Calcutta High Court (Appellete Side)
Deputy Commissioner Of Income Tax vs Kali Pradip Chowdhuri & Ors on 7 February, 2023
IN THE HIGH COURT AT CALCUTTA
CRIMINAL REVISIONAL JURISDICTION
Appellate Side
Present:
The Hon'ble Justice Jay Sengupta
CRR 3198 of 2018
With
CRAN 1 of 2018 (Old No. CRAN 3116 of 2018)
And
CRR 3199 of 2018
With
CRAN 1 of 2018 (Old No. CRAN 3117 of 2018)
Deputy Commissioner of Income Tax
Versus
Kali Pradip Chowdhuri & Ors.
And
Deputy Commissioner of Income Tax
Versus
KPC Medical College Hospital & Ors.
For the petitioner : Mr. Vipul Kundalia
Mr. Anirban Mitra
Mr. Anurag Roy
..... Advocates
For the OPs : Mr. J.P. Khaitan
Ms. Swapna Das
Mr. Partha Ghosh
Mr. Siddharth Das
2
.....Advocates
Heard lastly on : 09.11.2022
Judgment on : 07.02.2023
Jay Sengupta, J.:
1. As the two revisional applications are connected ones and involve the
same parties and the same questions of law, the same are taken up for
hearing together.
In re: CRAN 1 of 2018 in CRR 3198 of 2018 & CRAN 1 of 2018 in CRR
3199 of 2018:
2. The petitioner/Revenue contended that there were delays of about 95
days in filing the revision petitions. It was submitted that there was no
deliberate laches on behalf of the Income Tax Authorities in challenging the
order dated 09.04.2018. A certified copy was applied and was supplied on
the same day. A proposal was submitted with the Pr.CIT, C-1, Kolkata. Then
a letter was issued by him to the Ministry of Law and Justice to seek legal
opinion in this regard. Thereafter, a letter was issued for necessary approval
to the DGIT(Inv.) WB., Sikkim & NER. In the meantime the date for filing a
criminal revision expired on 10.07.2018. Then the Ministry of Law and
Justice accorded consent to move this Court. Soon thereafter necessary
approval was obtained from the DGIT(Inv.) WB., Sikkim & NER. Accordingly,
an approval was given by the Pr.CIT, C-1, Kolkata to file revision before this
Court. Thereafter, a letter was issued to the Ministry of law requesting to
appoint a government counsel. Then, a letter was received from them
regarding appointment of government counsel. Conferences were held and a
draft was made ready by the learned counsel. The draft was given to the
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Pr.CIT, C-1, Kolkata for examination. Learned counsel thereafter asked for
the details of the dates for filing application for condonation of delay. List of
dates regarding the movement of the file was made available to the learned
counsel soon thereafter. Some time went for drafting the application for
condonation of delay and for vetting out the applications. The applications
were made ready for affirmation on 04.10.2018. In fact, the same were
affirmed on the next date. The revisional applications involved substantial
questions of law and a careful marshalling of facts. Therefore, the
applications could be filed only after a delay.
3. Learned Senior Counsel appearing on behalf of the opposite party
submitted that a government department or, for that matter, the State was
not a preferred litigant. Although the dates are mentioned for movement of
files, the time taken for each such movement appeared to be inordinately
long and unacceptable. As such, the explanation provided for the delay in
filing the applications could not be accepted.
4. It is true that there is some delay in preferring the revisional
applications along with the applications for condonation of delay. However,
as is required, the petitioner/Revenue has provided even the minute details
of the movement of files leading to the passage of time beyond the stipulated
one for filing criminal revision.
5. It is alright to term bureaucratic red-tapism as the root cause for
delay in governmental work and indeed there is much room for
improvements even in the existing circumstances. However, giving approvals
and consent and deciding on issues involve taking into consideration not
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only the questions of legal tenability, but also the practicability and the
finances. In any event, our system does suffer from a poor ratio not only in
respect of judicial officers, but also as regards public servants.
6. In Collector, Land Acquisition, Anantnag & Ors. vs. Mst Katiji &
Ors., (1987) 2 SCC 107, the Hon'ble Apex Court held that the question of
condoning delay can be considered liberally in certain cases and quite
equally for the State.
7. In view of the above and upon considering the painstacking manner in
which the details of the steps taken were explained, I am inclined to allow
the applications for condonation of delay.
