TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 106
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....276C(1) [Wilful attempt to evade tax, etc.] of the Income Tax Act, 1961, (in short "IT Act") for assessment year 2017-2018. The High Court vide the impugned judgement dismissed the quashing petition filed by the appellant. Challenging the same, he has knocked the doors of this Court preferring the instant appeals. The consequence of the dismissal of quashing petition has led to the appellant facing trial for an offence in which settlement was entered by the Revenue with the appellant, granting him immunity from levy of penalty. 3. Shorn of unnecessary details, the facts are that, on 24.04.2016, search under Section 132 [Search and seizure.] of the IT Act was conducted at the residence of the appellant, and unaccounted cash of Rs. 4,93,84,300/- was seized. After taking statement of the appellant under Section 132(4) of the IT Act, a show-cause notice was issued on 31.10.2017 as to why prosecution should not be initiated against him. On assailing the same in the writ petition filed by the appellant, it was dismissed on 17.11.2017 being premature, observing that issuance of show-cause notice is an administrative act and in absence of reply, it cannot be questioned in the writ petit....
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....rved that for the assessment year 2017-2018, the amount seized has not been shown in earnings, which may amount to evasion of proposed tax. The defence put forth by the appellant was that the seized amount was an earning of the assessment year 2016-2017 and not of assessment year 2017-2018 for which settlement has been arrived at as per the order of the Settlement Commission. The said defence did not find favour on the pretext that it can be taken by the appellant during trial. It was also observed that the complaint was filed prior and the application before the Settlement Commission was subsequent, therefore, the stand of the appellant indicating that the seized amount was income of the assessment year 2016-2017 may also be looked into during trial. The question of competence of DDIT to initiate the prosecution against the appellant under Section 279(1) of the IT Act also did not turn in favour of the appellant in the order impugned. ARGUMENTS OF THE APPELLANT 6. Mr. Preetesh Kapur, learned senior counsel for the appellant has strenuously urged that the order passed by the Settlement Commission in exercise of power under Sub-Section (4) of Section 245D shall be conclusive u....
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....stly, it is urged that after grant of immunity from the penalty by the Settlement Commission, continuation of the prosecution in violation of the guidelines would amount to gross abuse of the process of law, therefore, order impugned passed by the High Court may be set-aside quashing the complaint lodged by Revenue. ARGUMENTS OF THE RESPONDENTS 9. Per contra, Ms. Nisha Baghchi, learned senior counsel for the revenue has vociferously contended that the complaint was filed by the respondent-DDIT prior to filing of application under Section 245C of the IT Act, therefore, in terms of the first proviso to Section 245H(1) [Power of Settlement Commission to grant immunity from prosecution and penalty.], appellant cannot be given any immunity from the prosecution. It is urged that the prosecution under Section 276C(1) against a person is for wilful attempt to evade any tax imposable or penalty or interest chargeable under the IT Act, and is penal in nature. In the facts of the present case, unaccounted cash was found at the residence of the appellant which was not disclosed in the return of the assessment year 2017-2018. Therefore, even after passing an order by the Settlement Commis....
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....n, a wilful attempt to evade any tax, penalty 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." 12. From the above, it is clear that Section 276C deals with two situations. Sub-section (1) pertains to a wilful attempt to evade tax, penalty, or interest that is 'chargeable', 'imposable', or relate to 'under-reporting of income'. In contrast, sub-section (2) addresses the wilful attempt to evade the 'payment' of any tax, penalty, or interest under the Act. The....
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....fence under section 276C or section 277 in relation to the assessment for an assessment year in respect of which the penalty imposed or imposable on him under [section 270A or] clause (iii) of sub-section (1) of section 271 has been reduced or waived by an order under section 273A.] (2) Any offence under this Chapter may, either before or after the institution of proceedings, be compounded by the [Principal Chief Commissioner or Chief Commissioner] or a [Principal Director General or Director General]. (3) Where any proceeding has been taken against any person under sub-section (1), any statement made or account or other document produced by such person before any of the income-tax authorities specified in [clauses (a) to (g)] of section 116 shall not be inadmissible as evidence for the purpose of such proceedings merely on the ground that such statement was made or such account or other document was produced in the belief that the penalty imposable would be reduced or waived, [under section 273A] or that the offence in respect of which such proceeding was taken would be compounded. [Explanation.-For the removal of doubts, it is hereby declared that the p....
