Madras High Court
P.Arulmudi vs The Assistant Commissioner Of Income ... on 1 December, 2023
Author: G.K.Ilanthiraiyan
Bench: G.K.Ilanthiraiyan
Crl.O.P.No.18609 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on : 23.11.2023
Pronounced on : 01.12.2023
CORAM:
THE HONOURABLE MR.JUSTICE G.K.ILANTHIRAIYAN
CRL.O.P.No.18609 of 2021 and
Crl.M.P.No.10228 of 2021
P.Arulmudi ... Petitioner
Vs.
The Assistant Commissioner of Income Tax,
New No.46, M.G.Road,
Nungambakkam, Chennai-34 ... Respondent
PRAYER: Criminal Original petition is filed under Section 482 of Criminal
Procedure Code, to call for the records in complaint No.EOCC.No.23 of 2019
pending on the file of the Additional Chief Metropolitan Magistrate Court (E.O-
II), Egmore and to quash the same.
For Petitioner : Mr.C.Emalias
For Respondent : Mrs.M.Sheela,
Special Public Prosecutor
for Income Tax
ORDER
This criminal original petition has been filed to quash the
proceedings in EOCC.No.23 of 2019 pending on the file of the Additional
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Chief Metropolitan Magistrate Court (E.O-II), Egmore, thereby taken
cognizance for the offence under Section 276CC of Income Tax Act, 1961, as
against the petitioner.
2. The respondent filed complaint for the offence punishable under
Section 276 CC of the Income Tax Act, 1961 (hereinafter called as 'the Act').
for the assessment year 2013-2014. The crux of the complaint is that the
petitioner failed to file his return of income for the assessment year 2013-2014
as required under Section 139 of the Act. He is duty bound to file his return of
income on or before 30.09.2013 for the assessment year 2013-2014. A search
was conducted as per Section 132 of the Act on 03.09.2013. Subsequent to the
search, a notice was issued as contemplated under Section 153A of the Act,
thereby called upon to file his return of income within a period of 30 days from
the date of receipt of the notice. It was duly received and the petitioner failed to
file his return of income within the time mentioned in the notice. Once again, a
reminder letter was also sent to the petitioner dated 15.07.2014 and
02.06.2015. The petitioner filed reply on 08.06.2016, but no valid reasons were
stated for non filing of return of income. But he filed the same only on
19.07.2016 with a delay of more than 15 months and thereby declared his total
income of Rs.2,32,48,580/- for the assessment year 2013-2014. Non
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filing of the income tax return within the time limit is wilful and deliberate on
the part of the petitioner. The assessment proceedings was completed for the
assessment year 2013-2014 on 12.08.2016 thereby the total income of
Rs.3,98,72,510/- was determined against the returned income filed by the
petitioner to the tune of Rs.2,32,48,580/-. Therefore, the penalty proceedings
were initiated and imposed penalty under Section 271F of the Act on
28.02.2017 for non filing of the return of income under Section 139(1) of the
Act.
2.1 Thereafter, sanction was accorded to prosecute the petitioner for
the offence punishable under Section 276CC of the Act. Before accorded
sanction, sanctioning authority issued show cause notice to the petitioner and
the petitioner replied by the explanation dated 09.06.2018. The petitioner
explained that for change in auditor, appointing new auditor and obtaining of
copies of the seized documents, approaching settlement commission, there was
a failure to file return of income and there was delay. Further, the petitioner
explained that he had already made payment of taxes in the form of Tax
Deduction at Sources (TDS) and requested not to accord sanction for
prosecution. In fact, the application filed before the settlement commission was
dismissed twice. Further, the petitioner did not ask for any seized documents.
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The admitted tax payable by the petitioner was higher than the amount which
was paid by way of TDS. Therefore, the petitioner has wilfully failed to file his
return of income either under Section 139(1) of the Act and also within a
period of 30 days from the date of receipt of notice under Section 153A of the
Act. Hence, the complaint. On the said complaint, the trial court had taken
cognizance in EOCC.No.23 of 2019.
