Smt.Malti Mishra vs State Of U.P.& Another
2017 Latest Caselaw 6159 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
 
 

?AFR 
 
Court No. - 9
 

 
Case :- U/S 482/378/407 No. - 1384 of 2008
 
Applicant :- Smt.Malti Mishra
 

 
Opposite Party :- State Of U.P.& Another
 

 
Counsel for Applicant :- P. Agrawal
 

 
Counsel for Opposite Party :- Govt.Advocate, D.D. Chopra, Manish Mishra
 

 
Hon'ble Ajai Lamba,J.

1.    The petition has been filed under Section 482 Criminal Procedure Code for quashing Complaint Case No.1305 of 2007 under Section 276-C (1) and Section 277 Income Tax Act, 1961 pending in the court of Special Chief Judicial Magistrate (Economic Offences), Lucknow.

2.     Heard Shri Pradeep Agrawal, Advocate assisted by Shri Anil Tewari, Advocate for the petitioner, Shri Manish Mishra, Advocate for respondent no.2 and learned counsel for the State.

3.    In the petition it has been pleaded that the petitioner is a partner in firm M/s Shyam Traders, and filed her return of income for assessment year 2002-2003 declaring income of Rs.3,10,247/- on 28.3.2003. There were certain other investments in shares; which were sold.  Some other investments were also made.  The petitioner also received Gift.

The details of purchase of shares and other transactions are not required to be noticed to decide the limited issue raised before this court. Suffice it to say that in the order of assessment the assessing authority added an amount of Rs.20,64,598/- as income from undisclosed sources vide Annexure 1 dated 18.3.2007. The petitioner has given explanation that there was no such concealment as is portrayed in order Annexure-1.

4. The petitioner aggrieved by order of assessment preferred an appeal to Commissioner of Income Tax (Appeals) II, Lucknow (for short CIT(A). The appeal was decided vide order dated 30.11.2005 Annexure-III. It is the contention of the petitioner that submissions made by the petitioners were not appreciated while deciding the appeal.

5. In the meantime penalty proceedings under section 271 (1)(c) of Income Tax Act were initiated against the petitioner and on addition of Rs.28,11,266/- a penalty of Rs.10,00000/- was levied vide order dated 31.5.2006. The petitioner feeling aggrieved by the order of penalty filed appeal before CIT(A) Lucknow. The appeal was dismissed vide order dated 22.12.2006 placed on record as Annexure-IV.

6. The petitioner feeling aggrieved by order of CIT(A) on the quantum filed an appeal before Income Tax Appellate Tribunal (for short ITAT) on 7.4.2006 vide Annexure V.

7. The applicant also being aggrieved by order of penalty filed appeal against the order passed by CIT(A) dated 22.12.2006 before ITAT on 8.2.2007, vide Annexure-VI.

8. In the petition, it has been pleaded that while the appeals were pending before ITAT, the assessing authority lodged impugned complaint on 15.3.2007 under Section 276(C)(1) read with Section 277 Income Tax Act, 1961 in the court of Special Chief Judicial Magistrate (Economic Offences) Lucknow. The said complaint was registered as Complaint Case No.1305 of 2007.

       It has been pleaded in the petition that the complaint does not make a reference to the pending appeals before the ITAT against appellate orders regarding quantum; as well as penalty for assessment year 2002-2003. Photocopy of the complaint has been annexed as Annexure VII.

 On considering the complaint impugned summoning order has been issued vide Annexure-VIII dated 8.1.2008.The proceedings in the complaint case and the order of summoning are under challenge in this petition.

9.   The petitioner filed supplementary affidavit along with certain documents while bringing on record judgement passed by ITAT Lucknow Bench dated 29.5.2009.

      Perusal of judgement dated 29.5.2009 (supra) indicates that it has been passed in context of penalty levied under Section 271(1)(c) of the Income Tax Act.

The operative portion of the judgment rendered by ITAT reads as under:-

?31. In the present case, as we have noted that assessee had not concealed the income or furnished inaccurate particulars of income because the interest was shown on receipt basis in the subsequent year and the investment in NABARD bonds was shown in the year under consideration.

32. Similarly, the particulars of gifts received from Shri Gautam Tandon were furnished. The statement of the donor was recorded. He disclosed the source of his income which was declared in the return of income so it cannot be said that the assessee furnished inaccurate particulars of income or concealed the income.

