Rajesh Somandas Sachdev Vs ITO (Bombay High Court)
The Bombay High Court heard a writ petition under Articles 226 and 227 of the Constitution of India seeking quashing of Criminal Complaint No. SW/535/2018 pending before the Additional Chief Metropolitan Magistrate, 38th Court, Ballard Pier, Mumbai, for an alleged offence under Section 276CC of the Income-tax Act, 1961.
The petitioner submitted that the income-tax return for Assessment Year 2014-15 was filed on 10 September 2018. Although the return had been filed pursuant to a notice under Section 148, the petitioner contended that the return disclosed entitlement to a refund of Rs. 1,64,340. It was argued that the case was covered by the proviso to Section 276CC, specifically clause (ii)(b), and reliance was placed on the decisions of the Supreme Court in Guru Nanak Enterprises vs. Income-tax Officer and the Madras High Court in Rajkumar Thiyagarajan vs. Income Tax Department, Madurai and Manav Menon vs. Deputy Commissioner of Income-tax.
The Revenue contended that the proviso to Section 276CC was applicable only to regular assessments and not to the present case, where the return had been filed only after issuance of a notice under Section 148 dated 18 September 2017 and after institution of criminal prosecution on 7 March 2018. The Revenue relied upon Sections 2(40), 143(3), 147, 148 and 276CC of the Income-tax Act and submitted that the offence under Section 276CC stood attracted because the petitioner had failed to furnish the return within the prescribed time. However, the Revenue fairly admitted that, as per the return filed by the petitioner and the Assessment Order dated 26 December 2018, the petitioner was entitled to a refund of Rs. 1,64,340.
The Court noted that, after the petitioner failed to file the return for Assessment Year 2014-15, a notice under Section 148 was issued on 18 September 2017. As the return was still not filed, the Department instituted Criminal Complaint No. SW/535/2018 on 7 March 2018 for the alleged offence under Section 276CC. Subsequently, the petitioner filed the return on 10 September 2018, showing Tax Deducted at Source (TDS) of Rs. 2,54,788 and claiming a refund of Rs. 1,64,340. The return was later accepted and confirmed by the assessment order.
The High Court reproduced the provisions of Section 276CC, including proviso (ii)(b), which provides that a person shall not be proceeded against where the tax payable on the total income determined on regular assessment, after reducing advance tax and tax deducted at source, does not exceed the prescribed threshold.
The Court referred to the Supreme Court decision in Guru Nanak Enterprises, where prosecution under Section 276CC was quashed because the final tax liability was Rs. 1,360, which was below the statutory threshold of Rs. 3,000 then prescribed. The High Court observed that the statutory threshold had since been increased to Rs. 10,000. In the present case, the petitioner was not liable to pay tax but was instead entitled to a refund of Rs. 1,64,340. The Court held that the observations of the Supreme Court were squarely applicable to the present facts and noted that the two Madras High Court decisions also supported the same legal position.
The Court further observed that, while granting sanction for prosecution, the Commissioner of Income Tax had failed to consider that TDS of Rs. 2,54,788 had already been deducted.
Although the Revenue argued that the proviso did not apply, the Court noted the admitted position that there was no loss to the Revenue and that the petitioner was entitled to the refund reflected in the return and assessment order.
The Court also observed that the jurisdiction under Section 482 of the Code of Criminal Procedure is to be exercised sparingly and only where justified, and that the same principle would apply under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023. Considering the factual position, including the filing of the return, the accepted assessment, the TDS already deducted, and the refund determined, the Court held that the case was covered by the Supreme Court decision in Guru Nanak Enterprises and that granting relief was necessary to secure the ends of justice.
Accordingly, the High Court held that, in the facts and circumstances of the case, the criminal prosecution was wholly unwarranted and amounted to an abuse of the process of law. The petitioner was held entitled to the relief sought, and the writ petition was disposed of by granting the prayer for quashing the criminal complaint.
Cases Discussed
- Manav Menon vs. Deputy Commissioner of Income-tax (Madras High Court), 2023 SCC OnLine Mad 8091
- Rajkumar Thiyagarajan vs. Income Tax Department, Madurai (Madras High Court), (2021) 124 taxmann.com 119 (Madras)
- Guru Nanak Enterprises vs. Income-tax Officer (Supreme Court), (2005) 10 SCC 451
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Heard Ms. Pawar, learned Counsel appearing for the Petitioner and Mr. Kumar, learned Counsel appearing for the Respondent Nos.1 and 2 and Mr. Walve, learned APP appearing for Respondent No.3-State.
