Order of ITAT not binding on Trial Court in income tax prosecution case. Appeal to stay prosecution during pendency of appeal before ITAT dismissed
ABCAUS Case Law Citation:
ABCAUS 2828 (2019) (03) AC
Important Case Laws Cited/relied upon by the parties
Commissioner of Income Tax vs. Bhupen Champak Lal Dalal 2001(3) SCC 459
Gauri Shankar Prasad and ors vs. UOI and ors (2003) 261 ITR 522
G.L. Didwania and anr vs. Income Tax Officer and anr. 1995 Supp (2) SCC 724.
Orissa vs. Nakula Sahu and others, 1997 SCC (Criminal) 283
M/s. Telu Ram Raunqi Ram v. Income-Tax Officer 1984 (145) ITR 111
T. M. S. Mohammed v. Union of India (1992) 197 ITR 196 (SC)
Jayappan’s case (1984) 149 ITR 696 (SC)
Uttam Chand’s case (1982) 133 ITR 909,
The appellant/revisionist assessee had filed a criminal revision before the Sessions Court against the order passed by the court of learned Chief Judicial Magistrate (CJM) in a criminal complaint whereby his application for stay of proceedings during pendency of appeal before Commissioner of Income Tax (Appeals) was dismissed.It was argued that the revisionist has already filed appeal before the Income Tax Appellate Tribunal (ITAT) and in case the assessment order on the basis of which criminal prosecution was launched, was set aside, then the entire exercise of recording evidence and proceeding further with the present complaint would become futile, as the findings of the Appellate Tribunal will have a direct bearing upon the status of present complaint.
Placing reliance upon the decision of the Hon’ble Supreme Court, the revisionist contended that the decision of ITAT will have a definite bearing on the case against the petitioner.
It was also pointed out that infact the Income Tax department should have waited for the outcome of the appeal which was already pending, before filing a complaint against the revisionist.
Accordingly, it was prayed that the impugned order be set aside and proceedings of the case be stayed till the final disposal of the petition.
Facts of the Case:
The petitioner was one of the Directors of a renowned business group. A search and seizure operation u/s 132(1) of the Income Tax Act, 1961 (the Act) was carried out by the income tax department at the business premises and residential house of the petitioner.
The assessment was framed on the strength that the petitioner had indulged in sham transaction to receive back his unaccounted money in the garb of long term capital gain and the petitioner concealed particulars of his income and thus furnished inaccurate particulars.
The petitioner filed appeal against the said assessment order before the Commissioner of Income Tax (Appeals). However, during the pendency of said appeal, the Department obtained permission to launch prosecution against the petitioner and filed the complaint u/s 276C(1) and Section 277 of the Act.
The petitioner filed an application for stay of proceedings of the complaint in question in the Trial court till the final decision of said appeal filed before Commissioner of Income Tax (Appeals), but aforesaid application was dismissed by the CJM Court (Trial court).
The Trual Court while dismissing the stay application held that on the facts and circumstances of the case, criminal complaint filed against the accused did not rest solely on the order of assessment and any order passed in appeal against the order of assessment could not be held to have material bearing on the decision in the present case.
In the meanwhile, the appeal filed against the assessment was also dismissed by the CIT(A) and the petitioner challenged the said order before the Income Tax Appellate Authority.
Since, in view of the CIT(A) having dismissed the appeal, technically speaking the instant Revision Petition had become infructuous. However, the petitioner sought stay of proceedings till decision by ITAT. In other words, the case of the petitioner was that since the penalty proceedings were open to correction by the decision of the Appellate Income Tax Tribunal, therefore, the proceedings of complaint pending before Trial court be stayed.
The Sessions Court observed that the Hon’ble Supreme Court in a similar case held that proceedings against the assessee in a criminal court can not be stayed on mere expectancy of a favourable decision but in case the expectancies of the petitioner fructify, and it gets an order in its favour by the time the trial is pending, or even at the appellate and revisional stages, all those courts, in dealing with that matter, would be required to give due regard to those findings in case they are favourable to the assessee.
Similarly, in another case, their Lordships had held that the criminal court no doubt has to give due regard to the result of any proceeding under the Act having a bearing on the question in issue and in an appropriate case, it may drop the proceedings in the light of an order passed under the Act. It does not, however, mean that the result of a proceeding under the Act would be binding on the criminal court. The criminal court has to judge the case independently on the evidence placed before it.
Accordingly the Sessions Court opined that the order passed by the Income-tax Appellate Tribunal would not be binding on the Trial Court before whom the prosecution was pending and, therefore, further proceedings of the case before the Chief Judicial Magistrate were not liable to be stayed.
As a result, the appeal of the assessee was dismissed