TaxTMI 
TaxTMI 
2024 (1) TMI 1007
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.... cases call in question proceedings initiated against the petitioners under Section 276C of the Income Tax Act, 1961 ('the Act' for short). Since issues raised and facts leading to registration of crime in every one of these cases are similar, they are taken up together and considered in this common order. 2. Facts leading to initiation of proceedings have a slight variation from petition to petition. Therefore, I deem it appropriate to succinctly note the facts in each of the petitions. 3. The petitioners in all these cases are income tax assesses for decades. Criminal Petition Nos. 909 and 4590 of 2017 concern one Anurag Bagaria. He claims to be a businessman and is assessed to pay tax in his individual capacity right from 1977. At the relevant point in time, the petitioner while filing his returns under Section 139 of the Act, claimed certain deductions under Chapter VI-A and in particular, deductions under the heads of Long-Term Capital Gain/Short Term Capital Loss. Long after the said deductions, sometime around September, 2015 the Income-Tax Department conducts search under Section 132 of the Act and later registers a crime on 30-07-2016 which becomes a crime in C.C. No....
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....scripts. In Criminal Petition Nos. 912 and 4594 of 2017 and Criminal Petition Nos. 913 and 4595 of 2017 which belong to the Companies, the allegation is the same. The financial year vary from 2010-11 to 2012-13. Here the Company has claimed capital gain of Rs. 19,22,44,266/- by trading with the same Companies. In Criminal petition No. 913 of 2017, the Company is said to have claimed long term capital gain of Rs. 1,93,02,738/- by trading with the same Company. Therefore, the solitary stream of allegation that runs qua the petitioners in all these cases is that the petitioners have registered long term capital gain or short term capital loss and thus the claims registered are bogus. It appears that all these claims so registered by the respective income tax assessees for the year 2010-11 which runs through 2012-13, the claims were accepted by the Income-Tax Department. At a later point in time, it was found that these claims had some suspicion. Based thereon assessment proceedings were instituted under the Income Tax Act for levy of penalty and simultaneously search was conducted under Section 132 of the Act. Statements of assessees were recorded under sub-section (4) of Section 132 ....
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....ction 482 of the CrPC on any of the grounds in favour of assessees who have willfully evaded payment of tax. Both the counsel appearing for assessees and revenue have relied on several judgments which would bear consideration according to their relevance in the course of the order. 9. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the material on record. 10. The afore-narrated facts are not in dispute. The petitioners, be it individuals or Companies, now alleged of similar offences are all income-tax assessees for several decades. Between the years 2010-11 and 2012-13 individuals and Companies had registered two claims - one deduction for long term capital gain and the other deduction for short term capital loss while filing their returns under Section 139 of the Act. All was well up to September, 2015. The Department conducted search on all the petitioners herein under Section 132 of the Act. Section 132 of the Act reads as follows: "132. Search and seizure.-(1) [Where the [Principal Director General or Director General] or Director or the [Principal Chief Commissioner or Chief Commissioner] or [Princ....
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....reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available; (ii-a) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing; [(ii-b) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) of Section 2 of the Information Technology Act, 2000, to afford the authorised officer the necessary facility to inspect such books of account or other documents;] (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search: ....
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....wered by the Board to do so.] [Explanation.- For the removal of doubts, it is hereby declared that the reason to believe, as recorded by the income-tax authority under this sub-section, shall not be disclosed to any person or any authority or the Appellate Tribunal.] (1-A) Where any [Principal Chief Commissioner or Chief Commissioner] or [Principal Commissioner or Commissioner], in consequence of information in his possession, has reason to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by the [Principal Director General or Director General] or Director or any other [Principal Chief Commissioner or Chief Commissioner] or [Principal Commissioner or Commissioner] or Additional Director or Additional Commissioner] [or Joint Director or Joint Commissioner]to take action under clauses (i) to (v) of sub- section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under sub-section (1), such [Principal Chief Commissioner or Chief Commissioner] or [Principal Commissioner or Commissioner] may, notwithstan....
