Builders & Anr Vs. The Assistant Commissioner of Income Tax  Insc 51
(28 January 2004)
Agrawal & Dr. Ar. Lakshmanan. Dr. Ar. Lakshmanan, J.
appeals are directed against the final judgment passed by the High Court of
Judicature at Madras in Criminal Revision Case No. 508
of 1997 and Criminal Misc. Petition No. 3411 of 1997 dated 13.08.1997 by which
the High Court dismissed the criminal revision under Section 397 read with
Section 401 of the Code of Criminal Procedure, 1973. The facts giving rise to
these appeals are as under:- The appellant is a partnership firm engaged in the
business of construction and sale of flats. The construction of some of the
projects started in the year 1981-82 and was completed in the year 1986-87. The
appellants filed the returns of income disclosing the assessed income as the
income. The cost of construction was shown as under:- Assessment Year 1983-84 -
Rs.4,72,860/- Assessment year 1984-85 - Rs.5,77,590/- Assessment year 1985-86 -
Rs.7,28,531/- Assessment year 1986-87 - Rs.7,03,002/- The appellants filed
revised returns as per the approved valuer's report for assessment years
1983-84 to 1986-87 on 04.11.1987 in the following manner as the earlier returns
were found to be defective with regard to cost of construction.
year 1983-84 - Rs.8,76,000/- Assessment year 1984-85 - Rs.5,42,000/- Assessment
year 1985-86 - Rs.13,47,229/- Assessment year 1986-87 - Rs.10,37,920/- The
revised returns were accepted by the Department and assessments were completed.
respondent/assessing authority treated the difference between the income as per
original return and revised income as concealed income. The Assistant
Commissioner of Income-Tax levied penalties under Section 271(1)(c) of the
Income Tax Act, 1961 (hereinafter referred to as "the Act") for all
the aforesaid four assessment years. Accordingly, penalty proceedings were
initiated. The first appeal against the order of penalties levied for
concealment of income against the appellants were confirmed by the C.I.T.
(Appeals). As per the directions of the Chief Commissioner of Income Tax, four
complaints were filed in the Court of Additional Chief Metropolitan Magistrate,
Egmore, Chennai for offences under Sections 276C (2), 278B of the Act and
Sections 120B, 34, 193, 196 and 420 of the Indian Penal Code.
gist of the prosecution case was that a conspiracy was entered into between the
accused/appellants and they filed false returns of income before the Department
which led to concealment of income to evade tax. On 24.10.1996, the appellants
had preferred an appeal before the Income-Tax Appellate Tribunal against the
consolidated order passed by C.I.T. (Appeals) on 18.07.1990 for assessment
years 1983-84 to 1986- 87. It was contended that the Assessing Officer referred
the matter relating to valuation of the Departmental Valuation Cell which
reportedly estimated the cost of construction at Rs.50,96,750/-. If that were
to be adopted then the income would result in a loss. It was contended that the
Department has not brought out any material to show that there was concealment
of income. The Tribunal, after verifying the records, found that the additions
were on the basis of settlement between the assessees and the Department and
represents voluntary offer made by the assessee and, therefore, in such
circumstances the Tribunal applying the principles laid down by this Court in
the Case 705 held that there was no concealment of income by the assessee and
accordingly the penalties were cancelled and allowed the appeals. The
appellants thereupon moved an application before the Additional Chief
Metropolitan Magistrate, (E.O.II), Egmore, Chennai by filing M.P. No.614 of
1996 in C.C. No. 425 of 1990 praying the Court for adjourning the proceedings
in the above case to enable them to move the necessary petition and to file the
copy of the order of the Tribunal dated 24.10.1996 which allowed the appeals
preferred by the Ist accused against the levy of penalty upon them.
the learned Magistrate permitted the appellants to mark the order of the
Tribunal in evidence at the appropriate stage of trial for which prosecution
has no objection.
