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TMI Blog2021 (4) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... e premises of Eagleton Resort, Bidadi, Bangalore where the respondent was staying for time being, the search team proceeded to the said Resort and searched the respondent after completing due formalities. During the course of search, the respondent took out a piece of paper from his wallet and tore it in front of the officers. The officers immediately reassembled the said piece of paper. The investigation carried out with reference to the said piece of paper which was attempted to be destroyed by the respondent contained certain unaccounted loan transactions with several persons / entities. In continuation of the investigation, on the basis of the entries found in the said piece of paper, the officers conducted search / survey in premises of Mr.Shashikanth, Mr.A.Somashekar, M/s.Keizen Digital and others which revealed that the said persons / entities were having unaccounted financial transaction with the respondent. The respondent had advanced huge amount of loan to these persons / entities. He did not disclose the said unaccounted financial transaction in his returns of income and further, the statements of several persons disclosed that the respondent had received huge amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owered to take cognizance of the offence upon a complaint made by the authority authorized in this behalf. The Special Court has also erred in not examining the scheme of the Income Tax Act in proper perspective. As per the provisions of the Income Tax Act, the jurisdictional assessing authority is empowered to file a complaint and the said authority cannot be divested of the said function solely on the ground that the amount of tax evaded was not quantified by passing an assessment order as contended by the respondent. 4(iii). The Court below committed an error in not considering the expression used in section 276C(1) of the Income Tax Act that "willful attempt to evade tax" and "amount sought to be evaded" did not necessarily mean quantification of the exact amount of the tax evaded; rather the said section provided for prosecution for every act of willful attempt to evade tax of an amount sought to be evaded. The allegations of attempted evasion of tax were made in the complaints by comparing the returns of the income submitted by the accused and the material disclosed during the search and seizure. The accused should have declared the income concealed and should have paid the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), with reference to para 43 thereof, submitted that, adjudication proceeding and criminal prosecution can be launched simultaneously; the decision in adjudication proceeding is not necessary before initiating criminal prosecution; both are independent in nature and therefore, non-quantification of the tax does not render the criminal prosecution of the respondent either illegal or vitiated. 6(i) On the same point, learned Additional Solicitor General of India referred to the principles laid down by the Hon'ble Supreme Court in P.JAYAPPAN vs. S.K.PERUMAL, FIRST INCOME-TAX OFFICER, TUTICORIN, 1984 (Supp) SCC 437 and reiterated that there is no provision in law which provides that the prosecution for the offences in question cannot be launched until determination of tax payable by the respondent on the unaccounted cash and transactions unearthed during the search. As the material collected during the search prima facie disclose commission of the offence, the criminal court has to judge the case independently on the evidence placed before it and not based on the adjudication made by the adjudicating authorities under the Act. 6(ii) Insofar as the finding recorded by the Special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned orders. In the course of his submissions, learned Senior Counsel raised the following questions for consideration namely:- 1. Whether the complaints filed by the Search Officer, Deputy Director of Income Tax (Investigation), Unit-3(1), Bangalore under section 276C(1) of the Income Tax Act, 1961 is without jurisdiction? 2. Whether the Principal Director of Income Tax (Investigation) Bangalore can exercise jurisdiction of the Director of Income Tax and that of superior officer Director General of Income Tax, Bangalore? and by referring to section 279 of the Income Tax Act, emphasized that the Legislature in its wisdom has incorporated number of changes to section 279 of the Income Tax Act in order to ensure that powers of prosecution of an assessee is vested with the highest authority in the hierarchy of the officers administering the Income Tax Department so that injustice is not caused and assesses are not harassed. Originally, the authority to prosecute an assessee vested with the Income Tax authority whereas after passage of time, it was found by the Legislature that prosecution being a deterrent force should be invoked in extreme situations. Therefore, the Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the rival submissions. Since the trial Court has discharged the respondent mainly on the ground that the "complaints filed by the complainant estimating the undisclosed income of the accused and launching the prosecution is without jurisdiction" and that the piece of paper torn by the respondent / accused was not a document lawfully compelled to be produced as evidence and that the same was not "obliterated, nor rendered illegible" making out the offences under section 201 and 204 of IPC, the following questions arise for consideration namely, (1) Whether the complaints presented by the authorized officer Sri.Sunil Goutam are without authority of law? (2) Whether the Principal Director of Income Tax (Investigation) Bangalore was competent to issue authorization to prosecute the respondent for the alleged offences punishable under section 276C(1) of the Income Tax Act, 1961 read with sections 201 and 204 of IPC? (3) Whether in the facts and circumstances of the cases, the Special Court was justified in discharging the accused under section 245 of Cr.P.C.? 11. Regarding Point Nos.