Madras High Court
Deputy Commissioner Of Income-Tax vs Shri.M.Sundaram on 11 February, 2010
Author: R.Mala
Bench: R.Mala
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 11.02.2010 CORAM: THE HONOURABLE MS.JUSTICE R.MALA Crl.A.Nos.692 and 693 of 2002 Deputy Commissioner of Income-tax, Central Circle-II, Coimbatore. .. Appellant in both the appeals Vs. Shri.M.Sundaram .. Respondent in both the appeals Criminal Appeal No.692 of 2002 against the judgment dated 11.6.2001 in C.C.No.19 of 1999 on the file of the First Additional District-cum-Chief Judicial Magistrate's Court, Coimbatore. Criminal Appeal No.693 of 2002 against the judgment dated 11.6.2001 in C.C.No.20 of 1999 on the file of the First Additional District-cum-Chief Judicial Magistrate's Court, Coimbatore. For appellant : Mr.K.Ramasamy, Senior Special Public Prosecutor For respondent : Mr.M.Mahadevan JUDGMENT
The Criminal Appeals arise out of the judgment passed by the learned First Additional District Judge-cum-Chief Judicial Magistrate, Coimbatore, on 11.6.2001 in C.C.No.19 of 1999 and C.C.No.20 of 1999, respectively, acquitting the respondent-accused of the offence under Section 276-CC of the Income Tax Act, 1961.
2. The case of the appellant-complainant-Income Tax Department is as follows:
The respondent-accused is a resident of Avinashi, which comes within the jurisdiction of the Income Tax Department. During the respective years 1991-92 and 1992-93, the accused was receiving income by way of salary and interest from the finance business. As his total income from all sources was assessable under the provisions of the Income Tax Act, he is required to furnish the return of his total income in the prescribed form under Section 139(1) of the Income Tax Act (hereinafter referred to as 'the Act') within the specified time. On his failure to do so, he was issued with notices under Sections 142 and 148 of the Act and even thereafter, he did not comply with the statutory requirement. Subsequently, return was filed belatedly on 31.8.1994 and 28.3.1996 respectively, to P.W.5, who sent the same to P.W.4 for due assessment. On receipt of the same, the assessment orders were passed by P.W.4 on 29.3.1996, against which, the accused filed appeals and the same were dismissed on 10.6.1996 confirming the order of P.W.4. As the respondent-assessee was not filing returns in due time, after obtaining due permission from the Commissioner of Income Tax, the complaints have been filed by P.W.1 against the accused for the offence under Section 276-CC of the Act.
3. The trial Court, after examining the witnesses, questioned the respondent-accused under Section 313 Cr.P.C., about the incriminating evidence found against him. The respondent-accused, having denied the same, raised a plea that he filed the return within the extended time. The trial Court, after considering the oral and documentary evidence, exonerated the respondent-accused from the charge levelled against him under Section 276-CC of the Act and acquitted him in both the cases.
4. Learned Special Public Prosecutor appearing for the appellant-Income Tax Department would contend that the respondent-accused ought to have filed the returns for the year 1991-1992 on or before 31.8.1991 and for the year 1992-1993 on or before 31.8.1992 and since he has not filed the returns in time, as per Section 139(4) of the Act, he has to file the same before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier and he has not filed the same in time and he filed only on 31.8.1994 and 28.3.1996. On 3.9.1993, notices under Section 148 of the Act was issued. Even after receipt of the notices, he has not filed the returns and he filed the returns only on 31.8.1994 and 28.3.1996 and notices under Section 142(1) of the Act have been issued to submit the statement of accounts for enquiry. Since he has not filed the return/statement of accounts on or before 31.8.1991/31.8.1992, search was made under Section 132 of the Act. As per his statement of accounts, on 22.10.1991, on the instructions of the accused, his father has drawn Rs.2 crores. The search has been made simultaneously with the respondent and his brother-in-law. The trial Court has committed error in coming to the conclusion that as per Section 139(2) of the Act, time has been extended for filing returns. But, imposing interest and recovery of the same will not absolve the liability of the respondent from the offence under Section 276-CC of the Act. The trial Court has committed error and considered the decision of the Supreme Court reported in 1985 (1) SCC 283 = (1985) 151 ITR 433 (SC) (Commissioner of Income-Tax, A.P. Vs. M.Chandra Sekhar) and came to the conclusion that since interest has been levied, the respondent-accused is not guilty of the offence under Section 276-CC of the Act and the offence has not been made out. Hence, the trial Court acquitted the respondent. Learned Special Public Prosecutor appearing for the appellant-Income Tax Department also relied upon various decisions of the Supreme Court, this Court and other High Courts and submitted that the return should be filed within the stipulated time, in default, the respondent-accused is guilty of the offence under Section 276-CC of the Act. Hence, he prayed for conviction of the respondent-accused.
