Delhi District Court
Ito vs Brij Gopal Chauhan on 1 April, 2015
IN THE COURT OF SH. DEVENDRA KUMAR SHARMA
ADDL CHIEF METROPOLITAN MAGISTRATE (Spl. Acts) CENTRAL
TIS HAZARI COURTS, DELHI
ITO vs Brij Gopal Chauhan
U/s 276D of the Income Tax Act 1961
CC No.24/4
JUDGMENT
(a)Serial no. of the case : 02401R0155982014
(b)Date of commission of offence : Assessment Year 201011
(c)Name of complainant : ITO Sh. Rambir Dalal
(d)Name, parentage, residence: Brij Gopal Chauhan
261A, Main Market, Kondli
Delhi110096
(e)Offence complained of/ proved : U/s 276D IT Act
(f)Plea of accused : Pleaded not guilty
(g)Final order : Acquitted
(h)Date of such order : 01.04.2015
Date of Institution of complaint: 31.03.2013
Arguments heard/order reserved: 30.03.2015
Date of Judgment : 01.04.2015
Brief statement of the reasons for the decision:
1. The complainant Sh. Rmabir Dalal, the then Income Tax Officer filed the present complaint against the accused for the offences u/s 276D of Income Tax Act, 1961 (for short the 'Act') for the Financial Year (AY) 201011.
2. The short facts of the case are that accused filed the return of income on 11.06.2010 for the AY201011 manually, being auditable case u/s 44AB, declaring Net Profit of Rs.6,05,122/ against gross receipt/sales of Rs. 9,50,01,256. Thereafter, a notice u/s 143(2) of the Act dated 29.09.2011 and ITO vs Brij Gopal Chauhan U/s 276D of the IT Act CC No.24/4 1 of 8 notices u/s 142(1) of the Act dated 07.02.2012, 17.09.2012, 19.10.2012, 17.12.2012 and 15.03.2013, were issued to the accused but he did not comply withe said notices within stipulated period as given in the notices. Then the assessment u/s 143(3) of the Act was framed at Rs.2,56,43,866/ on dated 30.03.2013 and a notice of demand u/s 156 of the Act showing taxable demand payable as Rs.1,06,35, 630/ was issued and served. Thereafter, a show cause notice for launching prosecution u/s 276D of the Act was issued but accused did not reply to the said show cause notice. It is alleged that accused has willfully not produced the books of accounts and has also not filed the audit report u/s 44AB of the Act. Hence, present complaint.
3. Vide order dated 17.11.2014, a notice u/s 276D of the Act was framed against the accused to which he pleaded not guilty and claimed trial.
4. In order to substantiate the allegations against the accused, the complainant Sh. Rambir Dalal examined himself as PW1 and Sh. Roshan Lal, the then ITO as PW2.
PW1 Sh. Rambir Dala was the complainant who filed the present complaint, reiterated the facts of the case and proved on record several documents like complaint Ex.PW1/1, sanction letter Ex.PW1/2, list of witnesses Ex.PW1/3, return of income filed by the accused Ex.PW1/4, notice issued u/s 143(2) of the Act along with its postal receipt Ex.PW1/5 and Ex.PW1/6, letter dated 07.02.2012 issued by the then ITO Sh. Roshan Lal Ex.PW1/7 and power of attorney duly signed by the accused in favour of his ITO vs Brij Gopal Chauhan U/s 276D of the IT Act CC No.24/4 2 of 8 CAs Sh. Sundeep Kumar and Sh. Adesh Goswami Ex.PW1/8. The witness has also proved on record several notices issued u/s 143(2) of the Act, 142(1) of the Act, notice u/s 274 r/w section 271 of the Act and letters/communications between the accused and his AR as Ex.PW1/9 to PW1/24, letter dated 15.01.2013 received from the accused through his AR Ex.PW1/31. PW1 has also proved the assessment order passed by him as Ex.PW1/32, show cause notices as Ex.PW1/33 and Ex.PW1/34 and report of process server as Ex.PW1/35.
PW2 Sh. Roshan Lal the then ITO deposed that he had also issued notices to the accused and placed reliance upon the notices Ex.PW1/5, Ex.PW2/1 and Ex.PW2/2 issued by him. Both witness were cross examined on behalf of the accused.