2. By this Writ Petition, filed under Articles 226 and 227 of the Constitution of India, the Petitioner seeks the quashing and setting aside of the Criminal Complaint No.SW/535/2018 pending on the file of the learned Additional Chief Metropolitan Magistrate, 38th Court, Ballard Pier, Mumbai.
3. It is the submission of the learned Counsel appearing for the Petitioner that the Petitioner has filed the Income Tax Returns on 10th September 2018 for the Assessment Year 2014-2015. It is submitted that although there is substance in the contention of the learned Counsel appearing for Respondent Nos.1 and 2 that the the Income Tax Returns were filed pursuant to a Notice under Section 148 of the Income Tax Act 1961 (for short “the said Act”), however, she submits that in fact, the Petitioner is seeking a refund in the said Income Tax Returns of Rs.1,64,340/-. Therefore, learned Counsel appearing for the Petitioner submits that the Petitioner’s case will be covered by the proviso to Section 276CC, specifically sub-clause ii(b) of the said Act. To substantiate her contention, she relies on the decisions of the Supreme Court in the case of Guru Nanak Enterprises vs. Income-tax Officer1 and also relies on the two decisions of the Madras High Court in the case of Rajkumar Thiyagarajan vs. Income Tax Department, Madurai2and Manav Menon vs. Deputy Commissioner of Income-tax3
4. On the other hand, Mr. Subir Kumar, learned Counsel appearing for Respondent Nos.1 and 2 submits that in the facts and circumstances, the proviso to Section 276CC, sub-clause ii(b) does not apply as it is only applicable to regular assessments. It is submitted that in this case, the Income Tax Returns were filed after a Notice was issued under Section 148 of the said Act on 18th September 2017 and after the initiation of the criminal prosecution on 7th March 2018. The learned Counsel relies on Sections 2(40), 143(3), 147, 148 and 276CC of the said Act. He submits that as the Petitioner has not filed the Income Tax Returns within the prescribed time, the offence under Section 276CC of the said Act is made out and therefore, no interference is required. However, he fairly admits that as per the Income Tax Returns filed by the Petitioner and the subsequent Assessment Order dated 26th December 2018, the Petitioner is entitled for a refund of Rs.1,64,340/-.
5. A perusal of the record shows that as the Petitioner failed to file the Income Tax Returns for the Assessment Year 2014-2015, a Notice under Section 148 of the said Act was issued to the Petitioner on 18thSeptember 2017. Despite the issuance of the said Notice, the Income Tax Returns were not filed. Consequently, Criminal Complaint being C.C. No.SW/535/2018 was filed against the Petitioner on 7th March 2018 for the offence under Section 276CC of the Income Tax Act.
6. It is an admitted position that thereafter on 10thSeptember 2018, the Petitioner filed the Income Tax Returns for the Assessment Year 2014-2015. The said Income Tax Returns show that the Tax Deducted at Source (TDS) for the Petitioner was Rs.2,54,788/- and that the Petitioner is entitled for a refund of Rs.1,64,340/-. The said Income Tax Return was subsequently accepted and confirmed by the Assessment Order.
7. Learned Counsel appearing for the Department fairly admits that as per the Income Tax Returns filed by the Petitioner and subsequent Assessment Order, the Petitioner is entitled for a refund of Rs.1,64,340/-. In these circumstances, Section 276CC and more particularly, proviso ii(b) is relevant and the same reads as under:
“Failure to furnish returns of income.
276CC. If a person wilfully fails to furnish in due time the return of fringe benefits which he is required to furnish under sub-section (1) of section 115WD or by notice given under sub-section (2) of the said section or section 115WH of or the return of income which he is required to furnish under sub-section (1) of Section 139 or by notice given under clause (i) of sub-section (1) of section 142 or section 148 or section 153A, he shall be punishable, —
(i) in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds twenty-five hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months which may extend to seven years and with fine;
(ii) in any other case, with imprisonment for a term which shall not be less than three months but which may extend to two years and with fine:
Provided that a person shall not be proceeded against under this section for failure to furnish in due time the return of fringe benefits under sub-section (1) of section 115WD or return of income under sub-section (1) of section 139—
(i) for any assessment year commencing prior to the first day of April, 1975; or
(ii) for any assessment year commencing on or after the 1st day of April, 1975, if—
(a) the return is furnished by him before the expiry of the assessment year; or
(b) the tax payable by him on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source, does not exceed three thousand rupees.”
