Madras High Court
K.M.Mammen vs The Deputy Commissioner Of Income Tax on 28 February, 2019
Author: B.Pugalendhi
Bench: B.Pugalendhi
1
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 03.12.2018
PRONOUNCED ON : 28.02.2019
CORAM:
THE HONOURABLE MR.JUSTICE B.PUGALENDHI
Crl.O.P.No.9065 of 2011
and
M.P.No.1 of 2011 & 1 of 2014
K.M.Mammen ... Petitioner
Vs
The Deputy Commissioner of Income Tax,
Central Circle IV(1),
Chennai – 34. ... Respondent
PRAYER: Petition filed under Section 482 of the Code of Criminal Procedure,
to call for the records in E.O.C.C.No.121 of 2011 pending on the file of the
Additional Chief Metropolitan Magistrate (Economic Offences – 1), Egmore,
Chennai – 8 and quash the same.
For Petitioner : Mr.V.T.Gopalan,
Senior Counsel
for Mr.Abudukumar Rajaratnam
For Respondent : Mr.N.Baaskaran
*****
ORDER
This application is filed by the petitioner to quash the proceedings pending against him in E.O.C.C.No.121 of 2011 on the file of the learned Additional Chief Metropolitan Magistrate (Economic Offences – 1), Egmore, http://www.judis.nic.in 2 Chennai. The said complaint is filed by the Deputy Commissioner of Income Tax, Central Circle IV(1), Chennai, as against the petitioner for the offence punishable under Sections 276(1) & 277 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for the Assessment Year 2002-03, ie., for the accounting year ending on 31.03.2002.
2. The case of the complainant, in brief, is as follows:
2.1. The accused is an individual, drawing salary from M/s.MRF Limited and has filed his return of income on 29.07.2002, showing his total income as Rs.45,48,850/-. The Central Board of Direct Taxes (CBDT), New Delhi, has received certain information that the accused had created a Trust, in the name of 'Webster Foundation' in Europe and maintaining an account with LGT Bank, Liechtenstein, a foreign State in Europe. The petitioner along with his father and brother, made a declaration of endowment in favour of M/s.Webster Foundation by endowing with a sum of Euro 1,23,000 (equivalent to Rs.52,20,784/-). From the documents, the Department found a sum of Swiss Franc 7,78,437.80 (equivalent to Rs.2,26,38,372/-) including accrued interest, was credited to this account. The documents referred were obtained by the Central Board of Direct Taxes, New Delhi from German Tax authorities under the Double Taxation Avoidance Agreement Scheme entered into with the Government of India.
http://www.judis.nic.in 3 2.2. Based on these informations, the respondent had verified the income return statement filed by the petitioner and found that the bank balance in the foreign bank account was not reflected either by way of income or deposits or interest from deposits and therefore, treating the assessment as an escaped assessment, assessment proceedings were reopened and a notice under Section 148 of the Act was issued to the assessee on 25.03.2009, within the limitation period. During the reassessment proceedings, the petitioner was examined on oath under Section 131 of the Act on 16.11.2009 and his statements were recorded. The petitioner denied that he created any such Trust and deposited any money in the said Trust. However, during the course of the examination, the petitioner came forward to pay the taxes on the basis of the information, without prejudice to his stand.
2.3. The Department concluded the reopened assessment by determining the assessed income as Rs.2,71,87,222/- and fixed the tax liability payable as Rs.1,28,15,546/-. The petitioner had also paid that amount, including interest on 27.01.2010. Since the petitioner had willfully and deliberately filed the return of income on 29.07.2002 without reflecting the investment in the form of bank balance in a foreign bank account, thereby, attempted to evade the tax, he is liable to be prosecuted under http://www.judis.nic.in 4 Section 276C(1) of the Act. Since the petitioner had stated false statement in verification under the Act and false return of income for the Assessment Year 2002-03, he was also prosecuted for the offence punishable under Section 277 of the Act.
2.4. The Commissioner of Income Tax, Central – I, Chennai has accorded sanction under Section 279(1) of the Act on 24.03.2011 for filing of a complaint and the complainant was authorised and directed to file the above complaint.