5. Per contra, learned counsel for the respondent-accused would contend that it is true that the respondent has not filed the returns in time, but as per Section 139(2) of the Act, time has been extended and in pursuance of the same, he submitted his returns. Since interest has been levied and recovered, the respondent-accused is not guilty of the offence under Section 276-CC of the Act. He further submits that when once tax has been accepted, the appellant-Income Tax Department is barred from taking criminal prosecution. It amounts to double jeopardy. Learned counsel for the respondent-accused relied upon the decisions of the Supreme Court, this Court and other High Courts and prayed for dismissal of the Criminal Appeals.
6. Admittedly, the respondent-assessee ought to have filed his returns for the assessment years 1991-92 (pertaining to Crl.A.No.692 of 2002) and 1992-93 (pertaining to Crl.A.No.693 of 2002). The statutory dates for filing of the income tax returns are 31.8.1991 and 31.8.1992. The trial Court in its judgment at paragraph 8, came to the conclusion that, "admittedly, the return is not filed within due date as prescribed under the Act which under normal circumstances constitute an offence punishable under Section 276-CC of the Income Tax Act." In paragraphs 10 and 11 of its judgment, the trial Court has considered the decisions of the Supreme Court reported in 1985 (1) SCC 283 = 1985 (151) ITR 433 (cited supra) and 1993 Supp (1) SCC 408 (Commissioner of Income Tax, A.P. and another Vs. M/s.M.J.Daveda (dead) by LRs. and another) and came to the conclusion that on account of delay, the respondent was imposed penalty under Section 271(1)(a) of the Act and in the appeals preferred by the respondent-assessee against such order, he raised two grounds and one of the grounds was that as interest has been levied under proviso (iii) to sub-section (1) of Section 139 of the Act, no question arose for imposing penalty. The Supreme Court in (1985) 151 ITR 433 (cited supra) has observed that where the Income Tax Officer extends the date, then all the dates upto the extended date is allowed for furnishing the returns as contemplated under Section 271(1)(a) of the Act as it then stood and conclusion must follow that the penalty provision does not come into play at all. In pursuance of the same, the trial Court came to the conclusion.
7. At this juncture, it is appropriate to consider the decisions relied upon by both sides. Learned Special Public Prosecutor appearing for the appellant-Income Tax Department relied upon the decision of the Supreme Court reported in (1985) 151 ITR 433 (C.I.T. Vs. Chandra Sekhar) (cited supra). This case was considered by the trial Court stating that before amendment of Section 139(2) of the Act, the Income Tax Authority was having authority to extend the time for submitting the returns. But after amendment, the provision of Section 139(2) of the Act has been taken away and it was deleted. The amendment came into existence only from the year 1989, i.e. with effect from 1.4.1989. The said decision relied upon by the trial Court in Chandra Sekhar's case (cited supra) deals with Section 139 of the Act, prior to amendment from 1.4.1971. This decision (1985) 151 ITR 433 has been referred to by this Court in the decision reported in (1993) 199 ITR 307 (K.Jagadeesan Vs. I.T.O.), in which, this Court held as follows:
" ... So, after the amendment, the interest to be paid is absolute, notwithstanding extension of date by the Income-tax Officer, under the proviso to section 139(1). Under the unamended provisions, the discretion to extend the time for furnishing the return could not be beyond the 30th day of September of the assessment year, or the 31st day of December of the assessment year, as the case may be, and such extension was in the discretion of the Income-tax Officer. After amendment, the discretion of the Income-tax Officer has been retained, but the restricted period up to 30th day of September or 31st day of December of the assessment year has been removed. This change clearly shows that fixing of a limit to the extended period was not enough though necessary since, in any event, the assessee was liable to pay interest, irrespective of the extension of time for furnishing the return. Again, the penal section 276C which came into the statute book with effect from April 1, 1971 underwent a change and now section 276CC is the relevant provision. Under section 276CC, a person who wilfully fails to furnish in due time the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or 148, shall be punishable.
