Delhi District Court
Ito vs Naresh Kumar Jaggi on 3 March, 2015
IN THE COURT OF SH. DEVENDRA KUMAR SHARMA
ADDL CHIEF METROPOLITAN MAGISTRATE (Spl. Acts) CENTRAL
TIS HAZARI COURTS, DELHI
ITO vs Naresh Kumar Jaggi
U/s 276CC of Income Tax Act
CC No.137/4
JUDGMENT
(a)Serial no. of the case : 02401R0133162011
(b)Date of commission of offence : Assessment Year 200910
(c)Name of complainant : Sh. Nitin Garg, ACIT
Central Circle11, IT Department,
Jhandewalan, New Delhi
(d)Name, parentage, residence: Naresh Kumar Jaggi
F11/16, Model TownII,
New Delhi
(e)Offence complained of/ proved : U/s 276CC of Income Tax Act, 1961
(f)Plea of accused : Pleaded not guilty
(g)Final order : Acquitted
(h)Date of such order : 03.03.2015 Date of Institution of complaint: 19.03.2011 Arguments heard/order reserved: 13.02.2015 Date of Pronouncement of Judgment : 03.03.2015 Brief statement of the reasons for the decision:
1. Sh. Nitin Garg the then Assistant Commissioner of Income Tax filed the present complaint u/s 276CC of the Income Tax Act, 1961 (for short the 'Act') for the Assessment Year (for short 'AY') 200910 against the accused.
2. The substratum of filing of the present criminal complaint case arose after a search operation under section 132 of the Act which was carried out on 19.02.2009 in the case of Koutons Retail India Limited & other group entities. ITO vs Naresh Kumar Jaggi U/s 276CC of Income Tax Act CC No.137/4 1 of 15 Consequent upon said search the complainant department filed three complaints titled as ITO vs Jasjit Singh bearing CC No.02/4, ITO vs Sanjay Sawhney bearing CC No.136/4 and the case in hand. During said search operation, a Memorandum of Understanding (MOU) relating to transaction of sale and purchase of share capital of M/s S.R. Resorts Private Limited was found and seized from the corporate office of M/s Koutons Retail India Limited, 274275, Udyog Vihar, PhaseVI, Sector37, Gurgaon. As per said MOU, accused along Jagjit Singh Jaggi, Bhupinder Pal Singh Sarna and Sanjay Sahni were four sellers on behalf of M/s S.R. Resorts Private Limited. As per Assessment Order Ex.PW1/10, in the post search proceedings, the accused made a declaration of Rs.8.30 crores on account of Long Term Capital Gain u/s 131 of the Act on account of long term capital gains earned by him on sale of stake of share capital in M/s S.R. Resorts Private Limited during Financial Year 200809, relevant to the Assessment Year 200910. Thereafter, a notice u/s 142(1) dated 13.10.2009 was issued to the accused to file his Return of income for the AY 200910 on or before 03.11.2009. Again a letter dated 11.02.2010 stated to have been issued to the accused for compliance of the said notice. Accused sent reply dated 27.07.2010 seeking time to file his Return. Finally, the Return of income was filed on 03.11.2010 declaring taxable income of Rs.6,23,36,790/. The return was processed and assessment was made at an Income of Rs.14,10,35,905/ and thereafter present complaint was filed against the accused for willfully not filing the return of income for AY 200910 within time given in the notice.
ITO vs Naresh Kumar Jaggi U/s 276CC of Income Tax Act CC No.137/4 2 of 15
3. The instant complaint was filed before the court on 19.03.2011. The accused was summoned for the alleged offence. After precharge evidence, a charge was framed against the accused for the offence u/s 276CC of the Act on 03.12.2012 to which he pleaded not guilty and claimed trial.