3. Mr.V.T.Gopalan, learned Senior Counsel for Mr.Abudukumar Rajaratnam, learned Counsel appearing for the petitioner had contended that as against the order of the Assessing Officer levying a penalty of 300%, an appeal was filed. The sum of Euro 1,23,000 endowed on 24.03.2000 cannot be the subject matter of assessment for the assessment year 2002-03. The outstanding sum of Swiss Franc 7,78,437.80 as on 31.12.2001 cannot be construed to be a deposit on 31.12.2001 and therefore, the assessment proceedings is barred by limitation as per Section 149(1)(b) of the Act.
4. It is also contended that in the appeal filed by the petitioner, the levy of 300% penalty imposed by the Assessing Officer was reduced to http://www.judis.nic.in 5 100%. In this regard, the learned Senior Counsel has referred to the provisions under Section 279(1A) of the Act that a person shall not be proceeded against for an offence under Section 276C or 277 in relation to the assessment for an assessment year in respect of which, the penalty imposed or imposable on him under clause (iii) of sub-section (1) of Section 271 has been reduced or waived by an order under Section 273A. In support of his contention, the learned Senior Counsel had also relied upon the judgment of the Hon'ble Supreme Court in Prem Dass v. Income Tax Officer, reported in MANU/SC/0083/1999, wherein, the Hon'ble Supreme Court has held as follows:
“10. We also find sufficient force in the contention of Mr.Salve that the legislative mandate in Section 279(1A) of the Income Tax Act has not been borne in mind by the High Court while interfering with an order of acquittal. Mr.Shukla, no doubt has indicated that the said provision will have no application as the penalty imposed has not been reduced or waived by an order under Section 273A. We do not agree with the aforesaid literal interpretation of the provisions of Section 279(1A) of the Act, when we find that the Commissioner of Income Tax (Appeal) has reduced the penalty. ...”
5. Learned Senior Counsel further contended that the complaint was filed on the strength of certain documents received by the Central Board http://www.judis.nic.in 6 of Direct Taxes, New Delhi and these documents are xerox copies, which cannot be relied upon by the prosecution under Section 78(6) of the Indian Evidence Act, 1872. Any foreign documents, as such relied by the prosecution have to be produced as original for evidence or by a copy certified by the legal keeper of the original with a certificate under Diplomatic or Consular Officers (Oaths and Fees) Act, 1948, along with the proof of character of the foreign document, according to the law of that foreign country. Therefore, the document without due certificate looses its legal existence and the complaint filed based on such document cannot be allowed to continue.
6. It is also contended that as against the notice issued by the Department under Section 148 of the Income Tax Act for the escaped or concealed income, an appeal is lying before this Court in T.C.A.No.252 of 2013 (Tax Case Appeal) and a Division Bench of this Court has admitted the tax case appeal on the substantial questions of law raised on limitation and placed his relevance that pending tax case appeal before this Court, the criminal prosecution on the same relevant issues / facts is liable to be quashed, for which, the petitioner had also relied upon the following judgments of the Hon'ble Supreme Court:
i) in Radheshyam Kajriwal v. State of West Bengal reported in (2011) 3 SCC 581;
http://www.judis.nic.in 7
ii) In Commissioner of Income Tax, Mumbai v. Bhupen Champaklal Dal, reported in (2001) 3 SCC 459; and
iii) In G.L.Didwania v. Income Tax Officer, reported in (1995) Supp (2) SCC 724.
7. Per contra, Mr.N.Baaskaran, learned Counsel appearing for the respondent Department submitted that on the directions of the Hon'ble Supreme Court, a Special Investigation Team (SIT), headed by retired Supreme Court Judges were appointed and on investigation, it was found the petitioner has deposited a sum of Euro 1,23,000/- (equivalent to Rs.52,00,000/-) in LGT Bank account, Liechtenstein, a foreign State in Europe and another investment of Swiss Franc 7,78,487/- (equivalent to Rs.2,26,38,372/-). However, the petitioner has filed his income tax returns on 27.07.2002, suppressing this amount and therefore, the assessment of the petitioner for the assessment year 2002-03 was reopened and a notice under Section 148 of the Income Tax Act was issued on 25.03.2009. The assessee had also participated for the enquiry and submitted his reply. The sworn statement of the petitioner was also recorded. In conclusion of the enquiry, an assessment order was passed on 29.12.2009 and the petitioner paid the taxes. Thereafter, a show cause notice was issued under Sections 276C and 277 of the Act and the petitioner has given his reply. Subsequent thereto, a http://www.judis.nic.in 8 sanction order was passed by the Commissioner of Income Tax on 24.03.2011 and the complaint was filed on 28.03.2011 and the case is taken on file in E.O.C.C.No.121 of 2011 and PWs 1 to 3 have been examined.