Hence, after the amendment of section 139 on and from April 1, 1971, mere charging of interest by the Income-tax Officer cannot be deemed to be implied extension of time to file the return which would in effect exclude wilful default and a consequent prosecution. The question of default being wilful or otherwise is a pure question of fact.
Held, dismissing the writ petition, that the complaint as well as the evidence prima facie showed that, in spite of several opportunities furnished to the petitioner, he did not file his return in due time for the assessment year 1985-86. The complaint against him under section 276CC could not be quashed."
8. From the above decision reported in (1993) 199 ITR 307, it is clear that after amendment of Section 139 of the Act, on and from April 1, 1971, mere charging of interest by the Income Tax Officer cannot be deemed to be implied extension of time to file the return, which would in effect, exclude wilful default and a consequent prosecution.
9. Learned Special Public Prosecutor appearing for the appellant-Income Tax Department also relied upon the decision reported in (1991) 188 ITR 583 (C.I.T. Vs. Inamullah), wherein, it is held that merely return was filed under Section 139(4) of the Act, it did not absolve the assessee of his obligation to file return within the prescribed time under Section 139(1) and that the assessee therein did not furnish any explanation for the delay in filing the return and in that case, it was further held that the Tribunal was not justified in cancelling the penalty.
10. Learned counsel for the respondent-accused relied upon the decision of the Supreme Court reported in 1993 Supp (1) SCC 408 (Commissioner of Income Tax, A.P. and another Vs. M/s.M.J.Daveda (dead) by LRs. and another), which was referred to by the trial Court, and in the said decision, Chandra Sekhar's case (1985) 151 ITR 433 (cited supra) was referred to. In 1993 Supp (1) SCC 408 (cited supra), it was held by the Supreme Court as follows:
"1. These appeals have arisen against similar orders of the High Court of Andhra Pradesh failing to be persuaded, Income Tax Appellate Tribunal beforehand, to refer the following three questions of law to the High Court said to arise from the appellate orders of the Income Tax Appellate Tribunal, Hyderabad. Those questions are taken and reproduced below from one case and in the others they are substantially the same.
"(1) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that by the levy of interest under Section 139 of the Income Tax Act, 1961 the Income Tax Officer must be deemed to have granted time up to the date of filing the return of income?
(2) Whether on the facts and in the circumstances of the case the Appellate Tribunal was correct in holding that even if the return was treated as filed under Section 139(4) penalty was not liable?
(3) Whether on the facts and in the circumstances of the case, the penalty liable within the meaning of Section 271(1)(a) shall be with reference to the net tax remaining due and payable at the date of final assessment after deduction of the tax paid under Section 140-A/141?"
2. Learned counsel for the parties are agreed that answer to question No.1 would be against the Revenue and in favour of the respondent assessee on the ratio of CIT v. M.Chandra Sekhar ( (1985) 1 SCC 283 : 1985 SCC (Tax) 85 : (1985) 151 ITR 433 : 1985 Tax LR 497) and thus would not be required to be referred. If this is so, as it has to be, the attempt to have question No.3 alone referred in isolation of the answer to question No.1 is a meaningless exercise because if the Income Tax Officer must be deemed to have granted time from the date of filing the return of income, which power he undoubtedly had, the question of levying any penalty under Section 271(1)(a) on the basis of failure to furnish return within time would in no event arise under the Income Tax Act, 1961."
11. In the decision of this Court reported in (2002) 255 ITR 0208 (Mahadeva Naidu Sons Vs. Commissioner of Income-tax), a Division Bench of this Court held as follows:
"The object of the two provisions, sections 271 and 276CC of the Income-tax Act, 1961, is different. While the object of the former is to emphasise the loss of revenue, and provide for a remedy for such loss, the object of the latter is to punish the offender for having committed an economic offence and to deter persons inclined to commit such offences from committing them. The penalty imposed under section 271(1)(c) of the Act is a civil liability. Wilful concealment is not an essential ingredient for attracting the civil liability, while for a successful prosecution under section 276C of the Act, it is. Moreover, the prosecution under section 276C as expressly provided therein, is without prejudice to the other penalties imposed. While considering an appeal against an order made under section 271(1)(c) what is required to be examined is the record which the officer imposing the penalty had before him and if that record can sustain the finding that there had been concealment, that would be sufficient to sustain the penalty. The fact that the authorities were unable to secure a conviction in a prosecution subsequently launched does not alter the record the Assessing Officer had before him and which record is what the appellate authority is required to peruse for the purpose of deciding as to whether the penalty was or was not warranted. While it would be wholly incongruous to prosecute a person for wilful concealment after the statutory Tribunal had held that there was no concealment, a finding by the criminal court that there has been no concealment wilful or otherwise, cannot have the effect of erasing the finding of concealment properly recorded by the statutory authorities, and upheld by the Tribunal.
