2015 (2) TMI 542 - HC - Income Tax

Penalty u/s 271(1)(c) - Tax evasion - application for settlement offering undisclosed income - grant immunity to the petitioner from penalty and prosecution denied - Held that - This is a case where the assessee has acted bona-fide and has concealed nothing which evident from the fact that the Settlement Commission has also accepted the income offered by the assessee for settlement. In this view of the matter we cancel the penalty levied. CIT Vs. Harkaran Das v. Ved Pal See 2008 (11) TMI 47 - HIGH COURT DELHI Since in the assessment proceedings the penalty levied against the petitioner has been set aside by the Income Tax Appellate Tribunal continuation of criminal proceedings against the petitioner in relation to the same proceedings would be nothing but an abuse of process of law.- Decided in favour of assessee.

Summary

Issues:
Petition under Section 482 of the Code of Criminal Procedure for quashing of criminal complaint and subsequent proceedings arising therefrom.

Analysis:
The case revolves around the petitioner filing a petition under Section 482 of the Code of Criminal Procedure seeking the quashing of a criminal complaint and subsequent proceedings. The complaint alleged that during a search operation, the petitioner intentionally made a false statement regarding disclosure of lockers, specifically withholding information about locker No. 8 in a bank. The petitioner was accused of fraudulently removing the contents of the locker to evade tax. The petitioner had opted for settlement, offering undisclosed income for settlement, which was accepted by the Income Tax Settlement Commission. However, immunity from penalty and prosecution was declined. The Income Tax Appellate Tribunal later set aside the penalty levied by the Assessing Officer and confirmed by the Commissioner, Income Tax (Appeals), based on the petitioner's bona fide actions and acceptance of income offered for settlement by the Settlement Commission.

In the judgment, the court referred to relevant legal precedents, including the case of 'K.C.Builders and another versus Assistant Commissioner of Income-tax' and 'Gupta Constructions Co. and others versus Income-Tax Officer,' emphasizing that if penalty proceedings are set aside, the basis for launching prosecution is nullified. The court also cited the case of 'State of Haryana vs. Bhajan Lal,' outlining categories where the High Court can exercise powers under Article 226 or Section 482 of the Cr.P.C. to prevent abuse of process or secure justice.

The court noted that since the penalty levied against the petitioner had been set aside by the Income Tax Appellate Tribunal, continuing criminal proceedings against the petitioner would amount to an abuse of process of law. Therefore, the court allowed the petition, quashing the criminal complaint and all subsequent proceedings arising from it. The judgment provides a detailed analysis of the petitioner's actions, the legal principles governing such cases, and the rationale behind quashing the criminal proceedings in light of the Tribunal's decision setting aside the penalty.