Calcutta High Court
Gopalji Shaw vs Income-Tax Officer, "D" Ward And Ors. on 4 March, 1988
Equivalent citations: [1988]173ITR554(CAL)
JUDGMENT Ajit Kumar Sengupta, J.
1. In this application, the petitioner, the karta of a Hindu undivided family, commonly known as Gopalji Shaw, has challenged the criminal proceeding initiated under Section 276CC(ii) of the Income-tax Act, 1961, against the said family by the Income-tax Officer, "D" Ward, District IV(I), Calcutta. The facts are briefly stated hereafter.
2. For the assessment year 1982-83 relevant to the financial year ending March 31, 1982, the said family filed its returns of income under the Income-tax Act, 1961, on February 15, 1985, showing a total income of Rs. 23,810 only. At the time of filing the return for the said year, the petitioner also paid the tax of Rs. 4,645, being the tax on self-assessment under Section 140A of the said Act, on February 13, 1985. On February 15, 1985, the said family also filed its returns of income under the said Act for the assessment years 1983-84 and 1984-85.
3. The first respondent, being the Income-tax Officer, "D" Ward, District IV(I), Calcutta, completed the assessment for the assessment year 1982-83 under Section 143(1) of the said Act on December 16, 1985. After adjustment of the tax of Rs. 4,645 paid on self-assessment for the assessment year 1982-83, the petitioner was required to pay a further sum of Rs. 3,036 which the petitioner paid on December 20, 1986. In the assessment, the Income-tax Officer charged interest under, Section 139(8) of the Act up to the date of filing the return. He also charged interest under sections 217 and 220(2) of the Act.
4. The first respondent also initiated penalty proceedings by a notice dated December 16, 1985, for the said assessment year 1982-83 under Section 271(1)(a) of the said Act for failure to furnish the return of income within the time allowed under Section 139(1) of the said Act. The first respondent, however, has not so far imposed any penalty under Section 271(1)(a) of the said Act and the said proceedings are still pending.
5. In February, 1987, the petitioner was served with a summons dated November 13, 1986, issued by the Chief Metropolitan Magistrate, Calcutta, under the provisions of the Criminal Procedure Code, wherein it was alleged, inter alia, that a criminal complaint being Case No. C/1462 of 1986 (State v. Gopalji Shaw) had been filed on November 11, 1986, in the court of the Metropolitan Magistrate, 11th Court, Calcutta, by the first respondent together with an authorisation dated nil issued by the second respondent, Commissioner of Income-tax, West Bengal-I, under Section 279(1) of the said Act requiring the petitioner to appear in person or by pleader before the said Metropolitan Magistrate on December 17, 1986.
6. In the said complaint dated November 11, 1986, the first respondent, inter alia, alleged that the petitioner failed and neglected to furnish the return of income by the due date, i.e., on or before July 31, 1982, for the assessment year 1982-83. It was further alleged in the said complaint that the petitioner furnished the said return of income on February 15, 1985, instead of July 31, 1982, and the petitioner was also required to pay advance tax which was not paid. It was further alleged that the petitioner was a habitual defaulter in filing the return of income and committed an offence punishable under Section 276CC(ii) of the said Act. In the circumstances, the first respondent, inter alia, prayed for cognizance of the offence alleged to have been committed under Section 276CC(ii) of the said Act and issue of summons for the trial of the petitioner.
7. In the said authorisation of the second respondent dated nil, under Section 279(1) of the said Act, it was, inter alia, alleged that after due consideration of all the materials and circumstances, the second respondent was satisfied that the petitioner had wilfully failed to furnish his return of income for the assessment year 1982-83 in due time and thereby committed an offence under Section 276CC(ii) of the said Act and, therefore, the second respondent authorised the first respondent to file the said complaint against the petitioner under Section 276CC(ii) of the said Act.
