TaxTMI 
TaxTMI 
2021 (1) TMI 483
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....old their immovable property situated in Muttukadu village. The Petitioner in Crl.R.C.No.15 of 2020 Mr.Karti P. Chidambaram has sold 5.110 Acres of land for a total consideration of Rs. 21.7175 Crores out of which Rs. 15.33 Crores said to have received by cheque and remaining Rs. 6.38 Crores was received as Cash, whereas he has filed Return of Income for the Assessment Year 2014-15 on 29.07.2014 declaring his total income at Rs. 45,18,430/-. In his Return of Income he has shown the sale of the said property at Rs. 15,33,00,000/- as a Long Term Capital Gain. However, he did not disclose the cash part of the sale consideration of Rs. 6.38 Crores. Mrs.Srinidhi Karthi Chidambaram 1st Petitioner in Crl.R.C.No.16 of 2020 has sold 1.18 Acres of land for a total consideration of Rs. 5.01 Crores out of which Rs. 3.65 Crores was received by Cheque and Rs. 1.36 Crores was received by cash, whereas she has filed Return of Income for the Assessment Year 2015-16 declaring her total income at Rs. 69,98,410/-. In her Return of Income she has shown the sale of the said property at Rs. 3,65,80,000/- as a Long Term Capital Gain. She has also not disclosed the cash payment of Rs. 1.36 Crores in the re....
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....ore whom the Returns were filed is competent to file any complaint for the alleged false Returns or evidence. All the assessment proceedings are deemed to be a judicial proceedings within the meaning of Section 193 and 196 of the Indian Penal Code Section 136 of the Income Tax Act also stipulate that any proceedings under the Act shall be deemed to be judicial proceedings for the purpose of 193, 228 and for the purpose of Section 196 of I.P.C.and every Income Tax authority shall be a Civil Court for the purpose of Section 195 of the I.P.C. Therefore, the plea was taken to the effect that the complaint lodged by the Deputy Director of Income Tax is not maintainable in the eye of law. However, learned trial Court has dismissed the Petitions filed by both accused in C.C. Nos.15 and 16 of 2019. Hence, present revisions have been filed. 6(a). Learned Senior Counsel Mr.Kapil Sibal appearing for the Revision Petitioner in Crl.R.C.No.510 of 2020 has submitted that the prosecution was launched against the accused without any materals and only due to the political reasons. It is further submitted that the Returns of the year 2014-15 filed and completed as early as 30.12.2016. Therefore, t....
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....is further contention that the position of law in this regard has been adopted as a policy of the Government for launching the prosecution. It is the policy of the Government that the prosecution has to be launched after the assessment of tax or penalties imposed by the ITAT. It is his submission that the Revenue mainly relied upon the case of P.Jayappan Vs. S.K.Perumal, First Income-Tax Officer, Tuticorin [1984 (Supp) Supreme Court Cases 437] wherein it is held that the prosecution can be launched irrespective of pendency of the assessment or re-assessment proceedings. His contention is that the above case is distinguished by the subsequent judgements of the Apex Court. At any event, his contention is that the prosecution at this stage is premature and launched by the incompetent person. It is also submitted by the learned Senior Counsel that the Department cannot avoid the rigour of Section 195 of Cr.P.C. by avoiding the IPC Offences. 6(c). It is his further contention that the materials relied by the prosecution is not admissible in evidence. The so called print outs allegedly taken from the cloned copies are not admissible. Further, third party statements also cannot be pres....
