IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 04 / 03 / 2011 CORAM: THE HON'BLE MR.JUSTICE C.S.KARNAN Crl.O.P.No.27158 of 2007 and M.P.No.1 of 2007 Smt. Vijayashanthi .... Petitioner/Accused Vs. The Assistant Commissioner, Income Tax, Chennai. .... Respondent/Complainant Prayer : Criminal Original Petition filed under Section 482 of the Code of Criminal Procedure, to call for the records in E.O.C.C.117 of 2007, on the file of the Additional Chief Metropolitan Magistrate Economic offences I, Egmore, Chennai – 8, and to quash the same. For Petitioner : Mr.I. David Singh For Respondents : Mr.K. Ramasamy Senior Counsel for Income-Tax Cases. O R D E R The above criminal original petition has been filed by the petitioner/accused to call for the records to dispense with her personal appearance in the E.O.C.C.117 of 2007, on the file of the Ist Additional Chief Metropolitan Magistrate Economic offences, Egmore, Chennai - 8. 2.The summarised facts of the prosecution case are as follows: The prosecution case filed by the Complainant/Assistant Commissioner of Income Tax, media Circle II, Chennai – 34, which are as follows: (ii)The complainant has filed on the sanction of the Commisioner of Income-tax, Chennai-IV within the meaning of Sec.279(1) of the Income-tax Act, 1961 dated 28.02.2007. The said sanction order under Section 279(1) is submitted along with this complaint before this Hon'ble Court. https://hcservices.ecourts.gov.in/hcservices/ (iii)The Complaint is in respect of the Assessment year 1992-1993, the relevant accounting year being the year ended 31.03.1992. (iv)The accused is presently assessed by Income-tax in Media Circle – II in the Jurisdiction of the complainant. (v)Notices and processes may be issued to the Accused at the address noted above. (vi)The Accused is a Cine Artiste by profession. (vii) The accused has filed her returns of income-tax up to the Assessment Year 1990-1991. For the Assessment year 1991-1992, the return was filed on 25.05.1993, which was beyond the time limit laid down even for a belated return. As such she is aware of her duties and responsibilities under the Income-Tax Act, 1961. The ostensible sources of income of the accused are income from house property, income from business of profession and agricultural income. (viii) For the Assessment year 1992-1993, relevant to the previous year ended on 31.03.1992, the accused had the following incomes: (a) Income from House Property (b) Income from business/Profession (c) Agricultural income (ix) The accused ought to have filed her Return of income for the Assessment year 1992-1993 on or before 31.08.1992 as required under section 139(1) of Income-Tax Act, 1961. However, the accused did not file her return of income within the due date prescribed by the Statute. Thus, the accused has wilfully and deliberately contravened the provisions of section 139(1) of Income-Tax Act, 1961 by not furnishing her return of income on or before the due date prescribed by the Statute, i.e., 31.08.1992, without any valid reason and thereby committed an offence punishable under section 276CC of the Income-Tax Act, 1961. Even after search, the accused did not file her return deliberately inspite of having substantial income. (x) As there was no voluntary compliance of filing the return of income within the due date, and as the failure in filing the said return of income still persisted, a notice under section 148 of the Income-Tax Act, 1961 was issued to https://hcservices.ecourts.gov.in/hcservices/ the accused on 02.02.1994, calling upon her to file the return of income within 30 days from the date of receipt of the notice which was served on 04.04.1994. The accused neither sent any reply in response to the said statutory notice issued to her nor filed her return of income. Therefore, a notice under section 142(1) dated 20.07.1994, was issued to the accused requiring her to file the return of income. Again, there was no response from the accused and not even a reply was sent giving reasons why she is persisting in delaying the filing of the said return of income even after the statutory due date and inspite of receiving the statutory notice under section 148. By another letter dated 18.01.1996, the accused was again reminded of her obligation of filing of her return of income. Another show cause letter dated 04.03.1996, was issued to the accused drawing her attention to the prosecution proceedings that will be initiated in the event of non-filing of return within the stipulated time as per the Act and also informing her that exparte assessment will be framed resulting in penalty proceedings that will be initiated in the event of non-filing of return within stipulated time as per the Act and also informing her that exparte assessment will be framed resulting in penalty proceedings and the launching of prosecution proceedings for non-compliance of furnishing of return within due date and for concealment of income. The accused filed her return of income for the Assessment year 1992-1993 on 25.03.1996 admitting total