Setting Aside Of Assessment Orders By ITAT On Technical Grounds Will Not Lead To Automatic Quashing Of Criminal Complaint: Madras High Court

The Madras High Court recently held that when an assessment order is quashed by the Income Tax Appellate Tribunal on technical grounds, the same cannot be made a ground to evade criminal prosecution before the concerned court under the Income Tax Act. Justice G Chandrasekharan was considering a plea filed by cine actor SJ Suryah for quashing the prosecutions against him before the Additional Chief Metropolitan Magistrate (E.O.I) Chennai, Alikulam Road on the ground that the Income Tax Appellate Authority had set aside the assessment order against him.The court observed that the the Income Tax Appellate Tribunal disposed the appeals only on the ground of limitation and not on merits. From the complaint allegation it was clear that despite, giving notice, statutory notice as detailed in the complaint, petitioner has not filed return, paid advance tax and tax demanded, suppressed the real and true income by not filing the return in time. These matters had to be necessarily tried before the Court as the violations were liable to be prosecuted for the offences under Section 276 C (1), 276 C (2), 276 CC and 277 of the Income Tax Act, 1961.Facts of the Case The Petitioner/accused Mr SJ Suryah, a cine actor and Director deriving income from remuneration for acting in movies and also directing movies had suppressed taxable income during the assessment years assessment years 2002-03 to 2006-07 and 2009-10.On account of failure to file return of income, a complaint was registered against the actor under Section 276 CC of Income Tax Act, 1961 before the EOCC Court . Aggrieved by the same, the actor had moved batch of pleas challenging the prosecution initiated by the Department before the special court for income tax cases.Contentions of the PetitionerThe following were the contention of the Petitioneri)the complaint is pre-mature, when the proceedings before the department are yet to conclude and reach finality.ii)The assessment order passed by the Assessing Officer, confirmed by the CIT (A) have been set aside by the Income Tax Appellate Tribunal declaring the Assessment orders as null and void. iii)the Income Tax Appellate Tribunal makes it clear that the petitioner is not liable to pay any tax penalty or interest that could be chargeable or imposable under the Income Tax Act by the department. iv)When that be the case, and when there is no tax, penalty or interest chargeable or imposable under the Act, prosecution under Section 276 C (1) of the Act, cannot be sustained. v)when there is no tax, penalty or interest payable by the petitioner, the allegation of attempting to evade payment of such tax, penalty or interest under Section 276 C (2) of the Act, cannot be sustained. vi)No prosecution under Section 276 CC of the Act, could be initiated for non filing income tax return when the tax that could have become payable is less than Rs.3000/-. In this case, petitioner would not be liable to be pay even a rupee and therefore, prosecution under Section 276 CC cannot be maintained. vii)Filing of false statement of verification cannot be sustained in this case as the petitioner had not filed any return of income or has made a statement which could be called as false. Contentions of the RespondentsThese complaints have been filed as an offshoot of survey and search proceedings. But for the survey and search proceedings, the violations committed by the petitioner would not have come to light and it would have resulted in suppression of income and loss of revenue to the Government.These petitions have been filed mainly on the reason that Income Tax Appellate Tribunal have held assessments are null and void. However, the Income Tax Appellate Tribunal has not adjudicated or given a finding on any of the grounds raised in the complaint. The order was passed solely on technical ground that the assessments were time barred. When the order was not passed on merits or grounds raised in the criminal complaint, the quashing of the proceedings cannot be prayed.It has been consistently held by the Courts that order of assessment by the Appellate authority, will not be a bar for criminal prosecution, especially when no finding was given by the Appellate Authority on the merits of the case.When the ingredients of offence are clearly made out in the complaint to establish that the accused has committed the offence, the complaint cannot be quashed.Observations by the CourtEssentially, the Income Tax Appellate Tribunal disposed the appeals only on the ground of limitation and not on merits. It is further observed that other grounds relating to merits become an academic exercise, meaning that other issues raised in the complaint, especially the allegations raised in the complaints with regard to non filing of return of income, non payment of advance tax, non payment of the tax demanded, suppression of true and correct income by not filing return of income had not been considered by the Income Tax Appellate Tribunal. When the matter ...

Setting Aside Of Assessment Orders By ITAT On Technical Grounds Will Not Lead To Automatic Quashing Of Criminal Complaint: Madras High Court

Upasana Sajeev

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