Income Tax Act| Pendency Of Any Adjudication Proceeding Is Not Bar To Proceed With Prosecution: Madras HC

The Madras High Court observed that adjudication proceedings and the criminal prosecution under Income Tax Act are independent to each other and the pendency of any adjudication proceeding is not bar to proceed with the prosecution.

In this case, though revisionary proceedings under Section 263 was pending consideration, the High Court refused to quash the proceedings and confirmed the criminal complaint filed against the Assessee under Section 276C(1) and 277 of the Income Tax Act, 1961.

Referring to the decision of Supreme Court in case of Radheshyam Kejriwal v. State of West Bengal & Anr. [(2011) 3 SCC 437], a Single Judge Bench of Justice G.K. Ilanthiraiyan observed that “adjudication proceedings and the criminal prosecution are independent to each other and the pendency of any adjudication proceeding is not bar to proceed with the prosecution”.

Senior Advocate Aravind Pandian appeared for the Petitioner/ Assessee while the Respondent/ Revenue was represented by Advocate M. Sheela.

The brief facts of the case were that a search operation was conducted on Saravana Store group and the residence of the Assessee was also covered wherein huge gold was seized. This culminated in proceedings under Section 153C against the Assessee. Thereafter, the Assessee filed a return showing investment in gold. The Assessment was completed after making an addition of Rs.72 Lacs towards undisclosed investment along with penalty under Section 271(1)(c) of Income tax Act. Although the CIT(A) deleted the penalty, however, ITAT sustained the penalty. Resultantly, the Revenue Department lodged complaint against the Assessee for offences punishable under Section 276C(1) and 277 for tax evasion and making false statement.

After considering the submission, the Bench referred to the decision of Radheshyam Kejriwal Vs. State of West Bengal to reiterate that decision in adjudication proceeding is not necessary before initiating criminal prosecution.

The Bench then referred to the argument of Assessee that the High Court in an earlier order of Assessee set aside the entire penalty by allowing the reconciliation of the quantum of jewellery and thus, prosecution based on the original order cannot be sustained.

The Bench then found that the PCIT however reopened the proceedings after finding that no reconciliation was carried out in the subject Assessment Year.

The Bench also found that though the Assessee challenged the proceedings before the High Court but the same was rejected and the reassessment proceedings are still pending before the Revenue Department.

Thus, observing that the previous proceedings had not attained finality and the quantum of jewellery found during search was not brought in the earlier returns and reconciliation of jewellery has still not attained finality, the High Court refused to quash the prosecution proceedings in view of the pendency of the proceeding under Section 263.

Cause Title: R. Revathy v. Assistant Commissioner of Income Tax

Click here to read / download the Judgment