TaxTMI 
TaxTMI 
2026 (9) TMI 1390
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....the Directors of M/s RS Rice Mills, and against petitioner No.4, who is an employee of the said firm. One Dalbir Singh @ Resham Singh was also stated to be working as an employee in the firm. It is alleged in the complaint that the petitioners, in connivance with each other and other persons, were involved in fraudulent and illegal financial transactions with the intention to conceal taxable income and evade lawful tax liability. 2.1 It is alleged that the petitioners generated unaccounted cash by showing false purchases of paddy in the name of M/s RS Rice Mills, despite no real purchase of paddy having taken place. In order to create false entries in the books of account, cheques were allegedly issued in the names of paddy suppliers. These cheques were stated to have been encashed through certain supplier firms, alleged to be dormant entities operated by one Raman Arora, who would return the cash amount to the petitioners or the partners of the firm after deducting commission at the rate of 0.8% per transaction. It is alleged that the cash so generated was thereafter used for making investments in real estate through various middlemen. 2.2 It is further alleged that the peti....
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.... identity of Dalbir Singh @ Resham Singh, as his income tax returns were duly filed, accepted and processed by the Department from time to time. Therefore, the allegation that he was a non-existent or fictitious person is completely false and self- contradictory. Furthermore, the identity of Dalbir Singh @ Resham Singh stands independently established from official documents and business records. In this regard, reference is made to the partnership firm M/s Amritsar Properties, which was constituted in the year 2007, wherein Dalbir Singh @ Resham Singh was shown as one of the partners with a defined share in profits. The partnership deed was duly executed and registered through valid stamp papers, and even the stamp vendor concerned, when summoned by the Department itself, confirmed the sale of those stamp papers and the relevant entries in his official register. 3.1 Learned Senior counsel further pointed out that even the driving licence of Dalbir Singh @ Resham Singh, which the complainant sought to describe as fake, was officially verified by the competent authority i.e. the District Transport Office, Khadur Sahib, Punjab, and was found to be genuine as per official records. ....
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....ion 245(D) of the Income Tax Act, 1961 dated 24.02.2023 at Annexure P-9. He, therefore, submitted that continuation of the present prosecution despite full settlement of the tax dispute serves no meaningful purpose and would amount to unnecessary harassment. 3.4 Learned Senior counsel further submitted that even if the allegations contained in the complaint are taken at their face value, the essential ingredients of the offences alleged are not made out against the petitioners. There is no material to establish dishonest intention, fabrication of false evidence, execution of forged documents, or deliberate furnishing of false information so as to justify continuation of criminal proceedings. It is also argued that, despite the allegations being directed against the business activities of the firm, no prosecution has been launched against the firm itself, and instead the individual petitioners have been individually targeted, which further reflects the mala fide nature of the proceedings. On these grounds, it is prayed for quashing of the impugned complaint along with all consequential proceedings arising therefrom. In support of his overall submissions, Learned Senior counsel re....
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....ent case. 7. In order to examine the said issue, it would be appropriate to refer to the relevant following statutory provisions under the Income Tax Act, 1961 :- (a) Section 276C. Wilful attempt to evade tax, etc .- (1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable,- (i) in a case where the amount sought to be evaded exceeds one hundred thousand rupees, with rigorous imprisonment for a term 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. (2) If a person wilfully attempts in any manner whatsoever to evade the payment of any tax, penalty or interest under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable with rigorous imprisonment for a term which sh....
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....t the first person or the second person, under this Act, the first person shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and with fine. Explanation .- For the purposes of establishing the charge under this section, it shall not be necessary to prove that the second person has actually evaded any tax, penalty or interest chargeable or imposable under this Act. (d) Section 278. Abetment of false return, etc. If a person abets or induces in any manner another person to make and deliver an account or a statement or declaration relating to) (any income or any fringe benefits chargeable to tax)[which is false and which he either knows to be false or does not believe to be true or to commit an offence under sub-section (1) of section 276-C, he shall be punishable,- (i) in a case where the amount of tax, penalty or interest which would have been evaded, if the declaration, account or statement had been accepted as true, or which is wilfully attempted to be evaded, exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than si....
