Once Order Of Assessment & Penalty U/s 143(3) R/w Sec 153A IT Act Stands Quashed, No Prosecution Can Be Made Till Fresh Assessment: Madras HC

While quashing the prosecution initiated against the Petitioner/ Assessee under Section 276C(1), 276C(2) and 276CC of the Income Tax Act, 1961, the Madras High Court ruled that initiation of the prosecution as against the petitioner cannot be sustained till the fresh assessment order is passed and therefore the complaints pending on the file of the Judicial Magistrate are liable to quashed.

A Single Judge Bench of Justice G.K. Ilanthiraiyan observed that “the entire prosecution initiated as against the petitioner is in pursuant to the order of assessment and penalty under Section 143(3) read with Section 153A of The Income Tax Act, 1961. Now, the order of assessment itself is set aside and as such, this Court is of the view that, initiation of the prosecution as against the prosecution cannot be sustained till the fresh assessment order is passed”.

Advocate T.P. Prabakaran appeared for the Assessee while the Revenue was represented by Advocate V. Vijaykumar.

As per the brief facts, the Assessee-Individual is in the business of real-estate, automobile, construction, and finance. The Assessee was subjected to assessment under Section 153A for AY 2009-10 to AY 2015-16 which led to tax demand and penalty that was not paid. Thus, the Revenue invoked the provision of Section 276C(1)/(2) for willful attempt to evade the payment of tax and the penalty. For one of the AYs falling under Section 153A proceedings, Assessee filed the return with delay of 11 months due to the death of his accountant. The Revenue, thus, initiated prosecution under Section 276CC for non-filing of return within the due time.

On appeal, the ITAT found that the seized documents belong to the partnership firm and not to the Assessee, thus, held that if the incriminating material did not belong to the Assessee the addition ought to be deleted. Therefore, remitted the matter to the Revenue for further verification.

After considering the submission, the Bench found that the entire prosecution was initiated in pursuance of the assessment order and penalty under Section 153A which itself was set aside for de novo consideration.

Accordingly, the High Court allowed the petition.

Cause Title: S. Arputharaj v. The Deputy Commissioner of Income Tax

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