income of Rs.5,19,830/- besides agricultural income of Rs.1,75,000/- after an inordinate delay of more than 24 months. (xi) The complainant submits that the accused deliberately did not file her return of income even within the time limit prescribed under section 139(4) of Income-Tax Act, 1961, which expired on 31.03.1994, in this case. Thus,there was inordinate delay of more than 24 months in filing of return by the accused. In order to conduct inquiry to complete the assessment, statutory notices under section 143 (2) dated 14.06.1996, notices under section 142 (1) dated 30.08.1996, 06.11.1996, 29.11.2006, 27.12.2006 and 04.02.1997 were issued to the accused requiring the accused to furnish the following information. (i)Books of Accounts (ii)Year wise breakup of income, cash flow and correlation of investment including movables with adequate source. (iii)Bank Pass Books with copies of Bank Statements. https://hcservices.ecourts.gov.in/hcservices/ The case was posted on 06.01.1997, for furnishing the aforesaid information and inquiry. In response to notice of hearing, assessee's representatives appeared on various dates. Seized books of accounts were perused. Statement and other documents furnished by the assessee were also perused. The assessment was completed under section 143(3) of the Income0Tax Act, 1961 on 26.03.1997, on a total income of Rs.6,98,110/- (and agricultural income of Rs.1,75,000/-) and determining tax of Rs.11,52,176/- for the assessment year 1992-1993 (including the interest of Rs.7,73,554/-)The assessee, Ms.Vijaya Shanthi filed a petition requesting for revision under section 154, to give credit to advance tax payment made by her on 27.10.1991. The assessment made was revised under section 154 on 30.08.2000, determining the taxable income at Rs.7,13,820/- and the tax payable was determined at Rs.5,66,244/- inclusive of interest of Rs.1,78,825/-). The said tax demand was duly remitted by the accused. (xii) The complainant states that as the accused willfully failed to furnish her return of income and deliberately delayed in filing of the return for the Assessment year 1992-1993 inspite of receiving statutory notice and despite giving of opportunities, show cause notice dated 22.02.2001 were issued to the accused asking her to explain why prosecution proceedings under section 276CC of Income-Tax Act, 1961 should not be initiated against her. In response to the show cause notice, the accused filed a reply dated 13.03.2001. In her reply, the accused has stated that at that point of time there was no full time Accountant to look after the affairs and had to rely upon the part time employees who had no regularity in attending to the duties and was always delaying the completion of books. As adequate taxes were already paid and subsequent tax demanded together with interest under section 234A,B and C were completely paid, the non filing of this Return had not caused any loss of revenue. Hence the petitioner requested that the prosecution proceedings be waived as this would not bring in any benefit tangible or intangible to the Department. After considering the relevant facts and circumstances, the sanctioning Authority accorded sanction under section 279(1) of the Income-Tax Act, 1961 on 28.02.2007. (xiii) The complainant submits that the return was not filed within the due date (i.e. 31.08.1992). It was also not filed in response to notice under section 148 issued on 02.02.1994. It was also not filed within the time limit prescribed under section 139(4) i.e., before 31.03.1994. The https://hcservices.ecourts.gov.in/hcservices/ reason given by the accused for such an inordinate delay are not valid in the eyes of law in compliance with statutory requirement. Thus inspite of having substantial taxable income, the assessee did not file her return of income on or before the due date, willfully and deliberately but filed only after the issue of notice under section 148 and other materials mentioned earlier. The presumption relating to culpable mental state under section 278E of the I.T. Act, squarely applies to this case. (xiv) The above facts clearly establish that the accused was bent upon deliberately not filing her return of income for the A.Y.1992-1993 within the stipulated time as required under section 139(1) and inspite of receiving the statutory notice issued under section 148 of the I.T. Act, 1961. (xv) Therefore the accused had wilfully and deliberately failed to furnish in due time the return of income for the assessment year 1992-1993 as required under section 139(1) of Income-tax Act, 1961 and she has filed the said return of income only after an inordinate delay of more than 24 months after receiving the statutory notices issued to her under section 148 and 142(1) of Income-Tax Act, 1961 and despite giving several opportunities as narrated supra and has thus committed an offence punishable under section 276 of Income-Tax Act, 1961. (xvi) The above offence has been committed within the jurisdiction of this Hon'ble Court (xvii) In the above circumstance, it is expedient and in the interest of justice that a charge be made against the accused on the above offence and the accused to be dealt with according to law. (xviii) The complainant therefore, prays that this Hon'ble Court may graciously be pleased to take the complaint on file, issue process to the accused to be dealt with according to law." SANCTION ORDER FOR PROSECUTION UNDER SECTION 279(1) OF THE INCOME-TAX ACT,1961 Whereas the assessee, Ms.Vijaya Shanthi, is assessed to Income-Tax in Media Circle II in PAN NO.AAMPS 7090J, at Chennai. 