3. Mr.C.Emalias, the learned counsel appearing for the petitioner
would submit that on 03.09.2013, there was a search under Section 132 of the
Act in the companies which were aggregating land for a setting up of SEZ for
companies based out of New Delhi. The petitioner is being a legal consultant to
the companies was also searched on 03.09.2013. During the search, the
authorities had seized bills raised and agreements that he had entered in
connection with his legal consultancy work and the same were in custody of
the authorities. Therefore, the petitioner was not able to file his return within
the due date. The seized documents were returned to the petitioner only after
the due date. Thereafter, the petitioner was issued notice under Section 153A of
the Act to file their return of income for previous six consecutive years for the
assessment year 2008-2009 to 2014-2015 within a period of thirty days.
Though the provision under Section 153B of the Act provides two years for
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completion of the assessment, the petitioner was provided only one month to
file his return of income, that too for all the six assessment years. After receipt
of the reminders from the authorities, the petitioner had sent reply stating that
there was an erroneous calculation of tax that is due and tax deducted at source
was not adjusted to the tune of Rs.47,66,509/- for the assessment year 2013-
2014 since it was deducted before the due date. The petitioner had collected
service tax to the tune of Rs.52,18,727/- and had duly paid on 15.05.2014.
Therefore, the petitioner sought for further time to file his return of income for
all six previous assessment years. Therefore, the delay is only for bonafide
reasons and not wilful or wanton.
3.1 He further submitted that as per Section 245C of the Act, the
petitioner filed application declaring his income before the settlement
commission in the month of March 2016 by making further deposit of
Rs.38,49,956/- as additional payment of taxes. However, the application before
the settlement commission was rejected on technical grounds. Thereafter, the
petitioner filed his return of income on 19.07.2016 and it is well within the
time limit provided under Section 153B of the Act. So he declared his
professional fees to the tune of Rs.4,01,40,976/- out of which taxes in the form
of TDS was already paid and also service tax to the tune of Rs.99,80,947/-.
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However, the assessment officer assessed his income to the tune of
Rs.3,98,72,510/- by adding a sum of Rs.1,66,08,499/- from the declared
income by the petitioner. The petitioner also preferred appeal before the
Commissioner of Appeals challenging the addition of service tax as part of
income. Therefore, if the petitioner succeeds in the appeal, no tax is payable by
the petitioner.
3.2 He further submitted that on receipt of the show cause notice
dated 25.06.2018, the petitioner submitted detailed reply by way of
explanation dated 29.06.2018. Even then, the authority without application of
mind, mechanically accorded sanction to prosecute the petitioner. The initiation
of prosecution is pre-mature since appeal filed by the petitioner against the
order of assessment is still pending. Therefore, delay in filing the income tax
return is not wilful but due to exigency of a situation. The complaint should
disclose necessary mens rea to prove the wilful element to delay the filing of
income tax returns. It requires mental element of wilful delay in filing the
return which is not reflected in the show cause notice. The petitioner had no
intention per se to evade tax at any point of time. The only mistake committed
by the petitioner was delay in filing his return of income. It was also duly
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explained in his explanation as due to sheer volume of work, obtaining copies
of the seized materials from the assessing officer and time taken before the
settlement commission and also rejection of the said application.
4. The respondent filed counter and Mrs.M.Sheela, the learned
Special Public Prosecutor for Income Tax submitted that the petitioner in his
individual capacity having substantial income both as a legal consultant and
Director in various companies had to file his return of income as mandated
under Section 139(1) of the Act. Even post search, the petitioner was served
with statutory notice under Section 153A of Act and thereby called upon the
petitioner to file his return of income within period of 30 days from the date of
receipt of the notice. The petitioner ought to have filed his return of income
voluntarily as contemplated under Section 139(1) available till 30.09.2013.
There was non filing of return of income even till 29.01.2014 and as such,
notice under Section 153A of the Act was sent to the petitioner. By not filing
the returns within the time mandated under Section 139(1), 139(4) or in
response to the notice under Section 153A of the Act, offence for non filing of
returns is attracted. Only after filing the return of income, the assessment can
be completed within the time. Therefore, the provision under Section 153B is
applicable only for completion of assessment by the assessment officer
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proceedings post search. The TDS was deducted by their parties and not by the
petitioner. The petitioner was having huge taxable income which mandated the
filing of returns. Further, there was filing of application before the settlement
Commission and the same was rejected on two occasions. Further, the
petitioner had disclosed his income of return to the tune of Rs.2,32,48,580/-.
