The Telangana High Court (HC)stayed the criminal proceedings against the assessee until disposal of the Compounding Application under section 279(2)of the Income Tax Act, 1961.
The petitioner filed the Criminal Petition under Section 482 of the Code of Criminal Procedure, 1973 (‘Cr.P.C.’) to quash the proceedings against them in C.C.No.268/2017 on the file of the Special Judge for Economic Offences at Hyderabad. The offences alleged against them are under Sections 276(c)(2) read with Sections 278 B & 278 E of the Income Tax Act, 1961.
As per section 276C if a person wilfully attempts to evade tax, penalty or interest, then he shall be punished with rigorous imprisonment which shall not be less than 6 months but which may extend to seven years and with a fine where tax sought to be evaded exceeds Rs. 25 lahks. As per section 278 if a person abets or induces in any manner another person to make and deliver an account or a statement or declaration relating to any income chargeable to tax which is false and which he either knows to be false or does not believe it to be true or to commit an offence under section 276C(1).
The income-tax authorities have found tax evasion as far as petitioners are concerned. Further submitted that a compounding application by Section 279(2) of the Income-tax Act, 1961 was made on 03.12.2019 and it is pending adjudication by the Chief Commissioner of Income-tax. In the event of acceptance of the compounding application, the Act prescribes closure of the criminal case.
Under Section 279(2)of the Income Tax Act, 1961, the prescribed Authorities have the power to compound an offence either before or after the institution of proceeding against the assessee but certainly not after their conviction.
A Coram comprising of single member Justice K Surender stayed all further proceedings against the petitioners in C.C.No.268/2017 on the file of the Special Judge for Economic Offences at Hyderabad, until disposal of the compounding application pending before the Chief Commissioner of income-tax. It was held that based on the outcome of the compounding application, the trial can proceed against these petitioners in the Special Court.
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