TaxTMI 
TaxTMI 
TaxTMI 
2004 (1) TMI 7
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....s. 5,77,590 Assessment year 1985-86 Rs. 7,28,531 Assessment year 1986-87 Rs. 7,03,002 The appellants filed revised returns as per the approved valuer's report for assessment years 1983-84 to 1986-87 on November 4, 1987 in the following manner as the earlier returns were found to be defective with regard to cost of construction. Assessment year 1983-84 Rs. 8,76,000 Assessment year 1984-85 Rs. 5,42,000 Assessment year 1985-86 Rs. 13,47,229 Assessment year 1986-87 Rs. 10,37,920 The revised returns were accepted by the Department and assessments were completed. The respondent/assessing authority treated the difference between the income as per original return and revised income as concealed income. The Assistant Commissioner of Income-tax levied penalties under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for all the aforesaid four assessment years. Accordingly, penalty proceedings were initiated. The first appeal against the order of penalties levied for concealment of income against the appellants were confirmed by the Commissioner of Income-tax (Appeals). As per the directions of the Chief Commissioner of Inco....
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....27, 1997. In the meanwhile, the Revenue Department filed an application under section 256(1) of the Act for reference of the question of law which had arisen out of the Income-tax Appellate Tribunal's order dated October 24, 1996. The application of the Revenue Department was rejected. Thereupon, the appellants preferred a criminal revision under sections 397 and 401 of the Criminal Procedure Code, 1973, before the High Court for setting aside the order passed by the Additional Chief Metropolitan Magistrate dated July 21, 1997. The learned single judge of the Madras High Court rejected the criminal revision vide his impugned order holding that the Income-tax Appellate Tribunal's order was not applicable since it was not marked as a defence document whereas the fact remains that the order was passed at a subsequent date. Before the High Court, the decision of this court in K.T.M.S. Mohammed v. Union of India [1992] 197 ITR 196 was cited. The High Court, after observing that the observation in the case of K.T.M.S. Mohammed [1992] 197 ITR 196 (SC) helps the appellants to the extent that the trial court should have given due regard to the Tribunal's order, clearly made an error by dist....
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....hat the Chief Commissioner and the Assessing Officer who initiated the prosecution under section 276C(1) had no right to overrule the order of the Income-tax Appellate Tribunal. More so, when the Income-tax Officer giving 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? We heard Mr. Ajit Kumar Sinha, learned counsel appearing for the appellants and Mr. R.P. Bhatt, learned senior counsel appearing for the respondent. Learned counsel appearing for the appellants submitted that the learned single judge of the High Court has failed to appreciate that under section 254 of the Act an order by the Income-tax Appellate Tribunal not only superseded the order passed by the Assessing Officer under section 143(3) of the Act but also set aside the finding of the Assessing Officer under the provisions of the Act. He further submitted that the High Court has failed to appreciate that both the penalty proceedings and the prosecution are simultaneous and any prosecution launched on the basis of the order of the Assessing Officer under section 143(3) of the Act became vo....
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.... order of the High Court is neither erroneous nor against the principles of law. Before proceeding to consider the rival submissions, it is beneficial to refer to some important provisions of the Act under which the proceedings have been initiated: Section 147 of the Act deals with income escaping assessment. Section 148 deals with issue of notice where income has escaped assessment. Section 254 deals with orders of the Appellate Tribunal. Section 256 deals with statement of case to the High Court (reference). Section 271(1)(c) reads as follows: "271. Failure to furnish returns, comply with notices, concealment of income, etc.--(1) If the Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person--... (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,--... (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his in....
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...., and section 278B deals with the offences by companies. Four complaints were filed by the Assistant Commissioner of Income-tax, Central Circle III(1) against the appellants on the basis of the sanction ordered by the Commissioner of Income-tax under section 279(1) of the Act for the prosecution of the accused/appellants for the offences punishable under sections 276C(1), 277 and 278B of the Act. It is stated in the complaint that the accounts and documents seized during the course of search showed that the accused had suppressed the true receipts from sale of flats, action under section 148 of the Act was taken and in response to the said notice, the return of the respective accounts were delivered to the Income-tax Officer which was signed and verified by the accused concerned and that the Income-tax Officer further made the enquiries and investigations and summoned various persons for their statements. When the enquiry was in progress, the accused knowing that the suppression of receipts has been found out by the Income-tax Officer filed another revised return on November 4, 1987, showing different income as against the original return. It was submitted that the appellants with....
