TMI Blog2000 (1) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... -87, showing a loss of Rs. 2,167. The petitioner, inter alia, had claimed expenses of Rs. 83,647 paid as hire charges in respect of a car (No. DIB-3538) alleged to have been purchased on hire purchase basis. An income of Rs. 49,634 was shown as income from the said car. On being required to explain the expenses being more than the income, the petitioner stated that it had purchased the car from B. Dharam Singh Babek Singh (Finance) Pvt. Ltd. by means of a hire purchase agreement dated June 18, 1984, when an initial payment of Rs. 27,201 was made and the balance amount of Rs. 60,690 was paid in 12 monthly instalments during the same accounting year. It appears that the hire purchase agreement provided for exercise of option for purchase on payment of a token purchase price of Re. 1. The learned Assessing Officer held that this clause about the exercise of option to become an owner on payment of Re. 1 was a colourable device to claim the amounts paid by it under the hire purchase agreement as revenue expenditure. He assessed the purchase price of the car at Rs. 72,000, treated it as capital expenditure, allowed an expenditure of Rs. 15,891 only (being the difference between Rs. 87, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and summoned the petitioners. After the order was passed by the Tribunal quashing the penalty levied, the petitioners filed an application under section 245(2) of the Code for discharge in view of the order of the Tribunal. The learned Additional Chief Metropolitan Magistrate vide impugned order dated September 25, 1998, held that at this stage it could not be said that there was no wilful concealment or wilful attempt to conceal income or to evade tax, penalty or interest chargeable under the Act and dismissed the application. The petitioners have filed this revision against that order. I have heard learned counsel for the parties. Learned counsel for the petitioner has contended that the Tribunal had set aside the order imposing penalty not finding it a fit case for imposing penalty. That order has not been challenged and became final. Also that there is no mens rea to base conviction. As such, the prosecution on the same facts cannot be sustained and in the circumstances the impugned order is not valid. He has relied on certain case law. Whereas learned counsel for the Revenue has contended that the Tribunal has also found concealment of income to the extent of Rs. 15,99 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anak Rani was found to be a partner of the assessee-firm and the firm was a genuine one and as such the assessee could not be prosecuted for filing a false return. The principle thus laid down in that case is that the prosecution once initiated may be quashed in the light of a finding favourable to the assessee on facts given by the highest fact-finding authority constituted under the Act. This principle has been followed in S. P. Sales Corporation v. S. R. Sikdar [1993] 113 Taxation 203 (SC). In that case, the assessee had made purchases of Rs. 20,015 during the assessment year 1985-86 from two named firms. The Assessing Officer held that the purchases had not been accounted for by supporting relevant documents and were thus made outside the books of account and penalty was imposed. On consideration of the material, the Commissioner in appeal held that the purchases were duly accounted for and the penalty was set aside. This order was affirmed in appeal by the Tribunal. However, before these orders, a complaint was laid under sections 276C, 277, 278 read with section 278B of the Act by the assessing authority. The Supreme Court upheld the order quashing criminal proceedings and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be proceeded. The Bombay High Court in Shastri Sales Corporation v. ITO [1998] 229 ITR 628 following these cases has taken the same view. In that case, it was held: "It is true that the penalty proceedings under section 271(1)(c) and the prosecution under sections 276C and 277 read with section 278 of the Income-tax Act are distinct and separate and may co-exist. It is also true that there is no question of double jeopardy in such cases and the existence of one proceeding or the other proceeding is no bar to any of them, inasmuch as an assessee can be levied penalty as well as prosecuted for concealment of income and/or furnishing of inaccurate particulars. However, when the final authority under the Income-tax Act, itself does not find any justification in the penalty order for the alleged concealment of income or furnishing of inaccurate particulars by the assessee, or the Tribunal holds that the Department has failed to establish in the penalty proceedings that the assessee concealed the income or furnished inaccurate particulars, prosecution of an assessee cannot be permitted on the self same facts." It will also be relevant to refer to the following observations mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in an appropriate case, a criminal court may adjourn or postpone the hearing of a criminal case in exercise of its discretionary power under section 309 of the Code of Criminal Procedure if the disposal of any proceeding under the Act which has a bearing on the proceedings before it is imminent so that it may take also into consideration the order to be passed therein. Even here the discretion should be exercised judicially and in such a way as not to frustrate the object of the criminal proceedings. There is no rigid rule which makes it necessary for a criminal court to adjourn or postpone the hearing of a case before it indefinitely or for an unduly long period only because some proceeding which may have some bearing on it is pending elsewhere." It is not an authority for the proposition whether a criminal proceeding should not be instituted when a favourable finding of fact not justifying penalty being imposed is given by the final authority, under the Act in favour of the assessee. After considering Uttam Chand's case [1982] 133 ITR 909 (SC) and the aforesaid observations made in P. Jayappan's case [1984] 149 ITR 696 (SC), the Supreme Court in K. T. M. S. Mohammed v. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken belief, would still be a bona fide belief which establishes the preponderance of probabilities in favour of the assessee. Moreover, there was no justification in levying the penalty on the entire amount of Rs. 72,000 which has been subjected to a substantial reduction as a result of decision by the Tribunal in the quantum appeal. On careful consideration of all the relevant facts and circumstances of the case, as discussed hereinbefore, I am of the view that it is not a fit case where any penalty can be levied under section 271(1)(c). I therefore, direct the Assessing Officer to cancel the same. In the result, assessee's appeal is allowed." Obviously, the learned Tribunal has accepted the explanation of the assessee in making an incorrect or wrong claim for deduction towards expenses on account of the cost of the car in the income-tax return and has not found it a fit case for levying penalty under section 271(1)(c) of the Act and has set aside the penalty imposed by the Assessing Officer and upheld by the Commissioner of Income-tax (Appeals). Now, the question is whether on these facts, the prosecution should be allowed to proceed. The effect of the finding of the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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