Law:

Section:

Section 276C, read with section 277, of the Income-tax Act, 1961 and sections 193 and 196 of the Indian Penal Code, 1860 - Offences and prosecution - Wilful attempt to evade tax - Assessment year 1978-79 - Whether where addition made to assessee-firm's income on account of suppression of stock was confirmed by Tribunal but penalty under section 271(1)(c) imposed on firm was cancelled, assessee-firm was right in contending that since penalty had been cancelled by Tribunal by treating assessee's explanation as bona fide, no prosecution proceedings could be launched against assessee-firm - Held, yes FACTS The assessee-firm's assessment for the assessment year 1978-79 was completed on a total income of Rs. 53,074 which included Rs. 23,445, being the value of suppressed stock for which the assessee-firm did not furnish any explanation even in response to a specific show-cause notice. The assessee's appeals before the AAC and the Tribunal were dismissed. Thereafter, penalty under section 271(1)(c) was imposed by the ITO which was maintained by the AAC. A complaint against the assessee-firm and its partners (accused) was filed by the ITO on 17-3-1986 under section 276, read with section 277, of the Income-tax Act, and sections 193 and 196 of the Indian Penal Code as offence under sections 277 and 276C had been committed by the firm and its partners by intentionally fabricating false evidence in the shape of bogus account books for being used in the income-tax assessment proceedings. Meanwhile, the assessee's appeal before the Tribunal in respect of penalty under section 271(1)(c) was accepted and the penalty was quashed. The Tribunal held that the explanation furnished by the assessee before the Tribunal was bona fide and taking into consideration the proviso below Explanation 1 to section271(1)(c), no penalty was exigible. Thereafter, the accused moved an application before the Trial Court stating that as the penalty under section 271(1)(c) imposed on the firm by the ITO had been quashed by the Tribunal, the accused had not concealed any income and had not filed any false return. Relying on the decision in Parkash Chand v. ITO [1982] 134 ITR 8 (Punj. & Har.), the…

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