Suman Paper & Boards Ltd vs Joint Commissioner Of Income Tax
2023 Latest Caselaw 2336 Guj

    R/CR.MA/3438/2004                            JUDGMENT DATED: 17/03/2023




             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

              R/CRIMINAL MISC.APPLICATION NO. 3438 of 2004
                                 With
              R/CRIMINAL MISC.APPLICATION NO. 3441 of 2004
                                 With
              R/CRIMINAL MISC.APPLICATION NO. 3439 of 2004
                                 With
              R/CRIMINAL MISC.APPLICATION NO. 3440 of 2004


FOR APPROVAL AND SIGNATURE:


HONOURABLE MR. JUSTICE NIKHIL S. KARIEL                   Sd/-

==========================================================

1     Whether Reporters of Local Papers may be allowed
      to see the judgment ?                                          NO

2     To be referred to the Reporter or not ?
                                                                     NO
3     Whether their Lordships wish to see the fair copy
      of the judgment ?                                              NO

4     Whether this case involves a substantial question
      of law as to the interpretation of the Constitution            NO
      of India or any order made thereunder ?

==========================================================
                 SUMAN PAPER & BOARDS LTD. & 6 other(s)
                               Versus
             JOINT COMMISSIONER OF INCOME TAX & 2 other(s)
==========================================================
Appearance:
(MR JP SHAH)(1054) for the Applicant(s) No. 1,2,3,4,5,6
DELETED for the Applicant(s) No. 7
MR MANISH J SHAH(1320) for the Applicant(s) No. 1,2,3,4,5,6
MR PREMAL R JOSHI(1327) for the Applicant(s) No. 1,2,3,4,5,6
 for the Respondent(s) No. 2
MR NIKUNT RAVAL WITH MRS KALPANAK RAVAL(1046) for the
Respondent(s) No. 1
MS MD MEHTA, APP for the Respondent(s) No. 3 (in all the matters)
==========================================================

    CORAM:HONOURABLE MR. JUSTICE NIKHIL S. KARIEL


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 R/CR.MA/3438/2004                                    JUDGMENT DATED: 17/03/2023




                            Date : 17/03/2023

                           ORAL JUDGMENT

1. Heard learned Advocate Mr.Manish J. Shah appearing with learned

Advocate Mr.Premal Joshi for the applicants, learned Advocate

Mr.Nikunt Raval appearing with learned Advocate Mrs.Kalpana Raval

for respondent Department and learned APP Ms.M.D. Mehta for the

respondent State in all the four applications.

2. Since facts and law involved in the all the four applications are common

and similar in nature, they are disposed of by this common judgement.

For the sake of convenience, Criminal Misc. Application No.3438 of

2004 is taken as the lead matter for deciding the issues involved.

3. Facts :-

3.1. The premises of the applicant No.1 - a Public Limited Company

and its Directors (other applicants) were raided on 1.12.1995 and

search was carried out by the respondent Income Tax Department

under Section 132 of the Income Tax Act and the search was

concluded on 5.1.1996. It appears that pursuant to a Notice under

Section 158BC of the Income Tax Act, the applicant had filed return

for the Block Period 1.4.1985 to 5.1.1996, declaring undisclosed

R/CR.MA/3438/2004 JUDGMENT DATED: 17/03/2023

income of Rs.20,31,055/- on 26.2.1996. The Assessing Officer vide

an order dated 31.1.1997, determined the undisclosed income at

Rs.62,61,623/-. The applicants herein filed an Appeal before the

Income Tax Appellate Tribunal ('ITAT' for short) and vide order

dated 18.5.1998, the Tribunal had granted certain reliefs and whereas

few additions have been set aside for re-adjudication. It appears that

pursuant to the re-adjudication, the undisclosed income was

computed as Rs.23,36,144/-.

3.2. The applicants thereafter received a show-cause notice from the

Department, asking it to show cause as to why the applicants should

not be prosecuted for not showing the amount of Rs.20,31,055/- in

the returns under Section 139 of the Act for the respective years.