8. The contention of the petitioner is that the said complaint was not made bona fide but was motivated by irrelevant and extraneous considerations and wholly without jurisdiction and authority of law. According to the petitioner, the said complaint does not disclose any offence whatsoever under Section 276CC(ii) of the said Act,
9. Mr. Murarka, learned counsel for the petitioner, has contended that the delay in filing the returns was not due to any conscious disregard of its obligation under the Act and was not contumacious or deliberate. But the principal contention is that the Income-tax Officer, having charged interest under Section 139(8) of the Act for delay in filing the return while making the assessment for the assessment year 1982-83, cannot initiate criminal proceedings for the self-same delay.
10. Reliance has been placed on a decision of this court in the case of Dooars Transport v. CIT [1986] 162 ITR 383. In that case, for the assessment years 1964-65 and 1966-67 to 1969-70, the assessee was required to file returns under Section 139 of the Income-tax Act, 1961, as it stood at the relevant time by June 30 of the respective calendar years 1964, 1966, 1967, 1968 and 1969. For the assessment year 1966-67, the assessee filed an application on September 30, 1966, praying for extension of time by three months for Submission of the returns. No order was communicated to the assessee in respect of the said application. In respect of the assessment year 1968-69, time to file the return was extended till December 31, 1968, and for the assessment year 1969-70, such time was extended till June 30, 1970. The assessee could not file the returns in respect of the said three assessment years even during the extended time. The assessee filed returns for the said years, respectively, on June 30, 1965, December 27, 1967, December, 27, 1967, February 3, 1970, and February 11, 1971. In making the assessments, the Income-tax Officer charged interest under Sub-section (8) of Section 139 of the Act. The Income-tax Officer also imposed penalty under Section 271(1)(a). The interest charged under Section 139(8) was waived by the Commissioner. In the appeal before the Tribunal regarding penalty, the assessee contended that the Commissioner had waived the interest saying that the assessee had more than 100 branches in India and Nepal and that the assessee maintained separate accounts for each branch, that it took considerable time to finalise accounts and, therefore, there was reasonable cause for the delay in the Submission of the returns. The Tribunal did not accept the contentions of the assessee and held that the reasons for which interest had been waived by the Commissioner made no difference in the matter as considerations for waiving penalty were different from those for waiving interest and accordingly rejected the appeals.
11. The Division Bench of this court held as follows (p. 392):
"In the facts of this case, it appears to us that interest having been charged by the Income-tax Officer up to the date of the filing the return, the principles laid down by the Supreme Court in M. Chandra Sekhar [1985] 151 ITR 433 are clearly attracted. The fact that such interest was waived Subsequently by the Commissioner of Income-tax would make no difference in principle inasmuch as it is the primary act of the Income-tax Officer in accepting the return filed and charging interest up to the date of the filing which raises the presumption of extension of time. What was waived by the Commissioner was interest which was already charged by the Income-tax Officer. As held by the Gujarat High Court in Liberal Engineering Works' case [1986] 158 ITR 520, the Income-tax Officer, having levied interest up to the date of the filing of the return, was not justified in further invoking the penalty proceedings. We accept the contention of the assessee that even in the said three assessment years where time was in fact extended by the Income-tax Officer, the charging of interest up to the dates of the filing of the returns after the extended period gives rise to a presumption of further extension of time for filing of the returns,"
12. It is, therefore, contended that if for the delay in filing the return, no penalty can be imposed as interest was charged, no criminal prosecution can be initiated for such default either.
13. It is contended on behalf of the respondents by Mr. Mihir Bhattacharjee, learned advocate, that since the prosecution has been launched and the learned Metropolitan Magistrate has taken cognizance of the same, this court should not at this stage quash the proceeding. If the Department cannot prove the case, the petitioner will be acquitted. He has Submitted that the facts disclose an offence which should be tried by the learned Metropolitan Magistrate.