As per the assessment order, a total income was assessed to the tune of
Rs.3,98,72,510/-. Therefore, there was penalty proceedings initiated under
Section 271 of the Act. Though the petitioner had filed appeal as against the
order of assessment, it yet to reach finality. Further, mere expectation of
success in the appeal cannot be a bar to initiate prosecution. The adjudication
proceedings and prosecution are independent to each other and the object of
adjudication proceedings is to garner revenue while the object of prosecution
proceedings is to punish the guilty.
5. Heard, the learned counsel appearing on either side.
6. The learned Special Public Prosecutor also relied upon the
judgment of the Hon'ble Supreme Court of India in the case of P.Jayappan Vs.
S.K.Perumal reported in 1984 AIR 1693, in which the Hon'ble Supreme Court
of India held that there is no rigid rule which make it necessary for a criminal
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court to adjourn or postpone the hearing of a case before it indefinitely or for
an unduly long period only because some proceedings which may have some
bearing on it is pending elsewhere. Further in the case of Kejriwal Vs. State of
West Bengal reported in (2011) 3 SCC 437, the Hon'ble Supreme Court of
India laid down the following ratio which can be culled out that can broadly be
stated as follows :-
(i) Adjudication proceeding and criminal prosecution
can be launched simultaneously;
(ii) Decision in adjudication proceeding is not
necessary before initiating criminal prosecution;
(iii)Adjudication proceeding and criminal proceeding
are independent in nature to each other,
(iv)The finding against the person facing prosecution in
the adjudication proceeding is not binding on the proceeding
for criminal prosecution;
(v) Adjudication proceeding by the Enforcement
Directorate is not prosecution by a competent court of law to
attract the provisions of Article 20(2) of the Constitution or
Section 300 of the Code of Criminal Procedure.
(vi) The finding in the adjudication proceeding in
favour of the person facing trial for identical violation will
depend upon the nature of finding. If the exoneration in
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adjudication proceeding is on technical ground and not on
merit, prosecution may continue;
(vii) In case of exoneration, however, on merits where
allegation is found to be not sustainable at all and person
held innocent, criminal prosecution on the same set of facts
and circumstances cannot be allowed to continue underlying
principle being the higher standard of proof in criminal cases.
(viii) In our opinion, therefore, the yardstick would be
to judge as to whether allegation in the adjudication
proceeding as well as proceeding for prosecution is identical
and the exoneration of the person concerned in the
adjudication proceeding is on merits."
7. Therefore on the ground of pending appeal, the proceedings
initiated by the respondent cannot be quashed and the petitioner cannot be
exonerated from prosecution. Admittedly, the petitioner had filed his return of
income only on 19.07.2016. Therefore, it cannot be treated as compliance of
provision under Section 139(1) or 139(4) or under Section 153A of the Act.
Even after receipt of several communications from the respondent, the
petitioner failed to file his return of income. It is relevant to extract provision
under Section 276CC of the Act hereunder:
"276 CC - Failure to furnish returns of income - If a person
willfully fails to furnish in due time (the return of fringe
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benefits which she is required to furnish under Sub-Section
(1) of section 115WD or by notice given under sub-Section (2)
of the said section or Section 115 WH or] the return of income
which he is required to furnish under sub-section (1) of
section 139 or by notice given under [clause (i) of sub-section
(1) of section 142] or section 148 [or section 153A], he shall
be punishable,
i) In a case where the amount of tax, which would have
been evaded if the failure had not been discovered, 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 imprisonment for a term
which shall not be less than three months but which may
extend to [two] years and with fine.”
Provided that a person shall not be proceeded against
under this section for failure to furnish in due time the return
of income under subsection (1) of section 139-
(i) for any assessment year commencing prior to the 1st
day of April, 1975 ; or
(ii) for any assessment year commencing on, or after the
1st day of April, 1975 , if-
(a) the return is furnished by him before the expiry of
the assessment year; or
(b) the tax payable by him on the total income
determined on regular assessment, as reduced by the advance
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tax, if any, paid, and any tax deducted at source, does not
exceed three thousand rupees.