8. Accordingly, CRAN 1 of 2018 in CRR 3199 of 2018 and CRAN 1 of
2018 in CRR 3198 of 2018 are disposed of.
In Re: CRR 3198 of 2018 and 3199 of 2018:
9. The petitioners in CRR 3198 of 2018 challenged the order dated
09.04.2018 passed by the learned Additional Sessions Judge, Alipore, South
24 Parganas in Criminal Motion No. 73 of 2018, thereby allowing the
revision and setting aside the order dated 15.02.2018 passed by the learned
Additional Chief Judicial Magistrate, Alipore in connection with case no. AC
2829 of 2016 and discharging the accused from the case. Similarly, the
petitioners in CRR 3199 of 2018 challenged the same order by which the
accused opposite parties were discharged by the learned revisional Court in
Criminal Motion no. 74 of 2018, thereby setting aside the order dated
15.02.2018 passed by the learned Trial Court in connection with case no.
AC 2736 of 2016 and discharging the accused from the case.
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10. On 12.07.2010 a search and seizure operation under Section 132 of
the Income Tax Act was conducted at the residential property of one
Bhaskar Ghosh, culminating in the seizure of Rs. 35 lakhs. A statement of
the said Bhaskar Ghosh was recorded according to which the seized cash
amount belonged to KPC Medical College and Hospital. On the same day a
survey operation in terms of Section 133 of the Income Tax Act was
conducted at the office premises of the said medical college and hospital.
According to the income tax authorities, the college and hospital was found
to have received corpus fund in the guise of donations from the KPC
foundation whose capital to provide such donations was inflated on the
strength of loans and advances from five companies having identical office
address. A summon was issued to one Kamala Shankar Pandey, one of the
directors of the five companies. He purportedly gave a statement that the
five companies were actually funded by the college and hospital and that
accommodation entries were provided in the guise of loans and advances.
On 14.10.2011 the assessee foundation filed its return for the assessment
year 2011-2012 under Section 139 of the Act, declared nil income and
claimed exemption under Section 12AA of the said Act. In 2012 the five
companies were dissolved as per orders of the High Court. Soon thereafter,
the petitioner issued notices against the assessee under Section 143(2) of
the IT Act. The petitioner thereafter issued notice to the assessee under
Section 142 (1) of the IT Act. In 2013 the assessee filed revised return of
income under Section 153 (C) of the IT Act for the year 2011-2012, declaring
net income of 1.41 crores, but not claiming any exemption. Thereafter,
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penalty proceedings were initiated under Section 271AA. On 30th September,
2013 the Income Tax Authorities passed penalty order under Section 271 (1)
(C) of the said Act and not under Section 271AA as there had been no
search and seizure under Section 132. A minimum penalty of Rs.
43,56,900/- was imposed. On 05.08.2015 a show cause notice under
Sections 276C (1), 276C (2) of the IT Act was issued against the assessee.
But, no reply came. In successive appeals, the CIT (A) and the Income Tax
Appellate Tribunal confirmed the penalty orders. Thereafter, this Court
dismissed the applications for admission of appeal against the order passed
by the IT Act. On 18.01.2016, Complain Case No. 2829 of 2016 was filed
against the assessee before the Chief Judicial Magistrate, Alipore under
Sections 276 (1) and 276 (2) read with Section 2 (35) of the IT Act for
willingly and intentionally concealing its income to evade tax and to evade
payment of income tax. On 15.03.2016 the SLP preferred by the assessee
against the order of this Court was disposed of granting liberty to the
assessee to file for review. In 2017 the accused prayed for discharge before
the learned Trial Court. On 15.02.2018 learned trial Court rejected the
application for discharge. However, the learned Additional Sessions Judge,
Alipore by an order dated 09.04.2018, set aside the order of the learned
Trial Court and discharged the accused. While the foundation and its
trustees were the accused in the matter which pertains to CRR 3198 of
2018, in case of CRR 3199 of 2018 the Medical College and Hospital and its
directors were the ones who were discharged.