Held, that, in the instant case, the acquittal of the assessee in a prosecution subsequently launched and in which some of the documents which had constituted the basis for the levy of penalty under section 271(1)(c) had not been put in evidence, could not be regarded as having the effect of removing the foundation on the basis of which the penalty had been levied under section 271(1)(c). The Tribunal was correct in upholding the penalty that had been levied under section 271(1)(c)."
12. Learned counsel for the respondent-accused also relied upon the decision of the Supreme Court reported in (2004) 265 ITR 0562 (K.C.Builders Vs. Assistant Commissioner of Income-tax), in which, the Supreme Court held that when once the penalties imposed on the assessee under Section 271(1)(c) of the Act, are cancelled on the basis of the conclusive finding of the Appellate Tribunal that there is no concealment of income, prosecution of the assessee for an offence under Section 276-C for wilful evasion of tax cannot be proceeded with thereafter and that the quashing of the prosecution is automatic.
13. At this juncture, learned Special Public Prosecutor appearing for the appellant-Income Tax Department would rely upon the decision of the Supreme Court reported in (2006) 130 Company Cases 341 (SC) (S.C.B. Vs. Directorate of Enforcement), wherein, it was held that the correctness of the view taken in the case of K.C.Builders (K.C.Builders Vs. Asst. C.I.T. (2004) 265 ITR 562 = 2004 (2) SCC 731) may require re-consideration, as the reasoning appears to run counter to the one adopted by the Constitution Bench in Assistant Collector of Customs, Bombay Vs. L.R.Melwani (AIR 1970 SC 962). Thus, the Apex Court, consisting of three-Judge Bench, in the said decision reported in (2006) 130 Company Cases 341 (SC), has come to the conclusion that the law laid down in the decision reported in (2004) 265 ITR 562 (cited supra) requires re-consideration.
14. Now, this Court has to decide that when once interest has been levied, whether the respondent-assessee is absolved from criminal prosecution.
15. At this juncture, learned Special Public Prosecutor appearing for the appellant-Income Tax Department would rely upon a decision of Rajasthan High Court-Jaipur Bench, reported in (1994) 206 ITR 222 (Universal Supply Corpn. Vs. State of Rajasthan), wherein, it is held as follows:
"In the Income-tax Act, 1961, there are separate provisions for levy of interest, penalty and criminal prosecution. The charging of interest has a different purpose: to compensate the Department for depriving it of the use of the money during the period the payment was withheld. Criminal proceedings have nothing to do either with the levy of interest or penalty. In the absence of these proceedings also, criminal prosecution can be launched if the ingredients of the offence under section 276B of the Income-tax Act, 1961, namely failure to pay the tax deducted at source to the credit of the Central Government within the prescribed time, are made out. The assessee can be charged with interest and also punished by prosecution.
The legal position can be summarised as follows:
(i) The scope and purport of interest/penalty proceedings and prosecution under the Income-tax Act are separate and independent. The existence or the absence of the one or the other is no bar to any one of them;
(ii) Simply charging of interest by the Department under section 201(1A) of the Act, for the delay in the payment of the amount to the Central Government, does not obliterate the prosecution;
(iii) The non-initiation of penalty proceedings does not lead to a presumption that the default in payment was for good and sufficient reasons or that the assessee was not obliged to establish that there were good and sufficient reasons for the default in payment;
(iv) Non-initiation of penalty proceedings in a case cannot be equated with a case where the penalty proceedings were initiated and a finding is recorded by the competent authority that there were good and sufficient reasons for the delay in payment;
(v) There is no statutory requirement either under section 279 or under any other provision of the Act to give notice to the assessee before criminal proceedings are initiated against him. In other words, a notice or a right of being heard before launching criminal proceedings under the Income-tax Act for the offences mentioned under Chapter XXII is not mandatory and proceedings cannot be quashed on this ground. However, if such notice is given by the Department, it may check frivolous and unnecessary criminal cases or such cases where the default in payment is technical or committed in good faith. The question of compounding the offence may also be considered by the concerned authority prior to the initiation of criminal proceedings if such notice is given by the assessee desirous to compound the offence."