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....all also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts. (emphasis supplied) 8. Now adverting to the facts of the case, the principal allegations in the complaint are that the petitioners had shown bogus purchases, generated unaccounted cash, concealed taxable income, created false records, and used the identity of one Dalbir Singh @ Resham Singh for carrying out alleged benami transactions. However, from the material placed on record, it is evident that one of the major foundations of the prosecution case is the allegation that Dalbir Singh @ Resham Singh was a fictitious person created for carrying out fraudulent transactions, which appear to be unsustainable on the face of the record. The petitioners have placed material to show that Dalbir Singh @ Resham Singh was an actual person, whose existence was known to the authorities. His income tax records existed, his participation in business concerns stood documented, and even the driving licence sought to be questioned by the Department was verified by the competent authority and found to be genuine. Therefore....
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....emand notice as per the provisions of section 156 r.w.s 245D(6) of the Act within 7 days from the date of receipt of this order. 20. Waiver of interest The applicants have prayed for waiver of interest. However, it is well settled by the decision of the Hon'ble Supreme Court in the case of CIT vs Anjum M.H. Ghaswalla & Others (2005) 252 ITR 1 (SC) that the Settlement Commission (now, IBS) is not empowered to grant waiver / reduction of interest chargeable u/s. 234A, 234B & 234C of the Act. Accordingly, interest u/s. 234A, 234B & 234C will be levied by applying inter alia, the position of section 234B(2A) of the Act w.e.f. 01.06.2015. 21. Immunity from Penalty and Prosecution: The applicants as per Terms of settlement mentioned in SOF, have prayed for grant of immunity from levy of penalty and from prosecution under the Act. On the other hand, the Pr. CIT, in his Rule 9 report has observed that disclosure of the applicants is not true and full and therefore, their request for granting immunity from levy of penalty and prosecution has no merits. 22. We have considered the request made by the applicants as well as objections of the Ld. ....
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.... for any other offence for which the applicants appear to have been guilty in connection with the settlement and the applicants shall also become liable to imposition of any penalty under the Act to which the applicants would have been liable had such immunity not been granted. The immunity so granted will also be withdrawn if the applicants fail to pay the additional tax and interest, if any, as stipulated in this order. 25. The applicants are allowed capitalization of the additional income disclosed before the Commission and no capitalization is allowed for further additional income added in this order as discussed above. 26. The applicants have prayed for grant of instalments for payment of tax and interest in the settlement applications. Accordingly, we consider their request and grant them two equated monthly instalments starting from March, 2023 to April, 2023. 27. This order shall be declared void if it is subsequently found by the Board that the same has been obtained by fraud or misrepresentation of the facts within the meaning of section 245D(6) of the Act." 11. The Hon'ble Supreme Court in Vijay Krishnaswami @ Krishnaswami Vijayakumar vs....
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....conclusive with respect to the matters stated therein. Once such an order was passed, it was incumbent upon the authorities to inform the High Court that continuation of the prosecution would amount to an abuse of the process of law, in particular when the Settlement Commission did not record any finding of wilful evasion of tax by the appellant. Even otherwise, it was the duty of the High Court to examine the facts of the case in their right context and assess whether, in light of the above circumstances, the continuation of the prosecution would serve any meaningful purpose in establishing the alleged guilt. Upon a holistic consideration of the matter, we are of the view that the conduct of the authorities lacks fairness and reasonableness, and the High Court's approach appears to be entirely misdirected, having failed to appreciate the factual and legal position in right earnest." 12. Moreover, the judgments relied upon by the respondents in P. Jayappan versus S.K. Perumal, First Income Tax Officer, Tuticorin (supra) and Ambey Construction Co. and others versus Deputy Commissioner of Income Tax, Bathinda (supra) are not applicable to the facts of the present case, as the ....