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....nt has not made any addition beyond what has been returned by the assessee. In other words, it was pointed out that the returned income has been accepted by the Department and there is no concealment of any income. It was stressed by counsel that the returns were revised in pursuance of the settlement with the Department only to buy peace. Learned counsel appearing for the Department, on the other hand, strongly supported the imposition of penalty in the facts and circumstances of the case. The Tribunal allowed the appeal and cancelled the penalty. It is useful to reproduce the concluding part of the order passed by the Tribunal which is as under: "We have carefully considered the rival submissions and perused the materials brought on record. Although there is a discussion by the Assessing Officer that the assessee has received some on-money in respect of sale of flats but he has not mentioned what is the exact quantum of such on-money receipts. The mere fact that though the receipt of on-money is a prevalent practice in the case of transaction in flats, it cannot be presumed that there was a concealment of income or evasion of taxes. The Department must bring out material to indi....
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.... Madras, Dated, the 24th October, 1996." The above order of the Tribunal was not appealed against and thus has become final and conclusive. The Additional Chief Metropolitan Magistrate, on an application moved by the appellants, permitted the appellants to mark the copy of the order of the Tribunal, dated October 24, 1996, in evidence at the appropriate stage of trial. It is also very useful, in the present context, to refer to the proceedings of the Income-tax Officer, City Ward-II (2), Chennai, cancelling the penalty. One sample order reads thus: "GIR. No: 279-K/CW.II(2) of 1983-84 Dated: 27-1-1997 Sub: Penalty under section 271(1)(c)--Assessment year 1983-84--in the case of M/s. K.C. Builders, 26, Nynar Nadar Road, Chennai 600 004--reg. Ref: I.T.A.T's Order in I.T.A. No: 3129 to 3132/Mds of 1990 dated October 24, 1996. ORDER Giving effect to the Income-tax Appellate Tribunal's Order in I.T.A. No: 3129 to 3132, the penalty levied under section 271(1)(c) is hereby cancelled. Under section 271(1)(c), Rs. 1,43,181 is hereby cancelled." Learned counsel appearing for the appellants cited the following decisions in support of his submissions at the time of hearing: The fir....
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....Procedure, 1973, to revise the order of the Additional Chief Metropolitan Magistrate has also dismissed the same and refused to refer to the order passed by the competent Tribunal. As held by this court, the High Court is not justified in dismissing the criminal revision vide its judgment 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 Appellate Tribunal's order, no offence survives under the Income-tax Act and thus quashing of prosecution is automatic. 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 I.T.A. Nos. 3129-3132. 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. In our opinion, the appellants cannot be made to suffer and face the rigorous of criminal trial when the same cannot be sustai....
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....dits deleted from the assessment, the consequent order of penalty had been rightly cancelled." 2. CIT v. Bhagwan Ltd. [1987] 168 ITR 846 (Cal): "Held, that the orders of reassessment on the basis of which penalties were levied had been set aside by the Tribunal. Hence, the order of penalty could not stand by itself. The cancellation of penalty was justified." 3. CIT v. Bengal Jute Mills Co. Ltd. [1988] 174 ITR 402 (Cal): "Where penalty was imposed solely on the basis of an addition of Rs. 4 lakhs to the assessee's total income and the addition was deleted by the Tribunal: Held, that it was evident from the material on record that the penalty had been imposed solely on the basis of the addition of Rs. 4 lakhs to the assessee's income. If the addition was deleted, the charge of concealment of income could not be sustained. Imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961, was, therefore, not valid." 4. CIT v. Madanlal Sohanlal [1989] 176 ITR 189 (Cal): "Penalty cannot stand on its own independently of the assessment. Where, in an appeal against the assessment reopened under section 147 of the Income-tax Act, 1961, the Appellate Tribunal deleted the ad....
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....gment in the case of Hira Lal Hari Lal Bhagwati v. C.B.I. [2003] 262 ITR 466 (SC); JT 2003 (4) SC 381, in which one of us (Dr. AR. Lakshmanan J.) was a member, this court while considering the scope of the immunity granted under the Kar Vivad Samadhan Scheme--Whether criminal proceedings initiated in respect of declaration filed under the Scheme and accepted by the Excise Department can proceed further with the prosecution for criminal conspiracy and cheating against the appellants therein. Allowing the appeals, this court held that since the alleged criminal liability stood compounded on settlement with respect to the civil issues, the FIR was erroneous and unwarranted and, therefore, the continuation of the proceedings would tantamount to double jeopardy. This court further held that as the Collector of Customs had exonerated the appellants there was no warrant for any fresh investigation and prosecution on a matter which stood settled. Further since no prima facie case of cheating and criminal conspiracy was made out the process issued is liable to be quashed. It is to be noticed that as per the Kar Vivad Samadhan Scheme, 1998, whoever is granted the benefit under the said Schem....