The Jharkhand High Court quashes the proceedings against the petitioner accused of concealment of income and held that once the penalty order is set aside, it will be presumed that there is no concealment and quashing of prosecution under Section 276C(1) of the Income Tax Act is automatic and the petitioner cannot be allowed to suffer and to face a criminal trial and the same cannot sustain in the eyes of law.
Brief Facts:
The petitioner was accused of concealment of income, after which a penalty proceeding was initiated against him under Section Section 271(1)(c) of the Income Tax Act, 1961 which was confirmed by the Commissioner of Income Tax (Appeal). The petitioner filed the present petition seeking quashing of entire criminal proceedings.
Contentions of the Applicant:
The learned counsel appearing on behalf of the petitioner contended that the subject matter of the assessment in the complaint case was also the subject matter of penalty under Section 271(1)(c) of the Income Tax Act, 1961 and the said appeal was allowed and penalty order was set aside and in view of this the foundation itself has been set aside.
Contentions of the Respondent:
The learned counsel appearing on behalf of the respondents contended that the offence is made out for concealment of income and in view of that even if the penalty order has been set aside by the appellate tribunal, the case cannot be quashed on that ground. The counsel further relied on the judgment in Radheshyam Kejriwal v. State of West Bengal and another to argue that both proceedings can go separately.
Observations of the Court:
The court referred to the judgment in Gopal Ji Shaw v. Income Tax Officer, Calcutta & others to state that a criminal prosecution for an offence under a special statute must not be initiated as a matter of course where the prosecution would involve intricate questions of interpretation of the Income Tax Act and the object of launching criminal prosecution for willful default in complying with the provisions of the Income Tax Act is to prevent evasion of tax.
The court further referred to the judgement in K.C. Builders & another vs. Assistant Commissioner of Income Tax to state that if the penalty order has been struck down, the criminal case cannot survive. The court further stated that once the penalty order is set aside, it will be presumed that there is no concealment and quashing of prosecution under Section 276C(1) of the Income Tax Act is automatic and the petitioner cannot be allowed to suffer and to face criminal trial and the same cannot sustain in the eyes of law.
The court further stated that penalty proceeding and prosecution can go simultaneously but in the present case, the penalty proceeding has already been set aside in view of the appellate order and if the penalty proceeding has been set aside, mens rea is one of the essential ingredients of a criminal offence.
The decision of the Court:
The court allowed the petition and quashed the entire criminal proceedings against the petitioner.
Case Title: Pralay Pal vs. State of Jharkhand and anr.
Coram: Hon’ble Mr. Justice Sanjay Kumar Dwivedi
Case No.: Cr.M.P. No. 2266 of 2017
Advocate for the Applicant: Mr. Amit Kumar Das
Advocate for the Respondent: Mr. Vishwanath Roy, Mr. Anurag Vijay, Mr. R.N Sahay and Mr. Sharda Kumari
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