The applicants submitted their reply dated 7.1.1999 to the show

cause notice inter alia contending that Block Assessment Period is a

single unit of Assessment comprising a period of 10 years and hence,

income taxed in a Block Assessment could not be stated to be related

to any particular year, that there was no finding of any concealment

in the regular assessment orders and, therefore, there could not be

any prosecution in respect of the regular assessment, more

particularly on account of Section 158BF of the Act, no interest or

penalty could be levied for the block returns filed, hence, as a

necessary corollary the prosecution could not have been launched.

R/CR.MA/3438/2004 JUDGMENT DATED: 17/03/2023

The respondent No.2 had sanctioned the prosecution by order dated

8.6.2000 under Section 279(1), stating that all the applicants had

knowledge about the concealment and thereby committed offence

under Section 276C(1), Section 277 read with Section 278B of the

Act, and Criminal Case No.2707 of 2000 has been launched in the

Court of learned Chief Judicial Magistrate, Surat, which is sought to

be quashed by the present applicants in the present Application.

4. Learned Advocate Mr.Shah, at the outset, would submit that the issue

raised in the present group of applications stand covered by decision of a

learned Coordinate Bench (Coram: Mr. Justice Anant S. Dave) in

Criminal Misc. Application No.3437 of 2004 dated 26.10.2018.

Learned Advocate would submit that the said application was part of the

present group and whereas issues decided by the learned Coordinate

Bench are the very selfsame issues raised in the present applications.

Learned Advocate would, therefore, submit that based upon the law laid

down by the learned Coordinate Bench, the present applications may be

allowed.

4.1. Learned Advocate Mr.Shah for the applicants would submit, on

merits, that the complaint is in respect of the returns under Section

139 and assessments under Section 143 of the Act and the Assessing

Officer, who had passed the orders under the said Section, had

R/CR.MA/3438/2004 JUDGMENT DATED: 17/03/2023

neither given any finding with regard to concealment of

income/furnishing inaccurate particulars, nor were there any

proceedings under Section 271(1)(c) with regard to penalty and,

therefore, prosecution for the act of omission or commission could

not be initiated. Learned Advocate Mr.Shah would draw the attention

of this Court to the Notice for prosecution under Section 276C(1)

and 278B of the I. T. Act issued by the respondent Department and

would submit that the respondent Department had determined a total

of Rs.62,61,623/- as undisclosed income, which was challenged by

the applicants before the learned ITAT, Ahmedabad. Learned

Advocate Mr.Shah would submit that after considering various

additions and undisclosed income as computed by the Assessing

Officer, the learned ITAT, Ahmedabad had, after granting certain

relief, set aside certain additions for re-adjudication, resulting in

revision of the undisclosed income as Rs.23,36,144/-. Learned

Advocate Mr.Shah would further submit that after filing return for

the undisclosed income of Rs.20,31,055/- as block assessment, an

amount to the tune of Rs.3,05,089/- would be the difference and in

spite of the same, the respondent Department had issued the above

Notice dated 30.11.1998 under Section 276C(1) and 278B of the I.

T. Act for prosecution for an undisclosed amount of Rs.20,31,055/-

on the ground that the said amount was not shown in the original

R/CR.MA/3438/2004 JUDGMENT DATED: 17/03/2023

return, which is not permissible.

4.2. Learned Advocate Mr.Shah would submit that the original return

for every financial year and return for block period of ten years for

undisclosed income are different and separate, and whereas the

respondent Authorities are trying to put the undisclosed income of

the block period in the original return so as to make the applicants

liable for prosecution.

