High Court Of Madras
Mahadeva Naidu Sons vs. CIT
Sections 271(1)(c), 276C
R. Jayasimha Babu & A.K. Rajan, JJ.
Tax Case No. 545 of 1991
6th December, 2001
Counsel Appeared
R. Janakiraman, for the Assessee : Mrs. Chitra Venkataraman, for the Revenue
JUDGMENT
R. JAYASIMHA BABU, J. :
The assessee contends that the acquital of the assessee in a prosecution under s. 276C of the IT Act, 1961, four years after the date on which the AO made the order under s. 271(1)(c) imposing penalty, should be regarded as having the effect of relieving the assessee of that penalty.
2. Sec. 276C provides for prosecution for wilful attempt to evade tax and reads thus : “276C. Wilful attempt to evade tax, etc.—(1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable,— (i) in a case where the amount sought to be evaded exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine ; (ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine. (2) If a person wilfully attempts in any manner whatsoever to evade the payment of any tax, penalty or interest under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and shall, in the discretion of the Court, also be liable to fine. Explanation.—For the purposes of this section, a wilful attempt to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof shall include a case where any person— (i) has in his possession or control any books of account or other documents (being books of account or other documents relevant to any proceeding under this Act) containing a false entry or statement; or (ii) makes or causes to be made any false entry or statement in such books of account or other documents ; or (iii) wilfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents ; or (iv) causes any other circumstance to exist which will have the effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof.” Prosecution under s. 276C is “without prejudice to any penalty that may be imposable” on the accused … “under any other provision of the Act”.
The launching of prosecution under s. 276C therefore, is not impermissible after a penalty had been imposed under s. 271(1)(c). It is also not impermissible to impose penalty under s. 271(1)(c) even after a prosecution under s. 276C had been launched. Prosecution may not proceed only in cases where the penalty proceedings attain finality with a finding that there has been no concealment at all. For the purpose of levy of penalty under s. 271(1)(c) the concealment need not be wilful. Mens rea is not an essential precondition for the imposition of penalty while it is an essential ingredient of the offence under s. 276C.
In the case of Gujarat Travancore Agency vs. CIT (1989) 77 CTR (SC) 174 : (1989) 177 ITR 455 (SC) : TC 49R.647, the apex Court after noticing the difference in language between s. 271(1)(a) and s. 276C observed that: “There can be no dispute that having regard to the provisions of s. 276C which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established . . .
In the case of proceedings under s. 271(1)(a) of the Act, however, the intention of the legislature is to emphasise the fact of loss of revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection, the terms in which the penalty falls to be measured are significant… In our opinion, there is nothing in s. 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision.”
In this case the AO levied penalty under s. 271(1)(c) by his order, dt. 14th Nov., 1985. As on that day, there was no prosecution pending. Prosecution was subsequently launched, and by that time the matter relating to penalty reached the Tribunal by way of further appeal from the order that had been passed on the appeal that had been filed against the order levying penalty. The criminal Court had rendered its verdict on 5th May, 1989, acquitting the accused. It was contended by the assessee before the Tribunal that having regard to that acquittal, the penalty that had been levied under s. 271(1)(c) of the Act must necessarily go, as the criminal Court had held that there had been no concealment. The Tribunal having declined to accept that submission and having further held that material documents on which the AO had relied, and which had been perused by the Tribunal had not been taken note of and had not formed part of the evidence before the criminal Court, the finding of the criminal Court would not by itself be sufficient justification for setting aside the order of penalty.
Learned counsel for the assessee submitted that the facts on the basis of which the prosecution was launched as also the facts on the basis of which penalty was levied by the AO, were the same and that the criminal Court’s verdict must be accepted as having concluded the issue as to whether the assessee had or had not concealed the particulars of his income and that in any case an issue estoppel arose from the decision of the criminal Court.
Counsel relied on the decision of the apex Court in the case of G.L Didwania & Anr. vs. ITO & Anr. (1997) 140 CTR (SC) 273 : (1997) 224 ITR 687 (SC) : TC S48.3888. It was held by the apex Court in that case that the continuance of the criminal proceedings against the assessee for having concealed the income in respect of the firm could not continue after the Tribunal had found that the assessee had not made any such false statements and that the income returned was correct. Counsel submitted that the present case is a converse one but that the same ratio should be applied here.