(1) and (2):- The petitioner does not dispute the legal position that a complaint for prosec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of each assessment year falling within the six assessment years and for the relevant assessment year or years. 14. As per section 132(9A) of the Income Tax Act, the authorized officer is required to hand over search material within 60 days from the date on which last of the authorizations for search was executed, to the jurisdictional assessing officer for the purpose of determination of the tax. By virtue of the said provision, after handing over search material to the jurisdictional assessing officer, the authorized officer becomes functus officio. But these provisions are not applicable to the prosecution of the offender under the Act. 15. The procedure regarding prosecution are dealt under Chapter XXII of the Income Tax Act. As per section 279 of the Income Tax Act, the prosecution under the Act could be launched at the instance of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. Section 279(1) of the Income Tax Act which is relevant for our purpose reads as under:- 279. (1) A person shall not be proceeded against for an offence under section 275A, section 275B, section 276, section 276A, section 276B, section 276BB, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... functions mentioned in (i) above by all or any of the Income Tax authorities who are subordinate to such Director General of Income Tax or Principal Director / Director of Income Tax, in respect of the territorial areas of whole of India; 18. In view of this notification, the authorization made in favour of Sri.T.Sunil Goutam, Deputy Director of Income Tax (Investigation), Unit-3(1), Bengaluru, is in consonance with the provisions of the Income Tax Act and does not suffer from any error or illegality as sought to be made out by learned Senior Counsel for respondent and hence, the contentions urged by learned Senior Counsel for respondent in this regard are rejected. 19. Regarding Point No.3:- Undisputably, the respondent is sought to be prosecuted under section 276C(1) of the Income Tax Act. Section 276C(1) read as under:- 276C. (1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable, or under reports his income, under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable,-- (i) in a case where the amount sought to be evaded or ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t made by an authority authorized in this behalf under this Act could take cognizance of the offence for which the accused is committed for trial." 23. Thus, a conjoint reading of the above provisions make it abundantly clear that the Special Court has no original jurisdiction to take cognizance of the offences under Chapter XXII of Income Tax Act unless the accused is committed for trial. These provisions therefore lead to the conclusion that a complaint seeking prosecution of the accused for commission of the offences under Chapter XXII of the Act could be initiated only before the jurisdictional Magistrate and not directly before the Special Court. In the instant cases, undisputedly, the complaints were lodged by the authorized officer directly before the Special Court and the records of the proceedings indicate that on receiving the complaints, the Special Court straightaway issued summons to the accused without even taking cognizance of any of the offences. The relevant order dated 14.02.2018 in this regard reads as under:- "Office is to register the case against the accused for the offence punishable under section 276C(1) of the Income Tax Act, 1961 and for the offences pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assumed jurisdiction to try the alleged offences without the accused having been committed for trial. That apart, all the offences alleged against the respondent being non-cognizable offences, the Special Court could not have proceeded in the matter based on the material collected by the authorized officer under section 132 of the Income Tax Act for the reason that investigation in respect of a non-cognizable offence is impermissible under the Code without authorization by the jurisdictional Magistrate. Under the said circumstances, the order passed by the Special Court discharging the accused and permitting the complainant to file fresh complaints may have to be sustained, though for different reasons as discussed above, with a rider that the fresh complaints, if any, on making out the offences under Chapter XXII of the Income Tax Act, be filed before the competent Court, as provided under the various provisions of the Criminal Procedure Code, 1973 and the Income Tax Act, as discussed above. 27. Coming to the allegations leveled against the respondent, in my view, the allegations made in the complaints and the material produced in support thereof prima facie do not make out the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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