4.3. Learned Advocate Mr.Shah would thereafter submit that at the

relevant point of time, Section 158BF of the I.T. Act was applicable

to the cases of raid between 1.7.1995 to 1.1.1997. According to

learned Advocate, as per Section 158BF, no interest under the

provisions of Section 234A, 234B or 234C or penalty under the

provisions of Clause (c) of Sub-section (1) of Section 271 or Section

271A or Section 271B could be levied or imposed on the assessee in

respect of the undisclosed income determined in the block

assessment and as such, there was no penalty/interest levied upon the

applicants. Mr.Shah would, therefore, submit that as there were no

proceedings for levying penalty, prosecution against the applicants is

out of question. Relying upon the decision of this Court in case of

Alkesh S. Shah Vs. State of Gujarat and Another, reported in

(1995) 212 ITR 255(Guj) (Criminal Revision Application No.132

R/CR.MA/3438/2004 JUDGMENT DATED: 17/03/2023

of 1989), learned Advocate Mr.Shah would submit that once the

position having been accepted by the Department and the income

having been accepted as income from undisclosed sources, it could

not have been urged by the Department that there was a willful

attempt on the part of the applicants - assessees. Learned Advocate

Mr.Shah would submit that, as reiterated by this Hon'ble Court in

the aforesaid decision, as no penalty proceedings for concealment of

income or for showing incorrect particulars in the return were

initiated, the prosecution could not have been launched on the basis

of a view which, right from the initiation, was even according to the

Department in favour of the applicants.

4.4. Learned Advocate Mr.Shah would further submit that neither the

Assessing Officer had opined concealment of income in his report,

nor had the learned ITAT, Ahmedabad held so in its order, rather the

learned ITAT, Ahmedabad had, after giving certain relief and setting

aside certain additions for re-adjudication, quantified the undisclosed

income for the block assessment and, therefore, it is not now open

for the Department to initiate criminal prosecution under the said

Sections. Learned Advocate Mr.Shah appearing for the applicants

thereafter would take this Court through the complaint filed by the

Department and would submit that a perusal of the complaint itself

would reveal that the applicants had already submitted details of all

R/CR.MA/3438/2004 JUDGMENT DATED: 17/03/2023

the income, disclosed and undisclosed and barring minor errors, the

applicants had never concealed any income as alleged by the

Department. Learned Advocate Mr.Shah would submit that the

respondent Department ought not to have clubbed the original

returns for individual financial years with the block assessment, as

both the assessments stand on different footing. Learned Advocate

Mr.Shah would draw the attention of this Court to Chapter XIV-B of

the IT Act, more particularly Section 158B, the definition of block

assessment, computation of undisclosed income etc., to fortify his

arguments. Having regard to such submissions, learned Advocate

would request this Court to quash the impugned complaints.

5. Per contra learned Advocate Mr.Nikunt Raval for the Department

would submit that the block assessment, which is over and above the

regular assessment is not an amnesty scheme, which was granted to the

Assessee and, therefore, once returns were filed and accepted, he could

not say Section 276C/278B would not apply ipso facto, unless there is

some evidence. Learned Advocate Mr.Raval would submit that after

returns under Section 139 of the Act, the Assessing Officer has two

alternatives; (I) if he is not satisfied with the returns filed by the

assessee, he issues notice under Section 143(2) of the Act, for more

information to justify the deduction. Thereafter, he passes the order

under Section 143(3), and if there is no response, he can proceed under

R/CR.MA/3438/2004 JUDGMENT DATED: 17/03/2023

Section 144. Learned Advocate Mr.Raval would submit that if the

Assessing Officer is of the opinion that the assessee is deliberately

suppressing some information, then the respondent Department has two

alternatives; either to conduct search under Section 132 of the Act or

conduct a survey under Section 133A. Mr.Raval would submit that for

such purpose there is no requirement of sanction per se. Learned

Advocate Mr.Raval would submit that under search proceedings, the

search team are allowed to collect whatever material available with the

assessee and, at the same time, can also record statements, and that is

what had happened in the present case. It is submitted that the assessee

initially had filed his returns for the relevant years. Subsequently in the

year 1995, a search was conducted and in his opinion, this is where

Section 158B comes into play. Learned Advocate Mr.Raval would

submit that after end of search, there are two options, either reopen

previous assessment or to do block-assessment. Mr.Raval would submit

that as a result of search, it was detected that there was undisclosed

income and, therefore, the process which was to be followed was as if

for the entire ten years' period, there was undisclosed income and that

has to be assessed.