4. In order to substantiate the allegations, the prosecution examined the complainant Sh. Nitin Garg as PW1 in post charge evidence. The complainant/PW1 reiterated the facts of the complaint and deposed that the accused failed to file his return of income for the AY 200910 in time. The witness further deposed that the return of income was filed on 03.11.2012. The witness proved the complaint as Ex.PW1/1, sanction letter Ex.PW1/2, list of witnesses Ex.PW1/3, notices u/s 142(1) issued to accused, its postal receipt as Ex.PW1/4, Ex.PW1/5 and Ex.PW1/6, replies sent on behalf of accused Ex.PW1/7 and Ex.PW1/8, copy of return of income filed by the accused Ex.PW1/9, Assessment Order along with copy of MOU collectively as Ex.PW1/10 and copy of print out of computation of tax payable by the accused as Ex.PW1/11 and as per Ex.PW1/11 taxable amount is shown to the tune of Rs.1,84,02,860/. The witness was cross examined at length on behalf of the accused.
5. Statement of accused was recorded u/s 313 Cr.P.C. read with section 281 Cr.P.C separately. In his statement, accused denied the material allegations and stated that the assessment order Ex.PW1/10 is under challenge and admitted tax as per his ITR has already been deposited. He has been ITO vs Naresh Kumar Jaggi U/s 276CC of Income Tax Act CC No.137/4 3 of 15 diligently filing his income tax return and depositing tax for the last about 20 years and there has never been any prosecution against him.
6. In support of claim and contentions, accused examined Mr. Sanjay Sawhney and Mr. Jasjit Singh as defence witnesses.
In his statement, DW1 Sh. Sanjay Sawhney deposed that he know accused as accused is one of the shareholder and director in the company M/s S.R. Resorts Pvt. Ltd. and he is also one of the shareholder and director in the said company. Mr. Jasjit Singh met them with a deal to sell their respective share holdings. Proposal for sale of shares in the form of MOU Ex.PW1/10 was also introduced but same could not be executed due to some infirmity. However, after discussions between them, the payments were given to them by Mr. Jasjit Singh and they had no knowledge of purchaser and cheques were issued by different individuals and companies. Since they do not have detail as to who has acquired the shares and to what extent and who had made for what quantum of payment, their income tax return could not be finalized. Lateron, they came to know that the purchaser is Koutons Group who had suffered an income tax raid. Since, the requisite details of payments and share transfer were not available, the return could not be filed.
DW2 Mr. Jasjit Singh deposed more or less on the similar lines of DW1. The witness further deposed that the directors of Koutons Group were all purchasers and had played a fraud upon them and also did not deposit TDS that was deducted from their payment.
ITO vs Naresh Kumar Jaggi U/s 276CC of Income Tax Act CC No.137/4 4 of 15
7. I have heard the final arguments on behalf of both the parties and gone through the relevant records. I have also considered the relevant provisions of the Income Tax Act and written arguments filed on behalf of the parties.
8. The relevant provisions of section 276CC which is reproduced below for ready reference: [276CC. Failure to furnish returns of income. If a person willfully fails to furnish in due [the return of fringe benefits which he is required to furnish under subsection (1) of section 115WDE or by notice given under subsection (2) of the said section or section 115WH or] time the return of income which he is required to furnish under subsection (1) of section 139 or by notice given under [clause (i) of subsection (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, which 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 this section for failure to furnish in due time [return of fringe benefits under subsection (1) of section 115 WD or return of income under subsection (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 1 st 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.] ITO vs Naresh Kumar Jaggi U/s 276CC of Income Tax Act CC No.137/4 5 of 15
9. It is argued by the learned counsel for the complainant that accused has failed to file the return in due time as required u/s 139(1) of the Act or in response to notice u/s 142(1) of the Act within the time given in the notice. Said notice was also not challenged and therefore, accused may be punished as per law. In support of claim and contentions reliance is placed upon the judgments reported in (i) Parkash Nath Sharma vs. CIT (2004) 266 ITR 0001 (SC) (ii) ACIT vs Nilofar Currimbhoy (2013) 35 Taxmann.com99 (Delhi) (iii) V.P. Punj vs. ACIT 253 ITR 369 (Delhi) and (iv) Sasi Enterprises vs. ACIT (SC).