effect to the Income Tax Appellate Tribunal's order in I.T.A. Nos. 3129- 3132,
the penalties levied under Section 271(1)(c) of the Act were cancelled by the
respondent on 27.01.1997. In the meanwhile, the Revenue Department filed an
application under Section 256(1) of the Act for reference of the question of
law which had arisen out of Income Tax Appellate Tribunal's Order dated
24.10.1996. The application of the Revenue Department was rejected. Thereupon,
the appellants preferred a Criminal Revision under Sections 397 and 401 of the
Criminal Procedure Code, 1973 before the High Court for setting aside the order
passed by the Additional Chief Metropolitan Magistrate dated 21.7.1997. The
learned Single Judge of the Madras High Court rejected the criminal revision
vide his impugned order holding that the Income Tax Appellate Tribunal's order
was not applicable since it was not marked as defence document whereas the fact
remains that the order was passed at a subsequent date. Before the High Court,
the decision of this Court in K.T.M.S. Court
after observing that the observation in the case of K.T.M.S. Mohammed & Anr.
(supra) helps the appellants to the extent that the trial Court should have
given due regard to the Tribunal's order but clearly made an error by
distinguishing the said judgment on the ground that the Tribunal's order was
marked as a defence document whereas in the instant case it was not marked as a
defence document. Whereas the fact remains that the defence documents were
marked earlier to the order dated 24.10.1996 passed by the Appellate Tribunal
which was immediately thereafter brought to the notice of the trial Court even
by the prosecution in their own application.
have perused the pleadings, the order passed by the High Court, copy of the
complaints, copy of the order dated 24.10.1996 passed by the Income Tax
Appellate Tribunal, Madras, order dated 11.12.1996 passed by the Additional
Chief Metropolitan Magistrate, Chennai, copy of the proceedings of the Income
Tax Officer cancelling the penalty levied under Section 271(1)(c) of the Act,
copy of the application filed on 12.12.1996 by the appellants and copy of the
order passed thereupon on 21.07.1997 and copy of the order dated 4.8.1997
passed by the ITAT Bench Madras in Reference Application Nos. 32-35 for
assessment years 1983-84 to 1986-87. We also perused the relevant provisions
under the Income Tax Act, 1961 and of the Indian Penal Code.
above pleadings and facts and circumstances of the case, the following
questions of law arise for consideration by this Court:-
Whether a penalty imposed under Section 271 (1) (c) of the Income Tax Act and
prosecution under Section 276C of the Income Tax Act are simultaneous?
Whether the Criminal prosecution gets quashed automatically when the Income Tax
Appellate Tribunal which is the final Court on the facts comes to the
conclusion that there is no concealment of income, since no offence survives
under the Income Tax Act thereafter?
Whether the High Court was justified in dismissing the Criminal Revision
Petition vide its impugned order ignoring the settled law as laid down by this
Court that the finding of the Appellate Tribunal was conclusive and the
prosecution cannot be sustained since the penalty after having been cancelled
by the complainant following the Income Tax Appellate Tribunal's Order no
offence survives under the Income Tax Act and thus the quashing of the
prosecution is automatic?
Whether the finding of the Income Tax Appellate Tribunal is binding upon the
Criminal Court in view of the fact that the Chief Commissioner and the
Assessing Officer who initiated the prosecution under Section 276C (1) had no
right to overrule the order of the Income Tax Appellate Tribunal. More so when
the Income Tax Officer giving the effect to the order cancelled the penalty
levied under Section 271 (1) (c).
Whether the High Court's order is liable to be set aside in view of the errors
apparent on record.
heard Mr. Ajit Kumar Sinha, learned counsel appearing for the appellants and
Mr. R.P. Bhatt, learned senior counsel appearing for the respondent.
counsel appearing for the appellants submitted that the learned single Judge of
the High Court has failed to appreciate that under Section 254 of the Act an
order by the Income Tax Appellate Tribunal not only superseded the order passed
by the Assessing Officer under Section 143(3) of the Act but also set aside the
finding of the Assessing Officer under the provisions of the Act. He further
submitted that the High Court has failed to appreciate that both the penalty
proceedings and the prosecution are simultaneous and any prosecution launched
on the basis of the order of the Assessing Officer under Section 143(3) of the
Act became void and it knocks down the very basis for prosecution under Section
276C of the Act and it is in this background the Assessing Officer giving
effect to the order of the Appellate Tribunal, cancelled the penalty levied.