5.1. According to Mr.Raval, since there was undisclosed income

unearthed during the search, either interest can be levied or penalty

can be imposed, or the third option is to prosecute the assessee. It is

R/CR.MA/3438/2004 JUDGMENT DATED: 17/03/2023

submitted that as there was undisclosed income, it was required for

the assessee to disclose the same within the specified time period

after filing the returns as envisaged in the law or else rigors of

prosecution comes into force. Learned Advocate Mr.Raval would

submit that Section 276C of the Act provides that if the assessee

willfully attempts evade tax, then he can be prosecuted. According

to learned Advocate Mr.Raval, the Department can go ahead with

prosecution, if there was any income, which the assessee was

supposed to disclose but not disclosed or he has under-reported or he

has not at all reported. In the instant case, at the relevant point of

time between 1995-97, the highest slab was 30% and there was a

lump sum scheme to encourage willful disclosure of the income and

under the block-assessment, as a lump sum, double the amount as tax

was charged, which included all other components and, therefore,

separate penalty proceeding was not there. Learned Advocate

Mr.Raval would submit that Section 271 provides for penalty for

concealment of income and he would further submit that as there was

no penalty imposed during 1995-97 in terms of the said Section and

mere factum of penalty not being imposed does not mean that

prosecution cannot be initiated, as prosecution is an independent

action. Learned Advocate would submit that the present case is at a

stage of complaint and Section 278E presumes that the defence must

R/CR.MA/3438/2004 JUDGMENT DATED: 17/03/2023

discharge the burden of there being no mens rea more particularly

since the provision presumes such existence against the accused.

Learned Advocate Mr.Raval would submit that once there is prima

facie case that there was some undisclosed income, and assessee did

not file return or under-reported, it is up to the assessee to prove that

the under-reported income or undisclosed income was not deliberate

and such aspect is a matter of trial. Mr.Raval refers to complaint,

more particularly paragraph 3 onwards (Page 13-14 of Criminal

Misc. Application No.3438 of 2004) in support of his submission.

Learned Advocate Mr.Raval would further draw the attention of this

Court to paragraph 10 of the complaint and would submit that it

clearly appears from the complaint that the applicants were well

aware of the fact and, therefore, this Court may not interfere with the

prosecution.

5.2. Learned Advocate Mr.Raval appearing for the Department relies

upon the decision of High Court of Patna in case of Deepak

Engineering Works Vs. Commissioner of Income Tax, reported

in [2012] 20 taxmann.com 689 (Patna), more particularly

paragraphs 12 and 13 and upon the decision of High Court of Jammu

and Kashmir in case of Arun Arya Vs. Income Tax Officer,

reported in [2018] 98 taxmann.com 470, more particularly

paragraphs 10 and 11, in support of his submission. Learned

R/CR.MA/3438/2004 JUDGMENT DATED: 17/03/2023

Advocate Mr.Raval, then, relying upon the decision of High Court of

Delhi in case of V.P. Punj Vs. Assistant Commissioner of Income

Tax, reported in [2001] 119 Taxman 543 (Delhi)s, would submit

that in any prosecution for any offence under the Income Tax Act,

the Court may presume the existence of mens rea and it is for the

accused to prove to the contrary and that too beyond reasonable

doubt. Mr.Raval would also rely upon the decision of the High Court

of Patna in case of Raghunath Pandey Vs. State of Bihar,

reported in [1998] 99 Taxman 371 (Patna), and would submit that

mere factum of no penalty imposed upon the assessee would not be a

ground for not initiating prosecution and the Commissioner or

Principal Commissioner, as the case may be, has a discretion 'to or

not to' initiate prosecution.

5.3. Mr.Raval would further submit that prosecution under Section

158BA is initiated only on the basis of search, meaning thereby that

there were some undisclosed income, which was not forming part of

the original returns. Mr.Raval would submit that insofar as the

partners are concerned, specially when there is some averment of

their involvement, the present applications cannot be considered for

quashing of the complaint. Relying upon the decision of this Court

in case of N. R. Agarwal Industries Ltd. Vs. JCIT, reported in

(2019) 416 ITR 578 (Guj), more particularly concluding paragraphs

R/CR.MA/3438/2004 JUDGMENT DATED: 17/03/2023

26 and 27, Mr.Raval would submit that the Court has not been taken

to Section 278E in that case, wherein the Court had observed that

there was no deliberate attempt on the part of the parties. Mr.Raval

would submit that if the submission made by learned Advocate

Mr.Shah is to be considered in the trial proceedings, one can say that

he would be absolutely right in doing so, but at the stage of

complaint, as the present case, such averments are not substantially

enough or to say, at this stage, we have no sufficient proof of mens

rea, which would fall flat on the face of what the provisions require.

