Law:

Section:

Section 276C/277 of the Income-tax Act, 1961 - Offences and prosecution - Wilful attempt to evade tax, etc. - Assessment year 1995-96 - While completing assessment, Assessing Officer found that out of seven unsecured loans shown by petitioner / assessee in its books of account, four were ingenuine - He, therefore, levied penalty on petitioner under section 271(1)(c) - On appeal, Commissioner (Appeals) confirmed levy of penalty - Thereafter, complaint was filed under section 276C/277 to punish petitioner - In meanwhile, petitioner filed an appeal before Tribunal against penalty levied and contended that since appeal was pending before Tribunal, its prosecution was illegal - Whether prosecution under sections 276C/277 and 278B was maintainable during pendency of appeal before Tribunal, but continuation of same would depend on decision of Tribunal as in case Tribunal would give its in favour of petitioner, prosecution might not be maintainable - Held, yes - Whether therefore, proceedings against petitioner were not liable to be quashed during pendency of appeal before Tribunal; however, prosecution proceedings should remain stayed till a decision was rendered by Tribunal - Held, yes FACTS The first petitioner-company filed its income-tax return for the relevant assessment year mentioning that the total income of the company was 'nil'. It had shown seven unsecured loans obtained by it. Out of those, three loans were found to be genuine and four loans to the tune of Rs. 7,70,000 did not appear to be genuine. Therefore, the said amount was added to the income of the petitioner and the assessment order was passed imposing a minimum penalty under section 271(1)(c). On appeal, the Commissioner (Appeals) confirmed the levy of penalty. Thereafter, a complaint had been filed under sections 276C, 277 and 278B to punish the petitioner according to law. Meanwhile, the petitioner-company filed an appeal before the Tribunal against the order levying penalty and same was pending. The petitioner filed instant petition seeking to quash criminal proceedings against it contending that since the appeal before the Tribunal was pending, its prosecution was illegal. HELD Since pendency…

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