2.Whereas the assessee Ms.Vijaya Shanthi, failed to furnish her return of income for the Assessment year 1993- https://hcservices.ecourts.gov.in/hcservices/ 1994 on or before 31.10.1993, the due date as per Section 139(1) of the Income-Tax Act, 1961. 3.Whereas the assessee, Ms.Vijaya Shanthi,failed to furnish her return of income for the assessment year 1993- 1994 even with the time limit stipulated under section 139 (4) viz., on or before 31.03.1995. 4.Whereas Ms.Vijaya Shanthi, failed to file the return of income due voluntarily as required under section 139(1) 139(4) of the Income -Tax Act, 1961 notice 148 was issued to the assessee on 22.07.1994, requiring her to file the return of income for the assessment year 1993-1994. 5.Whereas no compliance was forthcoming from Ms.Vijaya Shanthi,for filing return of income for the assessments year 1993-1994 in response to notice under section 148 issued, reminder letters dated 18.01.1996, and 04.03.1996 were issued to her reminding her about the non filing of the return of income and the penal consequences for such failure including the provision of Sec.276CC. 6.Whereas the assessee, Ms.Vijaya Shanthi filed her return of income on 25.03.1996, with a delay of more than 20 months from the date of issue of notice under section 148 admitting taxable income of Rs.31,43,490/- besides agricultural income of Rs.1,68,000/-. 7.Whereas the tax and interest payable on the admitted income was Rs.25,38,683/- assessee has not remitted any advance tax but remitted the same by way of self assessment tax under section 140A on 23.03.1996. 8.Whereas the assesee, Ms.Vijaya Shanthi's assessment was completed on 26.03.1997 for the assessment year 1993- 1994 and the total income was determined at Rs.32,58,310/- and agricultural income at Rs.1,68,000/- under section 143 (3) of the Income-Tax Act and tax of Rs.35,88,024/- was determined as payable (including interest of Rs.21,40,845/-) 9.Whereas the assessee willfully failed to furnish her return of income voluntarily and also after issue of statutory notice calling for the return of income, and after issue of letters reminding her about failure to file the return of income and requiring her to file the return of income, return of income was ultimately filed by the assessee on 25.03.1996, while the return was due for filing on 31.08.1993. https://hcservices.ecourts.gov.in/hcservices/ 10.Whereas, the Assessing Officer issued a show cause notice dated 22.02.2001, asking the assessee to show cause why she should not be prosecuted for willful failure to furnish her return of income within the stipulated time which she was required to furnish under section 139(1). 11.Whereas the assessee Ms.Vijaya Shanthi in her reply on 13.03.2001 has stated at that point of time there was no full time Accountant to look after the affairs and had to rely upon the part time employees, who had no regularity in attending to the duties and were always delaying the completion of books. As adequate taxes were already paid and subsequent tax demanded together with interest under Section 234A, B and C were completely paid, the non filing of this Return had not caused any loss of revenue. Hence the assessee requested that the prosecution proceedings be waived as this would only bring the hard earned image of the petitioner in disrepute neither would it bring in any benefit tangible or intangible to the Department. 12.Whereas the reply of the assessee dated 13.03.2001 was carefully considered along with the following records of the case indulging. (a) Notice issued under section 148 of the Income-Tax Act, 1961 dated 22.07.1994 which was served on 27.07.1994. (b) Reminder letter issued and served on 18.01.1996 reminding the assessee of non filing of return and provision of Sec.276CC. (c) Show cause letter dated 04.03.1996 served on 05.03.1996 (d) Return of income filed on 25.03.1996 admitting total income of Rs.3143,490/- and agricultural income Rs.1,78,000/-. (e) Notice under section 142(1) was issued on 30.08.1996, 06.11.1996, 29.11.1996, 27.12.1996, 20.01.1997, 04.02.1997 and 14.02.1997. (f) Order under section 143(3) dated 26.03.1997 (g) Notice of demand under section 156 of the I.T Act, 1961. 