Income Tax Adjudication Proceedings And Criminal Prosecution Are Independent To Each Other: Madras High Court

The Madras High Court has held that income tax adjudication proceedings and criminal prosecution are independent of each other; the pendency of one does not affect the other.

The bench of Justice G.K. Ilanthiraiyan has observed that the adjudication proceedings and the criminal prosecution are independent of each other, and the pendency of any adjudication proceeding is not a bar to proceeding with the prosecution.

The respondent or department lodged a complaint against the petitioner for the offences punishable under Sections 276C(1) and 277 of the Income Tax Act for the assessment year 2012–2013. The petitioner is an income tax assessee. As per Section 132 of the Income Tax Act, search and seizure operations were conducted in the Saravana Store group of cases on August 18, 2011. The residence of the petitioner was also covered in the said operation, and during the search operation, gold ornaments and jewellery were found valued at Rs. 47,37,496. The petitioner was issued notice under Section 153C of the Income Tax Act for the assessment years 2006–07 to 2011–12.

The petitioner had filed her return of income for the assessment year 2012–13 on March 11, 2013, admitting a total income of Rs. 24,09,170. During the assessment proceedings, the petitioner filed a revised memo of taxable income admitting Rs. 48,39,044 as an investment made in gold and offered it for tax. Section 143(3) was passed by determining the total income towards undisclosed investments.

The Assessing Officer simultaneously initiated penalty proceedings and passed an assessment order by levying a penalty of Rs. 14,51,713 under Section 271(1)(c) of the Income Tax Act. It was challenged by the accused in ITA No. 268/14-15, and the same was allowed.

The assessment officer filed an appeal before the tribunal, and the same was allowed, sustaining the order of penalty. Accordingly, the assessment order was passed, levying a penalty with interest. Therefore, the respondent lodged a complaint.

The assessee contended that the petitioner approached the Court on the quantum of jewellery. The Court remanded the matter back to the Assessing Officer to carry out the reconciliation of the quantum of jewellery of the petitioner to determine that the jewellery found during the search in the year 2011 was part of the jewellery declared by the petitioner. The entire penalty was deleted by allowing the reconciliation of the quantum of jewellery. The prosecution has been initiated as per the original order of penalty. The order passed by the court set aside the entire penalty. Therefore, the entire case of the prosecution cannot be sustained.

The department contended that the reassessment proceedings are pending with the assessment officer. As a result, the proceedings cannot be said to be concluded. Hence, there is no exoneration of the petitioner from all the charges. The quantity of jewellery found during the search was not included in the earlier returns filed by the petitioner. The reconciliation of jewellery has not attained finality in view of the pendency of the proceeding under Section 263 of the Income Tax Act.

The court declined to quash the prosecution proceedings and dismissed the petition.

Counsel For Petitioner: Aravid Pandian

Counsel For Respondent: M.Sheela

Case Title: R.Revathy Versus ACIT

Case No.: Crl.O.P.No.18477 of 2021 and Crl.M.P.No.10136 of 202

Citation: 2023 LiveLaw (Mad) 349

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