UNIVERSAL SUPPLY CORPORATION VS STATE OF RAJASTHAN
1995 P T D 598
[Rajasthan High Court (India)]
UNIVERSAL SUPPLY CORPORATION and others
Versus
STATE OF RAJASTHAN and another
S.B. Criminal Miscellaneous Petitions Nos.194, 268, 270, 272, 274, 276, 278 and 280 of 1990, decided on 30/07/1992.
Income-tax---
----Offences and prosecution---Tax deducted at source but not deposited with Central Government within prescribed time---Interest/penalty proceedings and prosecution are separate and independent---Existence or absence of one no bar to the others---Charging of interest under S.201(1-A), Indian Income Tax Act, 1961 does not obliterate prosecution----Non-initiation of penalty proceedings does not lead to presumption that default was for good and sufficient reasons---No statutory requirement that assessee to be served with notice before initiating criminal proceedings against him---Indian Income-Tax Act, 1961, Ss.194-A, 200, 201(1-A), 276, 278-B & 279---Indian Income Tax Rules, 1962, R.30(1)(b)(i)---Indian Criminal Procedure Code, 1973, S.482.
In the Income Tax Act, 1961, there are separate provisions for levy of interest, penalty and criminal prosecution. The charging of interest has a different purpose: to compensate the Department for depriving it of the use of the money during the period the payment was withheld. Criminal proceedings have nothing to do either with the levy of interest or penalty. In the absence of these proceedings also, criminal prosecution can be launched if the ingredients of the offence under section 276-B of the Income Tax Act, 1961, namely, failure to pay the tax deducted at source to the credit of the Central Government within the prescribed time, are made out. The assessee can be charged with interest and also punished by prosecution.
The legal position can be summarised as follows:
(i) The scope and purport of interest/penalty proceedings and prosecution under the Income-tax Act are separate and independent. The existence or the absence of the one or the other is no bar to any one of them:
(ii) Simply charging of interest by the Department under section 201(1-A) of the Act, for the delay in the payment of the amount to the Central Government, does not obliterate the prosecution;
(iii) The non-initiation of penalty proceedings does not lead to a presumption that the default in payment was for good and sufficient reasons or that the assessee was not obliged to establish that there were good and sufficient reasons for the default in payment;
(iv) Non-initiation of penalty proceedings in a case cannot be equated with a case where the penalty proceedings were initiated and a finding is recorded by the competent authority that there were good and sufficient reasons for the delay in payment;
(v) There is no statutory requirement either under section 279 or under any other provision of the Act to give notice to the assessee before criminal proceedings are initiated against him. In other words, a notice or a right of being heard before launching criminal proceedings under the Income-tax Act for the offences mentioned under Chapter XXII is not mandatory and proceedings cannot be quashed on this ground. However, if such notice is given by the Department, it may check frivolous and unnecessary criminal cases or such cases where the default in payment is technical or committed in good faith. The question of compounding the offence may also be considered by the concerned authority prior to the initiation of criminal proceedings if such notice is given by the assessee desirous to compound the offence
Banwarilal Satyanarain v. State of Bihar (1989) 179 ITR 387 (Pat.); CIT v. Angidi Chettiar (S.V.) (1962) 44 ITR 739 (SC); CIT v. Chembara Peak Estates Ltd. (1990) 183 ITR 471 (Ker); CIT v. Rajinder Kumar Somani (1980) 125 ITR 756 (Delhi); CIT v. Raunaq & Co. (P.) Ltd. (1983) 140 ITR 407 (Delhi); Gopal Lal Dhamani v. ITO (1988) 172 ITR 456 (Raj.); Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26; (1970) 25 STC 211 (SC); Jayappan (P.) v. Perumal (S.K.), First ITO (1984) 149 ITR 696 (SC); Jyoti Prakash Mitter v. Haramohan Chowdhury (1978) 112 ITR 384 (Cal.); Manasvi (D.M.) v. CIT (1972) 86 ITR 557 (SC); Nanalal Sobhagmal v. Union of India (1988) 1 Crimes 88; Nemi Chand Garg. v. ITO (1986) 161 TTR 500 (Raj.); Sequoia Construction Co. P. Ltd. v. P.P. Suri, ITO (1986) 158 ITR 496 (Delhi); State of Haryana v. Ch. Bhajan Lal AIR 1992 SC 604 and Uttam Chand v. ITO (1982) 133 ITR 909 (SC) ref.