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....aint lodged by him is not maintainable and she has to be discharged from the complaint. 7(b) The learned Senior Counsel further submitted that the original Returns filed in the year 2015-16 has not been set aside and still holds good. Reassessment is lapsed by period of limitation. Once assessment is confirmed, there cannot be parallel prosecution. Even in the complaint lodged by the Deputy Director of Income Tax Act, there is no material available to show that the Revision Petitioner in Crl.R.C.No.511 of 2020 made false declaration or given a false evidence before the authority. Hence, it is submitted that the so called alleged false declaration given before some other officer, only such officer has to give a finding as to the nature of false declaration and returns. Then only the complaint can be launched by such officer or any other officer authorised by the assessing officer. Whereas in this case the assessing officer has not even reassessed the Return filed by the husband and wife. Such view of the matter, the officer who have no way connected with the passing Assessment Order cannot come to the conclusion that there is false verification or false evidence and abetment of s....
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....order passed either under Section 148 or 153(A) of Income Tax Act will be subject to the orders passed by the appellate authority. If such orders are set aside by the Appellate Authority, the prosecution will not be maintainable. Even prosecution is launched after such orders under Section 153-A of Income Tax Act, even those orders are appealable. Therefore, without any order being passed as to nature of false declaration or false returns by Assessing officer it is premature to file a complaint by incompetent officer. 7(e) It is further contention of the learned Senior Counsel that the so called print outs taken from the cloning copy of the hard disk, such print outs acquired the character of print out taken from the secondary evidence, which is not admissible in evidence. The owner of the hard disc was never examined nor given any certificate as required under section 65-B of the Evidence Act. Therefore, those documents cannot be used in evidence. He also relied on the judgments placed by learned Senior Counsel Mr.Kapil Sibal. 8(a). The learned Senior Counsel Mr.N.R.Elango appearing for the 2nd Petitioner in Crl.R.C.No.511 of 2020 submitted that in the First Law Commission R....
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....rosecution is not maintainable. In this regard the Apex court in P.Jayappan Vs. S.K.Perumal, First Income-Tax Officer, Tuticorin [1984 (Supp) Supreme Court Cases 437] this regard has held that prosecution is maintainable. Further contention that when the petitioners were examined under Section131 of the Income Tax Act, they just denied the nature of the materials unearthed during the search. That itself indicate that they filed false Return and Declaration.The materials seized can be tested only in the trial, now the prima facie case is made out. Merely because third parities who given statements have not been examined that cannot be a ground to discharge the accused. It is their further contention that what has to be seen in a discharge application is a prima facie materials and suspicion. There cannot be any roving enquiry as to the validity of the documents. Hence, submitted that the Deputy Director is competent to lodge the complaint. Such power has been conferred by the Statute. 10. Further, it is their contention that the complaint is not for the offence under Section 193 or 195 of the I.P.C. It is lodged for the specific offence under the Income Tax Act, which is permissi....
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....and that since the original Returns still holds good, the prosecution launched on the basis of the statements from the 3rd parties not maintainable. The prosecution was launched even before the reasons for issuing 148 notice was issued. This Court dismissed the above applications. While dismissing the above applications this Court has held that since the complaints were not based on the assessment, they are based on search and seizure, their contention was negatived. Similarly held that third parties statements cannot be gone at this stage, only it has to be seen in the trial for evidentary value. Apart from that Transfer of cases also upheld. Now it appears that the appeal is pending before Honourable Supreme Court. It is relevant to note that the two grounds viz., the third party statements on which the prosecution is relied, and the absence of assessment order the prosecution not maintainable one, already decided in the above O.P., which is pending before the Apex Court. Therefore,this Court is of the view that the same cannot be once again urged in the revision petition. Though much reliance has been placed by Senior Counsels on the judgment Harish Dahiya @ Harish & Another vs.....
