V. K. SINGHAL, J. :
By this petition under s. 482 CrPC the proceedings before the Special Judicial Magistrate (Economic Offences) in Criminal Case No. 264/95 have been prayed to be quashed. An application under s. 245(2) of the CrPC was moved by the petitioners for discharging them of the alleged offences under ss. 276C and 277 of the IT Act, 1961, r/w s. 197 and 120B of the IPC.
2. A complaint was filed by the ITO ward II, Alwar, in respect of asst. yr. 1982-83 on the ground of concealment of income by declaring the income of Rs. 15,195 in the return submitted on 30th July, 1982, whereas the additions were made of Rs. 33,000 by the ITO on 30th August, 1983. The additions were reduced to Rs. 16,000 by order dt. 27th April, 1985 by the appellate authority. The petitioner thereafter filed a revised return on 21st January, 1986, and surrendered this amount of Rs. 16,000. The penalty of Rs. 5,632 was levied under s. 271(1)(c) of the IT Act, 1961, by order dt. 21st March, 1986. The said penalty has been quashed by the appellate authority on 25th July, 1986, and in appeal preferred by the Department to the Tribunal, the penalty was sustained vide order dt. 30th October, 1987. The petitioner moved an application for rectification which was accepted on 28th July, 1993, and the penalty was quashed. It is stated that the reference application moved by the Department was rejected by the Tribunal on 14th December, 1993, and the application under s. 256(2) have not been moved before this Court.
3. The complaint is stated to be contrary to various circulars issued by the CBDT and it is stated that in accordance with Circular No. 432 dt. 15th November, 1985 [published at (1986) 50 CTR (TLT) 1] the sympathetic view was to be taken against those persons who surrendered their income by 31st March, 1986, and the Tribunal having taken into consideration that Circular, set-aside the penalty in the rectification proceedings.
4. The submission of the learned counsel for the petitioner is that since the penalty itself has been quashed, the magistrate should not have taken the cognizance nor should have proceeded further in the matter and the application which was moved under s. 245(2) CrPC have wrongly been rejected.
5. Reliance has been placed on the decision given by the apex Court in the case of G. L. Didwania & Anr. vs. ITO (1997) 224 ITR 687 (SC) wherein it was observed that if the finding of false statement in respect of income have been set-aside by the Tribunal, the criminal proceedings could no longer be sustained. This decision was given following the judgment of Uttam Chand vs. ITO (1982) 133 ITR 909 (SC) This later decision was considered by the apex Court in the case of P. Jayappan vs. S. K. Perumal, ITO (1984) 149 ITR 696 (SC)
The decision of Patna High Court in the case of Md. Moinul Haque & Ors. vs. State of Bihar & Ors. (1997) 224 ITR 239 (Pat), is also relied where also the petition under s. 482 CrPC 1973, was allowed and the prosecution was quashed observing that no useful purpose would be served in remitting the case to the trial Court itself for consideration since the penalty imposed for concealment of income has been set aside by the CIT(A), and the basis for a prosecution under ss. 276C and 277 of the IT Act, 1961 no longer exists. There is another decision in the case of Mahadeo Lal Agarwal vs. State of Bihar (1997) 224 ITR 119 (Pat), in which also it was observed that once the proceedings under s. 271(1)(c) of the IT Act, 1961, has been dropped, there is no question of criminal prosecution against the assessee. In the case of Banwari Lal Satyanarain vs. State of Bihar (1989) 179 ITR 387 (Pat) also similar view was taken.
In Nemi Chand Garg vs. ITO (1986) 161 ITR 500 (Raj) it was observed by this Court that if the appeal is pending before the Tribunal further proceedings should not be taken during the pendency of that appeal.
In Kashi Ram Wadhwa vs. ITO (1984) 145 ITR 109 (P&H) Punjab & Haryana High Court has held that once the proceedings under s. 271(1)(c) is dropped, there is no question of criminal prosecution against the assessee.
Bombay High Court in the case of Shashichand Jain & Ors. vs. Union of India & Ors. (1995) 213 ITR 184 (Bom) has taken the view that once the Tribunal has come to the conclusion that there was neither wilful attempt of evasion of any tax nor any deliberate false statement made in the verification clause of the WT return, there is no basis for prosecution.
