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Gujarat High Court · body

2020 DIGILAW 927 (GUJ)

Hemal Manubhai Patel v. State of Gujarat

2020-11-06

GITA GOPI

body2020
JUDGMENT : 1. By way of this petition filed under section 482 of the Code of Criminal Procedure, the petitioner has prayed to quash and set aside the complaint being registered as Criminal Case No.1622 of 2019 with the Court of learned 4th Additional Senior Civil Judge and Additional Chief Judicial Magistrate, Gandhinagar for the offence punishable under section 276C(2) of the Income Tax Act, 1961 (hereinafter referred to as “the IT Act”) and the proceedings initiated pursuant thereto. 2. The petitioner, an assessee of the respondent-Income Tax Department, filed his Return of Income for the A.Y. 2011-12 on 20.11.2011 declaring total income of Rs.7,20,914/-. The case of the petitioner was taken for scrutiny assessment and vide order dated 24.03.2014 passed under section 143(3) of the IT Act, the taxable income of the petitioner was determined at Rs.1,78,82,474/-. The assessed income comprised of (i) income from sale of land of Rs.34,50,200/- due to disallowance of additional cost of Rs.27,64,744/- (ii) unsecured loan/advance of Rs.1,35,00,000/- taxed as an income from the sale of property and (iii) unexplained cash credit of Rs.8,96,819/-. 2.1 Being aggrieved by the order of assessment, the petitioner-assessee preferred appeal before the Commissioner of Income Tax (Appeals), Gandhinagar. The said appeal came to be partly allowed vide order dated 23.10.2015, whereby the additions of Rs.1,35,00,000/- made as an unsecured loan towards the sale of land and unsecured loan to the extent of Rs.1,39,092/- came to be deleted. Resultantly, a fresh notice of demand for Rs.15,96,800/- came to be raised under section 156 of the IT Act on 03.12.2015. 2.2 Against the order passed by the CIT(A), the petitioner-assessee preferred appeal before the Income Tax Appellate Tribunal, Ahmedabad Bench (for short, “the ITAT”), which was numbered as ITA No.3604/AHD/2015. It appears that the said appeal came to be dismissed for want of prosecution vide order dated 12.01.2018. Thereafter, a penalty order came to be passed on 30.07.2018 under section 271(1)(c) of the IT Act for Rs.8,14,180/- and notice of demand under section 156 of the IT Act came to be issued. 2.3 In the meanwhile, it appears that the petitioner had filed application being M.A. No.134/Ahd/2019 in ITA No.3604/Ahd/2015 seeking restoration of the appeal. The said application came to be allowed vide order dated 19.08.2019 and the appeal was restored on file. 2.3 In the meanwhile, it appears that the petitioner had filed application being M.A. No.134/Ahd/2019 in ITA No.3604/Ahd/2015 seeking restoration of the appeal. The said application came to be allowed vide order dated 19.08.2019 and the appeal was restored on file. On 28.11.2018 the Principal Commissioner of Income Tax issued show cause notice under section 276C(2) of the IT Act for the A.Y. 2011-12. The petitioner gave his reply to the said notice inter alia stating that the amount of demand has been reduced by the CIT(A) from Rs.74,74,650/- to Rs.15,96,800/- and that the appeal filed before the ITAT was dismissed on the ground of want of prosecution as the petitioner had not received the notice for appearance on account of change of his residential address. 2.4 Being dissatisfied with the reply submitted by the petitioner, the respondent No.2 filed complaint before the Court below alleging that the petitioner has willfully evaded payment of tax of Rs.15,96,800/- and penalty of Rs.8,14,180/- for the A.Y. 2011-12 and thereby, has committed offence punishable under section 276C(2) of the IT Act. The said complaint was registered as Criminal Case No.1622/2019 with the Court below and thereafter, process came to be issued. Being aggrieved by the same, the present petition has been preferred. 3. Mr. Zubin Bharda, learned advocate for the petitionerassessee, submitted that the prosecution launched against the petitioner under section 276C(2) of the IT Act is premature inasmuch as the appeal preferred before the ITAT had been restored to file and is pending. In the reply dated 29.01.2019, the petitioner had informed the Department that the appeal filed by him before the ITAT had been dismissed on account of the fact that the notice for hearing issued by the ITAT was not served upon him as he had changed his place of residence. The petitioner had informed the Department that he would be taking necessary recourse for restoration of the appeal before the ITAT no soon as the copy of the order passed by the ITAT dismissing his appeal for want of prosecution is received by him and till that time, he requested the Department not to initiate any criminal prosecution against the petitioner as he was genuinely pursuing the appeal before the ITAT. It was contended that the petitioner had filed an application for restoration of the appeal, which came to be allowed and the appeal filed by him has been restored to the file of the ITAT. As on today, the said appeal is pending. Hence, the demand raised by the Department is still the subject matter of adjudication of the ITAT and cannot be considered to be a crystallized demand. It was, accordingly, urged that the prosecution initiated by the Department is premature and deserves to be quashed and set aside. 