16. Learned counsel for the appellant-Income Tax Department also relied upon a decision of this Court reported in (1987) 163 ITR 487 (S.R.Arulprakasam Vs. Smt.Prema Malini Vasan, ITO), wherein, it was held as follows:
"Where an assessee files a revised return after the concealment had been detected by the ITO, the contumacious conduct on the part of the assessee in filing the original return, which, if it had been accepted, would have resulted in avoidance of tax, would not be wiped out. In the proceedings for imposition of penalty, the original return alone should not be considered in isolation without reference to the subsequent conduct of the assessee and all the facts and circumstances commencing with the filing of the original return and ending with the assessment have to be taken as relevant for considering the assessee's liability for penalty. As the filing of a revised return will not expatiate the contumacious conduct on the part of an assessee in not having disclosed the true income in the original return itself and will not be a bar to the initiation of penalty proceedings, it will not likewise be a bar to the launching of criminal prosecution. It cannot, therefore, be said that the original return is completely wiped out and no prosecution can be instituted on the basis of the original return."
17. Learned Special Public Prosecutor appearing for the appellant-Income Tax Department would also rely upon a decision of a Division Bench of Punjab and Haryana High Court, reported in (1981) 130 ITR 504 (C.I.T. Vs. Dehati Co-op. Marketing Society) and argue that the penalty could be imposed on the assessee under Section 139(1) of the Act for the whole of the period commencing from due date of filing return, to the date the assessee belatedly filed the return and the period of default would come in between the said period. In the said decision, it was held as follows:
"It cannot be said that once a notice requiring the assessee to furnish a return under S.139(2) or S.148 of the I.T. Act, 1961, is issued, penalty cannot be imposed for failure to furnish the return under S.139(1). If the provisions relevant in connection with notices under Ss.139(2) and 148 were omitted from S.271 of the Act, the result would be that after the ITO or the AAC comes to the finding that any person has without reasonable cause failed to furnish a return, he can direct such person to pay the penalty. Even though the customary method of asking an assessee to show cause against the payment of penalty is that of issuing a notice under S.139(2), this cannot be said to be the sole method of issuing notices contemplated by S.271. If the default has once occurred there has to be an express provision of law for relieving a defaulter of the penalty. The condonation of delay and the exemption of the defaulter from payment cannot occur indirectly by the issuance of a notice for some other kind of default made under the provisions of the Act apart from those contained in S.139(1). Moreover, if a contrary view were taken it would put a premium on concealment of income and evasion of tax. If there is any vagueness in a taxing law it has to be interpreted in favour of the tax payer. There is, however, no authority for the view that the law has to be interpreted in favour of a person who is a tax evader. Payment of tax is quite distinct from the payment of penalty. A provision with regard to the payment of tax can be construed liberally in favour of a tax payer but a provision with regard to payment of penalty cannot be so construed.
The assessee had to furnish its returns on or before June 30, 1969, under S.139(1)(a). It failed to do so. A notice under S.148 was served on it on August 10, 1970, calling upon it to file a return before September 9, 1970. The return was belatedly filed on February 24, 1971:
Held, that penalty could be imposed on the assessee under S.139(1) for the whole of the period commencing from June 30, 1969 to February 24, 1971, and the period of default would come to nineteen months."
18. For the same proposition, learned Special Public Prosecutor appearing for the appellant-Income Tax Department also relied on the decision of the Supreme Court reported in (1986) 157 ITR 330 (Maya Rani Punj Vs. C.I.T) and submitted that if a duty continued from day-to-day, the non-performance of that duty from day-to-day is a continuing wrong and that the legislative scheme under Section 271(1)(a) of the Income Tax Act, 1961, in making provision for a penalty conterminous with the default provided for a situation of continuing wrong. In the said decision, the Supreme Court held as follows:
" ... that in view of the language used in Section 271(1)(a) of the 1961 Act, the position was beyond dispute that the Legislature intended to deem the non-filing of the return to be a continuing default---the wrong for which penalty was to be visited, commenced from the date of dafault and continued month after month until compliance was made and the default came to an end. The rule of 'de die in diem' was applicable not on daily but on monthly basis. The imposition of penalty not confined to the first default but with reference to the continued default was obviously on the footing that non-compliance with the obligation of making a return was an infraction as long as the default continued.