5.4. Learned Advocate Mr.Raval would submit that insofar as

decision of learned Coordinate Bench in Criminal Misc. Application

No.3437 of 2004, the Court in the said case referred to, the stock

holding which was not disclosed and in the instant case, there are

commission charges, licencing charges, stock holdings, and various

other commissions. Learned Advocate would submit that since there

was material difference insofar as the heads of income which were

not disclosed, the findings of the learned Coordinate Bench would

not be applicable. Learned Advocate would further submit that the

ratio of that judgement can not be applied to the facts of the present

case, more particularly Section 278E was not considered by the

Court while passing the said decision.

R/CR.MA/3438/2004 JUDGMENT DATED: 17/03/2023

6. Learned Advocate Mr.Shah, in rejoinder, would submit that insofar as

the decisions, referred to by the learned Advocate Mr.Raval, of Patna

High Court and J & K High Court are concerned, there are no specific

allegations in the complaint and, therefore, the said decisions are not

applicable to the facts of the present case. Learned Advocate would,

therefore, request this Court to quash the impugned complaints.

7. Heard learned Advocate for the respective parties, who have not

submitted anything further.

8. At the outset, the primary question, which would be required to be

answered by this Court would be whether law laid down by this Court in

decision dated 26.10.2018 in Criminal Misc. Application No.3437 of

2004 would be applicable in the facts of the present case. In the

considered opinion of this Court, it would be only after the above

question being decided in negative that the Court would be required to

give its findings on the issues raised by the learned Advocates for the

respective parties.

9. Before adverting to the facts of Criminal Misc. Application No.3437 of

2004 and comparing them to the facts of the present applications, it

would be relevant to mention that a perusal of the orders passed in

Criminal Misc. Application No.3441 of 2004 (part of the group) would

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reveal that originally Criminal Misc. Application No.3437 of 2004 and

Criminal Misc. Application No.3441 of 2004 had been listed together

and a common order of issuance of notice had been passed by a learned

Coordinate Bench of this Court (Coram: Hon. Mr. Justice S. D. Dave)

on 19.4.2004. It further appears that as in Criminal Misc. Application

No.3437 of 2004, rule had been issued as in the present group of

applications vide an order dated 5.10.2004 and interim relief had also

been granted. Thus, it would appear that initially five applications had

been moved by the petitioners and whereas up to some time, the

applications were heard together and whereas it would appear that

Criminal Misc. Application No.3437 of 2004 got detagged and was

heard separately and decided by the learned Coordinate Bench vide an

order dated 26.10.2018.

10. As far as the facts are concerned, it would appear that as in the

present case, a search had been carried out on the business premises of

the group Companies of one M/s.N. R. Agrawal Group. The said fact

being noticeable from the paragraph of the Criminal Complaint in the

present applications, whereas similar averments appear to have been

made as in the Complaint impugned in Criminal Misc. Application

No.3437 of 2004, more particularly as noted by the learned Coordinate

Bench in the judgement concerned. It would appear that pursuant to the

search in question, a notice under Section 158BC of Income Tax Act

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had been issued and whereas return for block period from 1.4.1985 to

5.1.1996 declaring undisclosed income of Rs.20,31,055/- was filed on

26.2.1996. It appears that the Assessing Officer had passed a block

assessment order on 31.1.1997 assessing the undisclosed income at

Rs.62,61,623/-. It appears that in case of the decision in Criminal Misc.

Application No.3437 of 2004, the Assessing Officer had not believed

the block assessment filed by the applicant - assessee therein. It would

appear that as in case of the present lead application i.e. Criminal Misc.

Application No.3438 of 2004, as well as in the other applications, the

assessment had not been believed by the Assessing Officer, as can be

seen from different assessment orders and whereas all the assessment

orders were subject matter of challenge before the learned Income Tax

Appellate Tribunal, Ahmedabad Bench. It would appear that the learned

ITAT had granted certain reliefs and whereas a few additions by the

Assessing Officer were set aside for re-adjudication. It would appear

that vide an order dated 30.7.1998, the Assessing Officer had passed the

order giving effect to the learned ITAT's order and whereas the

undisclosed income had been revised as Rs.23,36,144/-. It would appear

that as in case of Criminal Misc. Application No.3437 of 2004, a show-

cause notice had been issued to the Company on the very same day i.e.

