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

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: 23^rd
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.