Vijay Jain Vs Union of India (Rajasthan High Court)
The Rajasthan High Court considered a criminal miscellaneous petition seeking quashing of Criminal Case No.293/2017 pending before the Court of Chief Metropolitan Magistrate (Economic Offences), Jaipur Metropolitan, for an offence punishable under Section 276C(1)(i) of the Income Tax Act, 1961.
The petitioner submitted that a search under Section 132 of the Income Tax Act had been conducted at his premises, during which certain documents were seized. Thereafter, two separate proceedings were initiated against him: one for imposition of penalty on undisclosed income and another by way of criminal prosecution before the trial court.
The petitioner challenged the penalty order before the Income Tax Appellate Tribunal (ITAT). By order dated 23.09.2019, the ITAT quashed the penalty imposed under Section 271AAB of the Income Tax Act. The petitioner contended that, in view of the Tribunal’s order, two proceedings arising out of the same cause could not continue simultaneously. He further relied upon the decisions of the Rajasthan High Court in Nagendra Choudhary vs. Union of India and Anr. and Ritesh Agarwal Vs. Union of India and Anr., where criminal proceedings under similar circumstances had been quashed after the penalty was set aside by the ITAT.
The petitioner referred to paragraphs 33 to 36 of the judgment in Nagendra Choudhary, wherein the High Court held that quashing of penalty under Section 271AAB by the ITAT, in the absence of an adverse finding of wilfulness, could not sustain prosecution under Section 276C(1) of the Income Tax Act. The Court had also observed that the inherent jurisdiction under Section 482 Cr.P.C. could be exercised to prevent continuation of proceedings that would amount to an abuse of process, while preserving the Department’s liberty to seek revival if the Tribunal’s exoneration was subsequently reversed in appeal.
The respondent-Department opposed the petition, submitting that it had filed D.B. Income Tax Appeal No.25/2020 against the ITAT’s order. The appeal had been admitted by the Division Bench on 29.06.2020 after formulation of substantial questions of law and remained pending. The Department argued that until the appeal was decided, the petitioner was not entitled to the relief sought.
In reply, the petitioner submitted that the Division Bench had not granted any interim stay of the ITAT’s order dated 23.09.2019. Accordingly, the ITAT’s order continued to operate, entitling the petitioner to the relief claimed.
After considering the submissions and examining the record, the High Court observed that the controversy had already been settled by the Co-ordinate Bench in Nagendra Choudhary, where an identical issue had been decided. The Court found no valid reason to adopt a different view.
Accordingly, the High Court allowed the criminal miscellaneous petition and quashed the proceedings arising out of Criminal Case No.293/2017 pending before the Court of Chief Metropolitan Magistrate (Economic Offences), Jaipur Metropolitan.
The Court, however, granted liberty to the respondent-Department to seek revival of the proceedings and recall of the order if the ITAT’s order was reversed in the pending appeal filed by the Department. The stay application and all pending applications were also disposed of.
Cases Discussed
- Ritesh Agarwal Vs. Union of India and Anr., S.B. Criminal Misc. Petition No.2139/2019 decided on 27.11.2025
- Nagendra Choudhary vs. Union of India and Anr. (Rajasthan High Court), 2025 SCC Online Raj. 6063
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
1. By way of filing the instant petition, a prayer has been made to quash the proceeding of Criminal Case No.293/2017, pending before the Court of Chief Metropolitan Magistrate (Economic Offences) Jaipur Metropolitan for the offence punishable under Sections 276C(1)(i) of the Income Tax Act, 1961 (for short, ‘IT Act’).
2. Learned counsel for the petitioner submits that a search under Section 132 of the IT Act, was carried out in the premises of the petitioner, wherein certain documents were seized and thereafter, two separate of proceedings were initiated against the petitioner. One for imposing penalty for the undisclosed income and other by way of filing a complaint against the petitioner before the Court below.