Learned counsel further submitted that the learned single Judge has failed to
see that the findings of the appellate Tribunal that there was no concealment
of income and the same became conclusive and hence prosecution could not have
been sustained. The High Court has also further failed to see that even the
application for reference by the Revenue Department under Section 256(1) of the
Act was rejected on the ground that it is a pure question of fact and no question
of law was involved. It was also further contended that the High Court failed
to note that the order passed by the income Tax Appellate Tribunal though
marked as Exhibit through the defendants witness was not considered by the
Bhatt, learned senior counsel appearing for the respondent, vehemently opposed
the contentions raised by learned counsel for the appellants. He submitted that
the penalty proceedings and the prosecution proceedings are clearly independent
and that the result of proceedings under the Act is not binding on the Criminal
Court and that the Criminal Court has to judge the case independently on the
evidence placed before it. He would further submit that the complaints were
filed in March, 1990 under Sections 276C (1), 277 & 278B of the Act before
the Additional Chief Metropolitan Magistrate which were registered as E.O.C.C.
Nos. 422 to 425 of 1990, charges were framed against the accused firm and its
partners in September, 1993 and by October, 1996, nine prosecution witnesses
had already been cross-examined and the prosecution witness No.10 was examined
on 8.10.1996. At this stage, the appellants filed a petition for dropping the
prosecution proceedings and, therefore, the High Court was justified in
dismissing the petition of the appellants on the facts and circumstances of the
case. It was further submitted that the discretion should be exercised
judicially and in such a way as not to frustrate the object of the criminal
proceedings and, therefore, the High Court is justified in dismissing the
petition of the appellants.
his submissions, learned senior counsel submitted that on the facts and
circumstances of the case, the order of the High Court is neither erroneous nor
against the principles of law.
proceeding to consider the rival submissions, it is beneficial to refer to some
important provisions of the Act under which the proceedings have been initiated:-
Section 147 of the Act deals with income escaping assessment. Section 148 deals
with issue of notice where income has escaped assessment. Section 254 deals
with orders of Appellate Tribunal. Section 256 deals with statement of case to
the High Court (reference). Section 271 (1)(c) reads as follows:- "Section
271. Failure to furnish returns, comply with notices, concealment of income,
the Assessing Officer or the Commissioner(Appeals) in the course of any
proceedings under this Act, is satisfied that any person
concealed the particulars of his income or furnished inaccurate particulars of
such income, he may direct that such person shall pay by way of penalty, -
in the cases referred to in clause (c), in addition to any tax payable by him,
a sum which shall not be less than, but which shall not exceed three times, the
amount of tax sought to be evaded by reason of the concealment of particulars
of his income or the furnishing of inaccurate particulars of such income."
One of the amendments made to the abovementioned provisions is the omission of
the word "deliberately" from the expression "deliberately
furnished inaccurate particulars of such income". It is implicit in the
word "concealed" that there has been a deliberate act on the part of
the assessee. The meaning of the word "concealment" as found in
Shorter Oxford English Dictionary, 3rd Edition, Volume I, is as follows:-
"In law, the intentional suppression of truth or fact known, to the injury
or prejudice of another." The word "concealment" inherently carried
with it the element of mens rea.
the mere fact that some figure or some particulars have been disclosed by
itself, even if takes out the case from the purview of non-disclosure, it
cannot by itself take out the case from the purview of furnishing inaccurate
particulars. Mere omission from the return of an item of receipt does neither
amount to concealment nor deliberate furnishing of inaccurate particulars of
income unless and until there is some evidence to show or some circumstances
found from which it can be gathered that the omission was attributable to an
intention or desire on the part of the assessee to hide or conceal the income
so as to avoid the imposition of tax thereon. In order that a penalty under
Section 271(1) (iii) may be imposed, it has to be proved that the assessee has
consciously made the concealment or furnished inaccurate particulars of his
the additions made in the assessment order, on the basis of which penalty for
concealment was levied, are deleted, there remains no basis at all for levying
the penalty for concealment and, therefore, in such a case no such penalty can
survive and the same is liable to be cancelled as in the instant case.
