Prosecution u/s 276C / 278B quashed as no concealment found by Settlement Commission
In a recent judgment, the Sessions Court Chandigarh quashed the prosecution u/s 276C / 278B as the Settlement Commission decided not to impose any penalties as no act of concealment of records was found on the part of the accused assesses.
ABCAUS Case Law Citation:
4208 (2024) (08) abcaus.in SeC
In the instant case, the assessee(s) have challenged the order passed by the Trial Court in summoning the assesses as accused to face trial/prosecution qua offences under Sections 276-C and 278-B of the of the Income Tax Act, 1961 (the Act).
A complaint was filed by Income Tax Department against the assessee party alleging willful attempt to evade income tax liability on undisclosed income. These assesses were directed to be summoned as accused to face trial qua the offence under Sections 276-C, 278-B of the Act. The accused assesses appeared and in due course were admitted to bail.
In between, they had filed applications before the Income Tax Settlement Commission. Therie applications were entertained and were directed to be proceeded with further. Those applications still were pending.
These said accused moved application before learned Trial Court seeking dismissal of the above said complaint or for its adjournment till the conclusion of proceedings before the Income Tax Settlement Commission. However, the application was declined.
The assesses submitted that they had already had filed applications before the Settlement Commission which was the final Assessing Authority. It had passed detailed order deciding not to impose any penalties upon these accused as no act of concealment of records was found on their part. Enhancements done by the Settlement Commission also were made on the basis of estimation and not for any malafide or unlawful act of these accused. Therefore, ultimately, the Settlement Commission had given immunity from penalty to these revisionists in personal capacity.
The accused assesses, in support of their arguments relied on several judgments and prayed that the revision may be allowed, the impugned order be set aside and complaint may be directed to be dismissed.
The Department contended that almost six months before the filing of applications by accused before Settlement Commission, the Department had filed the complaint before the Chief Judicial Magistrate. As per Section 245-H of the Act the Settlement Commission has no power to grant immunity from prosecution if the complaint by the Income Tax Department already stood filed.
The Sessions Court observed that when the applications moved application before the Trial Court, the applications before the Settlement Commission were pending. However, the fact that said applications were disposed of by the Settlement Commission was not brought before the Trial Court who by a subsequent order dismissed the application observing that he proceedings before said Settlement Commission were pending.
The Sessions Court observed that it was also an admitted stance of both the sides that as per this order, the penalty was enhanced purely on estimation basis. The accused assessee, therefore, patently were entitled to draw benefit from this order in the current criminal proceedings also.
The Sessions Court observed that the complaint stood filed prior to the moving applications to the Settlement Commission. In that circumstance the proviso of Section 245-H(1) states that the Settlement Commission cannot grant immunity from prosecution. However, the judgments relied upon by assesses held otherwise.
In the case relied upon by the assesses, a similar situation had arisen. Income Tax Department had filed complaint under Section 276-C (as is in present case) against the assesee. Latter had approached the Settlement Commission by way of an application. The application was granted. The Income Tax Department ad imposed the penalty. In that backdrop, our Hon’ble High Court had held that since the matter stood amicably settled by the Settlement Commission, the right to prosecute did not survive and hence the prosecution was quashed. In another case also a complaint was filed by the Income Tax Department against the assesee on allegation of willful attempt to evade tax. He was summoned by the Court. He then moved application before the Settlement Commission where it was concluded that concealment of income was not established. The Hon’ble Delhi High Court had quashed the summoning order.
The Sessions Court observed that in the case relied upon by the Department, none of the accused had approached the Settlement Commission. In that backdrop, their attempt to evade criminal prosecution had failed. The outcome was that in that matter the involvement of Settlement Commission was not at all there.Whereas in the instant case, the Settlement Commission had entertained the applications of revisionists-accused and had directed that same be proceeded with, and, ultimately held that they had made full and true disclosure of their income and the manner in which such income has been derived. It further was held that additions of penalty on each of them were made on the basis of estimation and not on account of concealment of any material fact. Therefore, immunity from penalty under the Act was granted to the revisionists. Immunity from prosecution was not granted because of the legal hitch envisaged by Proviso of Section 245-H (1) of the Act since the complaint already had been filed.
The Sessions Court opined that the impugned order was liable to be set aside and was accordingly set aside. Parties were directed to appear before the Trial Court who shall rehear the matter and shall pass fresh order keeping in mind the law cited.
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