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11. Mr. Vipul Kundalia, learned counsel appearing on behalf of the
petitioner, submitted as follows. A search and signature under Section 132
of the Income Tax Act at the residence of an individual led to a survey
operation. All these pointed to the fact that the KPC College and Hospital
had received corpus funds in the guise of donations from the said KPC
foundation for the assessment year 2011-2012. The assessee was the
ultimate beneficiary of Rs. 1.41 crores. The assessee declared nil income for
the said year and only subsequently filed a revised return of Rs. 1.41 crores
on 6th March, 2013, after being served with notices under Section 133 (2)
and 142 (1) of the said Act. Subsequently, the authorities imposed a penalty
under Section 271 (1) (C) for a sum of Rs. 43,56,900/-. Sections 276C (1)
and 276C (2) used the words 'wilfully attempts' to evade tax or evade
payment of tax. In such cases the Section used the words 'shall' and not
'may' to be punishable. Wilful attempt was also explained by the explanation
below Section 276 (C). The next relevant phrase was 'mens rea'. Section
278AA categorically specified that the section where one would not be
punishable on fulfilment of the 'reasonable cause' condition. But, Section
276 (C) nowhere found any mention in Section 278AA. Therefore, the facts
as stated above would clearly made out a prima facie case against the
accused. As regards the issue of the cases being barred by Section 300 of
the Cr.PC., one might refer to 279A of the IT Act. It was stated as follows
"Notwithstanding anything contained in the Criminal Procedure Code 1973
(2) of 1974, an offence punishable under Section 276 (B) or Section 276 (C)
or Section 276 (CC) or Section 277 or Section 278 shall be deemed to be
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non-cognizable within the meaning of the Code." Moreover, as per Section
279 (3) of the IT Act, the statement of the said Kamala Shankar Pandey
about providing accommodation entries was admissible in evidence and
corroborated the charges. The learned revisional Court overlooked the fact
that the assessee filed income tax return on 14th October 2011 and only
revised undisclosed income at the fag end of the assessment proceeding that
is, on 6th March 2013. It was clear by then that the undisclosed income had
been unearthed by the department. The assessee tried to evade both the
normal tax payable as well as the penalty taxes by revising the return.
Section 276C (1) was applicable because there was a wilful attempt to evade
tax at the last stage of self-assessment. The income received which would
otherwise not be exempted as donation under Section 12AA was made to be
shown as corpus donation by the accused trusts. Five shell companies were
involved, which were subsequently wound up. Upon survey, when it was
imminent to the accused that they were getting exposed, the accused trust
and college again tried to attempt to evade tax by revising the same return.
They disclosed income that they had not disclosed earlier. Such an Act
would surely amount to wilful attempt to evade tax penalty or interest
chargeable or imposable. On the point that penalty proceeding could
continue even after disclosure of concealed income, reliance was placed on
(i) Mak Data Pvt. Ltd., (2014) 1 SCC 674, CIT vs. Sova Bajoria, 1997 SCC
Online Cal 497, Kumar Jagadish Chandra Sinha Vs. CIT, 1981 SCC Online
Cal 316 and CIT Vs. Balarampur Chini Mills, 2015 SCC Online Cal 1524.
The judgments relied upon by the accused in this regard being G.
9
Viswanathan, Vinaychandra Chandulal Shah and Bindra Chandra Patel
were clearly distinguishable on facts. At the time of filing prosecution under
Section 276C of the Income Tax Act, what was required to be seen was that
there was a prima facie case that the accused parties had wilfully attempted
to evade tax. Subsequent disclosures made at the fag end of the proceeding
under Section 153 (C) could not absolve the accused parties from being
prosecuted. Once such a complaint was filed, the trial Court ought to
presume under Section 278 (E) the existence of a culpable mental state on
the part of the accused. Reliance was placed on Prakash Nath Khanna vs.
Commission of Income Tax, (2014) 9 SCC 686 and on Sasi Enterprises vs.
Assistant Commissioner of Income Tax (2014) 5 SCC 139. The case tried to
be made out by the accused was that they had not filed the return in March
2013 to have the undisclosed income taxed. But, such income which would
have been eligible for exemption in their capacity as trustees and societies
holding registration under Section 12AA and the donations received by them
were in any case exempt under Section 11 of the Act. This was not quite
acceptable. It was incredulous to accept that the accused made the
disclosures of income only to buy peace. The judgment relied upon by the
accused in Nawal Kishore Kejriwal Charity Trust was distinguishable on
facts. It related to action taken by the department for cancellation of
registration of tax under Section 12AA of the Act. The adjudication
proceeding and the subsequent appellate proceedings were continuing at
different appellate forums. It was germane to mention that there could be no
limitation in the case of economic offences as per the provisions of the
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Economic Offences (Inapplicability of Limitation) Act, 1974. This principle
was reiterated in the cases of Friends Union Oil Mills and Ors. vs. Income
Tax Officer, and Ors., 1975 SCC Online Ker 116 and in Sayarmull Surana
Versus Income Tax Officer, 2018 SCC Online Mad 3505. The judgments
relied on by the accused in this regard in Kishan Singh, Uday Kumar
Awasthi and Lalita Kumari were related to economic offences and were,
thus, distinguishable.