If a duty continued from day to day, the non-performance of that duty from day to day is a continuing wrong. The legislative scheme under section 271(1)(a) of the 1961 Act in making provision for a penalty conterminous with the default provided for a situation of continuing wrong."
19. Learned Special Public Prosecutor appearing for the appellant-Income Tax Department further relied upon the decision of the Supreme Court reported in (2004) 266 ITR 1 (Prakash Nath Khanna Vs. C.I.T.) and submitted that one of the significant terms used in Section 276-CC of the Act for the offence of failure to furnish return of income, is "in due time" and the time within which the return of income is to be furnished is indicated only in sub-section (1) of Section 139 and not in sub-section (4) and that even if a return is filed under Section 139(4), that would not dilute the infraction in not furnishing the return within the time as prescribed under sub-section (1) of Section 139 of the Act. In the said decision, the Supreme Court held as follows:
"One of the significant terms used in Section 276-CC (offence of failure to furnish return of income) of the Income-tax Act, 1961, is "in due time". The time within which the return of income is to be furnished is indicated only in sub-section (1) of Section 139 and not in sub-section (4). Even if a return is filed under Section 139(4) that would not dilute the infraction in not furnishing the return within the time as prescribed under sub-section (1) of Section 139.
Section 276-CC refers to "due time" in relation to sub-sections (1) and (2) of Section 139 and not sub-section (4). It cannot be said that the Legislature without any purpose or intent specified only sub-sections (1) and (2) and the conspicuous omission of sub-section (4) has no meaning or purpose behind it. Sub-section (4) of Section 139 cannot control the operation of sub-section (1) wherein a fixed period for furnishing the return is stipulated. The mere fact that for the purposes of assessment and carry forward and set off losses the return filed under sub-section (4) is treated as one filed within sub-section (1) or (2) would not amount to the return having being filed within due time.
Whether there was failure to furnish the return is a matter which is to be adjudicated factually by the court which deals with the prosecution case.
There is a statutory presumption prescribed in Section 278-E: the Court has to presume the existence of culpable mental state and absence of such mental state can be pleaded by an accused as a defence in respect of the act charged as an offence in the prosecution."
20. Until the respondent-assessee pays the income tax and furnishes the income tax returns, he is liable to pay interest/penalty levied by the Income Tax Authorities. Merely the assessee was levied interest/penalty, it will not absolve his criminal liability, as per the decision of the Rajasthan High Court reported in (1994) 206 ITR 222 (cited supra).
21. Learned Special Public Prosecutor appearing for the appellant-Income Tax Department further relied upon the decision of the Supreme Court reported in AIR 1959 SC 375 (Thomas Dana Vs. State of Punjab) and submitted that merely because interest/penalty has been levied, the respondent-assessee's criminal liability will not be absolved and the confiscation proceedings are entirely different from criminal prosecution. In the said decision, the Supreme Court held as follows:
"Simply because the Customs authorities took a very serious view of the smuggling activities of a person and imposed very heavy penalties under item 8 of the Schedule to S.167 of the Sea Customs Act would not convert those authorities into a Court of law or the penalty imposed on that person the same thing as a punishment imposed by a criminal Court by way of punishment for a criminal offence. That Act when it meant proceeding to be taken by the Customs authorities themselves, as is the case in most of the items to Schedule to S.167, has empowered those authorities to deal with the offending articles by way of confiscation or with the person infringing those rules by way of imposition of penalties in contradistinction to a sentence of imprisonment or fine or both. When a criminal prosecution and punishment of a criminal, in the sense of the penal law, is intended the section makes a specific reference to a trial by a Magistrate, a conviction by such magistrate and on such conviction to imprisonment or fine or both. The legislature was therefore aware of the distinction between a proceeding before the Customs authorities by way of enforcing the preventive and penal provisions of the Schedule and a criminal prosecution before a Magistrate with a view to punishing offenders under the provisions of the same section."
