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Gujarat High Court · body

2016 DIGILAW 711 (GUJ)

Samta Ravikant Manglani v. State of Gujarat

2016-03-31

SONIA GOKANI

body2016
JUDGMENT Sonia Gokani, J. 1. This group of petitions since involve identical question of facts and law, they are being decided by this common order. Brief facts necessary for the purpose adjudication have been drawn from Special Criminal Application No. 7132 of 2015. 2. The petitioner seeks to invoke extra ordinary jurisdiction under Article 226 of the Constitution of India for quashing and setting aside the order of issuance of summons by the learned Chief Judicial Magistrate, Vadodara in Criminal Case No. 16069/2015 for prosecution under Section 276CC of the Income Tax Act, 1963 ("Act" for short). The petitioner is an assessee under the Act. A search was conducted in case of one Dhanraj Manglani Group on 2nd and 3rd July 2012 and the present applicant is one of the assessee of the said group. Search was conducted at the premises of all the family members and various books of account and record, as per the case of petitioner, had been seized. 3. Notice for filing written under Section 153A of the IT Act was issued to the petitioner and others on 4th September 2013, and in response to which, the petitioner filed her return of income for the A.Y. 2011-2012 on 9th October 2014 declaring her total net income at Rs. 2,16,76,260/- and tax payable of Rs. 89,96,690/- 4. It is the case of the petitioner that because of raid by the Income Tax Department, books of accounts and records were seized which took the petitioner and her family to put the house in order and as a result of which, a bona fide delay occurred in filing the return of income under Section 153A of the IT Act. Moreover, it is the case of the petitioner that she was facing financial problems as a result of which it was not feasible for her to pay tax for want of funds and therefore, the petitioner had to apply for loan from the Bank. This issue was also discussed with the concerned Assessing Officer so also with the Joint Commissioner of Income Tax to whom they had promised to pay up the tax liability on or before 30th November 2014. However, with a view to cooperate and to comply with legal provisions, the petitioner filed return of income where entire undisclosed income had been offered for the purpose of tax. 5. However, with a view to cooperate and to comply with legal provisions, the petitioner filed return of income where entire undisclosed income had been offered for the purpose of tax. 5. A notice came to be issued on 28th October 2014 for launching prosecution under Section 276CC of the IT Act contending inter alia that as per the Notice under section 153A, the return of income was to be filed by 12th October 2013 which the petitioner has failed. A notice was then issued on 5th August 2014 under Section 142[1] of the Act by the Assessing Officer requiring to show cause as to why prosecution under Section 276CC of the Act should not be launched for willful failure to furnish the return of income. It is further mentioned in the said notice that the return was due for filing on 6th October 2013. The return of income for the A.Y. 2009-2010; 2011-2012; 2012-2013 in response to the notice under Section 153A of the IT Act were not received by the Office of Asstt. Commissioner of Income Tax [Central], Surat till issuance of notice dated 5th August 2014, and therefore, a show cause notice was issued requesting the petitioner to show cause why prosecution be not initiated against her for non furnishing the return of income in response to the notice under Section 153A of the IT Act. This was served upon the petitioner on 8th August 2014 and the reply to which had been filed after filing the return of income for A.Y. 2011-2012 on 9th December 2014 and for A.Y. 2013-14 on 29th August 2014. Assessment was made on 20th February 2015 for A.Y. 2011-2012 and 2013-2014. The demand was made under Section 156 of the IT Act. 6. It is the case of the petitioner that on 28th October 2014, show cause notice also came to be issued upon the petitioner for alleging prosecution under Section 376CC of the IT Act where attention of the petitioner was also drawn to the fact that provision of section 279(2) of the IT Act giving opportunity to the petitioner to opt for compounding of the offences mentioned therein. It is stated therein that if a petition for compounding is submitted in the prescribed proforma, addressed to the Director General of Income Tax [Investigation], Ahmedabad, the same shall be decided on merits and at the discretion of the Director General of Income Tax. There appears to be no such application made by the petitioner. However, it is the grievance of the petitioner that the prosecution came to be lodged against the petitioner on the ground that there was a willful failure on the part of submission of income-tax return under Section 153A of the IT Act, and therefore, the present raising various grounds. 7. It is her say that the entire amount has been made by the petitioner by disclosing her income and paying the entire tax on the said income, and therefore, under Section 279[2] of the Income Tax Act, the offence is compoundable, as there is no delay on the part of the petitioner nor any willful default, as the search for the entire group of family had made it impossible for them to recompile all the documents and set their house in order. It is to be noted that the search was conducted in group of cases which involved plethora of documents, and therefore the element of mens rea which is the pre condition of Section 276 CC of the IT Act is completely missing. Neither there is a willful default nor any mens rea for not filing of the IT return. It is also the say of the petitioner that it needs to be proved through clear, cogent and reliable evidence that non filing of the return in time was only on account of willful default on the part of the petitioner. It is also that there is neither any presence of mens rea nor any intention for let filing of the return of income, and therefore, initiation of proceedings under Section 276CC of the IT Act requires to be dropped and hence, the issuance of process by the concerned Court deserves quashment. 