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....tion of the principal commissioner or Commissioner (Appeals) or the appropriate authority to proceed against for an offence under section 275A (275B), section 276, section 276A, section 276B, section 276BB, section 276C, section 276CC, section 276D, section 277 section 277A or section 278 of the Income Tax Act. The very reading of the Section 279 of the Income Tax Act clearly indicates that to proceed against any person for the offences referred in Section 279 of the Income Tax Act, previous sanction of the Principal Commissioner or Commissioners (appeal) or the Appropriate Authorities is required. In the given case, the prosecution has been launched for the offences under Section 276C(1) and 277 of the Income Tax Act as against the husband Mr. Karti P Chidambaram Revision Petitioner in Crl.R.C.No.510 of 2020 and for the offences under Section 276C(1), 277 and 278 of the Income Tax Act as against both the wife and husband viz., Mr. Karti P Chidambaram and Tmt. Srinidhi Karti Chidambaram, the Revision Petitioners in Crl.R.C.No.511 of 2020. 15. It is useful to refer Section 276 C(1) and 276C(2) of the Income Tax Act. "276C.Wilful attempt to evade tax, etc. (1) If....
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....lfully attempts" employed in the above provision is an inclusive one. The explanations makes it very clear that to maintain the prosecution, the so called false entry or statement containing the books or account or other documents ought to have been in the possession or control of such person or and such person makes any false entry or statement in such a books of account or other document or wilfully omitted or caused to be omitted any relevant entry or statement in such books of account or other documents; or causes any other circumstance to exist which will have the effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this Act. The essential ingredients of the above sections makes it clear that any statements or incriminating materials either should come from the accused or very strong material unearthed during search or survey are required to maintain prosecution under Section 276C or 277 of the Income tax Act. 18. In the light of the above provision when entire complaint read same show that the Survey under Section 133(A) was carried out in the case of M/s. Advantage Strategic Consulting Pvt. Ltd., and other entities on 01.12.20....
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.... "136. Proceedings before income- tax authorities to be judicial proceedings: Any proceeding under this Act before an income- tax authority shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purposes of section 196 of the Indian Penal Code, 18603 (45 of 1860 ) 4 and every income- tax authority shall be deemed to be a Civil Court for the purposes of section 195, but not for the purposes of Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974 )]. D.- Disclosure of information." 20. As indicated above Section 136 of the Income Tax Act, clearly spelt out the nature of the proceedings under the Income Tax Act. When all the proceedings before the Assessment Officer under the Act deemed to be judicial proceedings and officer deemed to be a civil court, any such false declaration or false returns filed before the Assessing Officer such act of the assessee certainly punishable under Section 193 of I.P.C. In such case there must be finding to the effect that the statement given by the assessee during the assessment proceeding is false, has to be recorded by the officer concerned in the reasseement proceedings. With....
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....of some other public servant to whom he is administratively subordinate; (b) (i) of any offence punishable under any of the following sections of the Indian Penal Code (45 of 1860 ), namely, sections 193 to 196 (both inclusive), 199, 200, 205 to 211 (both inclusive) and 228, when such offence is alleged to have been committed in, or in relation to, any proceeding in any Court, or (ii) of any offence described in section 463, or punishable under section 471, section 475 or section 476, of the said Code, when such offence is alleged to have been committed in respect of a document produced or given in evidence in a proceeding in any Court, or (iii) of any criminal conspiracy to commit, or attempt to commit, or the abetment of, any offence specified in sub- clause (i) or subclause (ii), except on the complaint in writing of that Court, or of some other Court to which that Court is subordinate." 23. Admittedly, in this case neither the false Return nor any false statement or verification done before the Deputy Director of Income Tax Act to invoke such provision. Prosecution stand is that since some materials have seized in connection with the under Reportin....
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....any false statement given before him deemed to be made within the meaning of 193 of I.P.C. The Apex Court while dealing with Section 37(4) Income Tax (old Act) held that any false evidence or declaration given any proceeding under the Act deemed to be a judicial proceedings and only complaint is maintainbale as contemplated under section 195 of Cr.P.C.. It is also held that Section 195 of the CR.P.C.provides for exception to the ordinary rule that any person can make a complaint in respect of commission of an offence triable under Section 4(h) of the Cr.PC. 25. The Apex Court in Babita Lila and Another vs. Union of India [(2016) 9 Supreme Court Cases 647] has held that the complaint made by the Deputy Director of Income Tax Department for alleged false statement made during the income tax search proceedings under Section 131 of the Income Tax Act not maintainable. Such complaint cannot be maintainable by the Deputy Director of Income Tax Department as he is not a court or forum or authority to whom appeal would lie from any decision or action of the Income Tax Officer named in 131 proceedings. 26. In the above case search operation was conducted at the residence of the appell....