P. K. Kasliwal and Ravi Kasliwal for Petitioners.
Amar Singh for Respondent No.2.
JUDGMENT
In all these petitions, common questions of law are involved and, hence, they are disposed of by a common order. In all the petitions, the petitioners are the same and they have prayed for quashing the criminal proceedings initiated against them under section 276-B read with section 278-B of the Income Tax Act, 1961 (for short, "the Act").
Non-petitioner No. 2, viz., Deputy Commissioner, Assessment-I, Income-tax, Jaipur, filed eight separate complaints against the petitioners on December 21, 1988, for the offence under section 276-B read with section 278-B of the Act which pertains to the assessment year 1987-88. The accusation against the petitioners is that they had deducted income-tax at source on the interest amount paid by them under section 194-A of the Act, but did not pay/deposit the same to the credit of the Central Government within the prescribed time as required under section 200 of the Act read with rule 30(1)(b)(i) of the Income Tax Rules, 1962. As per the said rules, the tax so deducted should be deposited within two months from the date of the deduction. The details of the cases and the amount of tax deducted at source and the delay in depositing the amount to the account of the Central Government are given to the following chart:
| S.No. | Court Case No. | Amount of TDS | Date of deduction | Date of deposit | Late |
| 1. | 4 of 1989 | 34,741 | 28-2-1987 | 23-6-1987 | 4 months |
| 2. | 5 of 1989 | 5,000 | -do- | -do- | ?? -do-? |
| 3. | 6 of 1989 | 5,359 | -do- | -do- | ?? -do? |
| 4. | 7 of 1989 | 71,113 | -do- | -do- | ?? -do? |
| 5. | 8 of 1989 | 3,170 | -do- | -do- | ?? -do? |
| 6. | 9 of 1989 | 4,669 | -do- | -do- | ?? -do? |
| 7. | 10 of 1989 | 5,348 | -do- | -do- | ?? -do? |
| 8. | 11 of 1989 | 4,410 | -do- | -do- | ?? -do- |
| | | 1,33,810 | | | |
| | | | | | |
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The prosecution case, as per the complaint, is that the petitioner firm, Messrs Universal Supply Corporation, is a registered partnership firm under the Income Tax Act, 1961, and, in the assessment year 1982-83, the firm was reconstituted, whereby petitioners Nos. 2, 3 and 4 were made partners. For the assessment year 1987-88, the returns of income were filed on behalf of the firm which were verified by its partner, Arun Kumar Sogani, on July 9, 1987. During the course of assessment of tax, the Inspecting Assistant Commissioner of Income-tax (Assessment-I), Jaipur, noticed that the petitioners had paid interest exceeding Rs.1,000 to various creditors on which income-tax was deducted at .source under section 194-A of the Act, but the same was not deposited in the account of the Central Government within two months as required under section 200 read with rule 30(1)(b)(i), (ii) of the Rules. Then a notice was given to the petitioners by the Inspecting Assistant Commissioner of Income-tax (Assessment I), Jaipur, on November 17, 1987, to explain as to why interest under section 201(1-A) may not be charged. This notice was replied to on January 5, 1988. It was stated in the complaint that the explanation given by the petitioners was not accepted by the Inspecting Assistant Commissioner of Income-tax who passed an order at the time of making assessment to charge interest under section 201(1-A) of the Act.
All these complaints were filed before the Chief Judicial Magistrate (Economic Offences), Jaipur, who took cognizance and issued process again?st the petitioners. The petitioners, after putting in appearance in the Court moved an application under section 245(2) of the Code of Criminal Procedure to drop the proceedings but it was rejected by the learned Magistrate, vide ?order, dated July 22, 1989. Feeling aggrieved against the said order, the petitioners filed the present petitions under section 482, Criminal Procedure Code, with a prayer to quash the criminal proceedings.
I have heard Mr. Kasliwal, learned counsel for the petitioners, and Mr. Amar Singh, learned counsel for the Department, at length. Mr. Kasliwal has contended that the criminal proceedings against the petitioners in all the criminal cases deserve to be quashed on the following grounds:
(i) the assessing authority, at the time of passing the assessment order, was satisfied that charging interest under section 201(lA) of the Act was sufficient in the present case and, as such, he did not think it proper to initiate penalty proceedings under section 221 of the Act. According to learned counsel, in a case where charging penalty was not thought proper, launching of criminal prosecution which is a harsh remedy, is an abuse of the process of the Court;
(ii) that the order of the Commissioner of Income-tax under section 279(1) of the Act directing prosecution of the petitioners is invalid as it was done without application of mind and on taking into consideration certain facts which did not exist on the record;
(iii) that before launching prosecution against the petitioners, a notice should have been given to explain their position in a case like the present one where the delay in depositing the tax amount in the Central Government treasury was not abnormal.
