2023 (2) TMI 391 - HC - Income Tax

Court upholds discharge orders in tax evasion case, dismisses revision petitions

The court dismissed the revision petitions, upholding the orders of discharge issued by the first revisional court. It found no merit in the petitioner's ... Penalty proceedings u/s 271 (1) (C) or 276C - assessment u/s 153C - Scope of words ‘wilfully attempts’ to evade tax or evade payment of tax - existence of a prima facie case - Proceedings amounted to double jeopardy vis-a-vis the penalty proceedings - Complain Case was filed against the assessee before the Chief Judicial Magistrate, Alipore under Sections 276 (1) and 276 (2) read with Section 2 (35) of the IT Act for willingly and intentionally concealing its income to evade tax and to evade payment of income tax - KPC College and Hospital had received corpus funds in the guise of donations from the said KPC foundation - offences alleged are covered by the Economic Offences (Inapplicability of Limitation) Act, 1974 - seizure of a sum of money from the residential property of one Bhaskar Ghosh. HELD THAT:- It is settled law that double jeopardy would be attracted only if the two proceedings in question involved the same or similar penal provisions. A penalty proceeding under Section 271 of the Income Tax Act is distinctly different from a prosecution for alleged offences under Sections 276C of the said Act. Not only are the procedures for and the implications of imposition of penalty and for prosecution in a criminal case are different, but the scope and ambit of the purported wrong doings that are contained in the respective provisions are also not similar. Therefore, the instant criminal proceedings cannot be said to be barred under Section 300 of the Code of Criminal Procedure. Also if an entity is legally entitled to file a revised return of tax, even in terms of Section 153C, within a period and if it does so within such period, the same cannot attach any further disadvantage to the entity for having done so. In this regard the stand of the Revenue that the assessee tried to evade penalty tax by revising return is also not quite tenable. Penalty proceedings can continue even after disclosure of concealed income. But, one has to test this in respect of a prosecution and that too, in the particular facts of the case. It is quite clear from the above that something more is required to haul up an assessee under Section 276C of the Act than under Section 271 (1) (C). “Wilful” is the key word that sets these provisions apart, besides the core ingredients making them up and therefore, there has to be some additional material or averment of fact in this regard. Otherwise, a prosecution would be an automatic fallout of such a penalty proceeding, perhaps depending solely on the generosity of the officer concerned about whether such charges would be pressed. But, this is not what law envisages. It may not be sufficient in the present facts for the Revenue to raise a plea that here presumption under Section 278E would be applicable. A presumption like this is an exception to the general rule of burden of proof and may shift the onus of proof on an accused during trial. But, the initial onus of showing that a prima facie case is made out would still lie on the prosecution. In other words, there has to be some material to invoke such a presumption. Thus, at this stage, a Court has to find out whether a prima facie case is at all made out in this backdrop. It may be germane to mention here that there is a difference between discharging the initial onus of making out a case and shifting of onus of proof during trial by invoking a presumption. Although on different facts and stage, reliance is placed on Baljeet Singh vs. State of Haryana [2004 (2) TMI 737 - SUPREME COURT] and Durga Prasad & Anr. Vs. State of Madhya Pradesh [2010 (5) TMI 955 - SUPREME COURT] With the statements of the two witnesses appearing against the accused having been rendered ineffective, what is left for the prosecution is the purported wrong claiming of exemption by the accused. On the other hand, the accused purportedly retained their status of charitable entities and filed revised return within the stipulated time, waiving exemption and paying tax. It is one thing to suffer a penalty under Section 271 (1) (c) of the Income Tax Act for avoiding to pay tax or penalty. But, it is quite another to be prosecuted for wilfully trying to evade tax or evade payment of tax. The facts of the case as referred to above, for argument’s sake, may be at the best sufficient for inviting a penalty under Section 271 (1) (c) of the Act, but appear to be grossly insufficient for making out a prima facie case of an wilful attempt to evade tax or evade payment of tax. As would be evident from the above, the prosecution has even otherwise failed to make out a prima facie case that the opposite parties wilfully tried to evade tax or evade payment of tax, especially considering the fact that the fund was substantially disclosed and only an exemption was claimed, which was waived within the time for filing a revised return. When the opposite parties have been given the benefit of an order of discharge by the first revisional Court, there has to be cogent and convincing grounds on which such an order can be set aside. This Court is not convinced with the points raised by the petitioner in this regard. No merit in these applications. The same are, therefore, dismissed. Issues Involved:1. Delay in filing revision petitions.2. Double jeopardy and the applicability of Section 300 of the Cr.PC.3. Existence of a prima facie case for prosecution under Sections 276C of the Income Tax Act.4. The applicability of Economic Offences (Inapplicability of Limitation) Act, 1974.Detailed Analysis:1. Delay in Filing Revision Petitions:The petitioner/Revenue contended that there were delays of about 95 days in filing the revision petitions. The delay was attributed to the bureaucratic process involving multiple approvals and consultations with the Ministry of Law and Justice. The petitioner argued that the delay was not deliberate and provided detailed explanations for the movement of files. The court acknowledged the delay but noted that the petitioner had provided minute details of the steps taken, and thus, allowed the applications for condonation of delay.2. Double Jeopardy and Applicability of Section 300 of the Cr.PC:The petitioners challenged the orders that discharged the accused from criminal proceedings, arguing that the proceedings amounted to double jeopardy. The court clarified that double jeopardy would be attracted only if the two proceedings involved the same or similar penal provisions. It was held that penalty proceedings under Section 271 of the Income Tax Act are distinctly different from prosecution under Sections 276C of the said Act. Therefore, the criminal proceedings were not barred under Section 300 of the Cr.PC.3. Existence of a Prima Facie Case for Prosecution under Sections 276C of the Income Tax Act:The prosecution's case was based on the alleged seizure of a sum of money from the residential property of an individual and statements from a former director of the companies involved. The court found that the statements were not sufficient to establish a prima facie case, especially since the individual had recanted his statement and the director was deceased, making his statement inadmissible. The court also noted that the accused entities were charitable organizations with valid certificates under the Income Tax Act, and their income was ordinarily non-taxable. The court emphasized that the prosecution failed to demonstrate a 'wilful attempt' to evade tax, which is a necessary element under Section 276C. The court concluded that the facts of the case might justify a penalty under Section 271 (1) (C) but were insufficient for a prosecution under Section 276C.4. Applicability of Economic Offences (Inapplicability of Limitation) Act, 1974:The court noted that the offences alleged are covered by the Economic Offences (Inapplicability of Limitation) Act, 1974, and thus, the delay in lodging the prosecution was not fatal. The court also observed that the accused were aware of the constituent facts, ruling out any prejudice.Conclusion:The court dismissed the revision petitions, finding no merit in the arguments presented by the petitioner. The court upheld the orders of discharge issued by the first revisional court, emphasizing that there were no cogent and convincing grounds to set aside those orders. The court also noted that the prosecution failed to make out a prima facie case of wilful tax evasion, thereby affirming the discharge of the accused.