Technical exoneration in tax penalty does not terminate ongoing criminal prosecutions for tax evasion.

ORDER

The criminal prosecutions initiated against the petitioner by the Assistant Commissioner of Income Tax, Central Circle, Thrissur for the commission of offence under Section 276 (c)(1) and 277 of the Income Tax Act, 1961 (hereafter referred to as ‘the IT Act’) are challenged by the petitioner in these proceedings under Section 482 Cr.P.C.

2. The allegation against the petitioner is that he, who is a partner in 22 firms and also a Director of two private limited companies primarily involved in land transactions, had substantially concealed his income while filing returns under Section 139 of the I.T Act for the respective assessment years mentioned in the aforesaid cases and thereby resorted to tax evasion. It is stated that the offence came to light pursuant to a search and seizure under Section 132 of the I.T Act conducted on 18.12.2013 at the establishments run by the petitioner at various places and also at five residences including his own residence. After the issuance of notices under Section 153A/142(1) and 143(2) of the I.T Act, the petitioner filed returns of income for the respective assessment years which showed substantially higher income from the income which he had shown in the original returns. The violations in the above regard related to the assessment years 2008-2009 to 2013-2014. After obtaining the necessary sanction under Section 276C(1) of the I.T Act, the Assistant Commissioner of Income Tax filed the complaints before the Additional Chief Judicial Magistrate Court (Economic Offences), Ernakulam which took the complaints to files, assigned case numbers and issued summons for the appearance of the petitioner.

3. In these petitions, the petitioner would contend that none of the offences as alleged in the complaints are attracted, in the facts and circumstances of the case. According to the petitioner, the allegations against him cannot be termed as wilful evasion of tax but only under-reporting or misreporting of income which were brought into the statute book only from 01.04.2017 onwards with the amendment of Section 276C and incorporation of Section 270A in the I.T.Act, 1961 by Finance Act, 2016. Thus, it is stated that the complaints against the petitioner will not disclose any offence.

4. Heard the learned counsel for the petitioner and the learned Standing Counsel for the Income Tax Department.

5. At the time of arguments, the learned counsel for the petitioner mainly relied on the point that the petitioner herein has been absolved of his liability to pay penalty as per the order dated 05.03.2025 of the Commissioner of Income Tax (Appeals), and hence the criminal prosecutions launched against him are liable to be terminated in the light of the law laid down by the Apex Court in K.C.Builders and Others v. The Assistant Commissioner of Income Tax [ (2004) 2 SCC 731 ]. According to the learned counsel for the petitioner, the penalties imposed by the Assistant Commissioner of Income Tax upon the petitioner in connection with the respective violations have been set aside by the Commissioner of Income Tax (Appeals) vide order dated 05.03.2025, allowing the appeals filed by the petitioner. Thus, it is argued that all these criminal prosecutions initiated against the petitioner are liable to be closed in view of the dictum laid down by the Apex Court in K.C.Builders and Others (supra).

6. Per contra, the learned Standing Counsel for the Income Tax Department, by relying on the decision of a three Judges Bench of the Apex Court in Radheshyam Kejriwal v. State of West Bengal and Another [ (2011) 3 SCC 581 ], argued that the criminal prosecution initiated against an assessee could be terminated only in such cases where the assessee is exonerated from paying penalty