On the other hand, learned counsel for the Department argued that it was not necessary to issue any show-cause notice to the petitioners before filing a complaint as there is no such statutory requirement either under the Act or the Rules. According to learned counsel, the offence under section 276-B of the Act was committed by the petitioners as the provisions of sections 194-A and 200 of the Act read with rule 30(1)(b)(i), (ii) created an absolute liability on the part of the petitioners to have deposited the tax amount within the stipulated period. It was then contended that, in the instant case, the petitioners were given notice by the Inspecting Assistant Commissioner on November 17, 1987, and the assessing authority was not satisfied with the explanation given by the petitioners and ordered interest to be charged under section 201(1-A) of the Act on the tax amount. Mr. Amar Singh further argued that imposition of penalty by the Assessing Officer under section 221 of the Act is not a condition precedent for launching prosecution under section 276-B read with section 278-B, inasmuch as the prosecution of the petitioners is an independent recourse provided under the Act. It was then argued that cognizance was rightly taken by the Magistrate and there are no exceptional circumstances to quash the proceedings by invoking the inherent powers under section 482, Criminal Procedure Code. Both learned counsel have referred to a number of decisions which I shall refer to later on.
To appreciate the above submissions, it is necessary to consider the relevant provisions of the Act and the Rules. In Chapter XIV of the Income?tax Act, procedure for assessment is provided. Chapter XVII deals with collection and recovery of tax. Section 190 provides that, notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction or collection at source or by advance payment, as the case may be, in accordance with the provisions of this Chapter. Then, section 194-A provides for deduction of tax at source on payment of interest other than interest on securities. It provides that any person who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force. We are not concerned with the proviso to the section in the present case. Then, section 200 provides as under:
"200. Duty of person deducting tax.--Any person deducting any sum in accordance with the provisions of sections 192 to 194, section 194A, section 194-B, section 194-BB, section 194-C, section 194-D, section 194-E, section 194-EE, section 194-F, section 194-6, section 194-H, section 195, section 196-A and section 196-B, shall pay within the prescribed time, the sum so deducted to the credit of the Central Government or as the Board directs."
Then, section 201 provides the consequence of failure to deduct or pay the tax at source. For the sake of convenience, the relevant parts of the section are reproduced as under:
"201.---(1) If any such person and in the cases referred to in section 194, the principal officer and the company of which he is the principal officer does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax:
Provided that no penalty shall be charged under section 221 from such person, principal officer or company unless the Assessing Officer is satisfied that such person or principal officer or company, as the case may be, has without good and sufficient reasons fails to deduct and pay the tax.
(1-A) Without prejudice to the provisions of subsection (1) if any such person, principal officer or' company as is referred to in that subsection does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest at fifteen per cent. per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid."
Rule 30(1)(b)(i) and (ii) provides a period of two months for snaking payment to the credit of the Central Government of such tax deducted at source under section 194-A. In addition to the amount of interest as provided under section 201(1-A) of the Act, penalty can also be charged under section 221 of the Act. However, before levying any such penalty, the assessee is to be given a reasonable opportunity of being heard and in case the assessee proves to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons, no penalty shall be levied under this section.
Then, Chapter XXII provides for offences and prosecutions for the various contraventions committed by the assessee. Section 276B provides for punishment in the case of failure to pay the tax deducted at source. Then section 278-AA provides as under:
"278-AA. Notwithstanding anything contained in the provisions of section 276-A, section 276-AB or section 276-B, no person shall be punishable for any failure referred to in the said provisions if he proves that there was reasonable cause for such failure."
Section 278-B deals with the prosecutions for the offences committed by companies.
I have referred to the relevant provisions of the Act and the Rules with which we are presently concerned for the sake of convenience to appreciate the grounds submitted before me.
Now, I would like to deal with the various decisions referred before me in the course of arguments.
Now, I would like to deal with the various decisions referred before me in the course of arguments.