8. The learned Counsel for the respondent further contended that the question of limitation cannot be raised as the tax appeal and criminal case are independent to each other and there is no direct implication in conducting the criminal case. For launching a criminal case for economic offences, there is no limitation as per the amendment Act, ie., Economic Offences (inapplicability of Limitation) Act, 1974 (Act No.12 of 1974). It is further stated that the question of limitation for reopening the assessment order was already rejected by the appellate authorities.
9. With regard to Section 279 of the Act, the Counsel for the respondent submitted that Section 279 is applicable only in case where the waiver of reduction under Section 273(A) by the Commissioner of the Assessment Circle, ie., the Assessing Officer before giving such reduction or waiver get approval / permission from Commissioner for reduction or waiver as mentioned in 273(A)(1)(b), ie., if the assessee co-operated in the enquiry relating to the assessment of his income and has either paid or made satisfactory arrangements for the payment of any tax or interest payable in http://www.judis.nic.in 9 consequences of an order passed under income tax act in respect of the relevant assessment year. The explanation is very clear that the person should have made full and true disclosure of his income or of the particular relating that too in any case were the excess of the income assessed over the income returned is of such nature as not to attract the provisions. In this case, the assessee has not co-operated with the assessing officer.
10. He further submitted that the Commissioner of the Assessing Circle has not given any reduction or waiver for the penalty portion, however, the Commissioner (Appeals) has given a reduction of penalty from 300% to 100%, which would not affect the prosecution under Section 276C(1) of the Act and in support of his contention, the learned Counsel relied upon the following decisions:
● N.Athomoolam v. Income Tax Officer, reported in (2010) 327 ITR 603 MADRAS;
● P.Jayappan v. S.K.Perumal, First Income Tax Officer, reported in 1984 (149) ITR 696;
● Standard Chatered bank v. Directorate of Enforcement, reported in 2006 (2) Crimes 18; 2006 (2) SCC (Crl) 221; and ● Assistant Commissioner of Income Tax v. N.K.Mohamed Ali, reported http://www.judis.nic.in in [2010] 325 ITR 661 (Mad). 10
11. Heard the learned Counsel appearing on either side and perused the documents placed on record.
12. Sum and substance, the learned Senior Counsel for the petitioner has raised the following grounds for quashing the complaint:
i) Questioning the limitation in issuing the notice, which is pending adjudication before the Division Bench of this Court in T.C.A.No.252 of 2013;
ii) Unauthenticated documents relied upon by the prosecution, which have no legal value; and
iii) Since the levy of penalty has been reduced by the Commissioner of Income Tax (Appeals), criminal proceedings against the petitioner is liable to be dropped as per Section 279(1A) of the Income Tax Act, 1961.
13. Tax Case Appeal and Criminal Case are independent to each other. T.C.A.No.252 of 2013 is with regard to the notice dated 25.03.2009 issued under Section 148 of the Act. The legality of the said notice has been seized of by the Hon'ble Division Bench of this Court, but, the Criminal prosecution over the alleged economic offence has to be tried before the appropriate Court of law, as there is no direct implication in conducting the criminal case. Moreover, as per the Economic Offences (Inapplicability of Limitation) Act, 1974 (Act No.12 of 1974), there is no limitation for launching http://www.judis.nic.in 11 such type of cases and therefore, the first ground raised by the petitioner lacks merits.