8. This Court has heard learned senior advocate Mr. RR Marshall with Mr. SP Majmudar, learned advocate for the applicant. He has fervently urged that if issuance of the show cause notice is a mere ordeal and no attention if being paid to the contents of the reply to the show cause notice, it would render the very provision otiose. 8. This Court has heard learned senior advocate Mr. RR Marshall with Mr. SP Majmudar, learned advocate for the applicant. He has fervently urged that if issuance of the show cause notice is a mere ordeal and no attention if being paid to the contents of the reply to the show cause notice, it would render the very provision otiose. It is also further urged that when for the entire family a search was conducted by the Income-tax Department and assessment of six years was made, it was a truck load of documents which was seized by the IT sleuths and none of the documents were returned after many attempts were made, and therefore, it was practically impossible for one to file return of income well within the time prescribed under the Statute. He further submitted that if for default, as agreed in the filing the return of income, unless it is a willful default and mens rea is involved, no court can take cognizance of the same. The very prosecution under Section 276CC of the I.T. Act is bad in as much as there is a complete absence of mens rea. He further urged that if the parties need to undergo the trial and if the very aspect need to be proved by the Department at the end of the trial, the petitioner and other family members may not be allowed to suffer ordeal of trial as this Court can very well examine as to whether there was a willful defiance on the part of the petitioner or not. He has sought to rely upon the decisions of Calcutta High Court rendered in case of Gopalji Shaw v. I.T.O. "D" Ward & Ors., [1988] 173 ITR 554 (Cal.); of Andhra Pradesh High Court in case of Income Tax Officer v. Autofil & Ors., [1990] 184 ITR 47 (AP) and of Madhya Pradesh High Court rendered in case of Narayan v. Union of India, [1994] 208 ITR 82 (MP) to emphasis that this Court can certainly look into the aspect and examine the default in not filing the income tax return within the stipulated time period and determine as to whether it was willful or not. He has taken this Court through various documents and in particular the reply to the notice to reiterate his submission that the petitioner has sufficiently explained the reason of delay, which itself would have been sufficient for the respondent not to initiate any prosecution. 9. Learned advocate Mr. KM Parikh appearing for the Income-tax Department has contended that all the averments raised in the petitioner can be the best of the defences available to the petitioner. However, this Court in a petition for quashing preferred under Article 226 of the Constitution of India need not look into the same. This surely is not a malicious prosecution which would require any interference at this stage. According to him, the reason for interference and quashing the complaint should be so powering and mighty that the Court should choose to so do it at the threshold. Otherwise, this can be examined by the Court concerned at the time of appreciation of evidence. He has sought to reply upon the decisions rendered by the Apex Court in case of Prakash Nath Khanna & Anr. vs. Commissioner of Income Tax & Anr., (2004) 9 SCC 686 . 10. Having thus heard both the sides, at the outset, firstly, the law on the subject deserves reproduction. 11. Section 153A of the Income-tax Act provides for assessment in case of search or requisition and depicts that notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, the Assessing Officer is obliged to issue notice to such person requiring him to furnish within stipulated time; as specified in the notice, the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted. The A.O. shall also assess or reassess the total income in respect of each assessment year falling within such six assessment years. 12. The A.O. shall also assess or reassess the total income in respect of each assessment year falling within such six assessment years. 12. Section 276CC of the Act under Chapter XXII- "Offences & Prosecution" provides for prosecution for failure to furnish return of income, if a person willfully fails to furnish in due time, the return of income which he is required to furnish under sub-section (1) OF Section 139 or by notice given under clause (1) of sub-section (1) of section 142 or section 148 or section 153A, he shall be punishable [i] in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extent to seven years and with fine; [ii] in any other case, with imprisonment for a term which shall not be less than three months but which may extend to three years and with fine. 13. Section 279 pertains to prosecution at the instance of Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. Sub-section (2) of Section 279 provides that any offence under this Chapter may, either before or after the institution of proceedings, be compounded by the Principal Chief Commissioner or Chief Commissioner or a Principal Director General or Director General. 