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....facilitating settlement in individual cases will have this advantage over general disclosure schemes that misuse thereof will be difficult and the disclosure will not normally breed further tax evasion. Each individual case can be considered on its merits and full disclosures not only of the income but of the modus operandi of its buildup can be insisted on, thus sealing off chances of continued evasion through similar practices. 2.33 To ensure that the settlement is fair, prompt and independent, we would suggest that there should be a high-level machinery for administering the provisions, which would also incidentally relieve the field officer of an onerous responsibility and the risk of having to face adverse criticism which, we are told, has been responsible for the slow rate of disposal of disclosure petitions. We would, therefore, recommend that settlements may be entrusted to a separate body within the Department, to be called the Direct Taxes Settlement Tribunal. It will be a permanent body with three members. The strength of the Tribunal can be increased later, depending on the work-load. To ensure impartial and quick decisions, and to encourage officers with integ....
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....ire in the minds of the taxpayers as to its fairness and impartiality. For this reason, we consider it to be of paramount importance that only persons who are known for their integrity and high sense of justice and fairness are selected for appointment on the Tribunal." 16. In furtherance to recommendations of the Wanchoo Committee, an amendment was brought adding Section 245H, specifying the power of the Settlement Commission to grant immunity from prosecution and penalty. The said provision is relevant, therefore, reproduced as thus: "245H. Power of Settlement Commission to grant immunity from prosecution and penalty.- (1) The Settlement Commission may, if it is satisfied that any person who made the application for settlement under section 245C has co-operated with the Settlement Commission in the proceedings before it and has made a full and true disclosure of his income and the manner in which such income has been derived, grant to such person, subject to such conditions as it may think fit to impose [for the reasons to be recorded in writing], immunity from prosecution for any offence under this Act or under the Indian Penal Code (45 of 1860) or under any other Ce....
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....y. Therefore, the ancillary question which arises is about the efficacy of the continuation of the complaint lodged, even though saved under the first proviso to Section 245H, hampering the power of the Settlement Commission to grant immunity from prosecution. 19. Mr. Preetesh Kapur, learned senior counsel, submits that as per the order of the Settlement Commission, it is clear that the assessee has disclosed all the facts, material for computation of his additional income without any suppression of account, therefore, in exercise of order passed under Section 245D(4), immunity from levy of penalty was granted. It is not a case wherein due to the fraud or misrepresentation, the case of the appellant was reopened as per Section 245D(6) within the time as specified. In such circumstances, there cannot be any mens rea or wilful attempt to evade tax, which may be brought against the appellant to prove the allegation as alleged by prosecution. Learned senior counsel referring to Section 245-I of the IT Act submits, the order of the Settlement Commission shall be conclusive as to the matters stated therein. Section 245-I is relevant, which reads thus: "245-I. Order of settlem....
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....iated? A case should be processed for launching prosecution immediately after the commission of offence comes to the notice of the authority concerned. However, if some more evidences can be gathered during any proceedings, it would be advisable to complete such proceedings to gather all relevant evidences before initiating the prosecution. The Apex Court has laid down that if penalty for concealment fails then the prosecution initiated on same material/basis must also fail (M/s K.C. Builders Ltd Vs CIT [265 ITR 344]). Therefore, it is advisable to initiate prosecution under section 276C(1) only after confirmation of concealment penalty by the ITAT. xx xx xx xx" 22. The said guideline was based on a judgment of 'M/s K.C. Builders Ltd. Vs. CIT' (2004) 2 SCC 731, wherein this Court laid down that if penalty for concealment fails, the initiation of the prosecution on the basis of the same material also fails, therefore, it was advised that after confirmation of concealment of penalty by ITAT, the prosecution may be lodged in terms as specified in the above circular dated 24.04.2008. 23. Similarly, on 09.09.2019, the Central Board of Direct Taxes (in short "CBDT....
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....plead that it is not valid. 16. We reject the submission to the contrary made by the learned counsel for the Revenue and in the affidavit by M.K. Gupta, working as Director in the Department of Revenue, Ministry of Finance. One should have thought that an officer of the Ministry of Finance would have greater respect for circulars such as these issued by the Board, which also operates under the aegis of the Ministry of Finance, for it is the Board which is, by statute, entrusted with the task of classifying excisable goods uniformly. The whole objective of such circulars is to adopt a uniform practice and to inform the trade as to how a particular product will be treated for the purposes of excise duty. It does not lie in the mouth of the Revenue to repudiate a circular issued by the Board on the basis that it is inconsistent with a statutory provision. Consistency and discipline are of far greater importance than the winning or losing of court proceedings." 26. Further, in 'Paper Products Ltd. Vs. CCE' (1999) 7 SCC 84, where the dispute related to classification of products for the purpose of tax, in the context of circulars issued and in that regard, this Court observe....