Ordinarily, penalty cannot stand if the assessment itself is set aside. Where
an order of assessment or reassessment on the basis of which penalty has been
levied on the assessee has itself been finally set aside or cancelled by the
Tribunal or otherwise, the penalty cannot stand by itself and the same is
liable to be cancelled as in the instant case ordered by the Tribunal and later
cancellation of penalty by the authorities.
276C of the Act deals with wilful attempt to evade tax, etc. Section 277 deals
with false statement in verification, etc. and Section 278B deals with the
offences by companies.
complaints were filed by the Assistant Commissioner of Income Tax, Central
Circle III(1) against the appellants on the basis of the sanction ordered by
the Commissioner of Income Tax under Section 279(1) of the Act for the
prosecution of the accused/appellants for the offences punishable under
Sections 276 C (1), 277 and 278B of the Act.. It is stated in the complaint
that the accounts and documents seized during the course of search showed that
the accused had suppressed the true receipts from sale of flats, action under
Section 148 of the Act was taken and in response to the said notice, the return
of the respective accounts were delivered to the Income Tax Officer which was
signed and verified by the accused concerned and that the Income Tax Officer
further made the enquiries and investigations and summoned various persons for
their statements. When the enquiry was in progress, the accused knowing that
the suppression of receipts has been found out by the Income Tax Officer filed
another revised return on 4.11.1987 showing different income as against the
original return. It was submitted that the appellants with a view to wilfully
evade tax and to defraud the exchequer of its legitimate revenue and to deceive
the Income Tax Officer, acting in consort and in furtherance of the common
intention, all the accused conspired to fabricate false evidence in the form of
Books of Accounts containing false entries with a view to using them as genuine
evidence in Income Tax assessment proceedings for the assessment year 1983-84.
Thus it was stated that the appellants had committed offence punishable under
the provisions above-quoted.
consolidated order was passed by the Commissioner of Income Tax (Appeals) on
18.7.1990 for the assessment years 1983-84 to 1986-87. In all these appeals,
the assessee disputed the imposition of penalty under Section 271(1)(c) of the
Act. The assessments were initially completed under Section 143(3) of the Act.
On 20.3.1986, the business premises of the firm as well as the residential
premises of two of its partners were searched under Section 132 of the Act. In
response to the same, the assessee filed the returns of income disclosing the
income assessed as the income.
filing the returns in accordance with these books, the assessee came to know
that the Books of Accounts were defective with regard to the cost of
on 04.11.1987, the assessee filed a revised return estimating the cost of
construction on the basis of the approved valuer's report. The revised returns
were accepted by the Department and the assessments were completed. The
difference between the income as per the original returns and the income shown
in the revised returns was treated as concealed income and the Assessing
Officer has levied the penalty under Section 271(1)(c) of the Act in all these
years. The assessees were unsuccessful before the Commissioner of Income Tax
(Appeals). Therefore, the assessee filed the appeals before the Income Tax
Appellate Tribunal, Madras in I.T.A. Nos. 3129 to 3132/Mds/90.
