Gujarat High Court
H.T. Power Structure (P) Ltd. And Ors. vs R.P. Sharma And Anr. on 21 September, 2007
Author: M.R. Shah
Bench: M.R. Shah
JUDGMENT M.R. Shah, J.
1. As common question of law and facts arise in these petitions, they are being disposed of by this common judgment and order.
2. Special Criminal Appln. No. 1273 of 1992 is filed by the petitioners-original accused for an appropriate order quashing and setting aside the proceedings launched by the Income Tax department by way of Criminal Case No. 251 of 1992 pending in the court of learned Chief Judicial Magistrate, Ahmedabad and also to quash and set aside the order passed by the learned Addl. Chief Metropolitan Magistrate dated 27-3-1992 inissuing the summons upon the petitioners in the said criminal case.
Special Criminal Appln. No. 1274 of 1992 has been filed by the petitioners-original accused for an appropriate order quashing and setting aside the proceedings launched by the IT department by way of Criminal Case No. 252 of 1992 pending in the court of learned Chief Judicial Magistrate, Ahmedabad. It is also further prayed to quash and set aside the order ofAddl. Chief Metropolitan Magistrate dated 27-3-1992 in issuing thesummons upon the petitioners in the said criminal case.
3. Criminal Case No. 252 of 1992 has been filed by the Asstt. Commissioner, Circle 7(2), Ahmedabad against the petitioners-original accused for the offence punishable under Sections 177, 193, 196 and 199 of the IPC read with Sections 34, 109 and/or 114 of the IPC for the assessment year 1985-86.
Criminal Case No. 251 of 1992 is also filed by the very Asstt. Commissioner against the petitioners-accused persons for the offence under Sections 276C(1) and 277 of the Income Tax Act, 1961 read with Section 278B of the Income Tax Act for the assessment year 1985-86.
4. Few facts which are necessary for the determination of the aforesaid two criminal cases as emerge from the record in nutshell are that the petitioner No. 1 is a private limited company manufacturing transmission line towers and selling them to electricity board and railways. The petitioner Nos. 2 to 6 are the directors of the said company. On 28-6-1984, the petitioner company filed Income-tax return showing loss of Rs.2,19,169 inclusive therewith audited Profit and Loss a/c and balance sheet for assessment year 1984-85. The assessing officer (sic-assessment order) dated 30-3-1985 under Section 143(3) of the Income Tax Act, 1961 stating "depreciation of Rs. 2,19,169 and investment allowance of Rs. 91,198 is allowed to be carried forward." The above assessment order accepting the method of charging the retention money held back by the clients to be debited to Profit and Loss a/c was passed on 30-3-1985. On 1-5-1985, the petitioner company filed return for accounting year 1985-86 showing loss of Rs. 13,01,641 with a similar note like earlier orders in the notes forming part of accounts and debited to Profit and Loss a/c the amount of retention money. It is the case of the petitioners that by the time, the said assessment was taken up in the next year's account ending on 30-5-1985 for assessment year 1986-87, the petitioner company changed the method of accounting by deciding not to debit the retention money and therefore, during assessment proceedings of assessment year 1985-86, the petitioner company addressed a letter dated 22-2-1998 requesting the assessing officer to add back to income the claim of retention money. The assessing officer passed an assessment order dated 25-3-1988 for assessment year 1985-86 adding back Rs. 1,70,360 as prayed by the petitioner company yet computing the loss of Rs. 9,80,398 and also ordered initiation of penalty under Section 271(1)(c) of the Income Tax Act. The petitioner company went in appeal to Commissioner (Appeals) against this assessment order for assessment year 1985-86. The assessing officer passed an order giving effect to the order of Commissioner (Appeals) revising the total loss to Rs. 10,63,045. The present applications are against the prosecution of the company and its directors for concealing the above income by Rs. 1,70,360 for assessment year 1985-86. It appears that thereafter, the assessing officer issued show cause notice under Section 271(1)(c) of the Income Tax Act dated 6-9-1998. The petitioners replied to the same. However, the Income Tax Officer by order dated 30-3-1989 rejected the above and other contentions and imposed the penalty of Rs. 1 lac. The petitioner company went in appeal to Commissioner (Appeals) against the above penalty order. The Commissioner (Appeals) dismissed the appeal. The petitioner company preferred an appeal to the Tribunal being ITA No. 4778/1991. When the aforesaid appeal was pending, the Income Tax department instituted a Criminal Case No. 251 of 1992 for the offence under Sections 276C(1) and 277 read with Section 278B of the Income Tax Act and Criminal Case No. 252 of 1992 for the offence under Sections 177, 193, 196 and 199 read with Sections 34, 109 and/or 114 of the IPC. The learned Addl. Chief Metropolitan Magistrate passed an order issuing the summons upon the petitioners and non bailable warrants were also issued against the petitioner Nos. 2 to 7 being the directors of the petitioner company. Being aggrieved by the above two criminal proceedings and the orders passed by the learned Addl. Chief Metropolitan Magistrate issuing the summons upon the petitioners, the petitioners have preferred the present petitions under Articles 226 and 227 of the Constitution of India.