12. Mr. J.P. Khaitan, learned senior counsel representing the respondents
in both the revisions submitted as follows. Sub-section (1) of Section 276C
was applicable if a person "wilfully attempts in any manner whatsoever to
evade any tax, penalty or interest chargeable or imposable .....under this
Act". Sub-section (2) of Section 276C was applicable where a person "wilfully
attempts in any manner whatsoever to evade the payment of any tax,
penalty or interest under this Act." It was apparent from the use of the
words "chargeable or imposable" in sub-section (1) of Section 276C that it
dealt with the situation prior to the charging or imposition of any tax,
penalty or interest i.e., prior to the stage of passing of the order charging or
imposing tax, penalty or interest. On the other hand, sub-section (2) dealt
with the post-assessment stage where tax, penalty or interest had already
been charged or imposed and the payment thereof was sought to be evaded.
Thus, while sub-section (1) dealt with attempt to evade any tax, penalty or
interest chargeable or imposable, sub-section (2) dealt with evasion of the
payment of any tax, penalty or interest charged/imposed. Reference in this
behalf was invited to G.Viswanathan Vs. ITO, (1987) 167 ITR 103 (Ker),
Vinaychandra Chandulal Shah vs. State of Gujrat, (1995) 213 ITR 307 (Guj)
and Vinochandra C. Patel Vs. State of Gujrat, (2002) 253 ITR 289 (Guj). A
mere reference to the complaint would show that no case was made out as
regards evasion of the payment of any tax, penalty or interest after such tax,
penalty or interest was charged/imposed. Thus, it fell for consideration
whether a prima facie case for prosecution for commission of an offence
under sub-section (1) of Section 276C was made out. Before this Hon'ble
Court it was contended on behalf of the Revenue that subsequent to search
and seizure against one Bhaskar Ghosh and survey against the Society, the
Society had filed a disclosure petition dated September 8, 2010 disclosing
an income of Rs. 8,50,00,000/-; that in the returns filed under Section 153C
on December 20, 2011, the Society did not incorporate the amount so
disclosed; that it was only at the fag end of the assessment proceedings
when the Revenue unearthed the undisclosed income that the society on
March 6, 2013 filed revised returns for the assessment years 2007-08,
2008-09 and 2009-10 offering to tax undisclosed income of Rs.
33,21,00,000/-. According to the Revenue, there was clear attempt to evade
tax. It was not the case made out in the complaint that the society as an
entity had made the disclosure petition on September 8, 2010. The
complaint did not fault the society for non-incorporation of the amount
mentioned in the disclosure petition dated September 8, 2010, in the return
filed on December 20, 2011. The material portion of paragraph 5 of the
complaint (Page 28 of the petition) read as follows:- "..... The Hospital Group,
made a disclosure at 8.5 crore, though it was a vague disclosure." Similar
was the pleading in paragraph 3 (page 5) of the petition filed before this
Hon'ble Court. Thus, it was not the case of the complainant that the society
as a person made a disclosure. The disclosure was made by a "Group" and it
was considered a vague disclosure. It was not correct to say that the society
offered any "undisclosed income" to tax in course of the assessment
proceedings. In the return filed on March 6, 2013, the society did not claim
the exemption under Section 11 as a result of which the corpus donations,
which were exempt under Section 11, became taxable. Such taxation was
not because of any income being offered to tax as "undisclosed income." The
Revenue's contentions completely overlooked and did not deal with the
finding of the learned Additional Sessions Judge that the income of both the
society and M/s. Kali Pradip Chaudhuri Foundation, a Trust registered
under the Indian Trusts Act, 1882 (hereinafter referred to as "the Trust")
was exempt under Section 11 of the Act and the question of wilful attempt to
evade tax did not arise. The finding of the learned Additional Sessions Judge
was that both the Trust and the Society were entitled to exemption under
section 11 and income was not subject to tax in their hands and as such,
the question of evasion of tax did not arise. Since the society was engaged in
charitable purpose, namely, education and medical relief, it was granted
registration under Section 12AA of the Act with effect from April 1, 2004.
