Stay On Criminal Trial For Willful Evasion Of Tax U/s 276(c) Of The Income Tax Act, 1961 Till The Disposal Of The Appeal Filed Before Authorities
In the case
tilted as Beaver Estates Pvt. Ltd. and Ors. Vs. The Assistant Commissioner
of Income Tax Corporate, Circle 1(1) and Ors., OP (Crl.) No. 400 of 2019,
MANU/KE/4435/2019, the High Court of Kerala has directed the Trial Court to
keep the criminal proceedings initiated against the Petitioner Company and its
Managing Director on the complaint filed against them by the Assistant
Commissioner of Income Tax alleging that they had made wilful attempt to evade
tax and committed an offence punishable under Section 276C(1) of the Income Tax
Act, 1961 (hereinafter referred to as 'the Act'), in abeyance, till the
disposal of Income Tax Appeal filed by the Petitioners for challenging the
assessment of tax before the Commissioner of Income Tax.
That in the
instant case, the Petitioners filed a petition before the Hon'ble High Court
for staying the criminal trial initiated against them for wilful attempt to
evade tax on the ground that if the statutory appeal filed by the petitioners
under the Act gets allowed, it would knock down the very basis of the
prosecution.
The Petitioners
in support of their stand relied on the judgment of the Hon'ble Supreme Court
in the case of K.C. Builders v. Assistant Commissioner of Income Tax,
MANU/SC/0070/2004: (2004) 2 SCC 731, wherein it had been held that levy of
penalties and prosecution under Section 276C of the Act are simultaneous and
hence, once the penalties are cancelled on the ground that there is no
concealment, the quashing of prosecution under Section 276C of the Act is
automatic.
The Petitioners
also relied on the judgment of the Hon'ble Supreme Court in the case
of Income Tax v. Bhupen Champak Lal Dalal, MANU/SC/0141/2001: AIR
2001 SC 1096, wherein the Hon'ble Court had held as under:
"The
prosecution in criminal law and proceedings arising under the Act are
undoubtedly independent proceedings and, therefore, there is no impediment in
law for the criminal proceedings to proceed even during the pendency of the
proceedings under the Act. However, a wholesome rule will have to be adopted in
matters of this nature where courts have taken the view that when the
conclusions arrived at by the appellate authorities have a relevance and
bearing upon the conclusions to be reached in the case necessarily one
authority will have to await the outcome of the other authority".
On the other
hand, to counter the stand of the Petitioners, the Respondent relied on the
judgment of the Hon'ble Supreme Court in the case of Sasi Enterprises v.
Assistant Commissioner of Income Tax, MANU/SC/0072/2014: (2014) 5 SCC 139,
wherein the Hon'ble Court had held as under:
"We also find
no basis in the contention of the learned senior counsel for the appellant that
pendency of the appellate proceedings is a relevant factor for not initiating
prosecution proceedings under Section 276CC of the Act. Section 276CC
contemplates that an offence is committed on the non-filing of the return and
it is totally unrelated to the pendency of assessment proceedings except for
second part of the offence for determination of the sentence of the offence,
the department may resort to best judgment assessment or otherwise to past
years to determine the extent of the breach...... If it was the intention of
the legislature to hold up the prosecution proceedings till the assessment
proceedings are completed by way of appeal or otherwise the same would have been
provided in Section 276CC itself. Therefore, the contention of the learned
senior counsel for the appellant that no prosecution could be initiated till
the culmination of assessment proceedings, especially in a case where the
appellant had not filed the return as per Section 139(1) of the Act or
following the notices issued under Section 142 or Section 148 does not
arise".
In the instant
case, the Hon'ble Judge of the Kerala High Court differentiated the case in
hand with the judgment of Sasi Enterprises v. Assistant Commissioner of
Income Tax, relied upon by the Respondent, on the ground that the said judgment
was passed in the context of Section 276 CC of the Act and not in the context
of Section 276 C of the Act.
The Hon'ble
Court found merit in the contention of the Petitioners and therefore, allowed
the petition filed by them and directed the Trial Court to keep the criminal
trial in abeyance till the disposal of the appeal filed before Commissioner of
Income Tax.
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