In CIT v. S.V. Angidi Chettiar (1962) 44 ITR 739, the apex Court of the country, while considering the penalty provisions provided under section 28 of the Indian Income-tax Act, 1922, observed as under (at page 745):
"The power to impose penalty under section 28 depends upon the satisfaction of the Income-tax Officer in the course of proceedings under the Act; it cannot be exercised if he is not satisfied about the existence of conditions specified in clause (a), (b) or (c) before the proceedings are initiated. The proceedings to levy penalty has, however, not to be commenced by the Income-tax Officer before the completion of the assessment proceedings by the Income-tax Officer. Satisfaction before conclusion of the proceeding under the Act, and not the issue of a notice or initiation of any step for imposing penalty is a condition for the exercise of the jurisdiction."
M.D.M. Manasvi v. CIT (1972) 86 ITR 557, the Supreme Court, while considering the incidence of penalty as provided under section 271(1) of the Act, observed as under (at page 561):
"The fact that notices were issued subsequent to the making of the assessment orders would not, in our opinion, show that there was no satisfaction of the Income-tax Officer during the assessment proceedings that the assessee had concealed the particulars of his income or had furnished incorrect particulars of such income. What is contemplated by clause (1) of section 271 is that the Income-tax Officer or the Appellate Assistant Commissioner should have been satisfied in the course of proceedings under the Act regarding matters mentioned in the clauses of that subsection. It is not, however, essential that notice to the person proceeded against should have also been issued during the course of the assessment proceedings. Satisfaction in the very nature of things precedes the issue of notice and it would not be correct to equate the satisfaction of the Incometax Officer of the Appellate Assistant Commissioner with the actual issue of notice. The issue of notice is a consequence of the satisfaction of the Income-tax Officer or the Appellate Assistant Commissioner and it would, in our opinion, be sufficient compliance with the provisions of the statute if the Income-tax Officer or the Appellate Assistant Commissioner is satisfied about the matters referred to in clauses (a) to (c) of subsection (1) of section 271 during the course of proceedings under the Act even though notice to the person proceeded against in pursuance of that satisfaction is issued subsequently."
In CIT v. Rajinder Kumar Somani (1980) 125 ITR 756, a Division Bench of the Delhi High Court considered the question as to whether the penalty proceedings were not correctly initiated under section 271(1)(a) of the Act. After comparing the similar provisions of the Indian Income-tax Act, 1922, and the Act of 1961, it was observed as under (at page 760):
"The 1961 Act has changed the above position. A careful perusal of section 275 of this Act shows that it has laid down the bar of limitation in two respects, one explicitly and the other by necessary implication. The explicit limitation is that the order imposing the penalty has to be passed within a particular time. While we are not concerned with that period of limitation here, it is necessary to notice that the period of limitation prescribed starts running from the `end of the financial year in which the proceedings initiated are completed.' Thus, indirectly, but by necessary implication, the statute has also provided that the action for imposition of penalty must be initiated in the course of (as far as we are concerned) the assessment proceedings. It is thus not enough that the Income-tax Officer is satisfied in the course of the assessment proceedings that a case for penalty exists, it is further necessary that he should have initiated some action for the imposition of penalty in the course of such proceedings. It depends on the facts of each case whether any such action has been initiated before the date of completion of the assessment."
On the basis of the above decisions, learned counsel for the petitioners tried to convince that the very fact of not initiating penalty proceedings by the assessing authority showed that the authority was satisfied that there were good and sufficient reasons for the default in depositing the TDS amount in time. I am unable to accept such a broad proposition of law canvassed before me. In my view, no such presumption can be raised simply on non-initiation of penalty proceedings. The above decisions do not lay down such a broad principle of law. Hence, I have no hesitation to reject the submission.
Learned counsel then relied upon a Bench decision of the Delhi High Court in CIT v. Raunaq & Co. (P.) Ltd. (198-j) 140 ITR 407, in which it was held that section 221 of the Act enables the Income-tax Officer to impose a penalty where an assessee is in default in making the payment of tax, yet, the imposition of the penalty cannot be automatic as a consequence of the default. It was held that it is a question of fact to be decided on the facts and circumstances of the each case if good and sufficient reasons existed for non?levy of the penalty.