The society's income from its medical college and hospital was entitled to
exemption under Section 11 of the Act. Voluntary contributions received by
the society from part of its income in terms of Section 2(24) (ii) read with
Section 12(1) of the Act and, just like its other income, had to be used for
the promotion of its charitable objects. However, in terms of Section 11(1) (d)
read with Section 12(1) of the Act, voluntary contributions made with a
specific direction that they shall form part of the corpus of the trust or
institution shall not be treated as income. The society was required to spend
85% of its income including voluntary contributions (other than corpus
donations) for charitable purpose. Except for the assessment years 2007-08,
2008-09 and 2009-10 for which the society withdrew its claim for
exemption, the society had all along been assessed as an institution entitled
to exemption under Section 11 of the Act. Since the trust was also engaged
in charitable purpose, it was granted registration under Section 12AA of the
Act with effect from April 1, 2004. As in the case of the society, the trust was
also entitled to the exemption under Section 11. Voluntary contributions
constituted income of the Trust except where the contribution was made
with a specific direction that it shall form part of the corpus of the Trust.
The Trust was required to spend 85% of its income including voluntary
contributions (other than corpus donations) for charitable purpose. Except
for the assessment year 2011-12 for which the Trust withdrew its claim for
exemption, the Trust had all along been granted exemption under Section
11 of the Act. In so far as the society was concerned the donations
aggregating to Rs. 33,21,00,000/- received by it were with the specific
direction that they shall form part of its corpus. Thus, in terms of Section
11(1) (d) read with Section 12(1) of the Act, the society was not required to
treat such corpus donations as its income and was thus not liable for any
income tax thereon. The Trust was not liable for any income tax in respect of
the amounts aggregating to Rs. 33,21,00,000/- received from the five
companies and passed on to the society. The trust fully spent the voluntary
contributions for charitable purpose by making the same over to the society.
Reference in this behalf is invited to the Division Bench judgment of this
Hon'ble Court in CIT (Exemption) Vs. Nawal Kishore Kejriwal Charity Trust,
2022 (2) TMI 534, where it was held that it was permissible for a charitable
institution to donate to another charitable institution with the direction that
the donation was towards its corpus and in such a case the provisions of
Section 11(1) (a) of the Act stood complied with. It would thus be apparent
that neither the Trust nor the society was liable for any tax in respect of the
donations received by them. In so far as the Trust was concerned, it had
received the funds from the five companies and in its turn spent it on
charity by making corpus donations to the society. All income of the Trust
and the society including by way of donations was exempt under Section 11
of the Act. The requirement of the Section that 85% of the income should be
spent for charitable purposes was duly fulfilled by the Trust when it made
over the entire amount received as corpus donation to the society. Section
11 did not require the society to spend the corpus donation received by it.
Thus, no tax was payable by the Trust in respect of the donations received
by it from the five companies or by the society in respect of the donations
received from the Trust. The obligation to explain the source of the funds
was actually that of the five companies. Even if it was assumed that the
money which was donated by the five companies was liable to be subjected
to tax, such taxation could happen only in the hands of the five donor
companies. However, the said five companies had in the meantime been
dissolved under orders dated March 16, 2012, of this Hon'ble Court in CP
Nos. 78 to 82 of 2012 in members' voluntary liquidation. In such
circumstances, in order to buy peace of mind, the society decided not to
claim the exemption under Section 11 for the assessment years 2007-08,
2008-09 and 2009-10, the consequence of which was that the exemption
under Section 11 (1) (d) of the Act in respect of the corpus donations became
unavailable and the society became liable for income tax. Having so decided,
on March 6, 2013, the society filed revised returns in which the claim for
exemption under Section 11 as a charitable institution was not made. As
such, by giving up the claim for exemption, the society also gave up the
benefit under Section 11(1) (d) read with Section 12(1) of the Act in terms of
which corpus donations were not regarded as income. By withdrawing the
claim for exemption, the society did not say that the money received was not
by way of corpus donation or that it was undisclosed income nor did the
society say that it had concealed the particulars of its income or furnished
any inaccurate particulars of its income. The society could have persisted
with its claim for exemption which would have resulted in long drawn and
costly litigation. In order to buy peace of mind and avoid litigation, the Trust
also in the revised return for the assessment year 2011-12 filed on March 6,
2013, did not claim exemption under Section 11 and as a result its income
of Rs. 1,41,00,000/- became taxable. It was also the understanding of the
Trust that it would not be penalized in any manner and that there will be no
further proceedings. Reference to the assessment order dated March 31,
2013, in the case of the Trust for the assessment year 2011-12 would show
that it was not the case of the Revenue that the said sum of Rs.
