Dinesh B. Parikh vs State of Bihar and Another

R.N. Sahay, J.—Heard the parties.

This is an application to quash the entire proceeding in Complaint Case No. 166 of 1992 under Sections 276C and 277 of the Income Tax Act.

A complaint was filed by the Union of India against the petitioner stating that the petitioner is an assessee within the meaning of Section 2(7) of the Income Tax Act, 1961. The petitioner filed a return on November 30, 1988, declaring a total income of Rs, 2,29,230. The income was assessed u/s 143(1) at the total income of Rs. 2,29,230 by the Assessing Officer vide his order dated March 14, 1989. Subsequent thereto, an information was received that the assessee had sold 10,500 numbers of shares involving capital gains. The petitioner filed three separate returns before the Income Tax Officer, Ward 6(4) at Ahmedabad, who had made protective assessments in the names of the petitioner''s three minor children. These incomes escaped assessment in the hands of the petitioner. Notice u/s 148 was served on June 16, 1989. Consequently, the petitioner filed a return on July 17, 1989, declaring a total income of Rs. 3,52,320 including capital gains of Rs. 2,55,000 from sale of shares. Assessment was completed u/s 143(3)/147(a) on a total income of Rs. 2,46,460. During the course of assessment proceedings, penalty proceedings were initiated u/s 271(1)(c). Penalty of Rs. 65,000 was imposed u/s 271(1)(c) on March 27, 1990, vide the Assistant Commissioner of income tax''s order dated March 27, 1990.

The petitioner preferred an appeal against the penalty order u/s 271(1)(c) before the Commissioner of Income Tax (Appeals), Jamshedpur. The penalty was confirmed vide order dated November 19, 1991. It is alleged that the petitioner had wilfully attempted to evade tax by furnishing inaccurate particulars of income and making false verification in the return of income. Thus, the petitioner made himself liable to be prosecuted under Sections 276C and 277 of the Income Tax Act, 1961.

The complaint was filed on March 13, 1992. During the pendency of the criminal proceeding the Income Tax Tribunal, Patna, vide order dated February 11, 1994, held that the penalty was bad ab initio in law and, accordingly, the order of the Commissioner of Income Tax confirming the penalty was set aside. In this view of the matter, it has been contended that the criminal proceeding pending against the petitioner is liable to be quashed. In a similar situation, in the case of Mahadeo Lal Agarwala Vs. State of Bihar and Another this court had quashed the proceeding. In that case, the penalty proceeding u/s 276C was dropped by the assessing authority.

In the facts and circumstances of the case, this application is allowed and the criminal proceeding against the petitioner is hereby quashed.