In a major decision a Single Bench of the Jharkhand High Court observed that setting aside penalty order leads to automatic quashing of prosecution under Section 276C (1) of the Income Tax Act, 1961.
This petition has been filed for quashing the entire criminal proceedings including the order, whereby, summons has been issued against the petitioner, Pralay Pal, and also the order, whereby, substance of accusation under Section 276(c)(1) of the Income Tax Act, 1961 has been explained to the petitioner, pending in the court of the Special Judge (Economic Offence) cum Civil Judge.
The assessee was alleged to have attempted to evade the tax liability by furnishing inaccurate particulars of income leads to concealment of income of Rs.1,82,146/-. Thus, the accused made himself liable to be prosecuted under Section 276C (1) of the Income Tax Act, 1961. The sanction order under Section 279(1) of the Income Tax Act, 1961 for launching prosecution under Section 276C (1) of the Income Tax Act, 1961 against the accused for the Assessment Year 2011-12 has been accorded to by the Principal Commissioner of Income Tax.
Amit Kumar Das, the counsel for the petitioner submitted 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 that against the penalty order, the petitioner filed an appeal before the appellate tribunal under the Income Tax Act and the appeal was allowed and penalty order was set aside.
Anurag Vijay, the counsel for the Income Tax Department submitted that in view of Section 271(1)(c) of the Income Tax Act, the assessing officer, imposed penalty of Rs.56,285/- upon the petitioner for the said laches on behalf of the petitioner and that 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 Court of Justice Sanjay Kumar Dwivedi observed that “The Court comes to the conclusion that once 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. The petitioner cannot be allowed to suffer and to face criminal trial and the same cannot sustain in the eyes of law.”
“There is no doubt that penalty proceeding and prosecution can go simultaneously in the facts and circumstances of the cases, however, in the case in hand, the penalty proceeding has already been set aside in view of the appellate order. Further, if the penalty proceeding has been set aside, mens rea is one of the essential ingredients of a criminal offence” the Bench concluded.
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