TaxTMI 
TaxTMI 
2026 (9) TMI 712
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.... 2019, C.R Case No. 1099C/2019 & C.R Case No. 1100C/2019, under Section 276D/277 of the Income Tax Act, 1961, pending against them in the Court of learned Judicial Magistrate First Class, Kamrup (M), Guwahati, instituted by the respondent herein these petitions, pursuant to the same Assessment Order, dated 21.12.2018, being Order No. ITBA/AST/S/144/2018-19/1014486281(1), passed by the respondent No.1, as a common question of law is involved in all the three petitions and also being the parties involved are same in all the three petitions. 3. It is to be noted here that in Crl. Petition No. 896 of 2022, under Section 482 of the Code of Criminal Procedure, 1973, three petitioners, namely: (i) M/S Flamingo Breweries Private Limited, (ii) Shri Sanju Phangsho and (iii) Shri Bijoy Phangsho have prayed for quashing the C.R Case No. 1103C of 2019, pending against them. And in Crl. Petition No. 165/2022, the petitioner, namely, Shri Sanju Phangsho has prayed for quashing and setting aside the C.R Case No. 1099C/2019, pending against him and in Crl. Petition No. 168/2022, the petitioner, namely, Shri Bijoy Phangsho, has prayed for and quashing and setting aside ....
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.... in the learned Chief Judicial Magistrate, Kamrup (M), Guwahati, alleging inter-alia amongst others, the aforesaid facts. 5.1 Upon the aforementioned complaints, (i) CR Case No. 1103C of 2019, against three petitioners, as stated above, (ii) C.R Case No. 1099C of 2019, against the petitioner, namely, Shri Sanju Phangsho and (iii) C.R Case No. 1100C/2019, against Shri Bijoy Phangsho, were registered under Sections 276D/277 of the Income Tax Act, 1961, and thereafter, the learned Judicial Magistrate First Class, Kamrup (M), to whom the cases were made over, took cognizance of the offences, under Sections 276D/277 of Income Tax Act and issued summons to the petitioners, vide order, dated 15.07.2022. 5.2 While, the aforesaid cases were pending for disposal, the petitioners herein had challenged the assessment order, dated 21.12.2018, so passed by the respondent herein, under Section 144 of the Income Tax Act, 1961 by filing an appeal before the Commissioner of Income Tax (Appeals), Dibrugarh. Then the Commissioner of Income Tax (Appeals), Dibrugarh, passed the appellate order dated 28.02.2020, under Section 250 of the Income Tax Act, 1961, and gave a particular relief to the peti....
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.... Ld. Counsel for the assessee, therefore, has requested before this Tribunal that the matter may be restored to the file of the Ld. AO for adjudication on the issue afresh. The Ld. D.R has not objected to the same. 4. In view of the above submissions of both the Ld. Representatives', the impugned order of the learned CIT(A) is set aside and the matter is restored to the file of the learned AO to decide the issue afresh. The learned AO will allow the assessee to present/submit necessary evidence / account books, details, etc., and to present its case before him. Thereafter, the learned AO will decide the issue afresh by way of a speaking order." 5.5 Thereafter, the respondent herein had passed the assessment order, dated 24.03.2022 and he found the net profit of the petitioner company as Rs. 11,87,032 and thereafter he had initiated separate proceedings under Section 271(1)(c) of the Income Tax Act and also proceeding under Section 271(1)(b) of the said Act for non-compliance with the Notice under Section 142(1) of the Income Tax Act and thereafter, the petitioner herein had paid the outstanding demand of Rs. 10,00,000/, on 05.04.2023. Grounds taken by the petitioners....
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....ch circumstances, the criminal proceeding got no legs to stand upon and liable to be interfered with, as it is an abuse of the process of the Court if any further action against the petitioners were allowed to proceed, as nothing survives in the aforesaid three cases. Submissions of learned counsel for the petitioners:- 7. Mr. V. Rajkhowa, learned counsel for the petitioners, submits that the CR Case Nos. 1099C of 2019, against Sanju Phangcho; CR Case No. 1100C of 2019, against Bijoy Phangcho; and CR Case No. 1103C of 2019, against M/S Flamingo Beverages Private Limited and its two Directors, namely, Sanju Phangcho and Bijoy Phangcho, were instituted by the Income Tax Officer, Tinsukia, having found anomalies in filing return for the Assessment Year 2016-17, on 17.10.2017, declaring total income at Rs. 8,01,508. But, the Assessment Officer has determined the taxable income at Rs. 35,66,191/- against the declared income of respondent-declared income of Rs. 8,01,508/- and that he also submits that the Assessment Order dated 21.12.2018, by which the income of the petitioner was determined at Rs. 35,66,191/- is challenged before the Commissioner of Income Tax (Appeals) and the sa....
