The Madras High Court has held that the mere pendency of appellate proceedings is not a relevant factor for initiating prosecution proceedings under section 276CC of the Income Tax Act, 1961. As the trial has already commenced the Court refused to interfere with the criminal proceedings which was initiated in the year 2017.
Vinayagam Sabarisanthanakrishnan, the petitioner filed the petition to quash the proceedings pending on the file of the Additional Chief Metropolitan Magistrate ( Economic Offences ) Egmore, Chennai.
The respondent has filed a private complaint against the petitioner for the offence under Section 276CC of the Income Tax Act, 1961 ( ‘the Act’). During the Financial Year 2013-2014 (Assessment Year 2014-2015), the respondent detected that the petitioner had earned income/made investments. Despite having earned substantial income, the petitioner failed to file his returns for Assessment Year 2014-2015.
The petitioner was bound to file the returns on or before 31/07/2014 as per Section 139(1) of the Act. Hence, a show cause notice dated 03/08/2017 was issued to the petitioner to show cause as to why prosecution under Section 276CC should not be launched against the petitioner for failing to file the return of income for the Assessment Year 2014-2015. On receipt of this show cause notice, the petitioner gave a reply dated 11/08/2017 by giving some reasons as to why he missed out on filing the returns.
The respondent was not satisfied with the reply given by the petitioner and the respondent prima facie found that the non-filing of the return was wilful and hence, proceeded to file the complaint against the petitioner for alleged offence under Section 276CC of the Act.
The counsel for the petitioner submitted that there was no willfulness on the part of the petitioner in not filing the returns and that the petitioner had Tax Deducted at Source standing to his credit to the tune of Rs.11,34,018/- which covers the entire income earned by the petitioner during the relevant point of time. Therefore, the mere delay in filing the income tax returns due to ill health should not result in a prosecution.
It was further submitted that the respondent issued a notice under Section 148 of the Act after a very long time and an assessment order was also passed under Section 147 of the Act. The petitioner has also filed an appeal before the Appellate authority against the assessment order and the same is pending. In view of the same, it was contended that a criminal prosecution was not warranted in this case and accordingly, sought to quash the proceedings.
Per contra, the Special Public Prosecutor for income tax submitted that the petitioner has committed a wilful act of non-filing of the return of income as per Section 139(1) of the Act. The notice under Section 148 of the Act is issued to give a chance to the assessee to report any income that has originally escaped from assessment. Therefore, the return of income filed after the issuance of notice under Section 148 of the Act is not the original return of income. Therefore, the petitioner cannot be allowed to take a stand that the notice under Section 148 of the Act was issued with a delay and more particularly, when 6 years was given to the department to issue a notice under Section 148 of the Act.
Justice N Anand Venkatesh viewed that the mere pendency of the appellate proceedings is not a relevant factor for initiating prosecution proceedings under Section 276CC of the Act.
As the trial has already commenced the Court refused to interfere with the criminal proceedings which was initiated in the year 2017. Therefore, it is left open to the petitioner to raise all the grounds before the Court below and the same will be considered on its own merits and by the law.
The Court dismissed the Criminal Original Petition and directed the Court below to complete the proceedings in E.O.C.No.507 of 2017, within a period of three months.
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