8. Further, the Hon'ble Supreme Court of India held in the case of
Prakash Nath Khanna & Another Vs. CIT & Another reported in 2004 (135)
Taxman 327, wherein it was held that the expression failure' used in Section
276CC is with respect to the submission of assessment as well as the return of
income but cannot be equated with the failure to pay the tax in time under
Section 276C and filing of return of income within the time allowed under
Section 139(4) cannot dilute the infraction in not furnishing return in due time
as prescribed under Sec 139(1) of the I.T.Act.
9. It is a settled law by the Hon'ble Supreme Court of India in the
case of Sasi Enterprises Vs. Assistant Commissioner of Income Tax reported
in 2014 [5] SCC 139, wherein the Hon'ble Supreme Court had stated that
Section 276CC of the Act, is attracted once failure there to file the Return.
Once such failure is discovered and detected, the subsequent act of filing of
returns will not protect the defaulters from prosecution proceedings. The
Hon'ble Supreme Court of India had very clearly stated that filing the Return
within the stipulated and mandatory period is a duty cast on any person who
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has to declare the income and file the returns and pay the taxes within the
stipulated time.
10. The only contention raised by the petitioner is that the search
conducted was premature since the tax due was only on 30.09.2013. Whereas
the search was conducted on 03.09.2013. Though the search was conducted on
03.09.2013, it is not an impediment for the petitioner to file his return of
income on or before 30.09.2013. Filing return of income is mandatory as
contemplated under Section 139(1) of the Act. Therefore, mere search
conducted by the authority concerned would not preclude the petitioner to file
his return of income. Further, it is mandatory in nature and further expanded
that if the returns are not filed within the stipulated time, then a presumption as
to the culpable mental state can be drawn under Section 278E of the Act. The
non filing of return of income within the time as stipulated under Section
139(1) and 153 of Act, offence stands complete and there can be a presumption
for existence of mens rea and it is for the accused to prove the contrary beyond
reasonable doubt, only before the trial court during the trial. Therefore, the
issue as to whether there was wilfulness in not filing the returns on time and
not paying the tax on time is only a matter of fact, which can be ascertained
only through appreciation of evidence before the trial court. Therefore, these
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grounds cannot be considered by this Court, that too under Section 482 of
Cr.P.C since onus is upon the petitioner to rebut the presumption and that can
be done only before the trial court during the trial by letting in evidence.
11. The learned counsel for the petitioner vehemently contended that
once notice issued under Section 153A of the Act, it overrides all other
provisions such as Sections 139, 147, 148, 149, 151 and 153 of the Act. He
relied upon the judgment of the Hon'ble Supreme Court of India in the case of
Principal Commissioner of Income Tax, Central-3 Vs. Abhisar Buildwell
reported in 2023 SCC Online SC 481, in which the Hon'ble Supreme Court of
India dealt with the issue as to whether in respect of completed
assessments/unabated assessments, whether the jurisdiction of the assessing
officer to make assessment is confined to incriminating material found during
the course of search under Section 132 or requisition under Section 132A or
not i.e. whether any addition can be made by the assessment officer in absence
of any incriminating material found during the course of search under Section
132 or requisition under Section 132A of the Act or not. In the said issue, it is
held that as per the provisions of Section 153A, in case of a search under
Section 132 or requisition under Section 132A, the assessment officer gets the
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jurisdiction to assess or re-assess the total income in respect of each assessment
year falling within six assessment years. As per second proviso to Section 153A
of the Act, the assessment or reassessment if any, relating to any assessment
year falling within the period of six assessment years pending on the date of
initiation of the search under Section 132 or making of requisition under
Section 132A, as the case may be, shall abate.