3. Counsel submits that the order of penalty imposed by the Income Tax Department was assailed by the petitioner by way filing an appeal before the Income Tax Appellate Tribunal (for short, ‘ITAT’). The ITAT, vide its order dated 23.09.2019 quashed the order imposing penalty under Section 271AAB of the IT Act, against the petitioner. Counsel submits that under these circumstances, two separate proceedings arising out of the same cause cannot be allowed to continue before the Court below. He further submits that in identical matters, the Co-ordinate Benches of this Court in the case of Nagendra Choudhary vs. Union of India and Anr. reported in 2025 SCC Online Raj. 6063 and Ritesh Agarwal Vs. Union of India and Anr. while deciding S.B. Criminal Misc. Petition No.2139/2019 on 27.11.2025, have put the controversy to an end. It was held in para 33 to 36 of the judgment passed in the case of Nagendra Choudhary (supra), as under:
“33. So far as the present case is concerned, on the basis of foregoing discussion, this court finds that the challenge made by the petitioner qualifies all the tests laid down by the Hon’ble Supreme court in the case of Pradeep Kumar Kesarwani (supra).
34. Hence, on the above issues, this Court is inclined to hold that quashing of penalty under Section 271AAB of the Act of1961 by the ITAT, without an adverse finding of willfulness, stands against sustaining prosecution of the petitioner under Section276C(1) of the Act of 1961. The inherent jurisdiction under Section 482 Cr.P.C. is exercisable notwithstanding pendency of Department’s appeal or taking cognizance by trial court, where continuation would be unjust or contrary to statutory scheme. To allow continued prosecution in such circumstances would sanction an unjust, oppressive and abusive process, contrary to the constitutional guarantee of fairness and the very purpose of inherent jurisdiction under Section 482 Cr.P.C. The only logical conclusion is to quash the prosecution, while preserving the Department’s liberty to seek revival, if the Tribunal’s exoneration is reversed in the pending appeal.
35. In view of the above findings, this Court holds that the continuation of criminal proceedings under Section 276(C)(1) of the Income Tax Act, 1961 against the petitioner would amount to an abuse of the process of law. The prosecution is untenable in the absence of the foundational finding of concealment, which stands judicially negated and not yet reversed/ stayed in appeal.
36. In the light of above, this criminal misc. petition is, accordingly, allowed. The criminal proceedings in Criminal Case No. 140/2017 pending before the Court of Chief Metropolitan Magistrate (Economic Offences), Jaipur City, are hereby quashed and set aside.”
4. Counsel submits that the judgment passed by the Coordinate Bench in the case of Nagendra Choudhary (supra) was followed subsequently in the case of Ritesh Agarwal (supra) and the proceedings pending against the aforesaid persons before the Court of Chief Metropolitan Magistrate (Economic Offences), Jaipur City were quashed and set-aside. Hence, the petitioner is entitled to get the same relief, which was granted to the aforesaid persons.
5. Per contra, learned counsel appearing on behalf of the respondent-Department opposes the arguments raised by counsel for the petitioner and submits that against the order dated 23.09.2019, an appeal has been preferred by the Department before the Division Bench bearing D.B. Income Tax Appeal No.25/2020 and the same has been admitted on 29.06.2020 by formulating certain substantial questions of law. The aforesaid appeal is still lying pending for its adjudication before the Division Bench, so unless and until the same is decided by the Division Bench of this Court, the arguments raised by counsel for the petitioner are not tenable and the instant petition filed by the petitioner is liable to be rejected.
6. In rebuttal, learned counsel for the petitioner submits that the Division Bench of this Court has not passed any interim order staying the operation of the order dated 23.09.2019, passed by the ITAT. Hence, under these circumstances, the petitioner is entitled to get the relief as sought in the instant petition.
7. Heard and considered the submissions made at the Bar and perused the material available on the record.
8. Considering the arguments put forward by learned counsel for the parties and looking to the fact that the controversy involved in the instant petition has already been set at rest by the Co-ordinate Bench of this Court in the case of Nagendra Choudhary (supra), wherein the issue was identical and similar, under these circumstances, this Court finds no valid reason to take a different view.
9. Accordingly, the instant criminal misc. petition stands allowed. The proceedings arising out of the Criminal Case No.293/2017, pending against the petitioner before the Court of Chief Metropolitan Magistrate (Economic Offences), Jaipur Metropolitan stand quashed and set-aside.
10. However, the respondent-Department would be at liberty to seek revival of the instant petition and recall of this order in case, the order passed by the ITAT is reversed in the aforesaid appeal submitted by the respondent-Department against the petitioner.
11. The stay application and all pending applications, if any, stand disposed of.