Madras High Court in the case of Mohamed I. Unjawala & Ors. vs. Asstt. CIT (1995) 213 ITR 190 (Mad) observed that the finding of the Tribunal on the facts are final and the High Court has no jurisdiction to go behind the statement of fact made by the Tribunal. The criminal Court is bound to accept the finding of the Tribunal on questions of fact in the penalty proceedings giving the finding against the assessee who is facing criminal prosecution. He cannot be convicted on the basis of the findings of the Tribunal because the criminal Court has to follow the procedural law for trying an offender according to the CrPC, 1973, and, therefore, the High Court cannot deviate from the Code for the reason that a finding has been arrived at by the authorities under the IT Act, 1961. The facts found by the Tribunal in favour of the assessee cannot be disturbed by the High Court as the Tribunal is the fact-finding authority. The prosecution was quashed.
The Kerala High Court [V. Rajasekharan Nair vs. CIT (1993) 204 ITR 783 (Ker) -Ed.] observed that in view of the agreed nature of assessment and the failure to establish the falsity of explanation offered by the assessee, the prosecution was lost. The complaint was quashed with the observation that it would be without prejudice to the right of the respondent to file a fresh complaint if the order of the Tribunal was set aside in further proceedings arising consequent of the application under s. 256(2). The SLP against this decision was dismissed on 18th April, 1994 as reported in (1994) 207 ITR (St.) 33.
Calcutta High Court in Laxmi Narain Kathgola (Firm) & Ors. vs. State of West Bengal & Anr. (1996) 218 ITR 627 (Cal) observed that the penalty having been cancelled by the Asstt. CIT, the prosecution for violation of provisions of ss. 276 and 277 of the Act could not proceed and consequently prosecution for the offence and abatement of the same offence punishable under s. 278 of the IT Act, 1961, could not also proceed.
Kerala High Court in ITO vs. T. Abdul Majeed (1988) 169 ITR 440 (Ker) observed that the criminal Court has to give due regard to the result of proceedings under the IT Act having a bearing on the question in issue and in an appropriate case, it may drop the proceedings in the light of an order passed under the IT Act.
Delhi High Court in the case of Sequoia Construction Co. (P) Ltd. vs. P. P. Suri, ITO (1986) 158 ITR 496 (Del) observed that where the penalty imposed by the ITO under s. 201(1) r/w s. 221 was cancelled by the CIT(A) on the ground that there was good and sufficient reason for non-payment of tax within time because of financial stringency, the prosecution launched against the petitioners for offences under s. 276B based on the same defaults had to be quashed.
Delhi High Court in Rajinder Nath vs. M. L. Khosla, ITO (1982) 133 ITR 397 (Del) observed that when additions to income is knocked down, the prosecution cannot be sustained.
This Court in Prakash Chand Bhanwar Lal vs. ITO RLR 1987 (II) 42, observed as under :
"It is true that the criminal Court can independently judge the matter but it is equally true that if the findings of the Tribunal which is more or less highest in the hierarchy under the IT Act disposes on a point of fact on detailed appreciation of evidence then unless something contrary is shown or exceptional circumstances are pointed out requiring the exercise by a criminal Court from the original jurisdiction to the highest Court, it may result endangering the duplicacy of decision and that any decision so made even become in a given case an abuse of process of Court thereafter. In view of the above, only short point is that whether Form No. 12 was submitted or not and this short point has been answered by the Tribunal by an elaborate discussion to the entire documentary evidence. I am of the opinion that the case comes in the category where proceedings are required to be dropped as per the decision of P. Jayappan (supra) referred to above."
6. On the other hand the learned counsel for the respondent pointed out that the Kerala High Court in the case of P. K. Narayan vs. CIT (1996) 219 ITR 33 (Ker) has held that even if the penalty has been set-aside by the CIT, it will not be a ground for quashing the criminal prosecution and this fact can very well be raised before the Court below while filing the application and the Court below will consider this aspect and pass the appropriate order.
In P. Jayappan vs. S. K. Perumal (supra) it was held by the apex Court that criminal proceedings are independent proceedings and mere expectation on success in some proceeding in an appeal or a reference under the IT Act, cannot come in the way of the institution of criminal proceedings under s. 276C or s. 277 of the IT Act. Relevant observations made under :
"The criminal Court no doubt has to give due regard to the result of any proceeding under the Act having a bearing on the question in issue and in an appropriate case it may drop the proceedings in the light of an order passed under the Act. It does not, however, mean that the result of a proceeding under the Act would be binding on the criminal Court".