12. Whereas in the case on hand, the respondent initiated prosecution
for the offence punishable under Section 276CC of the Act. Accordingly if a
person wilfully fails to furnish in due time, the return of income which he is
required to furnish under sub section (1) of Section 139 or by notice given by
sub section (1) of Section 142 or Section 148 shall be punishable. Therefore,
the search under Section 132 and subsequent notice under Section 153A are
completely different from filing the return of income as contemplated under
Section 139(1) of the Act. At any point of time, a search can be made under
Section 132 of the Act if any incriminating material to show that the assessee
evaded certain income in his return of income, notice under Section 153 will be
issued to file his return of income for the concealed income. Therefore, the
above judgment is not applicable to the case on hand.
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13. It is true as per search under Section 132 or requisition under
Section 132A, the assessment officer assessed or re-assessed the total income
in respect of each assessment year falling within six assessment years, taking
into consideration of the incriminating materials collected during the search
and other material pending would abate. It is nothing to do with the mandatory
provision under Section 139(1) of the Act to file his return of income.
Admittedly, in the case on hand, the petitioner failed to file his return of income
on or before 30.09.2013. Further, there was not even an attempt by the
petitioner to file his return of income till 29.01.2014 as contemplated under
Section 139 sub clause (4) of the Act till the notice under Section 153A. That
apart, the petitioner also failed to file his return of income even after receipt of
the notice under Section 153A of the Act within the period of 30 days from the
date of receipt of the notice under Section 153A of the Act.
14. Further, this court already dealt with this issue in the criminal
original petition in Crl.OP.No.28572 of 2018 and by order dated 09.11.2023,
this Court held as follows:
“14. The learned counsel appearing for the petitioner
also cited the judgment of the Hon'ble High Court of Delhi in
the case of Principal Commissioner of Income Tax-19 Vs.
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Neeraj Jindal reported in (2017) 79 taxmann.com
96(Delhi), in which it is held that once the assessee files a
revised return under Section 153A, for all other provisions of
the Act, the revised return will be treated as the original
return filed under Section 139. Further held that when the
assessment officer has accepted the revised return filed by
the assessee under Section 153A, no occasion arises to refer
to the previous return filed under Section 139 of the Act for
all purposes, including for the purpose of levying penalty
under Section 271(1)(c) of the Act, the return that has to be
looked at is the one filed under Section 153A. In fact, the
second proviso to Section 153A(1) provides that "assessment
or reassessment, if any, relating to any assessment year
falling within the period of six assessment years referred to
in this sub-section pending on the date of initiation of the
search under Section 132 or making of requisition
under Section 132A, as the case may be, shall abate."
Therefore, Section 153A is in the nature of a second chance
given to the assessee, which incidentally gives him an
opportunity to make good omission, if any, in the original
return. Once the assessment officer accepts the revised return
filed under Section 153A, the original return under Section
139 abates and becomes non-est. Now, it is trite to say that
the "concealment" has to be seen with reference to the return
that it is filed by the assessee. Thus, for the purpose of
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levying penalty under Section 271(1)(c), what has to be seen
is whether there is any concealment in the return filed by the
assessee under Section 153A, and not vis-a vis the original
return under Section 139.
15. No quarrel that once the assessment officer
accepts the revised return filed under Section 153A, the
original return filed under Section 139 abates and becomes
non est. Therefore, no penalty can be levied under Section
271(1)(c) of the Income Tax Act. Whereas in the case on
hand, there was concealment by the petitioner while filing his
first return of income for the assessment year 2012-2013. In
fact, the levying of penalty was already dropped in view of
the order passed by the tribunal. However, the petitioner is
now facing prosecution under Section 276CC of Income Tax
Act. That apart, the mens rea of the petitioner is clearly
established by the respondent and as such, the above
judgment is also not helpful to the case on hand.”
15. Therefore, the respondent rightly initiated prosecution against the
petitioner and this Court finds no grounds to quash the same. Accordingly, this
criminal original petition is dismissed. Consequently, connected miscellaneous
petition is closed.
01.12.2023
Index :Yes/No
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Internet : Yes/No
Speaking order/non-speaking order
lok
To
1. Additional Chief Metropolitan Magistrate Court (E.O-II),
Egmore, Chennai
2.The Assistant Commissioner of Income Tax,
New No.46, M.G.Road,
Nungambakkam, Chennai-34
3.The Government Advocate,
High Court of Madras
G.K.ILANTHIRAIYAN, J.
lok
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01.12.2023
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