Bangalore District Court
The Income Tax Department vs M/S. Jaysons Infrastructure India (P) ... on 26 August, 2022
BEFORE THE SPECIAL COURT FOR ECONOMIC
OFFENCES: AT BENGALURU
Dated this the 26th day of August 2022
:Present:
Sri. ANAND S. KARIYAMMANAVAR, B.A., LL.B., (Hon')
Presiding Officer, Special Court
For Economic Offences, Bengaluru.
C.C.No.124/2019
Complainant: The Income Tax Department
By its Income Tax Officer,
Ward-4(1)(1), Room No.213,
2nd Floor, BMTC Building,
80 Feet Road, 6th Block,
Koramangala,
Bengaluru-560 095.
(Reptd. By Spl. P.P)
Vs.
Accused : 1. M/s. Jaysons Infrastructure India (P) Ltd.,
No.2, Champaka Mansion,
National High School Road,
V.V. Puram,
Bengaluru - 560 004.
Reptd. by its Managing Director.
2. Mr. Vijayaramu (Discharged)
Managing Director,
M/s. Jaysons Infrastructure India (P) Ltd.,
3. Mr. Bimba Prakash Jogaiah (Discharged)
Director,
M/s. Jaysons Infrastructure India (P) Ltd.,
No.2, Champaka Mansion,
National High School Road,
V.V. Puram,
Bengaluru - 560 004.
(Reptd. By Sri. S.A., Advocate)
2 C.C.No.124/2019
:JUDGMENT:
This is a complaint made by the complainant against the accused No.1 to 3 for the offence punishable under section 276C(1) r/w Section 278B of the Income Tax Act, 1961.
2. The brief facts of the complainant's case is that:
Accused No.1 being the company incorporated under Companies Act, which is engaged in the business of infrastructure, development and construction. Accused No.2 being the Managing Director and accused No.3 is the Director of accused No.1 company who are actively involved in the day to day business of accused No.1 company. Further, it is the case of the complainant that for the assessment year 2010-11 company filed its returns of income on 15.10.2010 declaring gross total income of Rs.1,49,36,776/- and had claimed deduction under Section 18IA of Income Tax Act resulting in nil income. Further it is the case of the complainant that during pendency of the assessment proceedings, the complainant conducted a survey in the premises of accused No.1 company U/s.133A of Income Tax Act on 07.12.2012. During the course of survey, it was found that the accused was engaged in executing contract works in BWSSB for constructing projects and was not eligible for deduction claimed U/s.80IA of Income Tax Act. Further, it is the case of the complainant that the statement of accused No.2 was recorded U/s.131 of IT Act after the survey, in which the accused No.2 admitted that it had not undertaken any other infrastructure projects during the assessment year 2010-11 3 C.C.No.124/2019 except BWSSB work and the said work carried out in the name of M/s. Jayaram Engineering and not by the accused company. Further, it is the case of the complainant that the accused company had not carried out any work, but has claimed deduction U/s.80IA of the Income Tax Act. In spite of that they filed nil returns for the said assessment year with an intention to evade the tax. The Assessing Officer also conducted detailed enquiry and passed order by disallowing the claim of deduction U/s.80IA of IT Act and thereby levied penalty of Rs.50,77,009/- for furnishing inaccurate particulars of income. The accused has challenged the said penalty order before the appellate authorities. However, the Hon'ble ITAT also confirmed the penalty order. Further, it is the case of the complainant that on 19.02.2015 the assessment order was revised by the Commissioner of Income Tax and thereby raised demand of Rs.7,28,19,135/-, after revision the Assessing Officer passed fresh penalty order and levied penalty of Rs.4,22,77,308/-. Further, it is the case of the complainant that the accused in order to evade the tax made false claim of deduction U/s.80IA of IT Act. Hence, the present complaint came to be filed.
3. Upon receiving the complaint, the sworn statement was dispensed with as the complainant is a public servant and this court took cognizance for the offence punishable U/s.276C(1) r/w Section 278B of Income Tax Act, 1961. Thereafter, the summons was issued to the accused No.1 to 3 and they were enlarged on bail. The charge was framed and read over to accused and explained to them in the language known to them. They pleaded not guilty and claimed to be 4 C.C.No.124/2019 tried. As such, the complainant was called upon to lead evidence.