5. Statement of accused was recorded u/s 313 Cr.P.C. In his statement, accused denied the allegations and stated that he did not file the manual return Ex.PW1/4. Accused further stated that his case was not auditable and therefore, it could be filed manually also which is clear from his vat returns. No notice was served upon him. However, accused admitted receipt of show cause notice and stated that due to late receipt of show cause notice, its reply was filed after date given in the notice. Accused opted not to lead any defence evidence.
6. I have given my thoughtful consideration to the submissions advanced on behalf of parties and considered the relevant provisions of the Act. ITO vs Brij Gopal Chauhan U/s 276D of the IT Act CC No.24/4 3 of 8 A) The relevant provisions of section 276D of the Act is reproduced as below: [276D. Failure to produce accounts and documents. If a person willfully fails to produce, or cause to be produced, on or before the date specified in any notice served on him under subsection (1) of section 142, such accounts and documents as are referred to in the notice, or willfully fails to comply with a direction issued to him under subsection (2A) of that section, he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine equal to a sum calculated at a rate which shall not be less than four rupees or more than ten rupees for every day during which the default continues, or with both.] B) It was argued on behalf of the complainant that the accused did not comply with the notices issued u/s 143(2) and 142(1) of the Act and has willfully failed to produce the books of accounts and has also not filed the audit report u/s 44AB of the Act.
On the other hand, it was argued on behalf of the accused that the return filed manually is as per instruction of CBDT and audit report u/s 44AB of the Act was also filed. Accused has also placed reliance upon the documents Ex.PW1/D1 to Ex.PW1/D4 in support of claim and contentions. It was also argued that the present complaint can not continue as the penalty levied by the Assessing Officer has been deleted by the CIT (A) on dated 09.02.2015. C) As per assessment order Ex.PW1/32, the accused filed the return of income on 11.06.2010 at a total income of Rs.4,62,460. The Assessing Officer initiated the penalty proceedings for noncompliance of statutory notices issued to the accused during assessment proceeding and levied penalty of Rs.10,000/ on the accused u/s 271(1)(b) of the Act.
ITO vs Brij Gopal Chauhan U/s 276D of the IT Act CC No.24/4 4 of 8 A copy of the order dated 09.02.2015 passed by CIT (A) is already on record. By the said order, the CIT(A) has deleted the aforesaid penalty observing that the penalty for noncompliance of statutory notices is not sustainable in this case as there was subsequent compliance for the hearing notices issued by the AO and the assessment was finally completed u/s 143(3) of the Act. Relevant para of the order is reproduced below: ...The appellant's submissions during the appellate proceedings are that the assessment was completed under section 143(3) and therefore, it needs to be presumed that the appellant had subsequently complied with the statutory notices issued by the Assessing Officer. Moreover, the penalty order only states that some of the above statutory hearing notices were served personally on the appellant without specifying dates. Therefore, it is not clear as to which hearing notices were actually served on the appellant to specify the noncompliance of the appellant. During the quantum appeal proceedings, the Assessing Officer submitted his remand report dated 10.12.2014 and in it was stated that as per the order sheet entries the appellant's Authorized Representative appeared during the assessment proceedings as many as 11 times. Therefore, I am of the view that penalty for noncompliance of statutory notices is not sustainable in this case of the appellant as it is clear that there was subsequent compliance for the hearing notices issued by the Assessing Officer and the assessment was finally completed under section 143(3) of the Income Tax Act. Thus, the penalty of Rs.10,000/ levied by the Assessing Officer under section 271(1)(b) of the Income Tax Act is deleted and the appellant succeeds in the grounds of appeal."
7. Deletion of penalty by the CIT(A) has not been disputed by the learned counsel for complainant. Since the penalty order/the basis of prosecution has been set aside by the CIT(A), present prosecution cannot continue in view of the law laid down by the Hon'ble Supreme Court in "(2004) 271 ITR 3134 (P&H) Arvind Jain v C.I.T. (Investigation)". It is further held in the judgment ITO vs Brij Gopal Chauhan U/s 276D of the IT Act CC No.24/4 5 of 8 reported as "(1987) 168 ITR 33 (Delhi) Dr. R.P. Gupta vs I.A.C. (Assessment)". Relevant para of the judgment reads as under: Prosecution - Assessment set aside by CIT(A) Entire substratum of the complaint having been taken away by setting aside of assessment order, complaint cannot continue and has to be quashed.