14. The Apex Court in case of Prakash Nath Khanna & Ors. [Supra] held that the expression "in due time" occurring in Section 276CC means within the time stipulated in Section 139[1] and not the time postulated in Section 139[4]. The Apex Court further held that filing of the return under section 139[4], even though without any notice from the Assessing Officer to do so does not satisfy the requirement of section 139[1] and attracts Section 276-CC. Thus, in view of clear provisions of Section 276 attempt to reach a different conclusion by placing reliance on marginal heading or explanatory memo laid before the Parliament at the time of introduction of that section is impermissible. Thus, in view of clear provisions of Section 276 attempt to reach a different conclusion by placing reliance on marginal heading or explanatory memo laid before the Parliament at the time of introduction of that section is impermissible. With respect to quashing criminal proceedings under Article 226 of the Constitution of India, the Apex Court held and observed that if the accused challenges the prosecution on the grounds that [a] there was no concealment of income and the allegation of tax evasion was based on no evidence, [b] the delay in filing returns happened in unavoidable circumstances and without any guilty mind, the absence of culpable mental state could be pleaded in defence at the criminal trial and the factual allegations raised by the writ petitioner-accused could then be considered by the trial Court. 15. Apt it would be, to reproduce the relevant findings given in para 21 to 23 of the said decision, which read thus- "21. The term of imprisonment is higher when the amount of tax which would have been evaded but for the discovery of the failure to furnish the return exceeds one hundred thousand rupees. If the plea of the appellants is accepted it would mean that in a given case where there is infraction and where a return has not been furnished in terms of sub-section (1) of Section 139 or even in response to a notice issued in terms of sub-section (2), the consequences flowing from non-furnishing of return would get obliterated. At the relevant point of time Section 139(4)(a) permitted filing of return where return has not been filed within sub-section (1) and sub-section (2). The time limit was provided in clause (b). Section 276-CC refers to "due time" in relation to sub-sections (1) and (2) of Section 139 and not to sub-section (4). Had the Legislature intended to cover sub-section (4) also, use of expression "Section 139" alone would have sufficed. It cannot be said that Legislature without any purpose or intent specified only the sub-sections (1) and (2) and the conspicuous omission of sub-section (4) has no meaning or purpose behind it. Sub-section (4) of Section 139 cannot by any stretch of imagination control operation of sub-section (1) wherein a fixed period for furnishing the return is stipulated. It cannot be said that Legislature without any purpose or intent specified only the sub-sections (1) and (2) and the conspicuous omission of sub-section (4) has no meaning or purpose behind it. Sub-section (4) of Section 139 cannot by any stretch of imagination control operation of sub-section (1) wherein a fixed period for furnishing the return is stipulated. The mere fact that for purposes of assessment and carrying forward and to set off losses it is treated as one filed within sub-sections (1) or (2) cannot be pressed into service to claim it to be actually one such, though it is factually and really not by extending it beyond its legitimate purpose. 22. Whether there was willful failure to furnish the return is a matter which is to be adjudicated factually by the Court which deals with the prosecution case. Section 278-E is relevant for this purpose and the same reads as follows: "278-E: Presumption as to culpable mental state- (1) In any prosecution for any offence under this Act which requires a culpable mental state on the part of the accused, the court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution. Explanation: In this sub-section, "culpable mental state" includes intention, motive or knowledge of a fact or belief in, or reason to believe, a fact (2) For the purposes of this section, a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability". 23. There is a statutory presumption prescribed in Section 278-E. The Court has to presume the existence of culpable mental state, and absence of such mental state can be pleaded by an accused as a defence in respect to the act charged as an offence in the prosecution. Therefore, the factual aspects highlighted by the appellants were rightly not dealt with by the High Court. This is a matter for trial. It is certainly open to the appellants to plead absence of culpable mental state when the matter is taken up for trial." 16. Therefore, the factual aspects highlighted by the appellants were rightly not dealt with by the High Court. This is a matter for trial. It is certainly open to the appellants to plead absence of culpable mental state when the matter is taken up for trial." 16. In wake of the discussions above and the decision of the Apex Court rendered in case of Prakash Nath Khanna & Anr. v. Commissioner of Income Tax & Anr. [Supra], this group of petitions deserve no consideration and are accordingly dismissed. 17. Needless to say that all the contentions raised before this Court by the petitioners shall be available to them at the time of trial and dismissal of these petitions and any of the observations made shall not come in the way of the parties concerned, nor it could be regarded by the Court concerned which shall adjudicate the matters on its own merits. 18. The three decisions of different High Courts which are sought to be relied upon by the learned senior advocate Shri RR Marshall are either at the stage of revision or appeal and all these petitions are at the stage where the Court concerned has issued process in the matters and the inducement of evidence and adjudication thereon is yet pending. Again, when the decision of the Apex Court is on the very issue, no further dilation of any of the ratio at this stage is desirable. Applicants would have ample opportunities to raise all these contentions at appropriate stage. This hardly is the stage for the Court to make a roving inquiry into the various contentions raised. 19. Resultantly, all these Special Criminal Applications fail and are therefore dismissed with no separate orders as to costs.