4. During pendency of the trial, the accused No.2 & 3 filed application U/s.245 of Cr.P.C. Accordingly, the said application came to be allowed and accused No.2 & 3 got discharged for the offence punishable U/s.276C(1) of IT Act and accused No.2 ordered to represent the accused No.1.
5. In order to bring home the guilt of the accused, the complainant has examined as PW-1 and one witness as PW-2 and got marked six documents as Ex.P-1 to Ex.P-15.
6. After the completion of evidence on behalf of complainant, the incriminating evidence available against accused persons was read over as per the provisions of Section 313 of Cr.P.C. Though accused sought to lead defence evidence, but have not made any efforts to lead defence evidence.
7. Heard the arguments advanced by both the Spl. PP and leaned counsel for accused. Upon hearing their arguments and on going through the materials on record, the following points arise for determination of this court:
1. Whether the complainant proves beyond all reasonable doubt that the accused No.1 willfully made attempts to evade tax thereby committed offence punishable U/s.276C(1) r/w section 278B of Income Tax Act, 1961?
2. What order?5 C.C.No.124/2019
8. My findings on the above said points are as under:
Point No.1: In the Negative
Point No.2: As per final order
for the following:
REASONS
9. Point No.1: The complainant company in order to prove its case examined himself as PW-1 and one witness as PW-2 and got marked Ex.P-1 to Ex.P-15 and reiterated the averments made in the complaint.
10. PW-1 in his chief-examination, deposed that he is working as Income Tax Officer, Ward-4(1)(1). On 17.06.2018 they got sanction from the Prl. Commissioner of Income Tax to prosecute against the accused. Accordingly, the show- cause notice was also issued to the accused. However, they had not replied to the said notice. Further he deposed that after perusal of the materials, the Prl. Commissioner of Income Tax accorded sanction on 23.05.2018 and they were some mistakes in sanction order, accordingly, corrigendum was issued on 26.11.2018. After receiving the sanction order, he filed this complaint against the accused. Further, he deposed that accused deliberately and willfully made attempts to evade the tax by making false claim of deduction U/s.80IA of IT Act and deposed that accused No.2 & 3 being the Managing Director and Director are also responsible as they are in-charge of day to day business of accused No.1 and got marked original sanction as Ex.P-1, the corrigendum as Ex.P-2, show-cause notices as Ex.P-3 to Ex.P-5.
6 C.C.No.124/201911. The complainant examined CW-2 as PW-2, he being Income Tax Officer, Ward-11(2), Bengaluru deposed that accused No.1 being company for the assessment year 2010- 11 filed its returns on 15.10.2010 declaring the gross total income of Rs.1,49,36,776/-, they claimed the deduction U/s.80IA of IT Act resulting nil income. Further he deposed that during pendency of the assessment, the survey was conducted in the premises of accused No.1 company. At that time, they found accused No.1 engaged in executing contract works for BWSSB for constructing projects. Hence, not eligible for deduction claim U/s.80IA of IT Act. Further he deposed that the accused No.2 in his statement recorded U/s.131 of IT act admitted that the accused No.1 had not undertaken any other infrastructure projects from the assessment year 2010-11 except BWSSB work and further he admitted in his statement that all works were carried in the name of M/s. Jayaram Engineers and not by the accused No.1 company. Further, he deposed that the accused No.1 company without undertaking the infrastructure work, but it has made false claim of deduction U/s.80IA of IT Act with an intention to evade tax and accused filed false returns of income in order to evade tax.