3.1 Learned advocate Mr. Bharda further submitted that the petitioner had applied with the Department for settlement of the tax dispute in March 2020 in pursuance of the scheme declared by the Union Government. The petitioner had already deposited 85% of the total demand raised by the Department. However, ignoring the fact that the tax demand had not been crystallized as the issue was pending before the ITAT, the Department rejected the request made by the petitioner for settlement of the tax dispute under the scheme. It was contended that the ground on which the Department rejected the proposal of the petitioner is baseless and without application of mind. It was, accordingly, urged that the prosecution raised by the Department under section 276C(2) of the IT Act deserves to be quashed and set aside. 4. Mr. M.R. Bhatt, learned Senior Standing Counsel appearing for the respondent Department, submitted that penalty proceedings and criminal prosecution are independent of each other and that they can be initiated simultaneously as per the provisions of the IT Act. It was submitted that there is no impediment in law for the criminal proceedings to proceed even during the pendency of proceedings under the IT Act inasmuch as the pendency of appellate proceedings is not a relevant factor for the purpose of initiation of proceedings under section 276C of the IT Act. It was contended that the petitioner willfully attempted to evade the payment of tax and therefore, the Department had no option but to launch prosecution under section 276C(2) of the IT Act. In view of the above facts, the application of the petitioner for settlement of the tax dispute under the scheme came to be rejected. Hence, no discretion may be granted in favour of the petitioner herein. 5. Heard learned advocates on both the sides and perused the material on record. In view of the above facts, the application of the petitioner for settlement of the tax dispute under the scheme came to be rejected. Hence, no discretion may be granted in favour of the petitioner herein. 5. Heard learned advocates on both the sides and perused the material on record. In the assessment order dated 24.03.2014 passed under section 143(3) of the IT Act, the total income of the petitioner was determined at Rs.1,78,82,474/- pursuant to which tax demand of Rs.74,74,650/- was raised. Against the order passed by the Assessing Officer, the petitioner had preferred appeal before the CIT(A). The CIT(A) granted partial relief in favour of the petitioner, whereby the tax demand was reduced to Rs.15,96,800/-. Against the order passed by the CIT(A), the petitioner had preferred appeal before the ITAT being ITA No.3604/AHD/2015. It appears that the said appeal came to be dismissed for want of prosecution vide order dated 12.01.2018. While dismissing the said appeal, the ITAT made the following observations in paragraphs – 2 & 3; “2. That the notice for hearing for 08.01.2018 was duly informed to the assessee through RPAD notice acknowledged by the assessee. However, on the date of hearing none appeared on behalf of the assessee and neither any adjournment petition was filed. This shows that the assessee is not serious in pursuing with this appeal and therefore, by following the decision of ITAT, Delhi Bench in CIT Vs. Multiplan India Pvt. Ltd., 38 ITD 320 (Delhi), we dismiss this appeal of the assesse in limine. 3. The assessee may, if so advised, file an application before this Tribunal for restoration of its appeal and hearing on merits by showing reasonable cause for not appearing before the Tribunal on the date of hearing, within limitation provided in the Income Tax Act. The Bench, if so specified, may recall its order and restore the appeal to its original number for hearing on merits…” 6. It is clear from the above order dated 12.01.2018 that the appeal was never adjudicated on merits and it was dismissed for want of prosecution. While doing so, the ITAT had also granted liberty to the petitioner to file an application for restoration of the appeal. It is clear from the above order dated 12.01.2018 that the appeal was never adjudicated on merits and it was dismissed for want of prosecution. While doing so, the ITAT had also granted liberty to the petitioner to file an application for restoration of the appeal. Pursuant to the dismissal of the appeal for want of prosecution, the petitioner filed restoration application being M.A. No.134/Ahd/2019, which came to be allowed, vide order dated 19.08.2019 and the appeal being ITA No.3604/AHD/2015 was restored to file. It is reported that the said appeal is pending adjudication as on date before the ITAT. Thus, evidently, the demand raised by the Department has not been crystallized since the appeal filed by the