1988 (3) TMI 13 - HC - Income Tax

Court emphasizes independence of assessment & criminal prosecution, dismisses petition to quash. Reassessment doesn't nullify basis for prosecution.

The court dismissed the petition to quash the criminal prosecution, emphasizing the independence of assessment proceedings and criminal prosecution. The ... Offences And Prosecution Issues Involved:1. Whether the order of the Tribunal directing the respondent to redo the assessment is a ground for quashing the criminal prosecutionRs.2. The independence of assessment proceedings and criminal prosecution.3. The relevance of reassessment orders to the continuation of criminal prosecution.4. The applicability of precedents in similar cases.Detailed Analysis:1. Whether the order of the Tribunal directing the respondent to redo the assessment is a ground for quashing the criminal prosecutionRs.The petitioners sought to quash the criminal proceedings on the ground that the reassessment ordered by the Income-tax Appellate Tribunal nullified the basis of the prosecution. The Tribunal had remanded the matter to the Income-tax Officer (ITO) for a fresh assessment, which the petitioners argued removed the original subjective satisfaction that led to the prosecution. The petitioners contended that if, upon reassessment, the entries were found to be false, a new complaint could be filed.2. The independence of assessment proceedings and criminal prosecution.The court held that assessment proceedings and criminal prosecution are independent of each other. The former aims to determine fiscal liability, while the latter seeks to punish penal offenses. The court cited the Supreme Court decision in P. Jayappan v. S. K. Perumal [1984] 149 ITR 696, which held that reassessment does not bar prosecution for offenses related to the filing of returns. The criminal court must independently judge the case based on the evidence presented, irrespective of the reassessment.3. The relevance of reassessment orders to the continuation of criminal prosecution.The court noted that the Tribunal did not make a positive finding that the entries were true. Instead, it remanded the matter for verification of the physical existence of the amounts and to allow the petitioners to explain the source. The Tribunal's order did not negate the discrepancies between the counterfoils and the original cheques or the fact that the cash was received by the fifth petitioner. The court emphasized that not every set-aside assessment order necessitates halting criminal prosecution. The reassessment was ordered to verify facts for fiscal liability, not to determine the truthfulness of the returns.4. The applicability of precedents in similar cases.The court discussed various precedents. In Uttam Chand v. ITO [1982] 133 ITR 909, the Supreme Court quashed the prosecution because the Tribunal found the firm genuine and the partner's signature authentic, thus negating the falsity of the returns. Similarly, in W. L. Kohli v. CIT [1985] 152 ITR 154, the Delhi High Court quashed the prosecution because the ITO found the firm genuine upon reassessment. However, in the present case, no such positive finding was made by the Tribunal.The court also referenced Associated Industries v. First ITO [1983] 139 ITR 269 (Mad), where it was held that criminal prosecution could proceed independently of reassessment orders, and S. R. Arulprakasam v. Tmt. Prema Malini Vasan [1987] 163 ITR 487, which held that filing a revised return does not negate the falsity of the original return.Conclusion:The court dismissed the petition to quash the criminal prosecution, holding that the reassessment order did not nullify the basis for prosecution. The allegations in the complaint sufficiently brought out the ingredients of the penal provisions cited. The court emphasized that the trial court is the appropriate forum to determine the truth or falsity of the statements and that the reassessment was intended to verify fiscal liability, not to validate the returns. The observations made in this judgment were solely for appreciating the legal contentions and should not affect the trial's outcome.