Another judgment relied upon by learned counsel for the petitioner is Nemi Chand Garg v. ITO (1986) 161 ITR 500 (Raj.). In that case, the assessee was prosecuted for the offences under sections 227 and 276-C of the Act. The prosecution was based on the findings of the Income-tax Officer, which were reversed by the Commissioner of Income-tax in appeal. On the basis of the findings of the appellate authority, a petition under section 482, Criminal Procedure Code, was filed before this Court to quash the proceedings. The petition was accepted by this Court -to a limited extent, relying upon a judgment of the Supreme Court in Uttam Chand v. ITO (1982) 133 ITR- 909, 910, wherein it was held as under (at page 502):
"Heard counsel, special leave granted. In view of the finding recorded by the Income-tax Appellate Tribunal that it was clear on the appraisal of the entire material on the record that Shrimati Janak Rani was a partner of the assessee-firm and that the firm was a genuine firm, we do not see how the assessee can be prosecuted for filing false returns. We, accordingly, allow this appeal and quash the prosecution."
This Court held as under (at page 504):
"At the moment, the judgment of the Commissioner, dated March 26, 1985, is in existence as a prima facie valid protective umbrella to the assessee. That being so, it would certainly be an abuse of process of the Court and may even appear to be unusual and improbable if, for the same, the assessee is being prosecuted. It would, therefore, be in the interest of justice that by invoking the exercise of power under section 309, Criminal Procedure Code, further proceedings are not taken till the judgment of the Commissioner, dated March 26, 1985, which is sub judice before the Tribunal is examined and the decision is given by the Tribunal."
In Banwarilal Satyanarain v. State of Bihar (1989) 179 ITR 387, it was held by the Patna High Court that the prosecution of an accused under the provisions of the Income-tax Act is liable to be discontinued if the statutory authority under the Act has passed any order on the merits in favour of the assessee who is an accused in a criminal trial in relation to the very same default which is the subject-matter of a criminal trial as well as the order which had attained finality. In that case, the following questions were formulated by the Judge (at page 398):
"Whether, in a penalty proceeding, where an authority under the Act who has expert knowledge of the subject has recorded a finding that the assessee had furnished good and sufficient reasons for failure to deduct and/or pay the tax within time, and dropped the penalty proceedings or deleted the same, as the case may be, it can be said that he is still liable to be prosecuted under section 276-B of the Act?
Can a criminal Court, in spite of a finding by the statutory authority under the Act that the assessee furnished good and sufficient reasons for not deducting and paying the tax within time, take a different view and hold that the failure on the part of the assessee was without reasonable cause or excuse?"
The honourable Judge gave the answer in the negative and held that the process of a criminal Court should not be allowed to be abused in cases where an assessee has succeeded in proving good and sufficient reasons for his failure before an authority under the Act in a penalty proceeding. In the judgment, the effect of section 278-A of the Act was also considered as under (at page 409):
"Now, it has to be seen as to what is the effect of the amendment. Can it be said that, after the amendment, the question whether an accused had any reasonable cause or not for not deducting and paying tax within time is only of academic importance and not relevant for a criminal Court? My answer is emphatically in the negative. Section 278-AA is nothing else at a proviso to section 276-B of the Act, but a separate section has been inserted in the Act, as similar provisions have been made with respect to prosecution under sections 276-A, 276-AB, 276-DD and 276-E. The cumulative effect of the amendment, in my view, is that in a case of prosecution under section 276-B of the Act, two things have to be shown; firstly, that there was failure on the part of the assessee in deducting or paying the tax within time and, secondly, that the failure was without any reasonable cause.
So far as the first prerequisite is concerned, even after the amendment, the prosecution has to prove the same, but so far as the second prerequisite is concerned, the prosecution is not required to prove the same as the effect of the amendment is that now there is a presumption in favour of the prosecution that the accused has no reasonable cause for his failure; of course, the presumption is not explicit, but the same becomes implicit if section 276-B is read alongwith section 278-AA. Why I say so will be apparent from section 278-AA, which lays down that no person shall be punished for such failure, if he proves that there was reasonable cause for such failure."
In CIT v. Chembara Peak Estates Ltd. (1990) 183 ITR 471, a Bench of the Kerala High Court considered the ambit of the circumstances for levying penalty under section 221(1) of the Act on a reference made to it under the Income-tax Act. It held that the imposition of penalty was not an automatic consequence of the default and it was also not mandatory. The Bench placed reliance on the judgment of the Supreme Court in Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26.