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....ing on the proceedings before it is imminent so that it may take also into consideration the order to be passed therein. The prosecution mainly relied upon this Judgement to contend that pendency of reassessment proceedings cannot be a bar to institution of the criminal prosecution under Section 276C and 277 of the Income Tax Act. In the above case, search was conducted at the residence of the Assessee under Section 132 of the Act, which resulted in the seizure of several documents and account books which revealed the suppression of purchase of chicory seeds, the existence of several bank accounts, fixed deposits, investments in the name of his wife and daughters and several bank accounts not disclosed in the statements filed along with the return. When the incriminating material seized from the very assessee and the statement under Section 132 of the Income Tax Act from him, the Apex Court has held that there is no bar for institution of criminal prosecution for the offence under Section 276C and 277 of the Income Tax Act. 30. In G.L. Didwania & Another vs. Income Tax Officer and Another [1995 Supp (2) SCC 724] the Honourable Supreme Court has held as follows: "4. In t....
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....e record that the firm was a genuine firm and the assessee could not be prosecuted for filing false returns and, therefore, quashed the prosecution. In P.Jayappan vs. S.K.Perumal, First Income-Tax Officer, Tuticorin, 1984 Supp. SCC 437, this Court observed that the pendency of the reassessment proceedings under the Act cannot act as a bar to the institution of the criminal proceedings and postponement or adjournment of a proceedings for unduly long period on the ground that another proceedings having a bearing on the decision was not proper. 32. Similarly in a judgment in K.C.Builders and another vs. Assistant Commissioner of Income Tax [(2004) 2 SCC 731] the Honourable Supreme Court has held that the Tribunal has set aside the order of concealment of income and penalties, there is no concealment in the eye of law. Therefore, the prosecution cannot be proceeded with the complainant and further proceedings will be illegal and without jurisdiction. 33. In Radheshyam Kejriwal vs. State of West Bengal and Another [(2001) 3 SCC 581] the Honourble Apex Court has held as follows: "38. The ratio which can be culled out from these decisions can broadly be stated as follows :-....
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.... different authority not maintainable, however, held that Section 276(C)(1) and Section 277(i) of the Income Tax Act are independent of Section 193 or 196 I.P.C. 37. In G.S.R. Krishnamurthy vs. M. Govindaswamy [1991 SCC Online Mad 580] also held that in the course of the same transaction distinct offence are made out apart from commission of offences falling within the ambit or the purview of Section 195(1)(b)(i) Cr.P.C. and a complaint had been lodged in respect of all the offences without a complaint emanating from the court under the provisions of section 195(1)(b)(i), Criminal Procedure Code, the entirety of the prosecution shall not stand vitiated and, if at all, that part of the prosecution as relatable to the offences falling within the ambit of section 195(1)(b)(i), Criminal Procedure Code, alone would become invalid and the prosecution in respect of other offence has to be continued in the manner allowed by law. 38. In the above case also factually distinguishable wherein also the accused in the statement recorded during the course of the search has confessed to having received the amount. only on the strong materials collected from the accused the prosecution launch....
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.... on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 40. The above judgement makes it clear that at the moment the search is conducted the proceedings have to be initiated under Section 153 and Assessment can be based only on the seized material. 41. A conspectus of various judgments referred above, it can be seen that though the prosecution is permissible during the assessment or reassessment proceedings, the Supreme Court has consistently held that any prosecution must await of any assessment or reassessment proceedings. In R. Vijayalakshmi and Another vs. Income Tax Officer [1995 216 ITR 173 Mad.]it is held that when there is a prima facie case for a commission of offence the court has to frame charges without going to ....
