TMI Blog1990 (3) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,167 was filed in the practiced proforma, signed and verified by H. 1. Malhotra, petitioner No. 2 herein, as one of the partners. During the assessment proceedings for the abovementioned period, the scrutiny of the books of accounts of the firm revealed an entry in the sum of ₹ 3,46,480 inserted within two days, namely, 25th January 1982 and 1st February 1982 in the books of account of the Bombay office of the firm, which entry was made against 31st January 1982. The investigation further revealed that in the books of accounts of the Delhi office of this firm corresponding entries were made in the cash book on 31st January, 1982 introducing the said amount of ₹ 3,46.480 under various heads, such as loan account, commission receivable account. refunds receivable account and Cat Bir tickets account. obviously with an intention to accommodate the Bombay office to insert the aforesaid entries in between the aforesaid two days. 3. On being called upon to explain these entries, the plea put forward was that these amounts reflected cash received from the various heads as shown therein as well as loan from Mrs. N. R. Malhotra and payment of tickets from Bangalore. The matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax (Appeals) by order dated 5th January 1988 set aside the said order expressing difference with the finding of the Income Tax Officer to the effect that the accused had an income of ₹ 3,46,480 from undisclosed sources. The plea was that the criminal. complaint pending then in the court of the Additional Chief Metropolitan Magistrate, was based specifically on the said finding of the Income Tax Officer, and that since that order has been set aside; nothing survived for prosecution of these persons and thus the complaint was liable to be quashed and proceedings against them dropped. 6. This application was opposed by the Department though the factum of the order having been passed by the Commissioner of Income Tax (Appeals) was not denied but it was added that by the said order, the Commissioner of Income Tax (Appeals) had only remanded the case for re-assessment and that there was no bar to the continuance of the criminal prosecution under the previsions of the Act. 7. The learned Additional Chief Metropolitan Magistrate dismissed the application of the accused by order dated 8th August 1988 by relying upon the Supreme Court judgment in the case of P. Jayappan v. S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the only basis was the finding in the Income Tax assessment order that the discrepancies in the entries were unexplained and that the inference which could be drawn was that these had been inserted to explain income from undisclosed sources. and that the entries were false. He contended that on the appeal being filed the appellate authority, namely, the Commissioner of Income Tax (Appeals), had found it to be a fit case where Explanation furnished by the assessed was examined. and while setting aside the finding of the Income Tax Officer had remanded the case. back with direction that the assessed be heard and afforded an opportunity to Submit Explanation for these entries or the discrepancies detected by the Income Tax Officer and then a fresh-finding recorded The learned counsel contended that there was nothing, which survived for criminal prosecution, and as such the continuance thereof was an abuse of the process of the court. He placed reliance in the first instance on a judgment of the Supreme Court in the case of Uttam Chand and others v. Income-tax Officer, Central Circle. Amritsar. [1982] 133 ITR 909 (SC) , and also on two judgments of this Court. These being; (1) the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er for considering the Explanation furnished by the assessed and passing a fresh assessment order. He Therefore, argued that for the present there was no material left, to sustain the allegation in the criminal complaint and that the same was liable to be quashed. 12. The learned counsel also quoted from a judgment of Karnataka High Court, reported as [1984] 150 ITR 128 (KAR) , Balaji Oil Traders and others v. Income Tax Officer, Central Circle, Bangalore (7), where it was held that when the order of the subordinate authority was set aside and re-assessment ordered; the prosecution in the criminal court would amount to prosecuting on uncertain facts and that in such a case the criminal complaint was liable to be quashed. 13. Mr. Satpal, appearing for the respondent countered these arguments by relying heavily on the Supreme Court judgment in the case of P. Jayappan (supra) (1) where it was held that the re-assessment proceedings would not act as a bar to the continuance of the criminal proceedings for the offence under section 276-C or section 277 of the Act. and the institution of the criminal complaint in the circumstances did not amount to an abuse of the process of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its and investments in the name of the family members of the assessed and also number of bank accounts which had not been disclosed in the statement of Income Tax returns and it was in that context obviously that it was held that there being independent material which the prosecution in the criminal complaint case could rely upon, besides the assessment returns, the mere pendency of the re-assessment proceedings would be of no consequence. Same was the position in the case before this Court re : Dharma Pratishthan (supra) as well as M/s. Rinkoo Steels (supra) where also the prosecution was based on independent material discovered by the Income Tax authorities during searches or seizure or scrutiny of records Although, it has been held by this Court, on a resume of the entire case law, while deciding the case of M/s. Rinkoo Steels (supra) that proceedings in the criminal complaint cannot be held liable to be dropped merely because assessment has been set aside, re-assessment ordered or undertaken but that, as already observed was, on the view that there was material independent of the assessment returns, collected during searches and seizure and which evidence the Court had yet to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been completed, and a fresh order passed by the Income Tax Officer because the present seems to be such a case where the order that is passed on re-assessment, might have a bearing on the prosecution case in the criminal complaint. It shall be however within the discretion of the trial court to pass an appropriate order on any such application being moved, after notice to the Department, so as to have factual position before it as to whether an re-assessment order was imminent because the accused cannot expect a sine die adjournment of the proceedings but only if the order after re-assessment in terms of remand order is expected soon, then in that situation the court may take this into consideration, and pass suitable order. of adjournment awaiting such an order The trial court shall, while disposing of such an application, bear in mind following observations of the Supreme Court in the case of P. Jayappan (supra) : 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 indef ..... 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