33. Considering the totality of the facts as discussed hereinabove, we are of the view that no penalty was leviable in the present case.?

34. xxxxx

35. In the result, the appeal filed by the assessee is allowed.?

10.  Affidavit of Ms. Sapna Srivastava, Income Tax Officer posted in the office of Principal Commissioner of Income Tax-II Lucknow sworn on 1.11.2017 has been filed, which is taken on record. The affidavit is to the effect that for the assessment year 2002-03 the assessment was completed on total income of Rs.31,21,510/-. Against the said assessment the petitioner filed appeal before CIT(A). The appeal was dismissed. Since addition was confirmed by CIT(A), therefore, penalty of Rs.10,00000/- was imposed and was also confirmed by CIT(A).

11. Prosecution proceedings were launched under the Income Tax Act in the court of CJM (Economic Offence), Lucknow. The affidavit confirms that the petitioner filed separate appeals before ITAT against order of quantum; as also against the order vide which penalty had been imposed.

      The affidavit further states that the ITAT allowed the appeal against quantum vide judgement dated 7.11.2008. Against the judgment rendered by ITAT, Income Tax Appeal No.30 of 2009 filed by Revenue Department before the High Court has been dismissed vide order dated 23.8.2013.

In para 7 of the affidavit, it has been stated that ITAT also allowed penalty appeal of the assessee-petitioner. Against the order the department has not preferred any appeal before the High Court. As on date, no litigation is pending against the petitioner before any court of law. The department has already issued the refund of Rs.22,57,790/- to the petitioner vide order dated 13.7.2009.

12. From the contents of the affidavit filed on behalf of Income Tax Department it becomes evident that order passed by ITAT dated 29.5.2009 (supra) has attained finality. It has been conclusively and finally held that penalty was not leviable in the case of the petitioner.

13. A perusal of the impugned criminal complaint Annexure- VII indicates that it was filed on the plea that the petitioner concealed income whereupon penalty had been levied and order in that regard had been passed. The complaint has been lodged on the foundation and basis that the petitioner furnished false and inaccurate details of particulars of income at the time of filing return for assessment year 2002-2003. The petitioner had full knowledge of the same and yet the income had been concealed to evade tax.

14. A reference to the contents of the impugned complaint and the proceedings initiated under the Income Tax Act before the departmental authorities indicate that the issue is common as to whether the petitioner concealed income and whether on that account penalty was leviable on the petitioner or not. As noticed above, ITAT vide judgment dated 29.5.2009 (supra) has already held that penalty was not leviable in the case because the petitioner had not concealed any income.

15. Learned counsel for the petitioner had relied on judgment rendered by Hon?ble Supreme Court of India in K.C. Builders and another vs. Assistant Commissioner of Income Tax reported in 2004 (Vol. 265) Income Tax Report, 562 to plead that the order of penalty having been set aside, the impugned criminal proceedings are liable to be quashed.

16. I have considered the facts and circumstances of the case, as noticed above. It is the conceded position of the Income Tax Department through additional affidavit sworn on 1.11.2017 (supra) that the order vide which penalty had been imposed on the petitioner has been set aside by ITAT. It has been concluded through a pronouncement by ITAT that the petitioner had not concealed income and therefore, penalty was not leviable. The order passed by ITAT (supra) has not been challenged, rather order of refund has already been passed in favour of the petitioner.

17. The Hon?ble Supreme Court of India in the case of K.C. Builders (supra) formulated the following question of law (relevant only):-

"On the above pleadings and facts and circumstances of the case, the following questions of law arise for consideration by this Court:-

(a) Whether a penalty imposed under Section 271 (1) (c) of the Income Tax Act and prosecution under Section 276C of the Income Tax Act are simultaneous?

(b) Whether the Criminal prosecution gets quashed automatically when the Income Tax Appellate Tribunal which is the final Court on the facts comes to the conclusion that there is no concealment of income, since no offence survives under the Income Tax Act thereafter?"

18. The questions have been answered in the following terms (relevant portion of the judgment only):-

?(page 573)   In the instant case, the penalties levied under Section 271(1)(c) were cancelled by the respondent by giving effect to the order of the Income Tax Appellate Tribunal in I.T.A. Nos. 3129-3132. It is settled law that levy of penalties and prosecution under Section 276C are simultaneous. Hence, once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution under Section 276C is automatic.