Allahabad High Court in Shiv Shanker Sitaram vs. ITAT (1987) 168 ITR 275 (All) , observed that the question as to whether any offence has been committed by the petitioners require investigation of fact which was not warranted in a writ jurisdiction and the petitioner would have a right to move the magistrate before whom the case was pending that they had not committed any offence for which they were being prosecuted. The writ petition was dismissed.
Allahabad High Court in Dr. D. N. Munshi vs. H. B. Singh (1978) 112 ITR 173 (All) observed that the order of the Tribunal may be utilised as the piece of evidence to show that there was no offence committed by the accused. But the finding given by the Tribunal cannot by itself be sufficient to direct the dismissal of the complaint or acquittal or discharge of the accused under CrPC.
In Hema Mohnot vs. State by Chief CIT (1992) 198 ITR 410 (Mad) Madras High Court relied on the decision given in Kumudini Subhan vs. Chief CIT (1992) 198 ITR 390 (Mad) Witnesses were examined and case was posted for questioning the accused under s. 313(a) of the Cr.PC 1973. It was observed that where the question of framing the charges has arisen, the proper course would be to put forward contentions before the trial Court.
In Telu Ram Raunqi Ram vs. ITO (1984) 145 ITR 111 (P&H) Punjab & Haryana High Court was moved for quashing the criminal complaint on the ground that reference was pending in the High Court against the order of the High Court. It was observed that mere expecting of such proceedings should not stand in the way of criminal Court.
7. Learned counsel for the respondents has also relied on the judgment given in the case of Jagmohan Singh vs. ITO (1992) 196 ITR 473 (P&H) : 1992 (1) Crimes 817 where the criminal revisions were dismissed as during the course of arguments. Learned counsel for the petitioner urged that the question of his responsibility to the company may be left open so that he may show it to the trial magistrate that in fact, the petitioner was not in charge of and responsible to the company for its business in respect of alleged prosecution under s. 194A r/w 276B for the decision regarding deduction of tax at source and depositing the same in time.
8. Apex Court in Mushtaq Ahmed vs. Mohd. Habibur Rehman Faizi & Ors. (1996) 7 SCC 440 considered the scope of s. 482 CrPC and relied on the decision given in the case of State of Haryana vs. Bhajan Lal 1992 (Suppl) SCC 335 wherein it was observed that "We also give a note of caution to the effect that the power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too in the rarest of rare cases; that the Court will not be justified in embarking upon an enquiry as to the reliability for genuineness or otherwise of the allegations made in the FIR or the complaint and that the extraordinary or inherent powers do not confer an arbitrary jurisdiction on the Court to act according to its whim or caprice".
In Upasana Hospital & Nursing Home & Anr. vs. ITO (1996) 217 ITR 555 (Ker) it was held by the High Court that the application filed under s. 482 CrPC 1973, has to be considered in each case on its merits and the petitioner has to move to the trial Court for appropriate order regarding continuation or otherwise proceedings pending against them. Madras High Court in S. Vasudeva Rao vs. P. S. J. Sigamany (1995) 211 ITR 284 (Mad) held that the fact that revised return has been accepted would not amount to admission that there had been no concealment of income and prosecution was not quashed.
In Vanaja Textiles Ltd. vs. IAC (1994) 208 ITR 602 (Ker) it was held that the factual aspect of the case requires detailed consideration and the complaint had to be enquired into and decided on merits. The interference under s. 482, CrPC is not legal or proper.
9. In the application moved on 4th October, 1994 under s. 245(2) of the CrPC, 1973, prayer for quashing the complaint was made which was rejected by the Chief Judicial Magistrate (Economic Offences) by his order dt. 7th March, 1995. It was claimed that the declaration of the income in the revised return of Rs. 16,000 was made on the basis of circular issued by the CBDT voluntarily and the Tribunal has given the benefit of the said circular for quashing the penalty. The trial Court found that the application under s. 245(2) Cr.PC, 1973, was moved earlier which was decided on 2nd March, 1993, in which the contention regarding benefit of circular issued by the CBDT was discussed in detail and there being no change in the circumstances, the second application is not maintainable.
