TaxTMI 
TaxTMI 
2025 (7) TMI 1440
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....ndation of the Criminal Complaints, has been set aside in Appeal by the Income Tax Appellate Tribunal (ITAT) and nothing survives for prosecution of the Complaints. 3. Briefly stated, Petitioner filed his original Income Tax Return for the year 2006-07 and 2007-08, by declaring his total income for the said years. The original Income Tax Return for the year 2006-07 and 2007-08, got finalized and even Refund was given to the Petitioner under Section 143(1) Income Tax Act, 1961 (hereinafter referred to as the IT Act) on 25.05.2007. 4. An information was received from the French Government under the Double Taxation Avoidance Agreement (DTAA) in 2011, indicating that the Petitioner along with certain others, held bank accounts in HSBC Private Bank (Suisse), SA, Switzerland. The profile of the Petitioner was also linked to four other accounts, namely: Portland Holdings Ltd.; Shagun 21 (formerly Shagun, until 25.11.2005); Willaston Investments Ltd., and Chotuman 21 (formerly Chotuman, until 25.11.2005), in which he was shown as the beneficial holder. 5. Further, the account of CHOTUMAN-21 where he is shown as the Account holder, had names of his brother and wife as Attorney and ....
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..... 13. Copies of the documents received under DTAA, were once again furnished to the Petitioner. He filed his Reply in respect of the said information dated 20.01.2015, wherein he reiterated his denial of having any knowledge or association with any Swiss Bank Account. 14. A Show Cause Notice was issued to the Petitioner on 04.03.2015 essentially on the basis that the said document received from the French Government containing details of the Petitioner's Bank Accounts, which could not have been accessed without his consent. 15. In Reply to the said Show Cause Notice, it was submitted that in the document received from the French Government, there was neither any specific source of information mentioned, nor were there any details of the Banks or the Government of any specific Country who had provided the said information. The said document neither had been authenticated by the concerned Bank or any Competent Authority. 16. It is further stated in the Reply to said the Show Cause Notice that further information was being sought from the Swiss Authorities, which shows that the Revenue itself is not sure about the information received. A photocopy of the News Report dated ....
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.... of Income; and non-compliance of Notice dated 18.07.2013 wherein the Petitioner was required to sign "the Consent Form" and thereby committed offences punishable thereunder, respectively. 23. Petitioner has sought quashing of these Complaints on the ground that the Orders of the AO and of the CIT (A) merged into the Order of the ITAT, being the final Fact-Finding Body under the Income-Tax Act, 1961. Once the Assessment Order passed by the AO itself is set aside, the criminal proceedings initiated against him, would become infructuous. 24. The Petitioner has relied on State of Haryana v. Bhajan Lal, AIR 1992 SC 604, where the Supreme Court held that interference under Article 226 or Section 482 Cr.P.C. may be warranted to prevent abuse of process or to secure justice, though this power is to be exercised sparingly. 25. Reliance is also placed on Baijnath Jha v. Sita Ram &Anr., 2008 (3) JCC 1823, where the Court noted that judicial process should not be an instrument of oppression, and the discretion under Section 482 Cr.P.C. must be exercised with caution. 26. Further reliance is placed on Uttam Chand & Ors. v. Income Tax Officer, (1982) 2 SCC 543, and K.T.M.S. Mohammed....
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.... of France under the Double Tax Avoidance Treaty, that the Petitioner held undisclosed HSBC Switzerland Accounts and there is no reason to doubt the veracity of the said information. The Petitioner never disclosed about these Bank Accounts neither in his Returns filed under Section 139 IT Act nor in response to the Notice under 153 (A) IT Act. 33. Reliance was placed on the case of S. Surya v. DCIT, (2022) 288 Taxman 209 (Del), to assert that Adjudication proceedings are not a bar to criminal proceedings. If adjudication proceedings were decided on technical grounds and not on merits, proceedings will continue and Assessee cannot take advantage of adjudication proceedings. 34. The Respondent has also relied upon the judgement of this court in the case of Karan Luthra v. Income Tax Officer, (2019) 259 Taxmann.com 500 (SC), asserting that non-compliance with the Notice under Section 142(1) of the IT Act and the questionnaire issued by the AO and refusal to cooperate, including not signing Consent Forms to allow verification from Swiss Banks, are separate offences that have not been looked into by the ITAT. 35. Reliance is placed on the case of Jayanti Dalmia v. DCIT, (2022)1....