petitioner in the year 2015 against the order dated 23.10.2015 passed by the CIT(A) is still pending before the ITAT and has not adjudicated on merits. Had it been so that the petitioner had not taken the legal recourse available for restoration of the appeal dismissed for want of prosecution on 12.01.2018, then the demand raised by the Department could be said to have been crystallized. However, in the present case, the petitioner immediately took necessary legal recourse by filing the restoration application, which came to be allowed and the appeal was restored to the file of the ITAT and is pending adjudication as on date. 7. It is true that the appeal filed by the petitioner before the ITAT was dismissed on 12.01.2018; however, it was not dismissed after being adjudicated on merits. Subsequently, the appeal has been restored to the file of ITAT vide order dated 19.08.2019. Unless and until the said appeal is adjudicated and disposed of on merits, the demand raised by the petitioner cannot be said to have been crystallized. Under the circumstances, the continuation of prosecution under section 276C(2) of the IT Act could not be permitted as it would amount to a double whammy to the petitioner. Once the finding of concealment and subsequent levy of penalty under section 271(1)(c) of the IT Act is struck down by the ITAT, the Assessing Officer has no other alternative except to correct his order under section 154 of the IT Act, as per the directions of the ITAT. Once the finding of concealment and subsequent levy of penalty under section 271(1)(c) of the IT Act is struck down by the ITAT, the Assessing Officer has no other alternative except to correct his order under section 154 of the IT Act, as per the directions of the ITAT. In other words, if the ITAT has set aside the order of concealment and penalty, then there is no concealment in the eyes of law, under which circumstance, the prosecution cannot be proceeded with by the Department and the further proceedings will be illegal and without jurisdiction. 8. In the present case, as discussed herein above, the appeal is pending adjudication before the ITAT. There is no dispute about the proposition that adjudication proceeding and criminal prosecution can be launched simultaneously. Both the proceedings are independent in nature. The finding in the adjudication proceeding in favour of the person facing trial for identical violation will depend upon the nature of finding. If the exoneration in adjudication proceeding is on technical ground and not on merit, the prosecution may continue. In case of exoneration, however, on merits where the allegation is found to be not sustainable at all and the person is held innocent, criminal prosecution on the same set of facts and circumstances cannot be allowed to continue the underlying principle being the higher standard of proof in criminal cases. The yardstick would be to judge as to whether the allegation in the adjudication proceeding as well as the proceeding for prosecution is identical and the exoneration of the person concerned in the adjudication proceedings is on merits. In case it is found on merit that there is no contravention of the provisions of the IT Act in the adjudication proceeding, the trial of the person concerned shall be an abuse of the process of the Court. 9. In the present case, the allegations in both the proceedings are similar. As discussed herein above, the demand raised by the Department is not crystallized as the appeal preferred by the petitioner is pending adjudication on merits. Considering the aforesaid factual scenario and since the petitioner has already deposited a substantial part of the demand raised by the Department, this Court is of the opinion that the continuation of the prosecution against the petitioner for the same allegations could not be permitted. 10. For the foregoing reasons, the petition is partly allowed. Considering the aforesaid factual scenario and since the petitioner has already deposited a substantial part of the demand raised by the Department, this Court is of the opinion that the continuation of the prosecution against the petitioner for the same allegations could not be permitted. 10. For the foregoing reasons, the petition is partly allowed. The prosecution initiated against the petitioner by way of Criminal Case No.1622 of 2019 pending with the Court of learned 4th Additional Senior Civil Judge and Additional Chief Judicial Magistrate, Gandhinagar for the offence punishable under section 276C(2) of the Income Tax Act, 1961 shall remain stayed until the final judgment is delivered by the ITAT in the pending appeal being ITA No.3604/AHD/2015. Needless to say that the passing of this order will not preclude the Department from considering the case of the petitioner under the “Vivad se Vishwas Scheme” in view of the object of the scheme and particularly when the petitioner has already deposited a substantial part of the demand. The petition stands disposed of accordingly. Rule is made absolute to the above extent. Application partly allowed.