Held The distinction between ss. 250(4) and 251(1)(a) is that whereas under s. 251(1)(a) the initial assessment is set aside and is no longer alive till it is made afresh by the ITO after compliance of the directions given by the appellate authority, under subs.(4) of s.250 the initial assessment is not set aside and is kept alive and only the result of further enquiry is called for by the appellate authority from the assessing authority. When the entire assessment order pertaining to the petitioner which contained objectionable items on the basis of which the complaint was lodged by the respondent against the petitioner, was set aside in its entirety vide order dt. 3rd March, 1986 passed by the CIT(A), the respondentDepartment officer is now left with no basis or material on the basis of which he can prosecute the petitioner regarding that complaint. It is an entirely different proposition that when the fresh assessment regarding the income of the petitioner is made in compliance with the directions made in the order dt. 3rd March, 1986 and if something objectionable pertaining to the same against the petitioner is detected, there would be no impediment in the way of the Department to file a fresh complaint, if so advised, against the petitioner, but as at present the entire substratum of the present complaint having been taken away by the setting aside of the assessment order, the present complaint cannot continue and has to be quashed.
8. Further, it has been held by the Hon'ble Supreme Court in the case reported in "(2004) 2 Supreme Court Cases 731, K.C. Builders and Another vs Assistant Commissioner of Income Tax" that once penalties imposed on the assessee are cancelled, the prosecution can not continue. Relevant para of the judgment is reproduced below: ITO vs Brij Gopal Chauhan U/s 276D of the IT Act CC No.24/4 6 of 8 "In the instant case, the penalties levied under section 271(1)(c), were cancelled by the respondent by giving effect to the order of the Income Tax Appellate Tribunal, in I.T.A. No.s 31293132. It is settled law that levy of peanlties and prosecution under section 276C are simultaneous. Hence, once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution under section 276C is automatic.
In our opinion, the appellants can not be made to suffer and face the rigorous of criminal trial when the same can not be sustained in the eyes of laws because the entire prosecution in view of a conclusive finding of the Incometax Tribunal that there is no concealment of income becomes devoid of jurisdiction and under section 254 of the Act, a finding of the Appellate Tribunal supersedes the order of the Assessing Officer under section 143(3) more so when the Assessing Officer cancelled the penalty levied.
In our view, once the finding of concealment and subsequent levy of penalties under section 271(1)(c) of the Act has been struck down by the Tribunal, the Assessing Officer has no other alternative except to correct his order under section 154 of the Act as per the directions of the Tribunal. As already noticed, the subject matter of the complaint before this court is concealment of income arrived at on the basis of the findings of the Assessing Officer. 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 can not be proceeded with by the complainant and further proceedings will be illegal and without jurisdiction. The Assistant Commissioner of Incometax cannot proceed with the prosecution even after the order of concealment has been set aside by the Tribunal. When the Tribunal has set aside the levy of penalty, the criminal proceedings against the appellants can not survive for further consideration. In our view, that the charges have been framed and the matter is in the stage of further cross examination and, therefore, the prosecution may proceed with the trial. In our opinion, the view taken by the learned magistrate and the High Court is fallacious. In our view, if the trial is allowed to proceed further after the order of the Tribunal and the consequent cancellation of penalty, it will be an idle and empty formality to require the appellants to have the order of the Tribunal exhibited as the passing of the order as ITO vs Brij Gopal Chauhan U/s 276D of the IT Act CC No.24/4 7 of 8 aforementioned is unsustainable and unquestionable."
9. In view of the foregoing discussions, facts and circumstances and law laid down by the Hon'ble Apex Court and Hon'ble High Court it is held that the present complaint cannot continue in the present form after deletion of the penalty order by the CIT(A). Consequently, present complaint is dismissed and accused stands acquitted. Earlier bail bond of the accused stands cancelled. Surety stands discharged. Original documents, if any, of surety be returned after cancellation of endorsement thereon. Accused is directed to to furnish fresh bail bond in a sum of Rs.25,000/ in terms of Section 437(A) of Cr.PC.
File be consigned to the record room after completion of due compliance. Judgment be sent to the server www.delhidistrictcourt.nic.in.
(DEVENDRA KUMAR SHARMA) ACMM(Special Acts) CENTRAL TIS HAZARI COURTS DELHI Announced in open court on 1st April, 2015 (Total number of page 8) (One spare copy attached) ITO vs Brij Gopal Chauhan U/s 276D of the IT Act CC No.24/4 8 of 8