In our opinion, the appellants cannot be made to suffer and face the rigorous of criminal trial when the same cannot be sustained in the eyes of law because the entire prosecution in view of a conclusive finding of the Income Tax Tribunal that there is no concealment of income becomes devoid of jurisdiction and under Section 254 of the Act, a finding of the Appellate Tribunal supercedes the order of the Assessing Officer under Section 143(3) more so when the Assessing Officer cancelled the penalty levied. In our view, once the finding of concealment and subsequent levy of penalties under Section 271(1)(c) of the Act has been struck down by the Tribunal, the Assessing Officer has no other alternative except to correct his order under Section 154 of the Act as per the directions of the Tribunal. As already noticed, the subject matter of the complaint before this Court is concealment of income arrived at on the basis of the finding of the Assessing Officer. If the Tribunal has set aside the order of concealment and penalties, there is no concealment in the eyes of law and, therefore, the prosecution cannot be proceeded with by the complainant and further proceedings will be illegal and without jurisdiction. The Assistant Commissioner of Income Tax cannot proceed with the prosecution even after the order of concealment has been set aside by the Tribunal. When the Tribunal has set aside the levy of penalty, the criminal proceedings against the appellants cannot survive for further consideration. In our view, the High Court has taken the view that the charges have been framed and the matter is in the stage of further cross-examination and, therefore, the prosecution may proceed with the trial. In our opinion, the view taken by the learned Magistrate and the High Court is fallacious. In our view, if the trial is allowed to proceed further after the order of the Tribunal and the consequent cancellation of penalty, it will be an idle and empty formality to require the appellants to have the order of Tribunal exhibited as a defence document inasmuch as the passing of the order as aforementioned is unsustainable and unquestionable.

X X X X X

(Page 576) The High Court without adverting to the above important questions of law involved in this case, and examining them in the proper perspective disposed of the revisions in a summary manner and hence the impugned orders passed by the High Court and the learned magistrate warrant interference.

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 courts unless and until the act of the appellants could have been described as culpable.

For the aforesaid discussions and reasons adduced, the questions of law formulated above are answered accordingly and the appeals stand allowed."

(emphasised by me)

19. The facts of the present case as noticed above, are evidently covered by judgment rendered by Hon?ble Supreme Court of India. In the case in hand also the order vide which penalty has been imposed has been set aside by ITAT. The penalty was imposed on the plea of the department that the petitioner had concealed income with an object of evading income tax. The ITAT, as noticed above, has held that the petitioner did not conceal the income and, therefore, penalty was not leviable.

20. The impugned criminal complaint has been filed on the premise that the petitioner with criminal intent concealed income and, therefore, penalty had been levied, for the assessment year 2002-2003. The order of penalty having been set aside, in the considered view of this court, criminal proceedings cannot be allowed to continue.

21.  The basis for initiating proceedings under the income tax laws by imposing penalty and on the criminal side by lodging criminal complaint is the same. The ITAT has taken into account all the facts and circumstances of the case, plea and explanation furnished by the petitioner and the case of the department, whereupon it has been held that the petitioner did not conceal the income. The cause for initiating criminal proceedings was alleged concealment of income and consequent order of penalty. The cause itself stands eliminated and dislodged vide judgement of the ITAT.  In such circumstances, the consequences (criminal complaint) cannot be allowed to survive.

22. The department has accepted that income had not been concealed, therefore, there is no occasion or logic either in law or in facts to prosecute the petitioner at the instance of the Income Tax Department for the alleged concealment of income for evading income tax.

23. I am also of the view that the ITAT has set aside the order of penalty and held that the petitioner had not concealed her income, under the Income Tax Laws.  The impugned complaint has been filed also under Income Tax Laws.  It would be an exercise in futility to allow prosecution of the petitioner, because in the face of ITAT judgment dated 29-5-2009 the petitioner would be entitled to acquittal at a later stage in trial proceedings.  Therefore, also this petition deserves to be allowed.

24. The petition is allowed.

25. Complaint Case No.1305 of 2007, under Section 276-C(1) and Section 277 Income Tax Act, 1961, pending in the court of Special Chief Judicial Magistrate (Economic Offences) Lucknow is hereby quashed.

Order Date :- 2.11.2017

Madhu