In Sequoia Construction Co. (P.) Ltd. v. P.P. Suri, ITO (1986) 158 ITR 496 (Delhi), the income-tax deductions were made by the accused from the amount of interest paid by him but there was delay in depositing the same in the Central Government treasury. A complaint was filed sunder section 276-B of the Act. The Income-tax Officer also commenced penalty proceedings under sections 201(1-A) and 221 of the Act. The Income Tax Officer imposed a penalty, but in appeal, the order of penalty was quashed, holding that there was sufficient and good cause for the default in the payment of tax. While deciding so, it was also held that the scope and purport of penalty proceedings and prosecutions are separate and independent. The existence of the one or the other was no bar to any of them. An assessee could be levied penalty as well as punished by prosecution.
On the basis of the above decisions, an argument has been raised by learned counsel for the petitioners that, in the absence of the penalty proceedings against the petitioners, the criminal element disappears and it cannot be said that the default was without reasonable cause. Learned counsel, therefore, argued that the criminal proceedings should be quashed.
This argument can be rejected for the simple reason that, in the Income-tax Act, there are separate provisions for levy of interest, penalty and criminal prosecution. The charging of interest has a different purpose: to compensate the Department for depriving it of the user of the-money during the period the payment was withheld. Criminal proceedings have nothing to do either with the levy of interest or penalty. In the absence of these proceedings also, criminal prosecution can be launched if the ingredients of the offence under section 276-B of the Act are made out. No presumption can be drawn to the effect that there were good and sufficient reasons for the default in making the payment of the tax simply on the ground that penalty proceedings were not initiated. In the same way, simply charging of interest by the Department for the delay also does not, in my view, obliterate the prosecution. The assessee can be charged interest as well as punished by prosecution. No such presumption can also be drawn that, in case penalty proceedings were initiated, the petitioners would have satisfied the appellate authority that there were good and sufficient reasons for the delay in payment. I am also fortified by the judgment of the apex Court in P. Jayappan v. S.K. Perumal, First ITO (1984) 149 ITR 696, wherein it was held as under (at page 700):
"It is true that, as observed by this Court in Uttam Chand v. ITO (1982) 133 ITR 909, the prosecution once initiated may be quashed in the light of a finding favourable to the assessee recorded by an authority under the Act subsequently in respect of the relevant assessment proceedings but that decision is no authority for the proposition that no proceedings can be initiated at all under sections 276-C and 277, as long as some proceeding under the Act in which there is a chance of success of the assessee is pending. A mere expectation of success in some proceeding in appeal or reference under the Act cannot come in the way of the institution of the criminal proceedings under section 276-C and section 2,77 of the Act. In the criminal case, all the ingredients of the offence in question have to be established in order to secure the conviction of the accused. The Criminal Court, no doubt, has to give due regard to the result of any proceeding under the Act having a bearing on the question in issue and; in an appropriate case, it may drop the proceedings in the light of an order passed under the Act. It does not, however, mean that the result of the proceedings under the Act would be binding on the criminal Court. The Criminal Court has to judge the case independently on the evidence placed before it." (Emphasis? supplied).
Their Lordships further observed as under (at page 701):
"We do not, however, agree with the view expressed by the High Court of Calcutta in Jyoti Prakash Mitter v. Haramohan Chowdhury (1978) 112ITR 384. In that case on a complaint made against the assessee for an offence punishable under section 277 of the Act, the Chief Metropolitan Magistrate issued process. Thereupon the assessee questioned the validity of the initiation of the criminal proceedings before the High Court of Calcutta on the ground that until the penalty proceedings initiated in respect of the same period under section 271(1)(c) of the Act were finally disposed of, no complaint could be filed. The contention of the assessee was that the prosecution was opposed to the principles of natural justice as he would be deprived of the benefit of a finding which was likely to be recorded in his favour in the penalty proceedings. It was urged on behalf of the Department that the penalty proceedings under section 271(1)(c) had no direct bearing on the maintainability of a prosecution launched under Chapter XXII of the Act. 77te High Court took the view, which according to us is an erroneous one, that the provisions of section 279(1 A) of the Act established the necessity for the completion of the penalty proceedings before the institution of the prosecution and; therefore, as long as the penalty proceedings were pending, the criminal proceedings could not be instituted." (Emphasis" provided).