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....arch, incriminating material was found against the Assessee. 43. Respondent has itself averred in paragraph 9 of the impugned Assessment Order dated 23.03.2015, which stated that the Respondent had sought further information from the Swiss Authorities about the impugned document or the alleged Bank Account, though nothing has been received so far. Thus, mere surmise and conjectures is not enough to prosecute a person alleging a criminal offence under Section 276D. 44. Section 276C (1) of the IT Act applies only where the Revenue clearly proves beyond doubt, a willful attempt to evade any tax, penalty or interest chargeable or leviable under the Act by the Assessee. 45. In so far as offence under Section 277 IT Act is concerned, Petitioner submits that nothing has been placed on record by the Revenue authorities to show that the Assessee has made a false statement in any verification under the Act. 46. Further, in Reply to the Notice dated 18.07.2013 sent under Section 142(1), Petitioner had stated that he had no connection with any of the alleged Accounts and transactions as mentioned, and therefore, there was no question of providing a signed Consent Letter. Any such L....
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.... want of incriminating material? I. Whether the information received from France under DTAA can be relied upon to initiate criminal case against the accused? 54. The Petitioner had filed Income Tax Returns for the Year 2006-07 and 2007-08 by declaring his total income for the said years. The Returns were finalized and refund was given to the Petitioner under Section 143(1) IT Act. 55. The case of the Respondent was that in 2011, they received some documents from the French Government under Double Taxation Avoidance Agreement indicating that the Petitioner along with certain other persons held Bank accounts in HSBC, Switzerland which led to reopening of the Assessment Orders of the years 2006-07 and 2007-08. On the basis of this information and unauthenticated documents, raid was conducted at the premises of the Petitioner, but admittedly no documents were recovered. Despite this, the Assessment for the Years 2006-07 and 2007-08 was reopened and the Assessment Officer imposed fresh penalties. However, these penalties as imposed upon the Petitioner was set aside by ITAT vide its Order dated 15.02.2018. 56. Indisputably, if credible information about a wrongdoing associate....
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...., was fraudulent or there was any concealment of true income. 62. This aspect also finds reinforcement from the Order of the ITAT dated 15.02.2018 which also quashed the revised Assessment Order made purely on the basis of unauthenticated documents so received under DTAA, by observing that there was no basis for revising the Income tax Return of the Petitioner. There was nothing even remotely to suggest that either the Assessee was having any bank account in Switzerland with HSBC or he was in any way linked with these bank accounts It thus concluded that if no incriminating material has been found during the course of search, no additions can be made in the Assessment year where Assessments had attained finality. This is more so when the AO did not confront the Assessee with any material which could be said to have been recovered from the possession of the Assessee in the course of search with regard to deposits or any link with Foreign Bank Accounts. It was further noted that CIT(A) while upholding the Order of AO had also given a finding, not on account of any document or evidence qua the linking of foreign account with the Assessee but only on the basis of information receive....
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.... material evidence, is not sufficient to make out a prima facie case and there cannot be a presumption that a person has committed any wrongdoing. Thus, mere surmise and conjectures is not enough to prosecute a person alleging a criminal offence under Section 276D. 69. The Respondent has also relied on the case of S.J. Surya v. DCIT (2022) 139 Taxman.com wherein it was observed that "when it comes to quashing a Criminal Proceedings, it is very well settled that uncontroverted averments in the Complaint without any addition or subtraction should be looked into to examine whether an offence can be made out are not. It was held that only when the Respondent/Complainant makes out a prima-facie case to proceed against the Petitioner for the offences alleged in the Complaint. Section 278 (e) of the Income Tax Act, 1961, can the Court presume culpable mental state of the accused, unless the accused shows that he had no such mental state with respect to the act charged as an offence in the prosecution. 70. In view of the aforesaid judgement, it is reaffirmed that presumption of guilty mind under S. 278E IT Act would arise only if prima facie case is disclosed in the Complaint. As not....
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....lt or else there was no reason for giving the consent to confirm the information received under DTAA. 78. The Consent Waiver Form requires the Assessee to give his consent to enable the Tax Authorities to obtain information from the Swiss Banks about the bank accounts held by the Assessee therein. The Consent Form was a part of the Notice issued under of the IT Act. It is contended by the Respondent that Non-compliance with the Notice so issued, leads to imposition of penalty as provided under Section 271(1)(b) of the IT Act. Additionally, the same is also an offence under Section 276D IT Act. 79. In the light of the facts of this case, first and the foremost, there was no basis for the Respondent to have sought the signing of the Consent Waiver Form. It was essentially a roving enquiry with no authentic basis and the Petitioner cannot be compelled to be a witness against himself. Had there been some concrete incriminating evidence with authenticated details of Foreign account, the non-signing of Consent waiver Form may have led to some adverse inference, but in the given circumstances, non-signing of Consent Waiver Form, cannot be considered as a basis for criminal prosecuti....