1,41,00.000/- came to the Trust from the five companies. It would be
relevant to mention that the said cash of Rs. 35,10,400/- was not added to
the society's income since Bhaskar Ghosh accepted it as his. At pages 8 and
9 of the assessment order, the Assessing Officer extracted and summarized
the stand of the assessee in the submissions filed before him that the
donations were genuine and not bogus or accommodation entry. A perusal
of the aforesaid assessment orders passed in the society's case would also
show that the only material adverted to therein is the alleged statement
dated August 30, 2010, of Kamala Shankar Pandey. At the same time, the
orders went on to state that Prabir Banerjee, the other common Director of
the said five companies, had stated that the donations were genuine and
there was no accommodation entry. It was mentioned in the assessment
orders that Prabir Banerjee stated before the Assessing Officer that Kamala
Shankar Pandey had expired, and he filed a copy of the death certificate.
Kamala Shankar Pandey having died is no longer available as a witness. The
alleged statement of Kamala Shankar Pandey, which had not been tested,
could not be relied upon. Reliance on behalf of the petitioner on Section
279(3) of the Act to content that such alleged statement was admissible
evidence was entirely misplaced. There was no proceeding against Kamala
Shankar Pandey in which the admissibility of the said alleged statement as
evidence arises. Section 279 (3) is ex facie inapplicable. The suggestion on
behalf of the petitioner as if in course of the assessment proceedings
discrepancies were found or that the five companies were found to be bogus
or that the Assessing Officer had unearthed undisclosed income because of
which the society and the Trust were compelled to file revised returns is not
borne out from the assessment orders. It was necessary to mention that the
penalty imposed upon the society under Section 271(1) (c) of the Act for the
assessment years 2007-08, 2008-09 and 2009-10 and upon the Trust for
the assessment year 2011-12 was confirmed up to the stage of the Tribunal.
The appeal of the Trust under Section 260A of the Income Tax Act, 1961
against the order of the Tribunal, being ITAT 106 of 2015, was admitted by
this Hon'ble Court on August 26, 2015. On the other hand, the appeals of
the society under Section 260A of the Act, being ITAT 105, 107 and 108 of
2015, were not admitted and dismissed at the admission stage by this
Hon'ble Court on August 7, 2015. The Society had preferred SLP(C) Nos.
3229-3231/2015 against such dismissal. On March 14, 2016, the Hon'ble
Supreme Court disposed of the Special Leave Petitions by granting liberty to
the society to file an application for review before this Hon'ble Court pointing
out the fact that the appeal of the Trust had been admitted. The Hon'ble
Supreme Court made it clear that the Special Leave Petitions had not been
considered on merit. The society has filed review petitions, being RVWO 35,
36 and 37 of 2016, which are all pending. It is submitted that the Assessing
Officer accepted the revised returns filed by the society for the assessment
years 2007-08, 2008-09 and 2009-10 and by the Trust for the assessment
year 2011-12. Having accepted such revised returns in toto, it was
impermissible for the Income Tax Authorities to launch prosecution under
Section 276C. Reliance in this behalf was placed on the judgment of the
Hon'ble Karnataka High Court in K.E. Sunil Babu, Assistant Commissioner
of Income-Tax Vs. Steel Processors & Ors., (2006) 286 ITR 315 (Karn). It is
further submitted that the petitioner had not explained the delay to
prosecute the opposite parties either in the complaint filed under Section
200 of Cr.PC or in the instant petition filed before this Hon'ble High Court.
The unexplained delay of six years is fatal. Reliance in this behalf was
placed on the following decisions:-
(i) Kishan Singh Vs. Gurpal Singh, AIR 2010 SC 3624;
(ii) Uday Shankar Awasthi Vs. State of Uttar Pradesh, (2013) 2 SCC;
(iii) Lalita Kumari Vs. Government of U.P., (2014) 2 SCC 1
13. I heard the learned counsels for the parties and perused the petition,
the affidavits and written notes of arguments.