(Emphasis added)
Thus, what is provided by Section 276 of the said Act is that if a person wilfully fails to furnish in due time and the return of income which he is required to furnish under sub-section (1) of Section 139 of the said Act then the said offence is punishable. However, proviso to Section 276CC of the said Act provides that if the tax payable by him on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source, does not exceed three thousand rupees then such a person shall not be proceeded with.
8. In view of the above provision of Section 276CC, the decision of the Supreme Court in the case of Guru Nanak Enterprises (supra) and more particularly, the paragraph Nos.5 to 8 of the same are relevant, which read as under:
“5. It appears to us that the case of the appellant is clearly covered by proviso (ii)(b) of Section 276-CC. In the instant case as noticed, the total tax liability of the appellant was finally assessed at Rs 1360. Under Section 276-CC proviso (ii)(b), shorn of unnecessary details, a person shall not be proceeded against under this section for failure to furnish in due time the return of income if the tax payable by him on the total income determined, as reduced by advanced tax, if any, paid, and any tax deducted at source, does not exceed Rs 3000. As noticed earlier, the appellant had disclosed a tax liability of Rs 644 which on final assessment was determined as Rs 1360.
6. Counsel for the Revenue could not advance any argument to support the prosecution launched against the appellant, because it is clear that the total income tax liability determined by the department is only Rs 1360 which is much less than Rs 3000 envisaged under the proviso.
7. We, therefore, find in the facts and circumstances of the case, that the prosecution is wholly unwarranted. Accordingly, we set aside the judgment and order of the High Court and quash the proceeding pending against the appellant in the Court of the Special Judicial Magistrate (Economic Offences), Jaipur on the basis of the complaint lodged by the Income Tax Officer, District Circle II, Jaipur on 31-3-1986.
8. This appeal is accordingly, allowed.”
(Emphasis added)
9. In the said case, before the Supreme Court tax liability was 1,316 which was well within the statutory limit of Rs.3,000/-. This threshold has since been increased to Rs.10,000/-. In the present case, however, the Petitioner is actually entitled for a refund of Rs.1,64,340/-. Thus, the above observations of the Supreme Court are squarely applicable to the present case. The two decisions of the Madras High Court also confirm this legal position.
10. It is also pertinent to note that while sanctioning prosecution, the Commissioner of Income Tax failed to consider that a TDS amount of Rs.2,54,788/- had already been deducted.
11. Although Mr. Subir Kumar, learned Counsel appearing for the Department submits that the said proviso is not applicable to this case, however, it is an admitted position that there is no loss to the revenue and that the Petitioner is entitled for the aforementioned refund. Consequently, in these facts and circumstances, the Petitioner is entitled to the relief sought.
12. It is settled legal position that inherent jurisdiction under Section 482 should be exercised sparingly, carefully and with caution and only when such exercise is justified by the tests specially laid down in the section. The Court is duty-bound to exercise its jurisdiction under Section 482CrPC when the exercise of such power is justified by the tests laid down in the said section. Jurisdiction under Section 482CrPC must be exercised if the interest of justice so requires. The same principle will apply to Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023.
13. The factual position on record clearly shows that as the Petitioner failed to file the Income Tax Returns for the Assessment Year 2014-2015, a Notice under Section 148 of the said Act was issued to the Petitioner on 18thSeptember 2017. Despite the issuance of the said Notice, the Income Tax Returns were not filed. Consequently, Criminal Complaint being C.C. No.SW/535/2018 was filed against the Petitioner on 7th March 2018 for the offence under Section 276CC of the Income Tax Act. It is an admitted position that thereafter on 10th September 2018, the Petitioner filed the Income Tax Returns for the Assessment Year 2014-2015. The said Income Tax Returns show that the Tax Deducted at Source (TDS) for the Petitioner was Rs.2,54,788/- and that the Petitioner is entitled for a refund of Rs.1,64,340/-. The said Income Tax Return was subsequently accepted and confirmed by the Assessment Order. Thus, the case is covered by the Supreme Court in the case of Guru Nanak Enterprises (supra). Thus, in the facts and circumstances, it is necessary to grant the relief sought in the Writ Petition to secure the ends of justice.
14. Thus, in the facts and circumstances of the case, the criminal prosecution is wholly unwarranted and the same would amount to an abuse of the process of law.
15. For the above reasons, the Petitioner is entitled for the relief in terms of the prayer clause (a).
16. Accordingly, the Writ Petition is disposed of in above terms.
Notes:.
1 (2005) 10 SCC 451
2 (2021) 124 taxmann.com 119 (Madras)
32023 SCC OnLine Mad 8091