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.... that the Board cannot pre-empt a judicial interpretation of the scope and ambit of a provision of the Act. Also a circular cannot impose on the taxpayer a burden higher than what the Act itself, on a true interpretation, envisages. The task of interpretation of the laws is the exclusive domain of the courts. However, the Board has the statutory power under Section 119 to tone down the rigour of the law for the benefit of the assessee by issuing circulars to ensure a proper administration of the fiscal statute and such circulars would be binding on the authorities administering the Act." 28. The Constitution Bench in the case of 'Commissioner of Central Excise, Bolpur Vs. Ratan Melting & Wite Industries (2008) 13 SCC 1, on a reference made by three Judge Bench, addressing the conflict of difference of interpretation of a circular by the Central Board of Excise and Customs, and by this Court coupled with binding nature of the same, observed as follows - "7. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for co....
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....f our analysis on this question is that the CBEC Circular of 1-7-2002 is binding on the Revenue. If the show-cause notice issued by the Revenue is found to be contrary to the Circular, it would prima facie result in abrogation of the uniformity and consistency which is strongly emphasised upon in Ranadey Micronutrients [Ranadey Micronutrients v. CCE, (1996) 10 SCC 387]. It goes without saying that the Revenue's stance against its own circular can potentially lead to a chaotic situation where, with one hand, the Revenue would lay down instructions on how to interpret the relevant statutes and rules, and with the other hand, it would promptly disobey those very directions. Maintaining predictability in taxation law is of utmost importance and, for this reason, the Court should not accept an argument by the Revenue that waters down its own Circular as this would fall squarely within the contours of the prohibition outlined in Paper Products [Paper Products Ltd. v. CCE, (1999) 7 SCC 84]." 31. From the above precedents, this Court unambiguously held that that the circulars issued by the Revenue are binding on the authorities, and can tone down the rigour of the statutory provisio....
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....TTLEMENT COMMISSION ADDITIONAL BENCH 640, ANNA SALAI, NANDANAM, CHENNAI-600 035. * * * * * * PROCEEDINGS BEFORE THE ADDITIONAL BENCH OF THE INCOME TAX SETTLEMENT COMMISSION, CHENNAI ------------------------------------------------------------------------ Settlement Application No. : TN/CN54/2018-19/53-IT Date of filing of the application : 07.12.2018 ------------------------------------------------------------------------ xx xx xx xx PRAYER: xx xx xx xx Immunity from penalty and prosecution 6.1 The applicant has prayed for grant of immunity from levy of penalty and prosecution. It could be seen that proceedings u/s 276C(1) of the Income Tax Act, 1961 are pending before the Hon'ble High Court of Madras. In the circumstances, the applicant cannot be granted immunity waiver from prosecution, for the assessment years which are settled in this order. 6.2 However, the applicant has co-operated during the settlement proceedings. The applicant has disclosed all the facts, material to the computation of his additional income. Thus, the applicant has fully satisfied the provisions of section 245H. The overall additional ....
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....er shall, save as otherwise provided, be reopened in any proceeding under the Act or under any other law for the time being in force. 36. In view of the foregoing discussions in conclusion we can safely hold that the prosecution lodged with the help of proviso to sub-section (1) to Section 245H was in defiance to the circular dated 24.04.2008, which was in vogue. It was the duty of the PDIT and DDIT to look into the facts that in absence of any findings of imposition of penalty due to concealment of fact, the said prosecution cannot be proved against the assessee. It seems, even after passing the order by the Settlement Commission on 26.11.2019, it was brought to the notice of the High Court, but the authorities were persistent to pursue the prosecution without looking into the procedural lapses on their part. Such an act cannot be construed in right perspective and the Revenue have acted in blatant disregard to binding statutory instructions. Such willful non-compliance of their own directives reflects a serious lapse, and undermines the principles of fairness, consistency, and accountability, which in any manner cannot be treated to be justified or lawful. 37. It must also ....