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....om third parties, the prosecution will not be maintainable. The intention of the legislature is only to prosecute the persons where concrete materials unearthed during the search or survey etc., It is also fortified by the very policy of the Government. It is useful to refer Circular No.24 of 2019 issued by the Government of India, Ministry of Finace , Department of Revenue (Central Board of Direct Taxes). The circular reads as follows: " Circular No. 24 /2019 F.No.285/08/2014-IT(Inv. V)/349 Government of India Ministry of Finance Department of Revenue (Central Board of Direct Taxes) ******* Room No. 515, 5th Floor, C-Block, Dr. Shyama Prasad Mukherjee Civic Centre, Minto Road, New Delhi -110002. Dated: 09.09.2019 Subject: Procedure for identification and processing of cases for prosecution under Direct Tax Laws-reg. The Central Board of Direct Taxes has been issuing guidelines from time to time for streamlining the procedure of identifying and examining the cases for initiating prosecution for offences under Direct Tax Laws. With a view to achieve the objective behind enactment of Chapter XXII of the Income-tax Act, 1961 (the Act)....
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....Principal Commissioner or Commissioner or Commissioner (Appeals) or the appropriate authority. For proper examination of facts and circumstances of a case, and to ensure that only deserving cases below the threshold limit as prescribed in Annexure get selected for filing of prosecution complaint, such sanctioning authority shall seek the prior administrative approval of a collegium of two CCIT/DGIT rank officers, including the CCIT/DGIT in whose jurisdiction the case lies. The Principal CCIT (CCA) concerned may issue directions for pairing of CCsIT/DGIT for this purpose. In case of disagreement between the two CCIT/DGIT rank officers of the collegium, the matter will be referred to the Principal CCIT(CCA) whose decision will be final. In the event that the Pr. CCIT(CCA) is one of the two officers of the collegium, in case of a disagreement the decision of the Pr. CCIT(CCA) will be final. 4. The list of prosecutable offences under the Act specifying the approving authority is annexed herewith. 5. This Circular shall come into effect immediately and shall apply to all the pending cases where complaint is yet to be filed. 6. Hind version shall follow. ....
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.... other third parties. As held by the Division Bench of Delhi High Court, reassessment or assessment order has to be passed only based on the materials seized during search. On such assessment, when the Assessment Officer comes to the conclusion that there is a wilful suppression to evade tax or under reporting etc., certainly the complaint is maintainable. In the case on hand, the Deputy Director had filed the complaint merely on the basis of his opinion. It is also relevant to note that the survey was originally conducted on 01.12.2015. Despite the above facts, scrutiny under 143 of the Income Tax Act, in respect of one of the assesses was completed on 30.12.2016. Despite unearthing some materials, the assessments were scrutinised and completed in respect of both the Assessees before search in the year 2018. Thereafter it appears that notice under Section 148 was also issued. However no Assessment Order has been passed. It is the contention of the Department that as the Notice under Section 153(C) of the Income Tax Act has issued, previous Returns are abated and it has to be passed afresh. 46. Be that as it may. Now, the fact remains that the prosecution was launched for the al....
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....which shall not be less than six months but which may extend to seven years and with fine; (ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine." 47. To attract the offence the assessee did not do any of the act required to constitute the offence of 277 of Income Tax Act before the Deputy Director of the Income Tax Department. Whereas it is admitted that the Returns were filed before the Assessing Officer by the Assessee and the verification is also done by them while fling the return. Whether such verification are false or not has to be decided by the Assessing Officer before whom such verification has filed. Furth er, mere showing ignorance by one of the assessees by maintaining that only her husband is aware of the return such conduct cannot be construed as abetment to atrract the offence under Section 278 of the Incomt Tax Act. To attract the offence of abetment there must be materials to show that she has instigated or invites her husband to commit offence. Therefore, this court is of the view that the offence under Section 278 not at all attracted against accused. ....