TMI Blog2007 (5) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner. In the assessment order, the Income-tax Officer (for short, "the ITO") observed that the aforesaid amount of Rs. 2,55,000 had actually come from' the resident depositor's account and not from the NRE account. The chief manager, State Bank of India, Race Course Road, Bangalore, also intimated vide his letter dated December 22, 1992, that no such declaration in favour of the petitioner had been issued by the bank. The aforesaid sum of Rs. 2,55,000 was, therefore, added to the income of the petitioner as income from undisclosed sources. For this suppression, show-cause notice dated March 11, 1993, was also issued asking the petitioner to show cause as to why prosecution under section 276C(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") be not initiated against him. The petitioner submitted his replies dated March 15 and 18, 1983, stating that he had not committed any wilful fraud and lapse was only on the part of the branch manager, State Bank of India, Race Course Road, Bangalore. - He also stated that in the meantime he .had approached the Settlement Commission for settling his case. Not satisfied with this reply, Shri S. S. Jain, Income-tax Officer, fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an appeal before the Commissioner of Income-tax (Appeals), which was decided vide order dated May 14, 1996. This appeal is also derided against the petitioner and he has preferred further appeal before the Income-tax Appellate Tribunal ("the ITAT"). (c) It is also mentioned that after passing the order of assessment, the assessing authority had imposed a penalty on the petitioner vide order dated August 30, 1993, under section 271(1)(c) of the Act whereby total penalty of Rs. 1,37,493 was levied. Against this order the petitioner had preferred appeal before the Commissioner of Income-tax (Appeals). This appeal was also dismissed vide order dated July 16, t996, which order is challenged by the petitioner by filing an appeal before the Income-tax Appellate Tribunal. 4 Since the present petition could not be decided even thereafter, another additional affidavit was filed by the petitioner on January 27, 2001, bringing on record the decision of the Income-tax Appellate Tribunal rendered on January 9, 2001, whereby both the appeals preferred by the petitioner, as mentioned above, have been decided. By this order, the Tribunal has set aside the penalty orders of the lower authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or such exoneration to determine whether these criminal proceedings could still continue. If the exoneration in departmental adjudication is on technical ground or by giving benefit of doubt and not on the merits or the adjudication proceedings were on different facts, it would have no bearing on criminal proceeding If, on the other hand, the exoneration in the adjudication proceedings is on the merits and it is found that allegations are not substantiated at all and the concerned person(s) is/are innocent, and the criminal prosecution is also on the same set of facts and circumstances, the criminal prosecution cannot be allowed to continue. The reason is obvious criminal complaint is filed by the departmental authorities alleging violation/contravention of the provisions of the Act on the part of the accused persons. However, if the departmental authorities themselves, in adjudication proceedings, record a categorical and unambiguous finding that there is no such contravention of The provisions of the Act, it would be unjust for such departmental authorities to continue with the criminal complaint and say that there is sufficient evidence to foist the accused persons with criminal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndisclosed sources has been upheld. However, in so far as imposition of penalty under section 271(1)(c) of the Act is concerned, the orders of the assessing authority as well as the Commissioner of Income-tax (Appeals) are set aside and this order is passed on the merits and not technical ground. The operative portion of the order of the Income-tax Appellate Tribunal dismissing the. appeal qua addition of income and allowing the appeal in so far as the penalty proceedings are concerned is as under "10. I have gone through the order of the Commissioner of Income-tax (Appeals) minutely and I agree with the factual findings given by him which have not been successfully contested before me on behalf of the assessee. The picture I got from a reading of the case right from its inception is that of an assessee, who has not complied with the legal requirement relating to the proof of the nature and source of the deposit in his bank account of Rs. 2,50,000 on some spacious plea or the other, despite sufficient opportunities given by the Assessing Officer, in compliance with the directions of the Tribunal. The matter relates to the assessment year 1992-93, and the proceedings have been suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty order passed is not revised. The ingredients necessary for a valid penalty order are missing. Merely because I have sustained the addition of Rs. 2,55,000, it is not possible for me to sustain the penalty, given the nature of the penalty order passed by the Assessing Officer after the fresh assessment proceedings. The plea that no satisfaction has been recorded in the fresh assessment order finds support from the following judgments of the hon'ble Delhi High Court: 1. CIT v. Ram Commercial Enterprises Ltd. [2000] 246 ITR 568 (Delhi); and 2. CIT v. Super Metal Re-rollers [2004] 265 ITR 82 (Delhi)." 10 Learned counsel for the petitioner had referred to the judgment of the Supreme Court in the case of K. C. Builders v. Asst. CIT [2004] 265 ITR 562. In this case, the apex court held that once penalties imposed on the assessee under section 271 (1) (c) of the Act are cancelled on the basis of the conclusive findings of the Appellate Tribunal that there is no concealment of income, prosecution of the assessee for an offence under section 276C of the Act for wilful evasion of tax cannot be proceeded with thereafter : quashing of the prosecution is automatic. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross-examination and, therefore, the prosecution may proceed with the trial. In our opinion, the view taken by the learned Magistrate and the High Court is fallacious. In our view, if the trial is allowed to proceed further after the order of the Tribunal and the consequent cancellation of penalty, it will be an idle and empty formality to require the appellants to have the order of the Tribunal exhibited as a defence document inasmuch as the passing of the order as aforementioned is unsustainable and unquestionable." 11. Applying the aforesaid ratio into the facts of this case, it is clear that merely because there is an addition of income, it would not automatically follow that the assessee had "concealed" his income. Penalty proceedings under section 271 of the Act or the prosecution under section 276C of the Act is when "concealment of income by the assessee is proved". As held by the Supreme Court in the aforesaid case, "concealment" inherently carries with it the element of mens rea. The Tribunal while reversing the order of the Assessing Officer observed that he had not recorded satisfaction that the assessee concealed his income or furnished inaccurate particulars ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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