14. The second ground raised by the petitioner is that the documents relied upon by the prosecution are only xerox copies, which are unauthenticated and will not be used before a Court of law, as per Section 78(6) of the Indian Evidence Act, 1872. For better understanding, Section 78(6) of the Indian Evidence Act, is extracted thus:
“78. Proof of other official documents:
..
(6) Public document of any other class in a foreign country, - by the original, or by a copy certified by the legal keeper thereof, with a certificate under the seal of a Notary public, or of an Indian Consul or diplomatic agent, that the copy is duly certified by the officer having the legal custody of the original, and upon proof of the character of the document according to the law of the foreign country.” Here in the case on hand, the documents relied upon by the respondent Department were obtained from German Tax Authorities under the Double Taxation Avoidance Agreement Scheme entered into with the Government of India. Its authenticity has been evidenced by the initials appended to the left and right hand side at the bottom of the said documents by the remitter of the information and the recipient of the information. Therefore, this Court is http://www.judis.nic.in 12 not in a position to accede the contention of the petitioner. Moreover, it is not for this Court to decide the authenticity of the documents relied upon by the prosecution. It is for the trial Court to decide the same and if the trial Court feels that the documents relied upon by the prosecution lacks evidenciary value, then it is open to the trial Court to reject the same.
Hence, the second ground raised by the petitioner deserves to be rejected.
15. With regard to the third ground raised by the petitioner, this Court is of the view that Section 279(1A) of the Act will not come to his rescue. The reason is that Section 279(1A) of the Act will come into play only when the penalty imposable / imposed is reduced / waived by an order under Section 273A of the Act. Here, in the case on hand, the Commissioner (Appeals), by his order dated 25.03.2014, passed under Section 250(6) of the Act, has reduced the penalty from 300% to 100%. For better appreciation, Section 279(1A) of the Act is extracted thus:
“279(1A) – A person shall not be proceeded against for an offence under Section 276C of Section 277 in relation to the assessment for an assessment year in respect of which the penalty imposed or imposable on him under Section 270A or clause (iii) of sub- section (1) of Section 271 has been reduced or waived by an order under Section 273A.” http://www.judis.nic.in 13
16. However, the learned Senior Counsel for the petitioner, in order to canvass this point, has relied upon the decision of the Hon'ble Supreme Court in Prem Dass v. Income Tax Officer, reported in MANU/SC/0083/1999, (referred to supra). In the said decision, the Hon'ble Supreme Court has held as follows:
“10. ...We do not agree with the aforesaid literal interpretation of the provisions of Section 279(1A) of the Act, when we find that the Commissioner of Income Tax (Appeal) has reduced the penalty. ...” For this purpose, this Court is inclined to extract Section 273A of the Act, which reads thus:
“273A. Power to reduce or waive penalty, etc., in certain cases.
(1) Notwithstanding anything contained in this Act, the Principal Commissioner or Commissioner may, in his discretion, whether on his own motion or otherwise:-
(i) ..omitted..
(ii) reduce or waive the amount of penalty imposed or imposable on a person under section 270A or clause (iii) of sub-section (1) of section 271; or
(iii) ...omitted...
if he is satisfied that such person -
(a) ...omitted...
(b) in the case referred to in clause (ii), has, prior to the detection by the Assessing Officer, of the concealment of particulars http://www.judis.nic.in 14 of income or of the inaccuracy of particulars furnished in respect of such income, voluntarily and in good faith, made full and true disclosure of such particulars,
(c) ...omitted...
and also has, in the case referred to in clause (b), co-operated in any enquiry relating to the assessment of his income and has either paid or made satisfactory arrangements for the payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year.
.....
(5) Every order made under this section shall be final and shall not be called into question by any court or any other authority.”