30.11.1998, asking the Company to show cause as to why prosecution

proceedings should not be initiated against it. The show cause being

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with regard to the Company for not showing undisclosed income of

Rs.20,31,055/- shown for the block period in the original returns. It

would appear that like in the case of Criminal Misc. Application

No.3437 of 2004, a reply had been sent by the present applicants also

through their Chartered Accountants on 7.1.1999 and whereas the same

having not been considered and sanction under Section 279(1) of IT Act

having been granted by the Commissioner on 8.6.2000 the impugned

complaint came to be filed before the learned Chief Judicial Magistrate,

Surat being Criminal Case No.270 of 2000.

10.1. As far as the contentions are concerned, it appears that the

principal contention of the applicants as in the present case, relying

upon Section 158BF of the Act as applicable at the relevant point of

time, have been recorded by the learned Coordinate Bench, relevant

portion of which is reproduced herein below for benefit:-

"6.4 ... It is emphatically submitted by learned counsel for the applicants that though raid was carried out on the business premises of petitioner no.1 and resident of directors on 1.12.1995, at the relevant point of time a new Chapter XVIB was introduced in the Act, 1961 which provided special procedure for search cases with effect from 1.7.1995 and was applicable in cases of raid carried out between 1.7.1995 to 1.1.1997. That relevant Section 158-BF provided that no interest under the provisions of Section 234A, 234B or 234C or penalty under the provisions of Clause (C) of Sub-section (1) of Section 271 or Section 271A or Section 271B shall be levied or imposed upon the assessee in respect of the undisclosed income determined in the block assessment.

R/CR.MA/3438/2004 JUDGMENT DATED: 17/03/2023

7. That above provision was made inapplicable after 1.1.1997 by virtue of newly inserted Section 158 BF(A) of the Act 1961. That petitioner no.1 filed a block return showing income of rupees-nil for the period 1.4.1985 to 5.1.1996 and the Assessing Officer passed a block assessment order on 31.1.1997 and computed the income of Rs.3,33,000/-. In appeal, the Tribunal passed an order on 18.5.1998 reducing the income to Rs.2,33,100/- and, thus, it was finally assessed income. Since above order attained finality, notice dated 30.11.1998 was received by the petitioner no.1 to show cause as to why the petitioner should not be prosecuted for not showing any returns under Section 139 of the Act 1961, for the respective years, the income of Rs.2,33,000/- sustained by the Tribunal. A reply dated 7.1.1999 was filed by the petitioner to the show cause notice and submitted that in regular assessments for the assessment years falling in the block period, the returns were accepted by the then assessing officer and all the assessments were of loss and there was no finding of any concealment in the regular assessment orders and, therefore, no prosecution can be lodged or instituted in respect of regular assessment, particularly, when provisions of Section 158BF was inoperative. Thus, according to learned counsel for the applicants it is clear that if there can be no penalties, a fortiori there cannot be prosecution. Therefore, sanction given by respondent no.2 vide order dated 8.6.2000 under Section 279 (1) is illegal and consequently, institution of criminal proceedings against the applicants also deserve to be quashed and set aside." (Emphasis supplied)

10.2. As noted herein above, this has been the principal issue which

has been urged by the learned Advocate for the applicants that when

provisions of Section 158BF was holding the field, more particularly

when amended Section 158BFA had not been introduced, therefore,

for block assessment between the period 1.7.1995 to 1.1.1997, even

penalties could not be imposed, therefore, a fortiori there cannot be

prosecution. The said question had been answered by the learned

Coordinate Bench vide judgement dated 26.10.2018 at paragraph 25,

relevant portion is quoted herein below:-

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"25. In view of above order dated 18.5.1998 passed by ITAT, Ahmedabad Bench, in Appeal No.71/1997 deduction was given under Section 80IA of the Act to the extent of Rs.99,900/- and refused undisclosed income so assessed to Rs.2,33,100/- and no surcharge was to be levied at present and revised demand notice was to be issued. The assessee has also replied to notice dated 30.11.1998 issued by Deputy Director of Income Tax (Prosecution) Surat, by reply dated 7.1.1999, wherein it was contended that "undisclosed income in Section 158 B

(b) include any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of accounts or other documents or transactions where such asset, entry or other document or transaction repaying wholly or partly income or property which has not been or would not have been disclosed for the purposes of the Act. Therefore, what the assessee had already disclosed or would have disclosed is not to be treated as undisclosed income.