14. First, the offences alleged are covered by the Economic Offences
(Inapplicability of Limitation) Act, 1974. Even otherwise, the purported delay
in lodging the prosecution is not fatal, especially considering that the
accused were aware of the constituent facts so that any prejudice can be
ruled out.
15. It appears that the prime thrusts of the impugned order were that the
impugned proceedings amounted to double jeopardy vis-a-vis the penalty
proceedings and that no prima facie case was made out against the accused.
16. It is settled law that double jeopardy would be attracted only if the two
proceedings in question involved the same or similar penal provisions. A
penalty proceeding under Section 271 of the Income Tax Act is distinctly
different from a prosecution for alleged offences under Sections 276C of the
said Act. Not only are the procedures for and the implications of imposition
of penalty and for prosecution in a criminal case are different, but the scope
and ambit of the purported wrong doings that are contained in the
respective provisions are also not similar. Therefore, the instant criminal
proceedings cannot be said to be barred under Section 300 of the Code of
Criminal Procedure.
17. Now comes the question of existence of a prima facie case. For getting
an answer, one may need to sift evidence and materials on record albeit for
the limited purpose of finding out whether a prima facie case is made out
against the accused or not. After all, the proceeding is not pending at an
initial stage, but is one step away from trial.
18. The starting point of the present prosecutions is the alleged seizure of
a sum of money from the residential property of one Bhaskar Ghosh. It
appears that subsequently he recanted the statement and claimed such
money to be his own during assessment proceeding and the income tax
authorities apparently did not dispute the same.
19. The only other statement allegedly appearing in favour of the
prosecution is that of one Kamala Shankar Pandey, a former common
director of the companies. However, he is there no more. As such, his
statement made before the income tax authorities would hardly be of much
consequence. He will not depose in this case and his statement will not be
subjected to cross-examination. Besides, there was no proceeding against
the said Kamala Shankar Pandey so as to attract Section 279 (3) of the
Income Tax Act.
20. It is further significant to note that the medical college and the
medical foundation were both charitable entities having necessary
certificates under the Income Tax Act. It does not appear that the certificates
were withdrawn and/or cancelled by the income tax authorities for the
subsequent years. Therefore, income in their hands would ordinarily be
non-taxable.
21. In the course of the assessment proceedings, the assessing officer
required the society to explain the source of donations. The source for the
Trust were the five companies. Therefore, the obligation to explain the
source of the funds was actually that of the five companies. However, the
concerned authorities did not pursue the same and not even with their
directors and in the meantime, the said companies were dissolved by an
order of this Court in the members' voluntary liquidation. In this light, the
stand of the assessee that there was no attempt to evade tax or penalty
cannot be totally ignored. The accused contended that the corpus fund was
not suppressed. Only an exemption was claimed for the particular financial
year. Such an act is not even covered by the Explanation after Section 276C.
This became an issue and purportedly to buy peace of mind, the society filed
a revised return in which the claim for exemption was not made. While
doing so, apparently the society did not admit that the money received was
an undisclosed income. It is the further case of the accused that had the
society persisted with the claim for exemption, it would have resulted in long
drawn and costly litigations. As a result, a larger income became taxable.
The accused further claimed that it was the understanding of the trust that
it would not be penalised any more. Yet, punitive proceedings were initiated.
22. Another aspect which needs to be looked into is that if an entity is
legally entitled to file a revised return of tax, even in terms of Section 153C,
within a period and if it does so within such period, the same cannot attach
any further disadvantage to the entity for having done so. In this regard the
stand of the Revenue that the assessee tried to evade penalty tax by revising
return is also not quite tenable.
