TMI Blog2022 (12) TMI 698X X X X Extracts X X X X X X X X Extracts X X X X ..... are cancelled on the ground that there is no concealment, the quashing of prosecution under section 276C is automatic. The case of the petitioners is fully covered with the case of K.C. Builders (supra) In the case in hand the penalty was quashed on merit. Thus the entire criminal proceeding including order taking cognizance passed by the Special Sub-Judge-VII, Economic Offence, Ranchi are hereby quashed. - Cr.M.P. No. 591 of 2017 With Cr.M.P. No. 593 of 2017 - - - Dated:- 29-11-2022 - HON'BLE MR. JUSTICE SANJAY KUMAR DWIVEDI For the Petitioners :Mr. Sumeet Gadodia, Advocate Mr. Ranjeet Kishwaha, Advocate Ms. Aanya, Advocate (in both cases) For the State : Mr. Rajneesh Vardhan, A.P.P. (in both cases) For the O.P. No. 2 : Mr. Ratnesh Nandan Sahay, Sr. Standing Counsel (in both cases) These matters were taken up on 09.03.2017 and on that date learned counsel for the O.P. No. 2 took time to file reply to the arguments made by the learned counsel for the petitioner. Again on 28.03.2022 these matters were adjourned at the instance of the learned counsel for the O.P. No. 2. Further on 28.04.2022 and 02.08.2022, again these matters were adjourned at the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961 (for short Act ) but he denied that his claim for Long Term Capital Gain is bogus. (iii). It has been further alleged that even subsequent to the said search, false statement was made by the petitioner on examination on oath under section 131(1A) of the Act. (iv). It has been further alleged that the petitioner had even attempted to evade tax which attracts offence under section 276 C (1), 277 and 278 E of the Income Tax Act, 1961 and, accordingly, proposal was made for launching prosecution under section 276 C (1), 277 and 278E of the Act by Deputy Director of Income Tax (Investigation) to the Principal Director of Income Tax (Investigation), Patna vide letter dated 20th May, 2016. (v). It has been further alleged that even opportunity of being heard was afforded to the petitioner by issuance of Show Cause Notice dated 07.06.2016 requiring the petitioner to show cause against the intended prosecution against him under section 276C(1), 277 and 278E of the Income Tax Act. (vi). It has been further stated that the assessee had replied to the said show cause notice and in his reply, the assessee has specifically stated that the case of the petitioner is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it-II, Ranchi to file complaint before the competent court against the petitioner, and accordingly, the complaint case has been filed. 8. In Cr.M.P. No. 593 of 2017 complaint has been filed alleging therein as under:- (i). It has been alleged that petitioner is the Karta of Murari Lal Jalan HUF and search and seizure operation was conducted in the residence of the petitioner under section 132(1) of the Income Tax Act, 1961 on 22.07.2015. (ii). It has been alleged that during course of search and seizure operation, it was found that the petitioner had claimed huge Bogus Long Term Capital Gain during the Financial Year 2013-14 relevant to Assessment Year 2014-15 and during the course of Post Search Investigation, the petitioner was even examined on oath under section 131(1A) of the Income Tax Act, 1961 (for short Act ) but he denied that his claim for Long Term Capital Gain is bogus. (iii). It has been further alleged that even subsequent to the said search, false statement was made by the petitioner on examination on oath under section 131(1A) of the Act. (iv). It has been further alleged that the petitioner had even attempted to evade tax which attracts offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed by them was bogus in nature. (xiii) it has been further stated in the complaint petition itself that the petitioner had, suo motu, deposited tax of Rs. 33,32,980/- for the Assessment Year 2014-15 and the said deposit of tax has not been followed by any Assessment Order/Demand Notice. It is an admitted fact in the complaint case that till date no Assessment Order/Demand Notice has been issued. (xiv). On the basis of the aforesaid allegations, it has been alleged against the petitioner that the petitioner has committed offence under section 276C(1), 277 and 278 of the Income Tax Act and, accordingly, it has been stated in the complaint petition that the Principal Director of Income Tax (Investigation), Patna has authorized Shri Mayank Mishra, Deputy Director of Income Tax (Investigation), Unit-II, Ranchi to file complaint before the competent court against the petitioner, and accordingly, the complaint case has been filed. 9. After filing of the complaint case in both the cases, the learned court has taken cognizance under sections 276(C)(1), 277 and 278E of the Income Tax Act vide order dated 10.11.2016 against the petitioners in both the cases. 10. Mr. Sumeet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the Income Tax Appellate Tribunal's order no offence survives under the Income Tax Act and thus the quashing of the prosecution is automatic? (d) Whether the finding of the Income Tax Appellate Tribunal is binding upon the criminal court in view of the fact that the Chief Commissioner and the assessing officer who initiated the prosecution under Section 276-C(1) had no right to overrule the order of the Income Tax Appellate Tribunal? More so when the Income Tax Officer giving the effect to the order cancelled the penalty levied under Section 271(1)(c)? (e) Whether the High Court's order is liable to be set aside in view of the errors apparent on record? 24. In the instant case, the penalties levied under Section 271(1)(c) were cancelled by the respondent by giving effect to the order of the Income Tax Appellate Tribunal in ITAs Nos. 3129-32. It is settled law that levy of penalties and prosecution under Section 276-C are simultaneous. Hence, once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution under Section 276-C is automatic. 25. In our opinion, the appellants cannot be made to suffer and face the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding was quashed by this Court. He relied on para 12 to 16, 19, 22 to 29 of the said judgments. On these grounds he submits that so far as criminal proceeding in both the cases, is bad in law and to continue the proceeding against the petitioners is abuse of the process of law. 12. On the other hand, Mr. Ratnesh Nandan Sahay, learned counsel appearing on behalf of O.P. No. 2 in both the cases submits that Long Term Capital Gain has been fraudulently enjoyed by the petitioners that is why the complaint has been filed. He submits that once criminal case is filed even subsequently if penalty is set aside by the appellate authority, criminal case cannot be quashed. He relied in the case of S.J. Surya Vs. The Deputy Commissioner of Income Tax Central Circle,-II (4), Chennai in Crl. O.P. No. 29914, 29915, 29916, 29917, 29918 29919 of 2015 and M.P. Nos. 1 and 2 of 2015. Referring para 21 of the said judgment he submits that mens rea is required to be looked into which is subject matter of trial. On these grounds, he submits that the Court may not interfere with the matters under section 482 Cr.P.C. 13. In view of above submission of the learned counsel for the parties the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention of the Legislature is that the penalty should serve as a deterrent. In the case in hand in the first case second appellate authority has set aside the penalty and it is and admitted fact that whether criminality can be sustained or not. In the similar circumstances in the case of G.L. Didwania (supra) the Hon ble Supreme Court has held that if that is the position then the Court is unable to see as to how criminal proceedings can be sustained and the same view was taken in the case of K.C. Builders (supra). The judgment relied by Mr. Sahay appearing for the O.P. No. 2 in the case of S.J. Surya (supra) is distinguishable in the facts and circumstances of the present case and the Madras High Court was of the view that if the penalty has been quashed on the technical ground not on merit the criminal proceeding cannot be quashed which has been considered at para 19 of the said judgment which is quoted here-in-below:- 19. From the reading and understanding of the judgments foresaid, it is made clear that pendency of re-assessment proceedings are remanding matter for adequate opportunity and that adjudication by Tribunal through adjudication proceedings are not a bar for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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