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....ons, Mr. Rajkhowa has referred to a decision of the Hon'ble Supreme Court in the cases of K.C Builders and Another-vs-Assistant Commissioner of Income Tax, reported in (2004) 2 SCC 731; and the Commissioner of Income Tax, Panchkula-vs-Jai Laxmi Rice Mill, Ambala City, reported in (2016) 16 SCC 673; and another decision of the Telangana High Court in Deccan Tobacco Processors Limited and Another-vs-Union of India, represented by Commissioner (Prosecution), Customs and Central Excise, Hyderabad, reported in 2021 SCC OnLine TS 3694. Submissions of learned counsel for the respondent:- 8. Per contra, Mr. J. Chopra, learned counsel for the respondent, has vehemently opposed the petition. According to him, though the assessment order has been set aside by the Tribunal, yet, the offence remains the same, as the petitioner has submitted false statement in verification of return of income tax, and that they failed to produce accounts and documents by not complying with the statutory notice and as such, the offences under Section 276D and Section 277 of the Income Tax Act are clearly made out against the petitioners, and that the penalty proceeding and criminal prosecution can go togeth....
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....conclusive, and the very basis of the complaint was knocked out. 13. Again, in the case of Uttam Chand vs. ITO, reported in (1982) 133 ITR 909 (SC), Hon'ble Supreme Court has held that the finding of the Appellate Tribunal favorable to the assessee (that is genuineness of the firm/no false return) is binding upon the criminal court, and prosecution under Section 277 cannot sustain. 14. It is to be noted that Section 276D deals with willful failure to produce accounts/documents under Section 142(1) or comply with a direction under Section 142(2A). And if the assessment order and any related finding of willful non-compliance is set aside on merit, the basis of alleging willful failure typically collapses. 15. Further, Section 277 deals with false statement in any verification under the Act or delivery of false account/statement knowing it to be false or not believing it to be true, the case is covered by the ratio laid down in the case of G.L. Didwania and Uttam Chand (supra), and if the appellate order negates the falsity of the underlying assessment, the prosecution does not survive. 16. Thus, what can be crystalized from the aforesaid discussion is that once the appell....
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.... However, in the case of K.C. Builders(supra) Hon'ble Supreme Court has held that the ITAT, being the final fact-finding authority, when held that there was no concealment, and thereafter cancelled the penalty under section 271(1)(c), and the Assessing Officer gave effect to that order by cancelling the penalties, the prosecution under section 276C (and related provisions) becomes unsustainable and must be quashed. Penalty and prosecution are simultaneous/ interdependent, and once the factual foundation of concealment is conclusively negated by the Tribunal, no offence survives and continuation of the criminal case is an abuse of process. In holding so Hon'ble Supreme Court has relied upon its earlier decision in G.L. Didwania (supra), where it has been held that once the Tribunal's finding that the alleged false statement had no basis, and it led to quashing of the criminal prosecution. 20. Further, in the case of Radheshyam Kejriwal v. State of West Bengal, reported in (2011) 3 SCC 581, Hon'ble Supreme Court has generalized the principle, though however, in the context of FERA, but it has, drawing premises from K.C. Builders (supra) and Didwania (supra), held that adjudication....
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....ved that as under:- "31. It is a well-established principle that the matter which has been adjudicated and settled by the Tribunal need not be dragged into the criminal court unless and until the act of appellant could have been described as culpable". 22. Again, in the case of Prakash Nath Khanna and Another-vs-CIT, reported in (2004) 9 SCC 686, wherein Hon'ble Supreme Court has held that whether there was willful failure to furnish the return is a matter that must be adjudicated factually by the Court dealing with the prosecution case. 23. As already noticed, the subject matter of the complaint before this Court is concealment of income on the basis of finding of the Assessing Officer. If the Tribunal has set aside the order of concealment and penalties, then there cannot be any concealment in the eyes of law and therefore, the prosecution cannot be proceeded with by the complainant, and that being so further proceedings will be illegal and without jurisdiction. In holding so, this Court derives authority from the ratio laid down in the case of K.C. Builders (supra), Hon'ble Supreme Court, referring to the case of G.L. Didwania (supra). 23.1 This court is also o....