Counsel also invited our attention to the decisions in the cases of Jerome D’Silva vs. Regional Transport Authority, AIR 1952 Mad 853; R. Gnanavelan vs. State of Tamil Nadu (1984) WLR 266; Pritam Singh & Anr. vs. State of Punjab, AIR 1956 SC 415 and Manipur Administration vs. Thokchom Bira Singh, AIR 1965 SC 87.
In the first of these cases, a Division Bench of this Court held that acquittal of a person in a prosecution under the Motor Vehicles Act would disentitle the Regional Transport Officer from proceeding to impose the penalty with respect to the same conduct. In the second of the cases a Bench of this Court held that after the acquittal of a person accused of having produced a fraudulent ticket in order to claim a prize at a raffle, the Director of Raffles could not decline to distribute the prize money to them on the ground that the ticket produced was not genuine. In the third of the cases, relied on, the apex Court held that issue estoppel would arise in criminal proceedings, and evidence to establish an offence in respect of which the accused had been earlier tried and acquitted, could not be permitted when the same accused was being tried for a different offence but which required proof with regard to the offence for which he had been earlier tried and acquitted. That such rule of issue estoppel binds the criminal Court was affirmed by the Constitution Bench in the case of Manipur Administration vs. Thokchom Bira Singh (supra).
The penalty imposed under s. 271(1)(c) of the Act is, as held by the Supreme Court, a civil liability. Wilful concealment is not an essential ingredient for attracting the civil liability, while for a successful prosecution under s. 276C of the Act it is. Moreover, the prosecution under s. 276C as expressly provided therein is without prejudice to the other penalties imposed. The penalty in this case having been imposed under s. 271(1)(c) the acquittal of the assessee in a prosecution subsequently launched and in which some of the documents which had constituted the basis for the levy of penalty under s. 271(1)(c) had not been put in evidence, cannot be regarded as having the effect of removing the foundation or the basis on which the penalty had been levied under s. 271 (1)(c). While it would be wholly incongruous to prosecute a person for wilful concealment after the statutory Tribunal had held that there was no concealment, a finding by the criminal Court that there has been no concealment wilful or otherwise, cannot have the effect of erasing the finding of concealment properly recorded by the statutory authorities, and upheld by the Tribunal.
In the case of G.L. Didwania (supra), the apex Court was concerned with the question as to whether a criminal prosecution that had been launched against an assessee should continue even after the Tribunal had found that there was no substantial material to hold that the assessee was the owner of the entire business, and that the authorities functioning under the IT Act had drawn wrong conclusion from the facts on record that the business in respect of which the prosecution had been launched, belonged to the assessee. It was in that background that the Court felt that allowing the prosecution to continue against an assessee who was found by the Tribunal to be not the owner of the business would be thoroughly unjust and quashed the prosecution.
No question of issue estoppel arises here, the penalty under s. 271(1)(c) having been levied before the prosecution was launched.
The object of the two provisions, ss. 271 and 276C, is different. While the object of the former is to emphasise the loss of revenue and provide for a remedy for such loss, the object of the latter is to punish the offender for having committed an economic offence and to deter persons inclined to commit such offences from committing the same. While considering an appeal against an order made under s. 271(1)(c) what is required to be examined is the record which the officer imposing the penalty had before him and if that record can sustain the finding that there had been concealment, that would be sufficient to sustain the penalty. The fact that the authorities were unable to secure a conviction in a prosecution subsequently launched, does not alter the record the AO had before him and which record is what the appellate authority is required to peruse for the purpose of deciding as to whether the penalty was or was not warranted.
The Tribunal was, therefore, not in error in upholding the penalty that had been levied under s. 271(1)(c) on the assessee. The question referred to us, viz., “Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the penalty under s. 271(1)(c) was leviable on the ground that the revised return was not voluntary despite the finding by the magistrate that the revised return was voluntary ?” is therefore answered against the assessee and in favour of the Revenue.
[Citation : 255 ITR 208]