In Gopal Lal Dhamani v. ITO (1988) 172 ITR 456 (Raj.), the facts were that, under the provisions of section 132(1) and (1-A) of the Act, a search was conducted in the business premises of the assessee and in the search, cash, precious, semi-precious stones, etc., were found. The Income-tax Officer finalised the proceedings under section 132(5) of the Act. Thereafter, complaints were filed under section 276 of the Act for various assessment years. The proceedings were challenged before the High Court on the ground that they were premature and there were no reasonable grounds for prosecuting the petitioners unless a regular assessment order was made by which it could be said that the petitioners wilfully evaded in any manner payment of any tax penalty/interest. This contention was repelled by this Court and it was held that it was not necessary that the prosecution can only be launched after a regular assessment was made.
The argument with regard to the validity of the order of the Commissioner of Income-tax under section 279(1) of the Act can be properly raised before the trial Court at the appropriate time.
In Nanalal Sobhagmal v. Union of India (1988) 1 Crimes 88, it was held that always it was not necessary for the authority concerned to apply its mind and it was also held that the requirement of application of mind can, be proved by the prosecution at the trial stage by leading evidence.
The last argument of learned counsel for the petitioner that initiation of the criminal proceedings by the Department without notice and without giving an opportunity of being heard to the petitioners is not permissible, can be rejected outright as there is no such statutory requirement under the law. The only requirement for initiation of criminal proceedings is provided under section 279 of the Act, which says that such prosecution should be at the instance of the Commissioner. In the absence of any statutory requirement, criminal proceedings cannot be terminated on the ground that the principles of natural justice are violated, if the same are launched without prior notice or an opportunity of being heard.
After the above discussions, the legal position can be summarised as under:
(i) ??????? The scope and purport of interest/penalty proceedings and prosecution under the Income-tax Act are separate and independent. The existence or the absence of the one or the other is no bar to any one of them;
(ii)??????? simply charging of interest by the Department under section 201(1-A) of the Act, for the delay in the payment of the amount to the Central Government, does not obliterate the prosecution;
(iii)?????? the non-initiation of penalty proceedings does not lead to a presumption that the default in payment was for good and sufficient reasons or that the assessee was deprived to establish that there were good and sufficient reasons for the default in payment;
(iv)?????? non-initiation of penalty proceedings in a case cannot be equated with a case where the penalty proceedings were initiated and a finding is recorded by the competent authority that there were good and sufficient reasons for the delay in payment;
(v)??????? there is no statutory requirement either under section 279 or under any other provision of the Act to give a show-cause notice to the assessee before criminal proceedings are initiated against him. In other words, a notice or a right of being heard before launching criminal proceedings under the Income-tax Act for the offences mentioned under Chapter XXII is not mandatory and proceedings H cannot be quashed on this ground. Though, if such notice is given by the Department, it may check frivolous and unnecessary criminal cases or such cases where the default in payment is technical or committed in good faith. The question of compounding the offence may also be considered by the concerned authority prior to the initiation of criminal proceedings if such notice is given by the assessee desirous to compound the offence.
Before parting with the case, I would like to say that the principles on which the complaint can be quashed under section 482, Criminal Procedure Code, are well-settled. In State of Haryana v. Ch. Bhajan Lal, AIR 1992 SC 604, the apex Court of the country has given the following categories of cases by way of illustration wherein the powers under section 482, Criminal Procedure Code, could be exercised either to prevent the abuse of the process of the Court or otherwise to secure the ends of justice (headnote):
"(1)????? Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused.
(2)??????? Where the allegations in the first information report and other materials, if any, accompanying the first information report do not disclose a cognizable offence, justifying an investigation by police officers under section 156(1) of the Code except under an order of a Magistrate within the purview of section 155(2) of the Code.
(3)??????? Where the uncontroverted allegations made in the first information report or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.
(4)??????? Where the allegations in the first information report do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under section 155(2) of the Code.
(5)??????? Where the allegations made in the first information report or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.
(6)??????? Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party.
(7)??????? Where a criminal proceeding is manifestly attended with mala fides and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge:
Admittedly, the present case does not fall in any of the categories mentioned above.
I may also point out that the offence under section 276-B read with section 278-B of the Act is compoundable as provided under subsection (2) of section 279 of the Act by the Chief Commissioner or the Director-General even after the institution of the criminal proceedings. Therefore, the petitioners shall be free to approach the concerned authority if they so desire for compounding the offence. If it is so done, it is expected from the said authority to consider such request sympathetically keeping in view that the delay in making payment is not abnormal and that interest has also been charged from the petitioners to compensate the Revenue for the delay.
The petitions are, therefore, dismissed as indicated above.
M.BA./682/T? ???????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????? Petition dismissed.