17. There are two things for this Court to analyse here. One is that the penalty can be reduced / waived under Section 273A of the Act, provided the assessee should voluntarily and in good faith, made full and true disclosure of particulars and also has co-operated in any enquiry relating to the assessment of his income and has either paid or made satisfactory arrangements for the payment. Here in the case on hand, admittedly, the petitioner has paid the tax amount, without protest and in the meantime, without prejudice to his stand. In other words, the petitioner can still fight for his case. Moreover, the provision is very clear that the assessee should voluntarily give such disclosure. In the order passed by the Commissioner http://www.judis.nic.in 15 (Appeals), dated 25.03.2014, itself, while reducing the penalty from 300% to 100%, the Commissioner has observed that the admission of the petitioner is not voluntary, but a compelled one. For better appreciation, the same is extracted thus:
“7.7. In the instant case, the entire addition, on account of deposits into LGT bank account, was made based on the information received from the Government of Germany. When the contents of the said information were put to the appellant for his explanation, the appellant first denied his involvement in the said deposits and also denied the signature contained in the information. At the same time, the appellant agreed for the addition claiming that he is accepting the transactions with a view to avoid unnecessary litigations and to buy peace of mind. Such admissions or surrender of claims etc will not automatically lead to concealment of income or furnishing of inaccurate particulars for the purpose of levying penalty u/s.271(1)(c) of the Act, under normal circumstances. But in the present case, the information received is from a sovereign country (Government of Germany), though not authenticated by the LGT bank or the Country in which the bank is located. Further, the signature contained in the information tallies with that of the appellant. This fact coupled with the appellant's acceptance, for whatever may be the reasons, shows that the amounts deposited in the bank account belong to the appellant. Thus, the appellant's admission to offer the amount to tax cannot be considered as 'for buying peace of mind from the department' only. The appellant by admitting / accepting the proposed additions prevented the AO from investigating the matter http://www.judis.nic.in 16 further. Hence, the appellant's admission / acceptance of additions will amount to concealment of income.
7.8. Further, the appellant's admissions are not voluntary. It was only when the Government of India received the information from the Government of Germany regarding the appellant's bank account and when the AO re-opened the assessment and confronted with the details, the appellant came forward to accept and offer amount for tax. This is clearly not a voluntary admission by the appellant. The admission by the appellant is rather a compelled one. Thus, the appellant's claims of voluntary admission and offer of the amount to tax should heavily be discounted.”
18. Though the Commissioner (Appeals) has observed such, he has reduced the penalty from 300% to 100%, for the reason that when these things were brought to the notice of the petitioner, he accepted and agreed for the addition, without protest. On this score alone, the Commissioner (Appeals) has reduced the penalty. But, that does not brush aside the fact that the petitioner has not satisfied the ingredients of Section 273A of the Act, ie., made disclosures voluntarily and in good faith.
19. The next thing for this Court to analyse here is that Clause 5 of Section 273A of the Act clearly says that every order made under this Section shall be final and shall not be called into question by any court or any other authority. But, the order, which the petitioner refers here for his rescue, ie., http://www.judis.nic.in 17 the order dated 25.03.2014 passed by the Commissioner (Appeals) under Section 250(6) of the Act, is an appealable order and the same has already been put under challenge by the Department before the Income Tax Appellate Tribunal, where the order of the Commissioner (Appeals) was upheld. Therefore, it is clear that the order passed by the Commissioner (Appeals) reducing the penalty is not an order under Section 273A of the Act and therefore, this Court, with due respect to the decision of the Hon'ble Supreme Court, is inclined to infer that Section 279(1A) of the Act will not come to the rescue of the petitioner.
20. Since all the grounds raised by the petitioner for quashing the complaint lack merits, this Criminal Original Petition is liable to be dismissed and the same is accordingly, dismissed. Considering the age of the proceedings, the learned Additional Chief Metropolitan Magistrate (Economic Offences – 1), Egmore, is directed to expedite the trial and conclude the same, as expeditiously as possible. Consequently, connected miscellaneous petitions are closed.
Internet : Yes 28.02.2019
Index : Yes / No
gk
http://www.judis.nic.in
18
To
1.The Additional Chief Metropolitan Magistrate (Economic Offences – 1), Egmore, Chennai – 8.
2.The Deputy Commissioner of Income Tax, Central Circle IV(1), Chennai – 34.
http://www.judis.nic.in 19 B.PUGALENDHI, J., gk Pre-Delivery Order made in Crl.O.P.No.9065 of 2011 and M.P.No.1 of 2011 & 1 of 2014 28.02.2019 http://www.judis.nic.in