10.Apart from several other arguments, learned defence counsel has vehemently argued following arguments:
(a)that the effective penalty provisions for not filing the return in time has to be imposed u/s 271F of the Act but the AO has not initiated or imposed the penalty under the said section. This shows the mindset of the AO. Since the accused has explained reasonable cause for delay in filing the return in time and due to this the AO has not initiated any penalty proceedings u/s 271F of the Act.
(b)That during the course of cross examination u/s 311 Cr.P.C. PW1 informed that that AY 200910 does not fall under the search period as defined u/s 153C of the Act and due to this he framed the assessment order under the regular provisions of the Act and passed the order u/s 143(3) of the Act. Whereas the AY200910 falls under the search period as defined u/s 153C of the Act because the search was conducted on 19.02.2009 and the AO have had the ITO vs Naresh Kumar Jaggi U/s 276CC of Income Tax Act CC No.137/4 6 of 15 jurisdiction over the case of the accused on 05.06.2009 when the case was centralized and thus, the assessment ought to have been made u/s 153C of the Act and not under section 143(3) of the Act.
(c)That the notice was required to be given under u/s 153C r/w section 153A of the Act for filing the return of income but no such notice was given and notice u/s 142(2) of the Act was issued which is illegal and not maintainable under the law. The accused has also filed an appeal appeal before the CIT raising said legal issue/validity of the assessment order as the assessment order ought to have been passed u/s 153C of the Act and not under section 143(3) of the Act. It is also argued that in one of the connected matter titled as ITO vs Jagjit Singh bearing CC No.02/04, learned ITAT vide its order dated 05.11.2014 bearing no. ITA No.1436/D/2012 of the IT Act has already held the impugned assessment order (Ex.PW1/13 of that date case) illegal as the same was not passed u/s 153C of the Act and quashed the assessment order observing the notice sent u/s 142(2) of the Act, as illegal.
11.It is also argued that the accused made a declaration to the IT Department even when he was not having the TDS certificate to show his bonafide and in support of claim and contentions, reliance is placed upon the judgments reported in "K.C. Builders & Anr. vs. Assistant Commissioner of Income Tax (2004) ITR 562 (SC)" and DCIT vs M. Sundran (2010) 322 ITR 196 (Madras)".
12.Present complaint was filed by the complainant u/s 276CC for non filing the return of income for the AY 200910 within the stipulated period. In view of ITO vs Naresh Kumar Jaggi U/s 276CC of Income Tax Act CC No.137/4 7 of 15 section 139(1) of the Act, every person, if his total income during the previous year exceeds the maximum amount which is chargeable to incometax, is bound to furnish a return of his income in the prescribed form and verified in the prescribed manner before the expiry of four months from the end of the previous year or before the 30th day of June of the assessment year which ever is later. Admittedly, in this case the accused has not filed the return of income in time. Late filing of return is not disputed at all. In his statement recorded u/s 313 Cr.P.C as well as in his defence evidence accused admitted that there is delay in filing return of income and explained the reasons for late filing of return of on income due to nonissuance of TDS by the deductor. PW1 has deposed that as the accused did not file the return within time u/s 139(1) of the I.T. Act, several notices u/s 142(1) of the Act was issued but the accused did not file the return in the given time and the return was filed on 03.11.2010.
13.To prosecute any person u/s 276CC of the Act, there must be regular assessment as defined u/s 2(40) of the Act and assessment is required to be made under sub section 3 of section 143 or 144. But the case in hand is covered u/s 153C of the Act as the present case was filed after search operation.
14.The definition of Regular Assessment is contained in section 2 (40) of the Act which is reproduced below: "Regular Assessment means the assessment made under [sub section (3) of section 143] or 144".