23. For the sake of expedience, the relevant provisions of Sections 271 (1)
and 276C of the IT Act are quoted as under _
Section 271 (1) (C). "Failure to furnish returns, comply with notices,
concealment of income, etc. - (1) If the [Assessing Officer] or the
[Commissioner(Appeals)] [or the [Principal] Commissioner or Commissioner]] in
the course of any proceedings under this Act, is satisfied that any person -
(b) has failed to comply with the notice [under sub-section (2) of section
115WD or under sub-section (2) of section 115WE or under sub-section (1) of
section 142] or sub-section (2) of section 143 [or fails to comply with a
direction issued under sub-section (2A) of section 142], or
(c) has concealed the particulars of his income or furnished inaccurate
particulars of [such income, or]
(d) has concealed the particulars of the fringe benefits or furnished
inaccurate particulars or such fringe benefits,]
he may direct that such person shall pay by way of penalty, -
(ii) in the cases referred to in clause (b), [in addition to tax, if any payable]
by him, [a sum of ten thousand rupees] for each such failure;]
(iii) in the cases referred to in [clause (c) or clause (d)], [in addition to tax, if
any, payable] by him, a sum which shall not be less than, but which shall not
exceed [three times], the amount of tax sought to be evaded by reason of the
concealment of particulars of his [income or fringe benefits] or the furnishing of
inaccurate particulars of such [income or fringe benefits.]
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, or under-reports his income,] under this Act, he
shall, without prejudice to any penalty that may be [or imposable, or under-
reports his income,] on him under any other provision of this Act, be
punishable, -
(i) in a case where the amount sought to be evaded [or tax on under-
reported income] exceeds [twenty-five 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 [two 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 shall not be less than three months but which may extend to [two
years] and shall, in the discretion of the court, also be liable to fine.
Explanation. - For the purposes of this Section, 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 statements; 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.
24. As was argued on behalf of the Revenue, it is settled law that penalty
proceedings can continue even after disclosure of concealed income. But,
one has to test this in respect of a prosecution and that too, in the
particular facts of the case.
25. It is quite clear from the above that something more is required to
haul up an assessee under Section 276C of the Act than under Section 271
(1) (C). "Wilful" is the key word that sets these provisions apart, besides the
core ingredients making them up and therefore, there has to be some
additional material or averment of fact in this regard. Otherwise, a
prosecution would be an automatic fallout of such a penalty proceeding,
perhaps depending solely on the generosity of the officer concerned about
whether such charges would be pressed. But, this is not what law envisages.
26. It may not be sufficient in the present facts for the Revenue to raise a
plea that here presumption under Section 278E would be applicable. A
presumption like this is an exception to the general rule of burden of proof
and may shift the onus of proof on an accused during trial. But, the initial
onus of showing that a prima facie case is made out would still lie on the
prosecution. In other words, there has to be some material to invoke such a
presumption. Thus, at this stage, a Court has to find out whether a prima
facie case is at all made out in this backdrop.
27. It may be germane to mention here that there is a difference between
discharging the initial onus of making out a case and shifting of onus of
proof during trial by invoking a presumption. Although on different facts
and stage, reliance is placed on Baljeet Singh vs. State of Haryana, (2004) 3
SCC 122 and Durga Prasad & Anr. Vs. State of Madhya Pradesh, (2010) 9
SCC 73.
28. With the statements of the two witnesses appearing against the
accused having been rendered ineffective, what is left for the prosecution is
the purported wrong claiming of exemption by the accused. On the other
hand, the accused purportedly retained their status of charitable entities
and filed revised return within the stipulated time, waiving exemption and
paying tax.
29. It is one thing to suffer a penalty under Section 271 (1) (c) of the
Income Tax Act for avoiding to pay tax or penalty. But, it is quite another to
be prosecuted for wilfully trying to evade tax or evade payment of tax. The
facts of the case as referred to above, for argument's sake, may be at the
best sufficient for inviting a penalty under Section 271 (1) (c) of the Act, but
appear to be grossly insufficient for making out a prima facie case of an
wilful attempt to evade tax or evade payment of tax.
30. As would be evident from the above, the prosecution has even
otherwise failed to make out a prima facie case that the opposite parties
wilfully tried to evade tax or evade payment of tax, especially considering the
fact that the fund was substantially disclosed and only an exemption was
claimed, which was waived within the time for filing a revised return.
31. When the opposite parties have been given the benefit of an order of
discharge by the first revisional Court, there has to be cogent and
convincing grounds on which such an order can be set aside. This Court is
not convinced with the points raised by the petitioner in this regard.
32. In view of the above, I do not find any merit in these applications. The
same are, therefore, dismissed.
33. However, there shall be no order as to costs.
34. Urgent photostat certified copies of this judgment may be delivered to
the learned Advocates for the parties, if applied for, upon compliance of all
formalities.
(Jay Sengupta, J.)
S.M