Before the Tribunal, it was pointed out that since there were defects in the
Books of Accounts with regard to the cost of construction, the assessee
voluntarily referred the matter to the approved valuer and has revised the
returns accordingly. All this was done with a view to buy peace with the
Department and the returned income does not represent any concealed income. It
was also pointed out by the learned counsel that the Department has not made
any addition beyond what has been returned by the assessee. In other words, it
was pointed out that the returned income has been accepted by the Department
and there is no concealment of any income. It was stressed by the counsel that
the returns were revised in pursuance of the settlement with the Department
only to buy peace. Learned counsel appearing for the Department, on the other
hand, strongly supported the imposition of penalty in the facts and
circumstances of the case. The Tribunal allowed the appeal and cancelled the
penalty. It is useful to reproduce the concluding part of the order passed by
the Tribunal which is as under:
have carefully considered the rival submissions and perused the materials
brought on record. Although there is a discussion by the Assessing Officer that
the assessee has received some on-money in respect of sale of flats but he has
not mentioned what is the exact quantum of such on-money receipts. The mere
fact that though the receipt of on-money is a prevalent practice in the case of
transaction in flats, it cannot be presumed that there was a concealment of
income or evasion of taxes. The Department must bring out material to indicate
the actual concealment of income. The whole discussions in the assessment order
clearly shows that the Department has proceeded only on the basis of the cost
of construction. At the stage when enquiries were made, the assessee has got
the valuation done by an approved valuer and filed the revised returns and paid
the taxes thereon. This conduct clearly shows that there was some sort of
settlement between the assessee and the Department. The assessment of income is
based purely on estimate basis. Without adequate materials, it is impossible to
accept the Department's contention that some part of the estimated income
represents concealed income. The assessee has filed the revised returns. By so
revising the returns, the assessee has substituted the income of the original
return with that of the revised returns vis-`-vis the revised return there is no
concealment of any income. The department has accepted all these revised income
which clearly shows that the assessments are based on the basis of the
voluntary offer made by the assessee. There is no material brought before us
even at this stage to show that there was any concealment of income by the assessee
and therefore find force in the stand taken by the assessee that the entire
revision of income was as a result of voluntary offer made by the assessee.
Keeping in view the ratio laid down by the Supreme Court in the case of Sir Shadilal
Sugar and General Mills Ltd. And Another vs. CIT (165 ITR 705), we hold that in
the facts and circumstances of the case there is no concealment of income by
the assessee. Accordingly, the penalties are cancelled.
result, the appeals are allowed.
(G. Chowdhury) (G.E.Veerabhadrappa) Judicial Member Accountant Member Madras,
Dated, the 24th October, 1996" (emphasis supplied) The above order of the
Tribunal was not appealed against and thus has become final and conclusive.
Additional Chief Metropolitan Magistrate, on an application moved by the
appellants, permitted the appellants to mark the copy of the order of the
Tribunal dated 24.10.1996 in evidence at the appropriate stage of trial.
also very useful, in the present context, to refer to the proceedings of the
Income Tax Officer, City Ward-II (2), Chennai cancelling the penalty. One
sample order reads thus:- "GIR.No: 279-K/CW.II(2)/83-84 Dt: 27-1-97 Sub:
Penalty under section 271(1)(c) Asst. year 1983-84 in the case of M/s K.C.
Builders, 26, Nynar Nadar Road, Chennai 600 004 reg Ref: I.T.A.T's Order in I.T.A.No:
3129 to 3132/Mds/90 dt. 24-10-1996.
:O R D
E R :
effect to the Income-tax Appellate Tribunal's Order in I.T.A.No: 3129 to 3132
the penalty levied under section 271 (1)(c) is hereby cancelled.
Rs.1,43,181/- is hereby cancelled." Learned counsel appearing for the
appellants cited the following decisions in support of his submissions at the
time of hearing:- Officer, Central Circle, Amritsar, (1982) 2 SCC 543. In this
case, the registration was cancelled on the ground that the firm was not
genuine and prosecution initiated for filing false return. The Tribunal
rendered the finding that the firm to be genuine and on the basis of the
finding of the Tribunal, this Court held that the prosecution must be quashed.
The short judgment reads thus:- "Heard counsel, special leave granted. In
view of the finding recorded by the Income Tax Appellate Tribunal that it was
clear on the appraisal of the entire material on the record that Shrimati Janak
Rani was a partner of the assessee firm and that the firm was a genuine firm,
we do not see how the assessee can be prosecuted for filing false returns. We,
accordingly, allow this appeal and quash the prosecution.
will be no order as to costs" Supp(2) SCC 724, the prosecution was levelled
against the assessee for making false statement. The Assessing Authority held
that the assessee had intentionally concealed his income derived from `Y'
company which belonged to him, initiating prosecution against him. The
appellant filed the appeal against the assessment order and the Tribunal set
aside the assessment holding that there was no material to hold that `Y'
company belonged to the assessee. The assessee thereupon filed a petition
before the Magistrate to drop the criminal proceedings and the application
before the High Court under Section 482 to quash the criminal proceedings which
were dismissed. On appeal, this Court held that the whole question was whether
the appellant made a false statement regarding the income which according to
the assessing authority had escaped assessment and so far as this issue was
concerned, the finding of the appellate Tribunal was conclusive and hence the
prosecution cannot be sustained.