12. Further PW-2 deposed that he has passed assessment order U/s.143(3) of IT Act and disallowed the claim of deduction and initiated penalty proceedings thereby levied penalty of Rs.50,77,009/- for furnishing inaccurate particulars of income. Further, he deposed that the accused have challenged the said penalty order. However, the same came to be dismissed and the Commissioner of Income Tax 7 C.C.No.124/2019 revised the assessment order passed by PW-2 and raised demand of Rs.7,28,19,135/-. After the revision, the Assessing Officer passed fresh penalty order and imposed penalty of Rs.4,22,77,308/- and accused has not challenged the same. Further, he deposed that the accused has made attempts to evade the tax by making false claim of deduction by taking advantage of U/s.80IA of IT Act thereby got marked Ex.P-6 i.e., IT returns of accused, final survey report marked as Ex.P-7, statements of accused marked as Ex.P-8 & Ex.P-9, copy of assessment order dated 30.03.2013 marked as Ex.P-10, penalty order marked as Ex.P-11, order passed by Commissioner (Appeal) dated 30.01.2015 marked as Ex.P-12, order passed by Hon'ble ITAT marked as Ex.P-13, order passed by Commissioner of Income Tax marked as Ex.P-14 and penalty order dated 30.09.2016 marked as Ex.P-15.
13. In the present case the accused No.2 & 3 have been discharged as there was no sanction order to prosecute against the accused No.2 & 3. Thereafter, the proceeding is continued against accused No.1 company and the counsel for accused No1 had taken following defences.
1. The sanction passed by the Prl. Commissioner of Income Tax, Bengaluru-4 is without the jurisdiction. The complaint filed by the complainant is also without jurisdiction and the alleged facts not attracts Section 276(1) of IT Act.
2. The survey conducted by the complainant authority is not valid.
3. The proposal for prosecution for send for passing sanction passed on the cancelled assessment order dated 30.03.2013.
8 C.C.No.124/2019Defence No.1 The sanction passed by the Prl. Commissioner of Income Tax, Bengaluru-4 is without the jurisdiction. The complaint filed by the complainant is also without jurisdiction and the alleged facts not attracts Section 276(1) of IT Act: In the present case, the counsel for the accused vehemently argued that the sanction order passed by the Prl. Commissioner, Bengaluru is without jurisdiction as in the operative portion of the sanction order, the Prl. Commissioner stated that the accused No.1 company willfully evaded the PAYMENT of tax and penalty and it is fit case for launching prosecution U/s.276(1) of IT Act. However, it is the case of the accused that as per Section 276(1) if any person willfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable......... Therefore, it is the case of the accused that the complainant filed this complaint U/s.276(1) of IT Act, but the sanction granted in respect of the Section 276(2) of IT Act. Therefore, the counsel for the accused argued that the sanction order passed by the Prl. Commissioner is not attracts the ingredients of Section 276(1) and same is barred by jurisdiction.
14. No doubt, in para No.7 of the sanction order it has mentioned as "accused No.1 company willfully evaded PAYMENT of tax. However, on entire reading of the sanction order, it clearly makes that the sanction is accorded only to Section 276(1) of IT Act and the said section is also re- produced in the sanction order. The word PAYMENT mentioned in para No.7 of the sanction order it is just a typographical error and as it is settled law that in order to understand the meaning of a document the whole document 9 C.C.No.124/2019 should be read. Therefore, the defence taken by the accused No.1 that sanction order is without jurisdiction is not proper. Further, the counsel for the accused argued that the complaint made by the complainant is also barred by jurisdiction as the accused files its returns before Income Tax Officer, Ward-11(2), Bengaluru, but this complaint is made by Income Tax Officer, Ward-4(1)(1), Bengaluru. Therefore, the complainant is not having jurisdiction to file this complaint.
15. On perusal of deposition of PW-2, who specifically deposed that Ward-11(2), Bengaluru was changed into Ward-4(1)(1) in the month of November 2014 and this complaint is in respect of the year 2010-11. Therefore, as on 2010-11, the accused has filed IT returns before Income Tax officer, Ward-11(2), Bengaluru and this complaint is filed on 06.03.2019 and as deposed by PW-2 in the year 2014 this Ward-11(2) has been changed as Ward-4(1)(1). Therefore, the defence taken by the learned counsel for accused No.1 at this point also does not holds good.
Defence No.2 The survey conducted by the complainant authority is not valid: In the present case, the accused has taken a contention that the survey conducted U/s.133(A) is not valid as the complainant has not produced authorization copy issued by complainant authority to conduct preliminary and final survey. At the time of arguments, the counsel for the accused relied upon Ex.P-7 which is a final survey report and submitted that the complainant have not produced any documents to establish that they have taken proper authorization to prove that the survey is a valid survey.