5. Shri J.P. Shah, learned senior advocate appearing on behalf of the respective petitioners has submitted that pending the present proceedings before this Court, the Tribunal has already allowed the appeal of the petitioner company by its judgment and order dated 10-2-1993 which is reported as H.T. Power Structures (P) Ltd. v. Asstt. CIT (1993) 47 TTJ (Ahd) 146 : (1993) 45 ITD 571 (Ahd). Under the circumstances and relying upon the two decisions of the Hon'ble Supreme Court in case of K.C. Builders and Anr. v. Asstt. CIT and in the case of Virtual Soft Systems Ltd. v. CIT , it is requested to allow the present applications and to quash and set aside the aforesaid criminal proceedings. The learned advocate appearing on behalf of the respective petitioners has submitted that as observed by the Hon'ble Supreme Court in the case of K.C. Builders and Anr. (supra), the finding of the Tribunal is conclusive and prosecution cannot be sustained since the penalty after having been cancelled, no offence survives under the Income Tax Act and thus, quashing of prosecution is automatic. It is further submitted by the Hon'ble Supreme Court (sic) that if the Tribunal has set aside the order of concealment and penalties there is no concealment in the eyes of law and, therefore, the prosecution could not be proceeded with by the complainant and further proceedings will be illegal and without jurisdiction. He has also relied upon the further observation of the Hon'ble Supreme Court in the aforesaid decision to the effect that as there was absence of dishonest and fraudulent intention, the question of committing the offence under Section 420 of the IPC does not arise. It is further submitted that as observed by the Hon'ble Supreme Court when the matter has been adjudicated and settled by the Tribunal need not be dragged into the Criminal Courts unless and until the act of appellants could have been described as culpable. Under the circumstance and in view of the subsequent development that the order of penalty has been quashed and set aside by the Tribunal, it is requested to allow the present applications and to quash and set aside the criminal complaints as well as the orders passed by the learned Metropolitan Magistrate in issuing the summons in the said complaint.
6. Shri B.B. Naik, learned advocate appearing on behalf of the department has not disputed that the order of penalty has been set aside by the Tribunal. He is also not in a position to distinguish the decision of the Hon'ble Supreme Court relied upon by the petitioners. He is also not in a position to dispute that once the order of penalty has been set asideby the Tribunal, the prosecution cannot be sustained.
7. Under the circumstances and considering the fact that the Tribunal has allowed the appeal of the petitioner company and has quashed and set aside the order of penalty, as held by the Hon'ble Supreme Court in the case of K.C. Builders and Anr. (supra), once the order of penalty has been cancelled by the Tribunal, the finding of the Tribunal is conclusive and the prosecution cannot be sustained is to be quashed.
8. For the reasons stated above and considering the judgments of the Hon'ble Supreme Court in the cases of K.C. Builders and Anr. (supra) and Virtual Soft Systems Ltd. (supra), the impugned complaint being Criminal Case Nos. 251 of 1992 and 252 of 1992 as well as the order passed by the learned Addl. Chief Metropolitan Magistrate dated 27-3-1992 in issuing the summons upon the petitioners in the said criminal cases are hereby quashed and set aside. Rule made absolute in each of the petition.