The Jharkhand High quashed the criminal proceedings against the petitioner, accused of evading taxes during the 2014 General Elections and observed that once the assessment proceeding has attained its finality with the finding that there was no evasion of tax then continuation of a criminal proceeding under Sections 276 C, 277 and 278E of the IT Act shall be without any foundation.
Brief Facts:
The petitioner was alleged to have attempted to evade taxes during the 2014 General Elections when he transferred a sum of twenty-five lakh to the bank account of a political party. The petitioners appealed against the assessment order which was the basis of the criminal proceedings which was set aside by the appellate authority.
The petition is filed by the petitioners for quashing the entire criminal proceedings under Sections 276C, 277 and 278E of the Income Tax Act given the quashing of the assessment order.
Contentions of the Applicant:
The learned counsel appearing for the petitioner contended that with the setting aside of the assessment order, the allegation of evasion of tax losses in any transaction and criminal prosecution cannot be allowed to continue given the setting aside of the order of assessment.
Contentions of the Respondent:
The learned counsel appearing of the department opposed the quashing of petitions and contended that the criminal prosecution and the appellate proceedings were independent and thus the criminal prosecution cannot be quashed merely on that ground. The counsel relied on the judgement in P. Jayappan vs. S. K. Perumal, First Income Tax Officer, Tuticorin where it was held that pendency of the reassessment proceedings cannot act as a bar to the institution of the criminal prosecution for offences punishable under Section 276 C or Section 277 of the Act.
Observations of the Court:
The court observed that both the assessment and criminal proceedings are independent proceedings and both these proceedings can proceed simultaneously but once the assessment proceeding has attained its finality with the finding that there was no evasion of tax then the continuation of criminal proceedings under Sections 276 C, 277 and 278E of the IT Act shall be without any foundation. It was further stated that the very foundation of criminal prosecution is knocked down once the order of assessing authority regarding evasion of tax is set aside because the assessment proceeding is a civil proceeding in which the burden of proof is lighter than that in a criminal case.
It was further stated that to permit a criminal proceeding after the department fails to prove in the civil proceeding is futile as the prospect of the same being proved is a remote possibility.
The decision of the Court:
The court set aside the impugned order and quashed the criminal proceedings because the assessment order regarding the evasion of taxes has already been set aside by the appellate authority.
Case Title: Pradip Prasad vs. Union of India through Deputy Director of Income Tax
Coram: Hon’ble Mr. Justice Gautam Kumar Choudhary
Case No.: Cr.M.P. No. 2115 of 2018
Advocate for the Applicant: Mr. Rohit Roy
Advocate for the Respondent: Mr. R.N Sahay and Mr. Anurag Vijay
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