ITO vs Naresh Kumar Jaggi U/s 276CC of Income Tax Act CC No.137/4 8 of 15
15.Section 143 of the Act contains the provisions regarding the assessment of the Income Tax Return filed by the assessee as mentioned: [143. Assessment. [(1) Where a return has been made under section 139, or in response to a notice under subsection (1) of section 142, such return shall be processed in the following manner, namely:
(a) the total income or loss shall be computed after making the following adjustments, namely:
(i) any arithmetical error in the return; or
(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;
(b) the tax and interest, if any, shall be computed on the basis of the total income computed under clause (a);
(c) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax and interest, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self assessment and any amount paid otherwise by way of tax or interest;
(d) an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to the assessee under clause (c); and
(e) the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee:
Provided that an intimation shall also be sent to the assessee in a case where the loss declared in the return by the assessee is adjusted but no tax or interest is payable by, or no refund is due to, him:
Provided further that no intimation under this subsection shall be sent after the expiry of one year from the end of the financial year in which the return is made.
Explanation. For the purpose of of this subsection,
(a) "an incorrect claim apparent from any information in the return"
shall mean a claim, on the basis of an entry, in the return, i. of an item, which is inconsistent with another entry of the same ITO vs Naresh Kumar Jaggi U/s 276CC of Income Tax Act CC No.137/4 9 of 15 or some other item in such return;
ii. in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or iii. in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction;
(b) the acknowledgment of the return shall be deemed to be the intimation in a case where no sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been made under clause(a).
[(2) Where a return has been furnished under section 139, or in response to a notice under subsection (1) of section 142, the Assessing Officer shall, i. where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely in support of such claim:
[Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003;] ii. notwithstanding anything contained in clause (i), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return:
[Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.] [(3) On the day specified in the notice, i. issued under clause (i) of subsection (2), or as soon afterwards as may be, after hearing such evidence and after taking into ITO vs Naresh Kumar Jaggi U/s 276CC of Income Tax Act CC No.137/4 10 of 15 account may be, after hearing such evidence and after taking into account such particulars as the assessee may produce, the Assessing Officer shall, by an order in writing, allow or reject the claim or claims specified in such notice and make an assessment determining the total income or loss accordingly, and determine the sum payable by the assessee on the basis of such assessment;
ii. issued under clause (ii) of subsection (2), or as soon afterwords as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment:] [(4) Where a regular assessment under subsection (3) of this section or section 144 is made,
(a) any tax or interest paid by the assessee under subsection (1) shall be deemed to have been paid towards such regular assessment;
(b) if no refund is due on regular assessment or the amount refunded under subsection (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and he provisions of this Act shall apply accordingly.
16. Section 144 relevant for the decision of this case deals with:
144. Best Judgment assessment. [1] If any person
(a) fails to make the return required [under subsection (1) of section 139] and has not made a return or a revised return under sub section (4) or subsection (5) of that section, or
(b) fails to comply with all the terms of a notice issued under sub section (1) of section 142 [or fails to comply with a direction issued under subsection (2A) of that section], or
(c) having made a return, fails to comply with all the terms of a notice issued under subsection (2) of section 143, ITO vs Naresh Kumar Jaggi U/s 276CC of Income Tax Act CC No.137/4 11 of 15 the [Assessing Officer], after taking into account all relevant material which the [Assessing Officer] has gathered, [shall, after giving the assessee an opportunity of being heard, make the assessment] of the total income or loss to the best of his judgment and determine the sum payable by the assessee [***] on the basis of such assessment:
[Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment:
Provided further that it shall not be necessary to give such opportunity in a case where a notice under subsection (1) of section 142 has been issued prior to the making of an assessment under this section.]