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....moval of doubts, it is hereby declared that the examination of any person under this sub- section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income Tax Act, 1922 (11 of 1922), or under this Act. (4-A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a do....
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.... sub-section (1), the books of account or other documents, or any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in Sections 132-A and 132-B referred to as the assets) seized under that sub-section shall be handed over by the authorised officer to the Assessing Officer having jurisdiction over such person within a period of sixty days from the date on which the last of the authorisations for search was executed and thereupon the powers exercisable by the authorised officer under sub-section (8) or sub-section (9) shall be exercisable by such Assessing Officer.] [(9-B) Where, during the course of the search or seizure or within a period of sixty days from the date on which the last of the authorisations for search was executed, the authorised officer, for reasons to be recorded in writing, is satisfied that for the purpose of protecting the interest of revenue, it is necessary so to do, he may with the previous approval of the Principal Director General or Director General or the Principal Director or Director, by order in writing, attach provisionally any property belonging to the assessee, and for the said purposes, the provisi....
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....here free ingress thereto is not available; (ii) for ensuring safe custody of any books of account or other documents or assets seized. [Explanation 1.- For the purposes of sub-sections (9- A), (9-B) and (9-D), the last of authorisation for search shall be deemed to have been executed,- (a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued; or (b) in the case of requisition under Section 132-A, on the actual receipt of the books of account or other documents or assets by the authorised officer.] Explanation 2.-In this section, the word "proceeding" means any proceeding in respect of any year, whether under the Indian Income Tax Act, 1922 (11 of 1922), or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year." (Emphasis supplied) Section 132 deals with search and seizure. Sub-section (4) of Section 132 dea....
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....to evade any tax, payable or interest chargeable or imposable under this Act or the payment thereof shall include a case where any person- (i) has in his possession or control any books of account or other documents (being books of account or other documents relevant to any proceeding under this Act) containing a false entry or statement; or (ii) makes or causes to be made any false entry or statement in such books of account or other documents; or (iii) wilfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents; or (iv) 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 or the payment thereof." (Emphasis supplied) Section 276-C makes the person liable for punishment and penalty if one willfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable. Sub-section (2) of Section 276- C also deals with a person who willfully attempts to evade tax. The proceedings are instituted for offences punishable under Section 276-C of the Act. The subm....
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.... the penalty falls to be measured is significant. Unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in Section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum, Vol. 85, p. 580, para 1023: "A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws." 5. Accordingly, we hold that the element of mens rea was not required to be proved in the proceedings taken by the Income Tax Officer under Section 271(1)(a) of the Income Tax Act against the assessee for the assessment years 1965-1966 and 1966-1967." (Emphasis supplied) The Apex Court holds that Section 276-C of the Act can be invoked only if a person willfully fails to furnish in due time the return of income required under ....
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....N. Shroff case [(2007) 6 SCC 329 : (2007) 8 Scale 304] has not considered the effect and relevance of Section 276-C of the IT Act. Object behind enactment of Section 271(1)(c) read with Explanations indicate that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276-C of the IT Act." (Emphasis supplied) It is also to the same effect. The Apex Court, later, in the case of COMMISSIONER OF INCOME TAX, AHMEDABAD v. RELIANCE PETROPRODUCTS PRIVATE LIMITED (2010) 11 SCC 762 has held as follows: ".... .... .... .... 15. It was only on the point of mens rea that the judgment in Dilip N. Shroff v. CIT [(2007) 6 SCC 329] was upset. In Union of India v. Dharamendra Textile Processors [(2008) 13 SCC 369] after quoting from Section 271 extensively and also considering Section 271(1)(c), the Court came to the conclusion that since Section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurat....
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....f income. 20. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the assessing officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the legislature." (Emphasis supplied) The Apex Court again holds that mens rea is an element that is to be present in a proceeding under Section 271 of the Act. The mere fact of not accurate tax, not exact tax or erroneous tax would not lead to the proceedings under Section 276 of the Act. 12. Following all the aforesaid judgments, a co-ordinate Bench of this Court in the case of M/S VYALIKAVAL HOU....