Besides, reference was made to Chapter XIV-B of the Act, whereby the undisclosed income incorporated into the scheme with effect from 1.7.1995 to 30.12.1996 was deleted and, accordingly, search was required to be assessed separately, for which budget note for the year 1995-96 were also relied on. The assessee tried to justify that the block assessment period was, therefore, a single unit of assessment year comprising a period of ten years and, hence, the income tax in the block assessment would not be said to be relating to the particular year of regular year of assessment. It was with this objective only the concept of block assessment was introduced. The assessee also relied on various other provisions. By relying on comparison of provisions for block assessment for the period 1.7.1995 to 31.12.1996 and similar provisions which were made effective from 1.1.1997, the prosecution was never intended by the Legislature, it was clear according to assessee that the period covering the search of the assessee for which no time limit was prescribed for filing the returns of income tax in Form No.2B under Section 158BC of the Act, which was amended by introducing Section 158BC (a) (ii) of the Act from 1.1.1997. At the same time, there was no provision for payment of tax which was amended by introducing Section 158BFA from 1.1.1997 and, therefore, during the period from 1.7.1995 to 31.12.1996, the tax was to be paid at the time of determination of income irrespective of the date of filing the return of undisclosed income and irrespective of the amount of undisclosed income. It was also clear that had there been any intention of levying any penalty or prosecution, the legislature would have been specific or would have introduced the provisions of Section 158 BC (a) (ii), and Section 276 CCC, since the provisions of Section 276 CCC was introduced from 1.1.1997 for prosecution for willful failure to furnish the return of income in such cases and by specific proviso contained in the Section provided that no person shall be punished for any failure to this Section in respect of search initiated under Section 132 or books of accounts or other documents etc.

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requisitioned under Section 132A after 30.6.1996 but before 1.1.1997. Therefore, specific exemption for the block period covering the case of the assessee-company indicated that if there was any intention of the legislature the specific provision for prosecution would have been introduced for such cases but in absence of such provision, it could be easily inferred that the legislature intended to grant immunity for the block period covering the case of the assessee company. Reliance was also placed under Section 158B (i) of the Act read with Section 158 BC whereby what is assessed is the undisclosed income of the block period and not total income of any previous year and the determination of the undisclosed income is the income, which was not disclosed or determined in the regular assessments. Therefore, what was concealed for regular assessment is taxed as undisclosed income in the block assessment. Even it was pleaded that there was no willful attempt to evade any tax so as to bring provisions under Section 276 (c) (i) of the Act and immunity granted by Section 158 BF from levy of interest and penalty under Section 271 (1) (c), 271 (A), 271-B of the Act. That there is no mention of Section 276-C in Section 158BF of the Act and, as a matter of fact, a careful reading of Section 276-C transpires that if a person willfully admits to evade any tax, penalty or interest chargeable or imposable under the Act, 1961 then only prosecution can be launched." (Emphasis supplied)

11. From the above discussion, it clearly appears to this Court that

the issue involved in the present group of applications and Criminal

Misc. Application No.3437 of 2004 decided by the learned Coordinate

Bench of this Court appears to be substantially similar and whereas

under such circumstances, the law laid down by the learned Coordinate

Bench would also cover the issue in question in the present group of

applications.

