Patna High Court
Patna Guinea House And Ors. vs Commissioner Of Income-Tax And Anr. on 15 September, 1999
Equivalent citations: [2000]243ITR274(PATNA)
Author: Sudihr Kumar Katriar
Bench: Sudhir Kumar Katriar
JUDGMENT Sudihr Kumar Katriar, J.
1. This is an application under Section 482 of the Code of Criminal Procedure, 1973, for and on behalf of the four partners of a partnership business known as Patna Guinea House, challenging the order dated January 4, 1991, passed by Shri S.R. Hussain, Presiding Officer, Special Court, Economic Offences, Muzaffarpur, in Complaint Case No. 3 of 1991 (TR No. 2188 of 1991), whereby cognizance was taken of the alleged offences under Section 276C of the Income-tax Act (hereinafter referred to as "the Act."), and the petitioners were summoned to stand their trial.
2. According to the petition of complaint lodged by one Lekha Shrivastava, Assistant Commissioner of Income-tax, Patna, the petitioners herein had, inter alia, disclosed a sum of Rs. 52,000 in their returns, but had refused to disclose the source of income. Therefore, penalty proceedings were initiated against them under Section 271(1)(c) of the Act and a penalty of Rs. 14,367 was imposed on them. The same was reduced to Rs. 2,701 by the appellate authority, and was affirmed by the Tribunal by its order dated December 20, 1989. On these allegations, the aforesaid petition of complaint dated January 7, 1991, was filed before the Special Court of Economic Offences, Muzaffarpur, which was registered as Complaint Case No. 3 of 1991, a copy of which is marked annexure 1 to this application.
3. It is relevant to state that the complaint petition was lodged with prior sanction of the Commissioner of Income-tax, Patna, authorising the complainant to file the petition of complaint, vide his order dated December 20, 1990 (annexure 2). On these allegations, the aforesaid order of cognizance was passed, and impugned herein.
4. While assailing the validity of the impugned order of cognizance, learned counsel for the petitioners submitted that the prosecution is misconceived and is beyond the scope of the provisions of Section 276C(1) of the Act, the relevant portion of which is set out hereinbelow for facility of quick reference :
"276C. Wilful attempt to evade tax, etc.--(1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act,' he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable,--
(i) in a case where the amount sought to be evaded exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine ;
(ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine,"
5. Learned counsel is right in his submission that there is no allegation against them in the petition of complaint that any income was sought to be held back or was not disclosed in the returns. On the contrary, it is a prosecution for refusal to disclose the source of income. It is manifest from a plain reading of the aforesaid provisions that prosecution can lie only if a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, In the present case, there is no allegation that the petitioners failed to disclose any taxable income which could have resulted in evasion of any tax, penalty or interest chargeable or imposable under this Act. It follows as a matter of necessary implication that failure to disclose the source of income, in contradistinction to the failure or refusal to disclose the corpus/ income itself is not punishable under Section 27GC(1) of the Act. Assessment on the basis of the returned figures, and quantification of the iax, penalty or interest payable, is the duty of the assessing authority.
6. Learned counsel for the petitioners next submitted that the net result after the revisional order is that they are required to pay penalty of Rs. 2,701 only. A copy of the revisional order is marked annexure 9 to the quashing petition. Apart from the aforesaid contention, the case is equally covered by the relevant Circular F. No. 285/160/90-IT(Inv.)/190, dated February 7, 1992, issued by the Government of India, Ministry of Finance, which says that income escaping assessment up to a sum of Rs. 25,000 is immune from prosecution. This notification was considered by a learned single judge of this court and the prosecution on that ground was quashed. The judgment is reported in Mahadeo Lal Agrawal v. State of Bihar [1997] 2 PLJR 714.
7. Let it be recorded that the allegations in the present case do not constitute a case of income escaping assessment. Therefore, the case of the petitioners stand on a much better footing than the one covered by the aforesaid notification and the reported judgment. Counsel has rightly invited my attention to the judgment of the Supreme Court reported in Uttam Chand v. ITO [1982] 133 ITR 909, wherein it has been held that the find ing,s of the assessing authority which is the basis for the prosecution, having been set aside by the superior court at a later stage, results in setting aside the resultant prosecution. This was followed by the Supreme Court in a recent judgment reported in G. L Didwania v. ITO [1997] 224 ITR 687. I am also reminded of the judgment of the Supreme Court reported in Nawabkhan Abbaskhan v. State of Gujarat, AIR 1974 SC 1471, wherein it has been held that the basis for prosecution having been set aside at a later date by a superior court, results in setting aside of the same from the date of its nativity. Therefore, the resultant criminal proceedings based on the said order becomes unsustainable in law. When the substratum is gone, where is the question of the superstructure ?
8. In the result, this quashing petition is allowed, the impugned order of cognizance dated January 4, 1991, passed in Complaint Case No. 3 of 1991, pending in the Special Court of Economic Offences, Patna, is hereby set aside and the entire proceeding is quashed against the firm as well as all the partners. Let it be recorded that the Special Court for Economic Offences has since been constituted in Patna and the prosecution was transferred to the Patna Court.