this Court quashed the criminal proceedings and allowed the appeal filed by the
above judgment squarely applies to the facts and circumstances of the case on
hand. In this case also, similarly, the application was moved by the assessee
before the Magistrate to drop the criminal proceedings which were dismissed by
the Magistrate and the High Court also on a petition filed under Sections 397
and 401 of the Code of Criminal Procedure, 1973 to revise the order of the
Additional Chief Metropolitan Magistrate has also dismissed the same and
refused to refer to the order passed by the competent Tribunal. As held by this
Court, the High Court is not justified in dismissing the criminal revision vide
its judgment ignoring the settled law as laid down by this Court that the
finding of the appellate Tribunal was conclusive and the prosecution cannot be
sustained since the penalty after having been cancelled by the complainant
following the appellate Tribunal's order, no offence survives under the Income
Tax Act and thus quashing of prosecution is automatic.
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. Nos. 3129-3132. It is settled law that levy of penalties 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.
opinion, the appellants cannot be made to suffer and face the rigorous of
criminal trial when the same cannot be sustained in the eyes of law because the
entire prosecution in view of a conclusive finding of the Income Tax 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 supercedes the
order of the Assessing Officer under Section 143(3) more so when the Assessing
Officer cancelled the penalty levied.
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 finding 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 cannot be
proceeded with by the complainant and further proceedings will be illegal and
without jurisdiction. The Assistant Commissioner of Income Tax 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 cannot survive for further consideration. In
our view, the High Court has taken the 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 Tribunal exhibited as a defence document
inasmuch as the passing of the order as aforementioned is unsustainable and
same view as that of ours has been taken by this Court and the various other
High Courts in catena of decisions.
Commissioner of Income-Tax vs. Bahri Brothers Pvt. Ltd.  167 I.T.R. 880
"Held, that the penalty was based on the earlier assessment order wherein
the amount representing cash credits was included. Since that order had been
set aside and the cash credits deleted from the assessment, the consequent
order of penalty had been rightly cancelled."
Commissioner of Income-Tax vs. Bhagwan Ltd.  168 I.T.R. 846 "Held,
that the orders of reassessment on the basis of which penalties were levied had
been set aside by the Tribunal. Hence, the order of penalty could not stand by
itself. The cancellation of penalty was justified." 3. Commissioner of
Income-Tax vs. Bengal Jute Mills Co. Ltd.  174 I.T.R. 402 "Where
penalty was imposed solely on the basis of an addition of Rs. 4 lakhs to the assessee's
total income and the addition was deleted by the Tribunal:
that it was evident from the material on record that the penalty had been
imposed solely on the basis of the addition of Rs. 4 lakhs to the assessee's
income. If the addition was deleted, the charge of concealment of income could
not be sustained. Imposition of penalty under section 271(1)(c) of the
Income-tax Act, 1961, was, therefore, not valid."
Commissioner of Income-Tax vs. Madanlal Sohanlal  176 I.T.R. 189
"Penalty cannot stand on its own independently of the assessment.
in an appeal against the assessment reopened under section 147 of the
Income-tax Act, 1961, the Appellate Tribunal deleted the addition on account of
deemed dividend under section 12(1B) read with section 2(6A)(e) of the Indian
Income-tax Act, 1922, the deemed dividend which had been deleted could not form
the subject-matter of imposition of penalty under section 271(1)(c) of the
Income-tax Act, 1961, because, the basis for imposition of penalty had ceased
to exist. Therefore, the Tribunal was correct in cancelling the penalty imposed
on account of the addition." 5. Commissioner of Income-Tax vs. Bedi and
Co. (P) Ltd.  183 I.T.R. 59 "Held, that, in view of the conclusion
reached by the High Court that the amount in question was not assessable, there
was no basis for the imposition of penalty. The cancellation of penalty was
Supreme Court has dismissed the special leave petition filed by the Department
against this judgment of the High Court in relation to penalty under section
271(1)(c) arising out of an assessment, wherein the addition of a loan has been
cancelled by the High Court as reported in [ 1983] 144 ITR 352 : See [ 1990]