12. It would be pertinent to mention here that the learned Advocate

appearing on behalf of the respondent Department had attempted to

argue that attention of learned Coordinate Bench had not been drawn to

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Section 278E and, therefore, the law laid down by the learned

Coordinate Bench may not be binding on this Court, in the considered

opinion of this Court, such a submission cannot be countenanced. As

far as the contention of Mr.Raval that a particular section or provision

was not brought to the notice of the Court, though the same was not

reflected in the order, normally it is deemed and presumed that the Court

had considered it. It would be relevant to mention here that the learned

Coordinate Bench had inter alia held that upon introduction of Section

158BFA and Section 158BC(a)(ii) and Section 276CCC from 1.1.1997,

the legislature had envisaged prosecution for willful failure to furnish

return of income in search cases, and whereas in absence of a specific

provision between the period from 1.7.1995 to 1.1.1997, it could be

inferred that the legislature had intended to grant immunity in such type

of cases. Essentially what has been emphasized is the lack of any

provisions to prosecute an assessee during the period between 1.7.1995

to 1.1.1997, which period covers the present cases also.

12.1. Furthermore, by relying upon Section 278E of the IT Act 1961,

learned Advocate for the respondent Income Tax Department

intends to submit that the said Section envisages existence of

culpable mental state in a prosecution for any offence and whereas,

the defence has been imposed with a burden of rebutting such

prosecution. It was intended to be submitted that such rebuttal could

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only be at the trial stage of the complaint and, therefore, an

application for quashing complaint under Section 482 may not be the

remedy. In the considered opinion of this Court, as noted herein

above, since the learned Coordinate Bench has taken a view as

regards there being no provision existing at the relevant point of time

whereby the Income Tax Department could launch a prosecution as

regards income disclosed in block assessment for the period between

1.7.1995 to 1.1.1997, automatically and as a direct consequence,

quashing of prosecution is the only necessary corollary. Having

come to such a conclusion, there was no requirement for the learned

Coordinate Bench to have discussed with regard to applicability of

Section 278E of the Act and whereas in the considered opinion of

this Court, therefore, the submission of the learned Advocate for the

Income Tax Department cannot be accepted.

13. Furthermore, insofar as the submission of the learned Advocate

for the Income Tax Department that the decision in Criminal Misc.

Application No.3437 of 2004 would not be applicable on the ground that

the heads on which incomes were not disclosed were different than the

heads of undisclosed incomes in the present case, therefore, the same

may not be applicable. In the considered opinion of this Court, the

Criminal Complaint has been filed by the Department inter alia alleging

commission of offences punishable under Section 276C, Section 277

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read with Section 278B of the Act. A bare perusal of Section 276(1)

would reveal that punishment is to be imposed for willful attempt to

evade tax, penalty or interest and whereas the heads of income under

which there has been any alleged willful attempt as per the Scheme of

the Section does not hold any special relevance.

13.1. In this regard it would also be relevant to note that while it is

undoubtedly true that the learned Coordinate Bench of this Court had

made observations with regard to the heads of income in the

judgement dated 26.10.2018, but at the same time what would be

necessary to note is the fact that having decided the preliminary issue

as regards there being no power vested with the Income Tax

Department to launch a prosecution with regard to undisclosed

income for block assessment for the period between 1.7.1995 to

1.1.1997, the necessary consequence would be quashment of the

Complaints. The latter observations would not have made any

difference to the final finding on the issue. Under such

circumstances, in the considered opinion of this Court, the fact of

heads on which income had not been disclosed being different and

distinct in the present group of cases and the decision by the learned

Coordinate Bench in Criminal Misc. Application No.3437 of 2004

would not be of any material consequence and hence, the said

submissions is also not countenanced.

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14. In view of the above discussion, more particularly since this

Court has come to a conclusion that the decision of the learned

Coordinate Bench dated 26.10.2018 in Criminal Misc. Application

No.3437 of 2004, substantially and essentially covers the issue raised in

the present group of applications and whereas since the law laid down

by the learned Coordinate Bench being binding upon this Court,

therefore, the present group of applications also require consideration.

15. Consequently, the impugned Criminal Complaints No.2707 of

2000, 2708 of 2000, 2709 of 2000 and 2710 of 2000 pending in the

Court of learned Chief Judicial Magistrate, Surat are hereby quashed and

set aside. The present applications are allowed accordingly. Rule is

made absolute to the aforesaid extent.

Sd/-

(NIKHIL S. KARIEL,J) V.V.P. PODUVAL