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May 2020

Complaint filed u/s 276C (1) of the Act – Wilful attempt to evade tax – Appeal pending before CIT(A) – Criminal proceedings kept in abeyance

By AJAY R. SINGH
Advocate
Reading Time 4 mins

3. M/s Beaver Estates Pvt. Ltd vs. The Assistant Commissioner of Income Tax Corporate Circle 1(1); OP(Crl.) No. 400 of 2019

Date of order: 23rd October, 2019

(Kerala High Court)

 

[Complaint filed CC No. 65/2015 of Additional Chief Judicial Magistrate (E&O), Ernakulam]

 

Complaint filed u/s 276C (1) of the Act – Wilful attempt to evade tax – Appeal pending before CIT(A) – Criminal proceedings kept in abeyance

 

In the instant case, the prosecution was launched u/s 276C(1) of the Act for wilful attempt to evade tax before the Additional Chief Judicial Magistrate’s Court (Economic Offences), Ernakulam. The first petitioner is a company and the second petitioner is the Managing Director of the said company.

 

The plea of the petitioners was that they have filed an appeal before the statutory authority challenging the assessment and that the decision in the appeal has got a bearing on the prosecution against them; therefore, the criminal proceedings pending against them may be kept in abeyance till the disposal of the appeal. The petitioners contended that if the statutory appeal filed by them under the Act is allowed, it would knock down the very basis of the prosecution against them and, therefore, the criminal proceedings may be ordered to be kept in abeyance.

 

The Hon. Court noticed that section 276C provides the punishment for wilful attempt to evade tax, penalty or interest. Section 278B provides for offences by companies. In the instant case, the prosecution is u/s 276C(1) for wilful attempt to evade tax. The decision of the statutory appellate authority regarding the assessment and computation of tax would have a bearing on the prosecution against the petitioners.

 

The Court relied on the decision of the Apex Court in the case of K.C. Builders vs. Assistant Commissioner of Income Tax (2004) 2 SCC 731 wherein it held that the levy of penalties and prosecution u/s 276C are simultaneous and, hence, once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution u/s 276C is automatic. In the instant case, the prosecution is u/s 276C(1) for wilful attempt to evade tax. The decision of the statutory appellate authority regarding the assessment and computation of tax would have a bearing on the prosecution against the petitioners.

 

Similarly, in Commissioner of Income Tax vs. Bhupen Champak Lal Dalal AIR 2001 SC 1096, the Court had observed that the prosecution in criminal law and proceedings arising under the Act are undoubtedly independent proceedings and, therefore, there is no impediment in law for the criminal proceedings to proceed even during the pendency of the proceedings under the Act. However, a wholesome rule will have to be adopted in matters of this nature where courts have taken the view that when the conclusions arrived at by the appellate authorities have a relevance and bearing upon the conclusions to be reached in the case, necessarily one authority will have to await the outcome of the other authority.

 

The Department relied on the decision of the Apex Court in Sasi Enterprises vs. Assistant Commissioner of Income Tax (2014) 5 SCC 139. The Court held that the decision in Sasi Enterprises (Supra) has got no application to the present case because the prosecution against the petitioners is for committing the offence u/s 276C and not for the offence u/s 276CC.

The Court held that the decision of the statutory appellate authority regarding the assessment and computation of tax would have a bearing on the prosecution against the petitioners for wilful attempt to evade tax. Therefore, the Additional Chief Judicial Magistrate (Economic Offences), Ernakulam was directed to keep in abeyance all further proceedings against the petitioners in the criminal case till the disposal of the appeal filed before the Commissioner of Income Tax (Appeals), Kochi.

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