13.Whereas the reasons given by the assessee are not valid in the eyes of law for complying with statutory requirement, thus inspite of having substantial taxable income she did not file the return of income on or before the due date willfully and deliberately but filed only after a search under section 132 of I.T. Act in the residence of the assessee on 14.07.1993 and after the issue of notice under section 148 and other reminders mentioned earlier. https://hcservices.ecourts.gov.in/hcservices/ 14.Now, on a careful consideration of the facts and circumstances of the case, I am satisfied that the failure of Ms.Vijaya Shanthi to furnish the return of income within the due time as required under section 139(1) and within the time stipulated in the notice issued under section 148 is willful. In the light of the facts that she is not only assessed to tax for several years, notice under section 148 was also issued requiring her to file the return of income, she deliberately postponed the filing of return of income and since the explanation of the assessee regarding the delay to furnish the return is not acceptable, being not based on sound reasoning , I am of the opinion that a prima facie case is made against the said Ms.Vijaya Shanthi, for prosecution under section 276CC of the Income-Tax Act, 1961. 15. Now, therefore, in exercise of the powers conferred upon me under section 279(1) of the Income-TaxAct, 1961, I, Ramesh Chandra Mishra, Commissioner of Income-Tax, Chennai- IV, Chennai, having jurisdiction over the assessee hereby accord sanction for filing of the complaint against the aforesaid Ms.Vijaya Shanthi, cine Actress, No.16, Parthasarathypuram, T.Nagar, Chennai – 600 017 for the offence under section 276CC of the Income-Tax Act, 1961 for the Assessment year 1993-1994 and authorise and direct Shri.D.Albert Manohar, ACIT, Media Circle-II, Chennai -34 to file the complaint in the Court of the Additional Chief Metropolitan Magistrate (Economic Offences), Egmore, Chennai – 8 or such other Court having competent jurisdiction. 3.Aggrieved by the said complaint the accused/petitioner has filed the above Criminal Original Petition to call for the records in EOCC.No.117 of 2007, on the file of Additional Chief Metropolitan Magistrate Economic Offences, Egmore, Chennai. The learned counsel for the petitioner raised the below mentioned points in the petition which are as follows:- "The petitioner submits that she was charged for an alleged above offence under section 276 C.C.(2) of the Income Tax Act, 1961 for non-filing of Income Tax Returns for the Assessment year 1992-1993, 1993-1994,1994-1995 in E.O.C.C.No.117 of 2007, E.O.C.C.118 of 2007 and E.O.C.C.119 of 2007 before the learned E.O.M.M-1, Egmore, Chennai – 8. She further submits that the above offence under section 279 (2) of the Income Tax Act 1961. She had filed petition under section 279(2) of the Income Tax Act for compounding the offence before the Chief Commissioner of Income Tax Chennai. https://hcservices.ecourts.gov.in/hcservices/ She further submits that she is a film artiste by profession and have been acting in the films from the age of 13 years and hence she had been assessed to Income Tax and Wealth Tax even though she was a minor and paying regularly the Income Tax to the Department. While so she was subjected to proceedings under section 132 of the Act on 14.07.1993. Consequent to which all the relevant materials relating to the professional earnings and expenditure details were seized by the department and in fact they are still under the custody of the department due to the seizure and the learned Commissioner has given the approval for release of documents only in the month of August 2006, but she yet to receive the documents. She further submits there has been delay in filing the return of Income Tax under Section 139(1) for the following years. The respective due dates and the date of filing are as under. S.No Assmt.Yrs Due Date Date of filing 1. 1992-1993 31.10.1992 25.03.1995 2. 1993-1994 31.10.1993 25.03.1996 3. 1994-1995 31.10.1994 02.09.1997 She further states that the proceedings under section 132 on 14.07.1993 and subsequent seizure of relevant document and materials, she was prevented from doing her legal obligation of filing the returns as she could not furnish any details of her income and expenditure to her auditor as a result she could not comply with the required time limit under the provisions of the Income Tax Act in as much as the required information and supporting documents were under seizure. She further submits despite all the legal hurdles efforts were made to obtain copies of the records and returns were complied with on the limited personal knowledge and information and eventually the returns were filed. She also submits that since the professional income was in excess of Rs.10 lakhs in relevant period, her auditor was not willing to sign the accounts unless all the relevant information was produced in the required manner. Hence there was a delay in filing the returns for no fault of mine. The delay in filing the income tax returns is neither willful nor wanton of negligence on her part. She further submits that for all the above mentioned years the assessment has been completed under section 143 (3) r/w Section 147 of the Act and the assessment was https://hcservices.ecourts.gov.in/hcservices/ appealed against and relief granted by CIT (A) and the corresponding taxes have been completely paid by her including interest under section 243A,B and C. She further submits that during the relevant three assessment years it was observed by the Department there was no concealment of income by her except the delay in filing the returns which was mainly on account of non-availability of information and supporting documents as all the records were under seizure consequent to proceedings under Section 132. She further submits that no penalty is exigible for mere delay in filing returns after 01.04.1989. It is substituted by interest under section 234-A. The question of prosecution cannot ordinarily lie, where there is no scope even for penalty. However explanation 3 to Section 271 (1) (iii) would provide for concealment penalty for those who do not file return in time. But then, alleged offence relates to Assessment year 1992-1993 to Assessment year 1994-1995 when penalty was exigible only against person who has not previously been assessed under this Act. These words were omitted by the finance Act 2002, only with effect from 01.04.2003. This amendment therefore is extending the scope of penalty for all assesses is only with effect from 01.04.2003,i.e. For assessment year 2003-2004. Circular No.204 dated 24.07.1976 explaining the insection of explanation 3 does not state, why assesses who were not previously assessed alone were made available for penalty. As mentioned in the commentary on the provision in Tax Compendium Vol.50 at page 60 reads as under. "Probably the proviso was considered necessary because a person who is already in the records of the Income Tax Department cannot avoid filing return sooner or later, while a new assessee can avoid filing return so that assessments get time barred if the I.T. Department is unable to locate him within time permissible for invitation of action under section 148". She further submits that whatever the circumstances of the case, she had given a petition under section 279(2) of the Income Tax Act 1961, for compounding the offence and the same is pending before the Chief Commissioner of Income Tax, Chennai. She further submits that there is no arrears of income tax to the respondents and also she is ready to pay the compounding fee. https://hcservices.ecourts.gov.in/hcservices/ She further submits that there cannot be two parallel proceedings one before the Income Tax Department for compounding the offence and another before the E.O. Court – 1, Egmore, Chennai in E.O.C.C.117 of 2007, for prosecution under section 276 C.C. Of the Income Tax Act. She further submits that she will be greatly prejudiced if the Court, proceedings are continued and her valuable right to compound offence will be defeated and she will be put to untold hardship and which will affect her reputation. She further submits that her right under section 279(2) will be prejudiced if the proceedings are continued in the Court." 4. The learned counsel for the petitioner cited the Judgments supporting his case namely; 1. Commissioner of Income Tax, Mumbai Vs.Bhupen Chempak Lal Dalal and another, AIR 2001, Supreme Court 1896. 2.Income Tax Officer Vs. Rajan and Company and another (2007) 291 ITR 345 (Delhi), and 3.Uttam Chand Vs. Income Tax Officer, (1982) 133 TRR 909 (SC) Twelve cases were lodged against the respondents under the Income-tax Act, 1961 (hereinafter referred to as 'the Act') before the Metropolitan Magistrate for offences punishable under the Act. In relation to the assessments arising under the Act, appeals had been preferred either before the Commissioner of Income-tax (Appeals) or the Income-tax-Appellate Tribunal (hereinafter referred to as 'the Tribunal'). On the basis that the appeals were pending the respondents filed applications for stay of the proceedings arising before the Criminal Court. Several decisions were cited before the Court to support the contention that the decision of the appellate authorities in the income-tax proceedings would be relevant to the criminal prosecution instituted against the respondents. The learned Magistrate, after examining the position in laws as to whether the findings of the appellate authorities are relevant for the purpose of the criminal proceedings and to avoid conflicting decisions of the criminal Court and the appellate authorities, felt that it would be appropriate to grant an interim order of the following nature. https://hcservices.ecourts.gov.in/hcservices/ However, passing of order about framing of charge, discharge of the accused or acquittal of the accused shall be stayed during pendency of the appeals by the accused before the Income-tax appellate authorities. These orders will be passed after the appeals filed by the accused before the Income-tax authorities are finally decided.' 2. Against that order, revision petitions were filed before the Sessions Court. The Sessions Court did not interfere with the order made by the learned Magistrate and dismissed the same. Thereupon, the matter was