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....ns to the petitioners. Aggrieved by the impugned action, the petitioners have invoked the jurisdiction of this Court under Section 482 of Cr.P.C. seeking to quash the impugned proceedings. .... .... .... .... 8. The gist of the offence under Section 276C(2) of the Act is the willful attempt to evade any tax, penalty or interest chargeable or imposable under the Act. What is made punishable under this Section is an "attempt to evade tax penalty or interest" and not the actual evasion of tax. 'Attempt' is nowhere defined in the Act or in the Indian Penal Code. In legal echelons 'attempt' is understood as a "movement towards the commission of the intended crime". It is doing "something in the direction of commission of offence". Viewed in that sense, in order to render the accused guilty of "attempt to evade tax" it must be shown that he has done some positive act with an Intention to evade tax. 9. In the instant case, the only circumstance relied on by the respondent in support of the charge levelled against the petitioners is that, even though accused filed the returns, yet, it failed to pay the self- assessment tax along with the returns. ....
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....ple to the present fact situation, the delay caused by the petitioner-Company in making payment of the income tax cannot be said to be evasion. 10.2. The fact remains that income tax has been paid and the authorities have received the necessary taxes. If at all, for the said delay, there could be an interest component which could have been levied. 10.3. Hence, I answer Point No. 3 by holding that delayed payment of Income Tax would not amount to evasion of tax, so long as there is payment of tax, more so for the reason that in the returns is an there filed acknowledgement of tax due to be paid." (Emphasis supplied) What would unmistakably emerge from a coalesce of the judgments rendered by the Apex Court and that of this Court is that, in such cases what is necessary to be present is mens rea. Incorrect claim or erroneous claim would not amount to willful evasion. Erroneous claim in certain circumstances can be erroneous interpretation of law. 13. On the bedrock of the principles laid down in the afore- quoted judgments, the case at hand requires to be noticed. The offence alleged against each of the petitioners is as afore-quoted. The defence of the peti....
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....he accused under the umbrella of crime. The co-ordinate Bench in the case of M/s. CONFIDENT PROJECTS (INDIA) PVT LTD., has framed a specific issue on an identical order of taking of cognizance and has answered it as follows: "12. Answer to Point No. 5: Whether the order of cognizance by the Economic Offences Court is proper and correct? 12.1. The order of cognizance in both cases is identical and is extracted below:- "Perused Complaint and Connected papers, materials placed proceed against the A-1 to 8 to take Cognizance. Hence "Cognizance" taken for the offence P/U/Sec 276c(2) and 277 R/W/S. 2788 of the Income Tax Act, 1961. Register the case as C.C. in 3 register and issue Accused Summons to accused No. 1 to 8 through RPAD If RPAD charges paid R/by-27-05-2016". 12.2. Shri Vivek Holla, learned counsel for the petitioners has contended that the Court taking Cognisance is required to apply its mind while taking Cognisance, the above order passed does not indicate such application of mind as such the order of Cognisance is to be set aside. 12.3. The Hon'ble Apex Court as also this Court in a catena of decisions has categorically held t....
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...., Cognisance could be taken, if No, taking Cognisance could be refused. The only manner of ascertaining the above is by the manner of recordal made by the Court in the order taking Cognisance. The order passed by the court taking Cognisance would therefore reflect such application of mind to the factual situation 12.11. In the above background the order passed by the Magistrate does not indicate any such consideration by the Magistrate. 12.12. It can be ex facie seen that the order of the Magistrate does not satisfy the requirement of arriving at a prima facie conclusion to take Cognisance and issue process let alone to the accused residing outside the Jurisdiction of the said Magistrate. 12.13. Mere reference to the provisions in respect of which offences are alleged to have been committed would not be in compliance with the aforesaid requirement of the statutes as also the various decisions of the Honb'le Apex Court extracted hereinabove. 12.14. When there are multiple accused, the order is required to disclose the application of mind by the Court taking Cognisance as regards each accused. 12.15. The Court taking Cognisance ought t....