Law:

Section:

Section 276, read with section 271(1)(c), of the Income-tax Act, 1961 - Offences and prosecutions - Wilful attempt to evade tax - Assessment year 1985-86 - Whether once order of penalty has been cancelled by Tribunal, finding of Tribunal is conclusive and prosecution cannot be sustained - Held, yes FACTS The assessee-company was manufacturing transmission line towers and selling them to electricity board and railways. The Assessing Officer issued a show-cause notice to the assessee and its directors under section 271(1)(c) for concealing income of Rs. 1,70,360 for assessment year 1985-86 and imposed penalty of Rs. 1 lakh. The Commissioner (Appeals) confirmed the order of the Assessing Officer. The assessee filed an appeal to the Tribunal. When the appeal was pending, the department instituted a criminal case against the assessee for offence under section 276C, read with section 278B. The Chief Metropolitan Magistrate (CMM) passed an order issuing the summons upon the assessee and non-bailable warrants were also issued against the directors. In petition, the assessee contended that since pending present proceedings before the Court, the Tribunal had already cancelled the penalty, the criminal complaints as well as the orders passed by the CMM were liable to be set aside. In contending as above, the assessee relied upon the decisions of the Supreme Court in K.C. Builders v. Asstt. CIT [2004] 265 ITR 562/ 135 Taxman 461 and Virtual Soft Systems Ltd. v. CIT [2007] 289 ITR 83/ 159 Taxman 155 . HELD Under the circumstances and considering the fact that the Tribunal had allowed the appeal of the assessee and had quashed and set aside the order of penalty, as held by the Supreme Court, in the case of K.C. Builders (supra), once the order of penalty has been cancelled by the Tribunal, the finding of the Tribunal is conclusive and the prosecution cannot be sustained and has to be quashed. [Para 7] Thus, the impugned complaint as well as the order passed by the Chief Metropolitan Magistrate in issuing the summons upon the assessee and its directors in the said criminal cases were to be quashed and set aside. CASES REFERRED TO H.T. Power Structures (P.) Ltd. v. Asstt. CIT…

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