10. Learned counsel for the petitioner has submitted that the earlier application under s. 245(2) was filed when the appeal with regard to penalty was pending with the Tribunal and was not decided. The second application was filed after the Tribunal decided the appeal with regard to levy of penalty and has taken into consideration the circular issued by the CBDT. In the Circular No. 432, dt. 15th November, 1985 (supra) revised return could be filed in certain circumstances. Since the order of the Tribunal quashing the penalty is not in dispute before me, I do not consider that any observation be made with regard to correctness of the order of the Tribunal though in S. R. Arulprakasam vs. ITO (1987) 163 ITR 487 (Mad) and S. Vasudeo Rao vs. P. S. J. Sigamani (supra), a different view was taken in respect of filing of revised return. The trial Court after passing the order on the first application submitted under s. 245(2) CrPC has not taken into consideration the order of the Tribunal passed subsequently quashing the penalty on the basis of circular issued. It was observed by the Tribunal that the assessee voluntarily surrendered Rs. 16,000 in the revised return and paid tax thereon. The revised return was accepted by the ITO. This addition of Rs. 16,000 was confirmed on 27th April, 1985, and penalty was levied on 31st March, 1987 though the revised return was filed on 27th March, 1987. The assessee is required to be given the benefit of Boards circular and the Dy. CIT(A) has rightly cancelled the penalty.
11. The various principles which emerges from various decisions referred to above, are (1) if the finding of the false statement in respect of income has been set aside by the Tribunal the criminal proceedings cannot be allowed to be continued, (2) if the proceedings for levy of penalty have been dropped the question of any criminal prosecution to continue does not arise, (3) if the penalty has been set-aside on the ground not deciding the factual position of the matter, the trial Court can continue with the criminal prosecution, (4) the criminal proceedings are independent proceedings and mere expectations of success in appeal or reference would not come in the way of the Department for institution of criminal proceedings, (5) the question whether any offence has been committed requires investigation of the fact and the trial Court and the High Court in jurisdiction under Art. 226 of Constitution or s. 482 Cr.PC cannot adjudicate the same. It is for the magistrate who can record a finding as to whether an offence has been committed or not, (6) the finding recorded by the Tribunal on facts is final and the High Court cannot go behind such finding, (7) the order of the Tribunal is a good piece of evidence and unless something contrary is shown or exceptional circumstances are pointed out, the trial Court would not deviate from such finding of fact recorded, (8) the power under s. 482 Cr.PC can be exercised for quashing the criminal proceedings very sparingly and with circumspection in rarest of rare cases, (9) mens rea is an essential ingredient and the burden to establish the offence is on the prosecution, (10) it would not be proper to continue with the criminal proceedings during the pendency of appeal before the CIT(A) or Tribunal.
12. The very basis on which the application of the petitioner under s. 245(2) was rejected is not in accordance with law because there was change of circumstances as the penalty itself was quashed by the Tribunal subsequent to the decision given on the earlier application under s. 245(2). The matter could have been examined by the trial Court on merits as to whether the proceedings be quashed or should be allowed to be continued.
13. The circular dt. 7th February, 1991 issued by the CBDT have been brought to my notice where prosecution under s. 276(1) of the IT Act was directed not to be initiated if the income evaded is less than Rs. 25,000. Concealment alleged is of income of Rs. 16,000. The Tribunal in its order dt. 28th July, 1993, observed that after the assessment order having been set aside by AAC on 27th April, 1985, the assessee voluntarily surrendered addition of Rs. 16,000 in the course of set aside proceedings.
14. I would have sent the matter back to the trial Court for deciding the matter afresh taking into consideration the subsequent order of the Tribunal. But looking to the special facts of this case that the amount of alleged evasion of tax on the income of Rs. 16,000 is meagre and without going to the merits of the case the complaint filed under s. 276(1)(c) and 277 of the IT Act, 1961 and s. 197 r/w 120B, IPC, for asst. yr. 1982-83 are hereby quashed as even according to the instructions of the Board, prosecution in cases where the income concealed is less than Rs. 25,000 is not warranted now.
The petition is allowed.