181 ITR (St.) 19-Ed.]
Commissioner of Income-Tax vs. Agarwalla Brothers  189 I.T.R. 786
the fact a particular construction had not been shown in the accounts of the assessee
was not relevant since this circumstance had not been recorded as one of the
reasons for initiating the proceedings under section 147(a);
the Tribunal had found, after examining the entire record, that there had been
no failure to disclose primary facts on the part of the assessee. The reassessment
was, therefore, not valid;
penalty had been imposed consequential to the re-assessment.
the reassessment had been set aside, the order of the Tribunal cancelling the
penalty levied under section 271(1)(c) of the Act was also legal."
Additional Commissioner of Income-Tax vs. Badri Prasad Kashi Prasad  200
I.T.R. 206 "Held, that the levy of penalty was based on the addition to
income made by the Income-tax Officer. The addition was deleted by the
Tribunal. Hence, the Tribunal was justified in cancelling the penalty."
Commissioner of Income-Tax vs. Roy Durlabhji  211 I.T.R. 470 "Held,
dismissing the application for reference, that the Tribunal had set aside the
penalty on the ground that the additions to income had already been deleted.
Since there was no liability to tax, no penalty could be levied.
Tribunal was justified in cancelling the penalty and no question of law arose
from its order" The very recent judgment in the case of Hira Lal Hari Lal Bhagwati
vs. C.B.I. New Delhi, JT 2003 (4) SC 381,in which one of us (Dr. AR. Lakshmanan,J.)
was a member, this Court while considering the scope of the immunity granted
under the Kar Vivad Scheme - Whether criminal proceedings could be initiated in
respect of declaration filed under the Scheme and accepted by the Excise
Department can proceed further with the prosecution and criminal conspiracy and
cheating against the appellants therein. Allowing the appeals, this Court held
that since the alleged criminal liability stood compounded on settlement with
respect of the civil issues, the FIR was erroneous and unwarranted and,
therefore, the continuation of the proceedings would tantamount to double
jeopardy. This Court further held that the Collector of Customs had exonerated
the appellants there was no warrant for any fresh investigation and prosecution
on a matter which stood settled. Further since no prima facie case of cheating
and criminal conspiracy was made out the process issued is liable to be
quashed. It is to be noticed that as per the Kar Vivad Samadhan Scheme, 1998
whoever is granted the benefit under the said Scheme is granted immunity from
prosecution from any offence under the Customs Act, 1962 including the offence
of evasion of duty. In the circumstances, the complaint filed against the
appellants is unsustainable. This Court further held that under the penal law,
there is no concept of vicarious liability unless the said statute covers the
same within its ambit. In that case, the appellants have been wholly discharged
under the Customs Act, 1962 and the GCS granted immunity from prosecution.
this instant case, the charge of conspiracy has not been proved to bring home
the charge of conspiracy within the ambit of Section 120-B of I.P.C. It is also
settled law that for establishing the offence of cheating, the complainant is
required to show that the accused had fraudulent or dishonest intention at the
time of making promise or misrepresentation. From his making failure to keep up
promise subsequently, such a culpable intention right at the beginning that is
at the time when the promise was made cannot be presumed. As there was absence
of dishonest and fraudulent intention, the question of committing offence under
Section 420 of the I.P.C. does not arise.
High Court without adverting to the above important questions of law involved
in this case and examined them in the proper perspective disposed of the
revisions in a summary manner and hence the impugned orders passed by the High
Court and the learned Magistrate warrant interference.
a well-established principle that the matter which has been adjudicated and
settled by the Tribunal need not be dragged into the criminal courts unless and
until the act of the appellants could have been described as culpable.
the aforesaid discussions and reasons adduced, the questions of law formulated
above are answered accordingly and the appeals stand allowed.