1990 (10) TMI 16 - HC - Income Tax

Court upholds prosecution under Income-tax Act, dismissing challenges on notice, sanction, and jurisdiction.

The court upheld the maintainability of the prosecution under section 276C(1) of the Income-tax Act, dismissing the petitioner's challenges related to ... Notice, Offences And Prosecution, Wilful Attempt To Evade Tax Issues:- Prosecution under sections 193, 420, 511 of IPC, and sections 276C(1) and 277 of Income-tax Act, 1961.- Premature complaints by Income-tax Department.- Lack of notice before initiation of prosecution.- Validity of sanction to prosecute.- Constitutional validity of section 276C(1).- Territorial jurisdiction of the respondent.- Filing of returns and prosecution under section 276C(1).- Mandatory notice requirement before prosecution.- Maintainability of prosecution under section 276C(1).- Quashing of prosecution.Analysis:The judgment by Justice Arunachalam addresses the petitioner's prosecution under various sections of the Indian Penal Code and the Income-tax Act, 1961. The petitions raised common questions regarding the premature nature of complaints by the Income-tax Department, lack of notice before prosecution, validity of sanction, constitutional validity of section 276C(1), and territorial jurisdiction of the respondent. The petitioner challenged the initiation of prosecutions as an abuse of the court's process, contending that the complaints were premature and lacked mandatory notice before prosecution.The court examined the provisions of sections 276C and 277 of the Income-tax Act, which deal with tax evasion and false statements. It was established that prosecution under these sections could proceed independently of assessment proceedings, without the need for a mandatory notice before prosecution. The court cited a Supreme Court case to support the independence of prosecution proceedings from assessment processes, emphasizing that the criminal court must judge the case based on evidence presented.Regarding the validity of sanction to prosecute, the court found no merit in the argument against it, stating that the law did not prescribe sanction as a prerequisite for initiating prosecution. The challenge to the constitutional validity of section 276C(1) was dismissed, with the court holding that the provision did not violate the equality guaranteed under article 14 of the Constitution.The court also addressed the issue of territorial jurisdiction, noting that since the petitioner had filed returns before the respondent, the argument against jurisdiction was unsubstantiated. Additionally, the court clarified that the failure to file returns for the relevant assessment year could lead to prosecution under section 276CC of the Act, without violating principles of natural justice.Ultimately, the court ruled that the prosecution under section 276C(1) was maintainable, rejecting the petitioner's arguments and dismissing the petitions. The court emphasized that the question of mens rea would be determined during the trial, and inherent powers could not be used to delve into evidentiary matters. The judgment concluded that the prosecution could not be quashed at that stage, and previous cases emphasizing the mandatory notice in assessment proceedings were deemed irrelevant to the prosecution context.