10 C.C.No.124/2019However, on perusal of Ex.P-7 it reveals that the date of survey is dated 07.12.2012 and PW-2 in his cross- examination specifically deposed that the prior approval was taken to conduct survey. No doubt, the said permission has not been produced, but mere non-production of the said authorization will not vitiate or invalidate the survey conducted on 07.12.2012. Therefore, the defence taken by accused does not hold good.
Defence No.3 The proposal for prosecution for send for passing sanction passed on the cancelled assessment order dated 30.03.2013: The accused in the present case specifically contended that the sanction order passed U/s.279(1) of IT Act is based on the cancelled assessment order dated 30.03.2013 and further contended that the even the penalty order also set aside by the Hon'ble High Court of Karnataka. Therefore, the present case is not maintainable in the eye of law. In order to substantiate the same, the counsel for the accused has relied upon Ex.P-14 which is order passed U/s.263 of IT Act by the Prl. Commissioner of Income Tax in which at page No.5 the Prl. Commissioner ordered to cancel the assessment order dated 30.03.2013. Further, he relied upon Ex.P-6 which is proposal sent for order of sanction for prosecution, in which, column No.4 does not contain any date.
16. Further, the counsel for the accused has relied on the order of Hon'ble High Court of Karnataka in ITA No.353/2013, in which the accused herein has preferred appeal against the penalty order passed by Assessing Officer for the year 2010-11 which was confirmed by the Income Tax 11 C.C.No.124/2019 Officer (Appeals) and Hon'ble ITAT, Bench-B, Bengaluru in the said appeal the Hon'ble High Court of Karnataka by allowing the appeal held that the penalty order passed by Assessing Officer for the year 2010-11 and consequent orders passed by the Commissioner of Income Tax and Hon'ble ITAT were set aside. Further, at time of arguments, learned counsel for accused relied on the decision reported in (2004)135 TAXMAN 461 SC in which Hon'ble Supreme Court held that:
"Section 271(1)(c), read with section 276C, of the Income Tax Act, 1961 - Penalty - for concealment of income - Assessment years 1983-84 to 1986-87
- Whether where an order of assessment or reassessment on basis of which penalty has been levied on assessee has itself been finally set aside or cancelled by Tribunal or otherwise, penalty cannot stand by itself and same is liable to be cancelled - Held, yes - Whether levy of penalties under section 271(1)(c) and prosecution under section 276C are simultaneous and, therefore, once penalties are cancelled on ground that there is no concealment, quashing of prosecution under section 276C is automatic - Held, yes"
17. He further relied upon decision reported in (1973) 88 ITR 323 in which Hon'ble Supreme Court held that:
"Section 263 of the Income Tax Act, 1961 (Corresponding to section 33B of the Indian Income Tax Act, 1922) - Revision - Of orders prejudicial to interest of revenue - Assessment year 1960-61 - Whether even where an income has not been earned and is not assessable, merely because assessee wants it be assessed in his or her hand in order to assist some one else who would have been assessed to a larger amount, an assessment so made can certainly be erroneous 12 C.C.No.124/2019 and prejudicial to interest or revenue - Held, yes - Whether, therefore, Commissioner has ample jurisdiction to cancel said assessment and may initiate proceedings for assessment against some other assessee who according to revenue authorities is liable for income thereof - Held, yes"
18. He further relied upon decision reported in (1990) 183 ITR 59 in which Hon'ble High Court of Karnataka held that:
"Section 271(1)(c) of the Income Tax Act, 1961, Penalty - For concealment of income - Assessing Officer made addition during reassessment proceedings - On reference, said reassessment was set aside by High Court - However, in view of addition made Assessing Officer initiated penalty proceedings - Whether in view of fact that said reassessment was set aside by High Court, there would exist no basis at all for imposition of penalty -Held, yes"
19. He further relied upon decision reported in (2007) 161 Taxman 111 (Delhi) in which Hon'ble High Court of Delhi held that:
"Section 276C, read with section 271(1)(c), of Income Tax Act, 1961 - Offences and prosecution
- Wilful attempt to evade tax, etc. - Assessment year 1992-93 - Whether merely because there is an addition of income, it would not automatically follow that assessee has concealed his income; penalty proceedings under section 271 can be initiated or prosecution under section 276C can be launched only when concealment of income by assessee is proved - Held, yes - Whether where Tribunal set aside penalty proceedings initiated against assessee, quashing of prosecution initiated against assessee under section 276C is automatic
- Held, yes"13 C.C.No.124/2019
20. On perusal of above said decisions of law, it clearly reveals that once the penalty imposed by the authority has been cancelled then, the prosecution initiated against the accused stands cancelled automatically. However, learned Spl. PP has relied upon the decision of Hon'ble Supreme Court reported in (2006) 4 SCC 278 (Standard Charted Bank and others V/s. Director of Enforcement) in which the Hon'ble Supreme Court held that:
"Two proceedings before authority and court are independent of each other and the findings on the adjudication is not conclusive on a prosecution under the act"
21. However, in the present case, Hon'ble High Court of Karnataka has set aside the order passed by Assessing Officer and appeal orders passed by the Income Tax (Appeal) and Hon'ble ITAT. Under the said circumstances the decisions relied on by the prosecution is not applicable to the present case on hand.