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....y the Order of ITAT on the ground that there was no basis for making such additions or imposing penalty. Moreover, the penalty for non-signing of Consent Waiver Form had already been imposed under Section 271 of IT Act and the Appeal preferred therein has already been dismissed by CIT(A). Therefore, when the ITAT concluded that there was no basis for making additional Assessment, no adverse inference on account of non-signing of Consent Waiver Form by the Assessee could be termed as an act of concealing his true income. 86. It is therefore, held that non-signing of Consent Waiver Form in the present case, could be penalized under Section 271 of IT Act, which has already been done but this act in itself, especially on basis of some unauthenticated information cannot lead to initiation of criminal proceedings against the accused. III. Whether the Criminal Complaints under Sections 276(1), 276D, and 277(1) of the IT Act can be sustained when the Assessment Order has been set aside by ITAT for want of incriminating material? 87. To understand the rival contentions, it would be pertinent to first understand the contours of Sections 276C(1)(i), 276 (D) and 277(1) IT Act under wh....
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.... (1) of section 142, such accounts and documents as are referred to in the notice or wilfully fails to comply with a direction issued to him under sub-section (2-A) of that section, he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine equal to a sum calculated at a rate which shall not be less than four rupees or more than ten rupees for every day during which the default continues, or with both." 95. The entire prosecution rests on non-signing of the Consent Waiver Form. As discussed above in detail, the basis for compelling him to sign the Consent Waiver Form was the unauthenticated information of Swiss Bank Accounts, which has already been discussed to be not justiciable. He has already been penalized under S. 271 (b) for this act. Therefore, no offence is even prima facie disclosed under this S. 276 (D) IT Act. 96. The third offence for which the Petitioner is sought to be prosecuted is S. 277 which deals with False statement in verification, etc. It reads as under: "S.277. If a person makes a statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which ....
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....ly denied by him, no prima facie offence is established by the prosecution. 102. Likewise, non-signing of Consent Waiver Form by no interpretation can be taken as proof of undisclosed income of the Petitioner or considered as evidence to prima facie establishing any case for criminal prosecution against the Petitioner. Final Analysis: 103. The criminal prosecution in the present petition rests solely on these non-existent Bank Accounts. The findings of ITAT also confirms and corroborates that there exist no Facts, no Accounts, no False Statement and no Falsification of Record, which merit the prosecution under Sections 376C(1)(i), 276D and 277(1) of IT Act. 104. Similar facts as in hand were considered in the case of CIT vs. Kabul Chawla (Supra) wherein, it has been held that under 153A, Assessment cannot be made arbitrarily or without any relevance or nexus with the seized material. The Assessment has to be made only on the basis of seized material. In the absence of any incriminating material, the completed assessment can be reiterated and the Assessment or reassessment can be abated. It was further explained that where the Assessments are pending, the jurisdiction to....
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....o hold that an adjudication in favour of the Assessee, can aid the defence if all the issues raised in the Complaint, are discussed and decided on merits. 110. In the present case, the same facts were subject matter of Income Assessment before ITAT, i.e. alleged undisclosed Swiss Bank Accounts, which were held to be not established. 111. It would be significant to refer to the principles laid down by the Hon'ble Supreme Court in CIT v. Abhisar Buildwell (P) Ltd. (Supra) and by this Court in CIT v. Kabul Chawla (Supra), wherein it is held that no additions can be made in respect of completed and unabated Assessments in the absence of any incriminating material discovered during the search under Section 153(A). 112. Reference be also made to the case of PCIT vs. Best Infrastructure (India) Pvt. Ltd. (2017) 397 ITR 82, wherein similar facts were considered by the Coordinate Bench of this Court. It was held that during the course of search, statements recorded under Section 132(4) by themselves, do not constitute incriminating material and assumption of jurisdiction by the AO under Section 153A, solely based on the said statements is unsustainable. It was thus, concluded t....
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....t abated. 115. The Respondent has relied upon Sasi Enterprises Vs. Assistant Commissioner of Income Tax (Supra) to contend that the Assessment proceedings are not related to criminal prosecution and therefore, setting aside of the Assessment Order would not have any impact on the prosecution proceedings. The issue in the said case was whether non-filing of Income Tax Returns of the Partnership Firm, by the partners on the ground that the Assessment was being filed by the individual Partners, was tenable. The Assessee had sought to justify non-filing of Returns on behalf of Firm was that they had filed their Income statements and that Books of Account, had not been finalized. In this context, it was observed that a Firm is independently required to file Income Return and merely because partners of Firm in their individual Returns, disclosed that no Return has been filed by the Firm due to non-finalization of Books of Account, would not nullify the liability of Firm to file its Returns, as per Section 139(1) of the IT Act. Thus, it was observed that the prosecution can be initiated in the absence of culmination of Assessment proceedings, especially when the Appellant has not filed....