Indian Plywood Manufacturing Co. ... vs P.S. Dave And Anr.
2006 Latest Caselaw 248 Bom

JUDGMENT

V.M. Kanade, J.

1. Both these criminal applications can be disposed of by a common judgment since the issue involved in both these matters is identical.

2. The applicants in Criminal Application No. 43 of 2000 filed income-tax return for the assessment year 1992-93 on September 13, 1992. The order was passed under Section 193 dated March 8, 1995, by the Inspecting Assistant Commissioner, Assessment Range V(B), whereby the total income was assessed at Rs. 1,29,74,262 including an amount of Rs. 27,17,994 which was the amount of refund of excise duty received in the year 1981. The addition made by the Inspecting Assistant Commissioner was upheld in the appeal. The application made by the applicants for change in the accounting period was allowed.

3. It was alleged that the excise duty was not credited to its profit and loss account and this was done to avoid income-tax. Accordingly, penalty proceedings were initiated under Section 271(1)(c) of the Income-tax Act and on March 27, 1987, the order was passed imposing penalty to the tune of Rs. 89,08,882. Finally, the Commissioner of Income-tax by order dated March 28, 1990, set aside the penalty which was imposed.

4. Simultaneously, after the penalty proceedings were initiated, a complaint was filed in the court of the Additional Metropolitan Magistrate, 19th Court, Esplanade, Mumbai, vide Criminal Case No. 4/S/87 for the offence punishable under Sections 276C and 227 of the Income-tax Act read with Section 273B of the said Act. Process was issued on the said complaint. Though the Commissioner of Income-tax (Appeals) Bombay had allowed the appeal filed by the applicants, the criminal proceedings were not discontinued and, therefore, the present criminal application was filed for quashing the said criminal proceedings.

5. Learned Counsel appearing on behalf of the applicants submitted that in view of the provisions of Section 279(1A), if the penalty imposed on the assessee under Clause (iii) of Sub-section (1) of Section 271 has been reduced or waived by an order under Section 273A, the criminal proceedings were liable to be dismissed and could not be continued. He invited my attention to the provisions of Section 279(1A). He submitted that the Supreme Court in the case of K.C. Builders v. Asst. CIT had held that in the event of penalty imposed under Section 271(1)(c) being cancelled or waived by the Income-tax Appellate Tribunal by holding that there was no concealment then, in that case, quashing of the prosecution under Section 276C is automatic. Sections 279(1) and 279 (1A) read as under:

279.(1) A person shall not be proceeded against for an offence under Section 275A, Section 276, Section 276A, Section 276B, Section 276BB, Section 276C, Section 276CC, Section 276D, Section 277 or Section 278 except with the previous sanction of the Chief Commissioner or Director General or Commissioner:

Provided that no such sanction shall be required if the prosecution is at the instance of the Commissioner (Appeals) or the appropriate authority.

Explanation.--For the purposes of this section 'appropriate authority' shall have the same meaning as in Clause (c) of Section 269UA.

(1A) A person shall not be proceeded against for an offence 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 Clause (iii) of Sub-section (1) of Section 271 has been reduced or waived by an order under Section 273A.

6. It is an admitted position that the Commissioner of Income-tax (Appeals) had set aside the penalty which was imposed and allowed the appeal by holding that no penal cause under Section 271(1)(c) was made out against the applicants and that no penalty was attracted under the said provisions. Thus, in view of this order which is passed by the Commissioner of Income-tax (Appeals), the complaint which is still pending in the Court of Metropolitan Magistrate will have to be quashed in view of the clear and unambiguous provisions of Section 279(1A).

7. The Supreme Court in the case of K.C. Builders in paragraph 24 of the judgment has observed as under (page 573):

24. 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. As. Nos. 3129-32. 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.

8. The ratio of the said judgment, therefore, is squarely applicable to the facts of the present case.

9. In the result, Criminal Application No. 43 of 2000 is made absolute in terms of prayer Clause (b). Rule is made absolute in the above terms.

10. In Criminal Application No. 44 of 2000, the applicants were prosecuted under Section 193 read with Section 191 and 192 read with Section 34 of the Indian Penal Code. The allegations made against the applicants in the said case were identical that they had not disclosed the refund of excise to the tune of Rs. 27,17,994. The penalty was, therefore, imposed by the Inspecting Assistant Commissioner, Assessment Range V(B), Bombay which, in turn, was set aside by the Commissioner of Income-tax (Appeals), Bombay. The ratio of the judgment, therefore, in the case of K.C. Builders is also squarely applicable to the facts of the present case.

11. In the result Criminal Application No. 44 of 2000 is also allowed in terms of prayer Clause (b). Rule is made absolute in the above terms.

12. Both the above criminal applications are accordingly disposed of.