22. Further, learned Public Prosecutor relied upon the decision of Radheshyam Kejriwal V/s. State of West Bengal (2011)3 SCC 581. By relying all these decisions learned PP submitted that the ratio laid down by the Hon'ble Supreme Court in K.C. Builders Case should not be read as statue and when the adjudication proceedings and criminal proceedings are totally different. The findings against person who facing the prosecution in adjudication proceedings is not binding on the proceedings for criminal proceedings, if the order of adjudication authority is on technical ground. However, in the present case though the adjudication proceedings passed 14 C.C.No.124/2019 against the accused, but the Hon'ble High Court of Karnataka set aside the said adjudication orders. Under the said circumstances the judgment relied on by the learned PP is not applicable to the present case on hand. Therefore, in view of the orders of Hon'ble High Court of Karnataka, the present prosecution against the accused does not hold good. Hence, I answer Point No.1 in the Negative.
23. Point No.2: In view of my findings on Points No.1, I proceed to pass the following:
ORDER By exercising the power conferred under section 248(1) of Cr.P.C., the accused No.1 is acquitted for the offence punishable under section 276C(1) r/w section 278B of the Income Tax Act, 1961.
The bail bond of accused No.1 shall stand cancelled.
(Dictated to the Stenographer, same has been typed, corrected and then pronounced by me, in open court on this the 26th day of August 2022) (ANAND S. KARIYAMMANAVAR) Presiding Officer, Spl. Court for Economic Offences, Bengaluru.15 C.C.No.124/2019
ANNEXURE:
List of the witnesses examined on behalf of the Complainant:
PW-1 : Sri. A. Bhaskar
PW-2 : Sri. M. Rudrappa
List of the Documents exhibited on behalf of the Complainant:
Ex.P-1 : Original Sanction Order
Ex.P-2 : Corrigendum
Ex.P-3 to 5 : Copies of Show Cause notices
Ex.P-7 : Copy of IT Returns
Ex.P-8 & 9 : Copies of Statements of accused No.1
Ex.P-10 : Copy of Assessment Order
Ex.P-11 : Copy of Penalty Order
Ex.P-12 : Copy of Order passed by Commissioner (Appeal)
Ex.P-13 : Copy of Order passed by Hon'ble ITAT
Ex.P-14 : Copy of Order passed by Commissioner of IT
Ex.P-15 : Copy of Penalty Order
List of witnesses examined on behalf of the Accused:
- Nil -
List of Documents examined on behalf of the Accused:
- Nil -
Presiding Officer, Spl. Court for Economic Offences, Bengaluru.16 C.C.No.124/2019
26.08.2022 Complt.: IT Accd: SA For Judgment Judgment pronounced in the open court (vide separate order) ORDER By exercising the power conferred under section 248(1) of Cr.P.C., the accused No.1 is acquitted for the offence punishable under section 276C(1) r/w section 278B of the Income Tax Act, 1961.
The bail bond of accused No.1 shall stand cancelled.
PRESIDING OFFICER.