14. I am, however, unable to accept the contentions of Mr. Bhattacharjee.
15. A criminal prosecution for an offence under a special statute must not be initiated as a matter of course where the prosecution would involve intricate questions of interpretation of the Income-tax Act. The Department should not rush with the prosecution without any determination by the Income-tax Officer of the liability of the accused-assessee which is sought to be made the basis for prosecution. In this case, though penalty proceeding under Section 271(1)(a) was initiated against the petitioner for delay in filing the return, no order has been passed. In other words, the Income-tax Officer did not find any reason to penalise the petitioner for delay in filing the return. In Dooars Transport's case [1986] 162 ITR 383, this court held that once interest under Section 139(8) of the Act has been charged up to the date of filing of the return, it must be presumed that the time to file a return was in fact extended. A proceeding under the Income-tax Act for imposition of penalty is quasi-criminal in nature. If the quasi-criminal proceeding, that is to say, the proceeding for imposition of penalty cannot be sustained when the Income-tax Officer, while making the assessment, charges interest under Section 139(8) of the Act, on a parity of reasoning, no criminal prosecution either can be launched in such a case. In the criminal proceeding, wilful default in filing the return has to be established. By charging interest under Section 139(8), the Income-tax Officer has impliedly extended the time to file the return and the question, therefore, of wilful default in filing the return of income does not and cannot arise. As a matter of fact, although in this case, penalty proceeding was initiated, it was not proceeded with thereafter, which only goes to show that the Department did not consider it necessary to impose any penalty after realisation of interest under Section 139(8).
16. In a criminal case, it is not for the accused to establish his innocence. The onus is on the prosecution to bring home the guilt of the accused. Mens rea is an essential ingredient of a criminal offence. The fact of extension of time to file the return excludes the element of mens rea inasmuch as it must be presumed that the Income-tax Officer, being satisfied that there was ground for delay in filing the return, had extended the time.
17. The object of launching criminal prosecution for wilful default in complying with the provisions of the Income-tax Act is to prevent evasion of tax. But in each and every case, without looking into the gravity of offence and without considering the attending circumstances, no prosecution should be launched. Unless there is wilful default in filing the return, no prosecution can be launched. From the complaint that has been filed in this case, it appears that no case of wilful default has been made out.
18. It was, inter alia, stated in the said complaint-
(a) that the accused was under a statutory obligation under Section 139(1) of the Income-tax Act, 1961, to file the return of income for the assessment year 1982-83 for the financial/accounting period ending on March 31, 1982, on or before July 31, 1982. The accused failed and neglected to furnish the said return of income by the due date ;
(b) that the accused ultimately furnished the said return of income on February 15, 1985, instead of July 31, 1982.
(c) that it appears from the records that the accused is a habitual defaulter in filing his return of income;
(d) that from the facts and circumstances stated above, it will appear that the accused has committed an offence punishable under Section 276CC(ii) of the Income-tax Act, 1961.
19. In my view, the complaint does not disclose any offence at all. When the Income-tax Officer levies interest up to the date of the filing of the return, it must be presumed that the Income-tax Officer had extended the time for filing the return after satisfying himself that it was a case for extension of time. The Income-tax Officer, being entrusted with judicial or quasi-judicial duties, must be presumed to discharge the duties as enjoined by the Act. Accordingly, the, complaint which has been filed by the Income-tax Officer does not disclose the correct state of affairs. The Income-tax Officer could not have said that there was wilful default on the part of the assessee to file the return within the time allowed. Nor was such averment made in the complaint. If that be the position, no prosecution can be launched for the delay in filing the return. If there be no liability of a person to pay any penalty in view of the payment of interest levied under Section 139(8) of the Act, no criminal prosecution either can be launched in such a case.
20. In my judgment, the allegations made in the complaint do not constitute any offence. There is evidence which manifestly and clearly is inconsistent with the accusation made in the complaint. In other words, the complaint does not disclose the essential ingredient of the offence which has been alleged against the accused. Having regard to the principles laid down by this court in Dooars Transport's case [1986] 162 ITR 383, following the decision of the Supreme Court in the case of M. Chandra-sekhar [1985] 151 ITR 433, there is a bar against the institution or continuance of the criminal proceeding in respect of the offence lodged.
21. On the facts and in the circumstances of this case, I am of the view that the initiation of the criminal proceeding under Section 276CC(ii) of the Act is without jurisdiction and must be quashed.
22. For the reasons aforesaid, this application is allowed. Criminal Case No. C/1462 of 1986 (State v. Gopalji Shaw) pending before the learned Metropolitan Magistrate, 11th Court, will stand quashed. The respondents are directed not to proceed any further with the said criminal case.
23. There will be no order as to costs.