22. Learned Special Public Prosecutor appearing for the appellant-Income Tax Department would also rely upon the Constitution Bench decision of the Supreme Court reported in AIR 1970 SC 962 (Asst. Customs, Collector, Bombay Vs. L.R.Melwani) (cited supra) to show that levying of interest/penalty is not for adjudication by the Courts of Law. In the said case, it was held that criminal prosecution of the accused for the alleging smuggling is not barred merely because proceedings were earlier instituted against him before the Collector of Customs and adjudication before a Collector of Customs is not a prosecution, nor the Collector of Customs a 'Court'. In the said decision, the Supreme Court held as follows:
"Criminal prosecution of the accused for alleging smuggling is not barred merely because proceedings were earlier instituted against him before the Collector of Customs. Adjudication before a Collector of Customs is not a prosecution, nor the Collector of Customs a 'Court'. Therefore, the rule of autre fois acquit cannot be invoked. Neither the issue estoppel rule is attracted. The issue estoppel rule is but a facet of the doctrine of autre fois acquit. Even though the accused was given benefit of doubt in earlier proceedings the decision of the Collector of Customs does not amount to verdict of acquittal in favour of accused so as to attract the rule of issue estoppel."
23. Learned Special Public Prosecutor appearing for the appellant-Income Tax Department would submit that as per Section 139(4) of the Act, the respondent-assessee ought to have filed his returns within the time stipulated and after amendment with effect from 1.4.1989, Section 139(2) has been omitted. In such circumstances, the respondent-assessee ought to have filed the returns within the stipulated time as per Section 139(4) of the Act.
24. Section 139(4) of the Act reads as follows:
"Return of income:
Section 139:
....
(4) Any person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier:
Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year."
25. Section 276-CC of the Act reads as follows:
"Failure to furnish returns of income:
Section 276-CC: If a person wilfully fails to furnish in due time the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under clause (i) of sub-section (1) of section 142 or section 148 or section 153A, he shall be punishable,--
(i) in a case where the amount of tax, which would have been evaded if the failure had not been discovered, 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 imprisonment for a term which shall not be less than three months but which may extend to three years and with fine:
Provided that a person shall not be proceeded against under this section for failure to furnish in due time the return of income under sub-section (1) of section 139--
(i) for any assessment year commencing prior to the 1st day of April, 1975; or
(ii) for any assessment year commencing on or after the 1st day of April, 1975, if--
(a) the return is furnished by him before the expiry of the assessment year; or
(b) the tax payable by him on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source, does not exceed three thousand rupees."
26. Since the respondent-assessee-accused has not filed the returns within the stipulated time, notices under Section 148 of the Act were issued on 3.9.1993 and he filed the returns only on 31.8.1994 and 28.3.1996. Section 148 of the Act reads as follows:
"Issue of notice where income has escaped assessment Section 148: (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139.
(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so."
27. As already discussed, admittedly, the respondent-assessee-accused has not filed his returns in time, for the respective assessment years. So, he is liable to be prosecuted for the offence under Section 276-CC of the Act. Since he has not filed the returns in time, mere payment of interest/penalty will not absolve his criminal liability. Hence, the trial Court has committed error in acquitting the respondent-accused. The appellant-Income Tax Department has proved that the respondent-accused is guilty of the offence under Section 276-CC of the Income Tax Act, beyond reasonable doubt. The respondent-accused is guilty of the offence under Section 276-CC of the Income Tax Act. Therefore, he is liable to be convicted for the offence under Section 276-CC of the Income Tax Act.
28. In fine,
(a) the Criminal Appeals filed by the appellant-Income Tax Department, are allowed.
(b) The impugned judgments of acquittal passed by the trial Court are hereby set aside.
(c) The respondent-accused is convicted for the offence under Section 276-CC of the Income Tax Act.
29. To question the respondent-accused regarding the sentence for the said conviction under Section 276-CC of the Income Tax Act, Registry is directed to post the Criminal Appeals on 18-2-2010 under the caption "regarding questioning the respondent-accused".
cs To
1. The First Additional District Judge-cum-
Chief Judicial Magistrate, Coimbatore.
2. Deputy Commissioner of Income-tax, Central Circle-II, Coimbatore