17.Relevant provisions of section 153C of the Act is reproduced below for ready reference: [153C. Assessment of income of any other person. [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewelery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be haded over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A] [(2)] Where books of account or documents or assets seized or requisitioned as referred to in subsection (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date of furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year
(a) no return of income has been furnished by such other person and ITO vs Naresh Kumar Jaggi U/s 276CC of Income Tax Act CC No.137/4 12 of 15 no notice under subsection (1) of section 142 has been issued to him, or
(b) a return of income has been furnished by such other person but no notice under subsection (2) of section 143 has been served and limitation of serving the notice under subsection (2) of section 143 has expired, or
(c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.]
18.From bare perusal of this section, it is clear that assessment or reassessment of income of any other person u/s 153C of the Act than the person searched, will be made in accordance with the provisions of the section 153A. As per section 153A(1), the AO has to issue notice calling for the return of income in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted and assessed or reassessed the total income of the assessee. In this case search was conducted on 19.02.2009 and the AO have had the jurisdiction over the case of the accused on 05.06.2009 when the case was centralized and thus, the assessment order ought to have been made u/s 153C of the Act and not under section 143(3) of the Act. On this ground alone present complaint for prosecution of the case u/s 276CC of the Act is not maintainable. Furthermore, vide order dated 05.11.2014 bearing no. ITA No.1436/D/2012, the learned ITAT while allowing the appeal filed by Mr. Jasjit Singh in CC No.02/4 (supra) has already held the impugned assessment order (Ex.PW1/13) of that case illegal ITO vs Naresh Kumar Jaggi U/s 276CC of Income Tax Act CC No.137/4 13 of 15 as the same was not passed u/s 153C of the Act and quashed the assessment order.
19.During arguments, learned defence counsel has taken one more specific stand that since the TDS certificate from the deductor M/s Koutons Limited has not been issued and therefore, return could not be filed in time. The basic provisions of the TDS is mentioned in ChapterXII of the Act. From the bare perusal of TDS provisions, it is clear that the responsibility is on the part of the payer to deduct TDS and if they fail to deduct or deduct but fail to deposit or fail to issue the TDS certificate, then under the Act, deductor will be liable for penalty or prosecution for the offence.
20.In view of the aforesaid legal provisions mentioned above, it is clear that willful failure to furnish the returns u/s 276CC required to be furnished, shall be punishable only if the tax payable by him on the total income determined on regular assessment as reduced by advance tax, if any, paid, and any tax deducted at source, does not exceed Rs.3000/. However, from the aforesaid discussions, it is clear that the AO has erred in judging the nature and category of the case and wrongly issued notice u/s 142(1) of the Act and framed assessment order u/s 143 of the Act while the case of the accused is exclusively covered u/s 153C of the Act and not under section 143(3) of the Act. Thus, the notice u/s 142(2) of the Act issued to the accused is illegal and not maintainable under the law and after quashing of the assessment order as well as holding notice u/s 142(1) of the Act by the Highest Appellate Authority ITO vs Naresh Kumar Jaggi U/s 276CC of Income Tax Act CC No.137/4 14 of 15 in identical matter of Jasjit Singh, no question of noncompliance of the provisions of section 139 of the Act or notice u/s 142(1) of the Act survive at all in present case as well. In such circumstances, accused can not be held liable for the offence u/s 276CC of the Act.
21.Keeping in view the facts and circumstances of the case and aforesaid discussions, this court is of the considered opinion that the complainant has failed to prove the case against the accused beyond reasonable doubt. The present complaint is not maintainable u/s 276CC of the I.T. Act. The complaint is, therefore, dismissed. Accused is acquitted for the offence punishable u/s 276CC of the Income Tax Act. His bail bond stands cancelled. Surety stands discharged. Original documents, if any, be returned to the rightful claimant after endorsement cancelled thereupon. Accused is directed to furnish fresh bail bond in terms of section 437A Cr.P.C. File be consigned to the record room after 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 03.03.2015 (Total number of page 15) (One spare copy attached) ITO vs Naresh Kumar Jaggi U/s 276CC of Income Tax Act CC No.137/4 15 of 15