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TMI Blog2022 (8) TMI 1032X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.1,61,32,000/- on 14.07.2011. The entire sale consideration was received by the accused by cash. Subsequently, the accused has purchased a property at Government Industrial Estate, Ambattur, Chennai-58 on 14.06.2013. He has claimed to have spent Rs.1,39,89,530/- on Civil construction on the said property. Accordingly, the accused declared long term capital gain of Rs.16,24,088/- after claiming deduction under Section 54F of the Income Tax Act to the tune of Rs.1,12,06,199/-. 2(b) . It is the case of the prosecution that the sale of new property was to be restricted to industrial use and hence it could not considered as a residential house. The Assessing Officer further observed that out of the cash receipt of Rs.1,39,89,530/- the accused claimed to have spent Rs.1,26,70,000/- on construction which was incurred in cash. The Assessing Officer had disallowed the deduction claimed by the accused under Section 54F of the Income Tax Act and passed an order on 30.01.2015 determining the total income of at Rs.1,38,80,029/- and total tax liability quantified at Rs.28,14,969/- which along with interest payable worked out to Rs.37,87,470/-. Penal proceedings were also initiated under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following judgments: 1. Noorjahan vs. Deputy Commissioner of Income- Tax [[2022] 138 taxmann.com 76 (Madras)] 2. K.E.Gnanavel Raja vs. Assistant Commissioner of Income Tax [[2022]137 taxmann.com 372] 3. S.P.Velayutham vs. Assistant Commissioner of Income Tax [[2022]135 taxmann.com 43 (Madras)] 5. Whereas the learned counsel appearing for the Respondent filed her counter and submitted that but for the scrutiny process the income would have been escaped and it is the contention that having sold house property, the Petitioner has made investment in the industrial area and he has wrongly claimed capital gain. Therefore, the penalty proceedings also initiated. The Assessment Order was upheld by the Appellate Tribunal. Hence, submitted that it is only the accused has to rebut the presumption under Section 278E of Income Tax Act, which provides culpable mental state of mind of the accused. Hence submitted that the conduct of the Petitioner clearly made out the offence under section 277 I.T.Act and the same cannot be quashed at this stage. Hence, opposed the petition. 6. In support of her submissions, she relied upon the following judgments: 1. J. Dinakaran vs. the Deputy Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain the prosecution there must be a willful attempt to evade any tax, penalty or interest on the part of the assessee. The very crux of the allegation in the complaint indicate that the accused has sold house property to construct a building in the industrial site. The prosecution case is that the amount ought to have been invested in the house property. It is also admitted by the prosecution that the assessee has claimed exemption under Section 54F of the Income Tax Act. The very averment in the complaint itself indicates that there is no concealment or willful suppression of any materials, what was sought for is exemption under Section 54F of the Income Tax Act. Of course, an Assessment Officer has not accepted the claim for exemption under Section 54F of the Act. Accordingly, the Assessment Order passed by the authorities were upheld by the Tribunal which is not disputed. 11. In the Income Tax Appellate Tribunal order it is not found that the accused fraudulently removed or claimed bogus exemption. The assessment order upheld mainly on the ground that since the property was purchased in the industrial area not residential house, the claim has not accepted. It is nowhere found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the accused has not purchased residential house. It is the bona fide claim of assessee that on the sale of property he has purchased the another property. The fact remains that the another property, which is supported his case, only a residential house not an industrial property. On relying upon the judgment of the CIT vs. Reliance Petroproducts (P) Ltd., reported in [2020] 322 ITR 158 (SC) wherein the Apex court explained that whether a claim simply not accepted by the A.O., it does not mean that it is a concealment of income or furnishing of inaccurate particulars of income so that penalty can be levied. Following that, the Income Tax Appellate Tribunal has observed as follows: "We are of the opinion that the assessee has neither concealed the income nor furnished inaccurate particulars in this case. Therefore, the penalty levied by the A.O. And confirmed by the Ld.CIT(A) is not correct." Accordingly, the penalty imposed is set aside by the Appellate Tribunal. The penalty proceedings also reached finality, no further appeal is filed. As it is not observed anywhere that the assessee claimed false or bogus it cannot be said that there is concealment or wilful evasion of the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt regarding the income which according to the assessing authority has escaped assessment and this issue was dependent on the conclusion reached by the appellate Tribunal and hence the prosecution could not be sustained. In Uttam Chand & Ors. vs. Income Tax Officer, Central Circle, Amritsar, 1982 (2) SCC 543, this Court held that in view of the finding recorded by the Tribunal on appraisal of the entire material on the record that the firm was a genuine firm and the assessee could not be prosecuted for filing false returns and, therefore, quashed the prosecution. In P.Jayappan vs. S.K.Perumal, First Income-Tax Officer, Tuticorin, 1984 Supp. SCC 437, this Court observed that the pendency of the reassessment proceedings under the Act cannot act as a bar to the institution of the criminal proceedings and postponement or adjournment of a proceedings for unduly long period on the ground that another proceedings having a bearing on the decision was not proper. 16. In Radheshyam Kejriwal's case (supra) the Honourble Apex Court has held as follows: "38. The ratio which can be culled out from these decisions can broadly be stated as follows :- (i) Adjudication proceeding and crimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oolam vs. Income Tax Officer [[2010] 327 ITR 603 (Madras) this Court has refused to quash the proceedings mainly on the ground that substantial portion of witnesses have been examined. Therefore the same is not applicable. 19. Considering the above position when the Tribunal has held that there is no suppression or willful evasion of tax and it is also admitted that tax is also paid and penalty proceedings recorded that there is no suppression of fact and the assessee has originally disclosed the receipt of the sale property, merely claiming a deduction cannot be said that there is willful evasion of tax. 20. This court in K.E. Gnanvel Raja vs. Assistant Commissioner of Income-Tax [2022] 137 taxmann.com 372 (Madras)] has held that penalty was levied for wrong calculation of loss and not concealment of income, continuation of prosecution against the assessee would amount to abuse of process of law. 21. In Mrs. Noorjahan vs. Deputy Commissioner of Income Tax [2022] 138 taxmann.com 76] this court in paragraphs 12 15 and 16 held as follows: "12. In Prem Dass cited supra the Hon'ble Supreme Court while considering the expression 'Wilful attempt to evade any tax' as foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability." 16. A 'culpable mental state' which can be presumed under section 278E of the Act would come into play only in a prosecution for any offence under the Act, when the said offence requires a 'culpable mental state' on the part of the accused. Section 278E of the Act is really a rule of Evidence regarding existence of mens rea by drawing a presumption though rebuttable. That does not mean that, the presumption would stand applied even in a case wherein the basic requirements constituting the offence are not disclosed. More particularly, when the tax is paid much before the process for prosecution is set into motion. The presumption can be applied only when the basic ingredient which would constitute any offence under the Act is disclosed. Then only, the rule of evidence under section 278E of the Act regarding rebuttable presumption as to existence of culpable mental state on the part of accused would come into play." 22. In the above judgment this Court quashed the proceedings mainly on the ground that the petitioner had failed to pay the tax l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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