 of the aforesaid judgement, read as under:- “14. On a careful consideration of the matter what emerges out is that although there does not exist any writing advice from M/s Taneja Associates in favour of the assessees advising them that their case did not fall within the ambit of Section 40(3) of Finance Act, 1983 yet there exist several circumstances which go to prove that the assessee was given such an advice and acting bonafide under which they did not file the wealth tax return. Taking strength from the ratio of Ramnikalal D. Mehta referred to supra, what could be said is that the assessee were assisted by qualified CAs and if they acted on their advice and 5 did not file wealth tax returns timely, it could not be said that they consciously disregarded their obligations to file such returns. 15. In the result, we are of the view that there existed a bonafide belief constituting a reasonable cause that the assessee's case did not fall within the ambit of Section 40(3) of the Finance Act, 1983 and, therefore, there was no requirement of filing the return.” 8. It is contended that since appeal has been allowed by Tribunal, therefore, criminal proceedings alleging offence under Section 35B of Act, 1957, amounts to gross abuse of process of law. 9. I find that order of Tribunal relates to filing of returns of A.Ys. 1984-85 to 1988-89 while present case relates to A.Y. 1991-92, therefore, aforesaid judgement is not at all attracted in the case in hand. Moreover, to attract Section 35B of Act, 1957 it is not the penalty whether justifiable or not but the offence is non-filing of W.T. Return and violation of Section 14(1) or 14(2) or 17(1) of Act, 1957. 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/- 6 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:- 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 7 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:- “(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 8 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 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, firstly order of Tribunal relates to a different 9 period of assessment. Secondly, 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 hand would automatically cease after setting aside penalty imposed for the A.Ys. 1983-84 to 1988-89 since in the present case, A.Y. 1991-92 is involved. 16. No other point has been argued. 17. Application lacks merit and is accordingly dismissed. Interim order, if any, stands vacated. Order Date :- 11.12.2019 Siddhant Sahu "