2021 (10) TMI 1113 - HC - Income Tax

High Court overturns Tax Tribunal's penalty, sets demand to 'Nil,' quashes trial, stresses factual accuracy

The Division Bench of the High Court interfered with the Income Tax Appellate Tribunal's penalty imposition in a Tax Case Appeal, setting it aside due to ... Offences u/s 276CC, 276C(1) and 276C(2) of the Income Tax Act, 1961 - search conducted in the partner's premises and that the transactions were admittedly recorded in the books of accounts of the firm, the Income Tax Appellate Tribunal's view that there was concealment of income for invoking Section 271(1)(C) - as urged by the learned Counsel that putting the petitioners through the ordeal of trial would be a futile exercise - HELD THAT:- Income Tax Department, very fairly affirmed that the Dvision Bench of this Court had set aside the order of the Income Tax Tribunal and stated that no further proceedings are pending against the parties and that order of the Division Bench had not been taken up further in appeal by the department/revenue. Also affirmed by the learned Counsel that the complaint had been preferred only consequent to the order of the Appellate Tribunal. But, as it turned out, that particular order of the Tribunal had been set aside by the Divison Bench of this Court. Find every reason to interfere with further progress of E.O.C.C now pending of the file the learned Additional Chief Metropolitan Magistrate/E.O - I, Egmore, insofar as the petitioners/A1 to A3 are concerned and direct the same to be quashed - present Criminal Original Petition is allowed and E.O.C.C.on the file of the Additional Chief Metropolitan Magistrate, Economic Offences Court - I, Egmore is quashed. Issues:1. Petition to quash further proceedings in a Calendar Case under Section 482 of the Code of Criminal Procedure.2. Allegations of offences under Sections 276CC, 276C(1), and 276C(2) of the Income Tax Act, 1961.3. Search and seizure operations leading to penalty imposition for delayed filing of income returns.4. Confirmation of penalty by the Income Tax Appellate Tribunal.5. Lodging of a complaint based on the Tribunal's order before the Magistrate Court.6. Division Bench's interference with the Tribunal's order in a Tax Case Appeal.7. Revising the penalty demand to 'Nil' following the Division Bench's order.8. Argument for quashing further trial proceedings based on the Division Bench's factual interference.Analysis:1. The petitioners sought to quash proceedings in a Calendar Case under Section 482 of the Code of Criminal Procedure. The respondent/complainant alleged offences under Sections 276CC, 276C(1), and 276C(2) of the Income Tax Act, 1961 for the assessment year 2005-2006. The complaint detailed search and seizure operations resulting in penalty imposition due to delayed income return filing.2. The Income Tax Appellate Tribunal confirmed the penalty, leading to the lodging of a complaint before the Magistrate Court. However, a Tax Case Appeal was filed, and the Division Bench of the High Court interfered with the Tribunal's order, setting aside the penalty imposition based on factual discrepancies.3. Following the Division Bench's order, the Tax Recovery Officer revised the penalty demand to 'Nil' and requested payment of the balance demand to avoid coercive action. The petitioners argued for quashing further trial proceedings, emphasizing the Division Bench's factual interference and the lack of legal grounds for prosecution.4. The Special Public Prosecutor affirmed that no further proceedings were pending against the parties, as the Division Bench's order had not been appealed by the department. Given the Division Bench's factual interference and the subsequent quashing of the penalty, the Court directed the quashing of further proceedings in the Calendar Case for the petitioners.5. Consequently, the Criminal Original Petition was allowed, and E.O.C.C.No.68 of 2013 on the Magistrate Court's file was quashed, closing the connected miscellaneous petition. The judgment highlighted the importance of factual accuracy and legal scrutiny in tax penalty cases, emphasizing the role of appellate review in ensuring justice and fairness.