Court Rejects Quashing Plea in Income Tax Case, Emphasizes Limited Scope of Section 482 CrPC

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Case Name:

Jayashree vs Income Tax Officer (High Court of Madras)

Crl.O.P.No.3252 of 2017 and Crl.M.P.Nos.2346 and 2347 of 2017

Date: 16th July 2020

Key Takeaways:

1. The court reaffirmed the limited scope of Section 482 CrPC in quashing complaints or charges.

2. Courts should not evaluate evidence validity at this stage, focusing only on whether allegations constitute the alleged offenses.

3. The judgment emphasizes the importance of allowing trials to proceed and evidence to be tested in court.

Issue:

Should the court quash the proceedings against the petitioner under Section 482 CrPC for an alleged offense under Section 276CC of the Income Tax Act?

Facts:

1. The Income Tax Officer (respondent) filed a complaint against Jayashree (petitioner) for the assessment year 2013-2014.

2. Jayashree allegedly sold a property for Rs.1,05,60,000 and purchased another for Rs.1,55,00,000.

3. She failed to file her income tax return for that year, even after receiving notices on 06.07.2015 and 26.04.2016.

4. A show cause notice was issued on 29.04.2016.

5. Jayashree submitted her return on 24.05.2016, claiming exemption under Section 54F of the Income Tax Act.

6. The respondent filed a complaint for non-filing of return, arguing that filing was mandatory even if claiming exemption.

7. The trial had already commenced, with some prosecution witnesses examined.

Arguments:

Petitioner's Argument:

- The entire sale consideration was reinvested in a residential property, making the income exempt under Section 54F of the Income Tax Act.

- There was no taxable income, so filing a return wasn't necessary.

Respondent's Argument:

- Despite the exemption, it was mandatory for the petitioner to file a return and then claim the exemption.

- The petitioner failed to file the return within the stipulated time, constituting an offense under Section 276CC of the Income Tax Act.

Key Legal Precedents:

1. Devendra Prasad Singh Vs. State of Bihar & Anr. (Crl.A.No.579 of 2019, dated 02.04.2019): The Supreme Court held that the High Court, while hearing an application under Section 482 CrPC, has no jurisdiction to appreciate witness statements or record findings on inconsistencies.

2. Central Bureau of Investigation Vs. Arvind Khanna (Crl.A.No.1572 of 2019, dated 17.10.2019): The Supreme Court emphasized that in a petition under Section 482 CrPC, the High Court should not record findings on disputed facts or go into minute details of allegations and defenses.

3. M.Jayanthi Vs. K.R Meenakshi & anr (Crl.A.No.1817 of 2019, dated 02.12.2019): The Supreme Court reiterated that while invoking power under Section 482 CrPC, the court should not inquire into the validity of evidence. It should only see if the allegations constitute the offenses complained of.

Judgement:

1. The court dismissed the petition to quash proceedings in EOCC No.161 of 2016.

2. It held that the points raised by the petitioner cannot be considered under Section 482 CrPC at this stage.

3. The court directed the trial to be completed within six months from the date of the order.

4. The petitioner's personal appearance was dispensed with, except for specific stages of the trial.

FAQs:

1. Q: Why didn't the court quash the proceedings?

  A: The court followed Supreme Court precedents that limit the scope of Section 482 CrPC, emphasizing that evidence and merits should be tested during trial, not at this stage.

2. Q: Can the petitioner still defend herself?

  A: Yes, the court explicitly stated that the petitioner is at liberty to raise all grounds before the trial court.

3. Q: What's the significance of this judgment for similar cases?

  A: It reinforces the principle that courts should be cautious in quashing proceedings under Section 482 CrPC, focusing only on whether allegations constitute the alleged offenses.

4. Q: Does this mean the petitioner is guilty?

  A: No, this judgment doesn't determine guilt. It merely allows the trial to proceed where evidence will be examined and a verdict reached.

5. Q: What's the next step for the petitioner?

  A: The petitioner will need to defend herself in the trial court, where she can present her arguments and evidence.

This petition has been filed to quash all further proceedings in EOCC No.161 of 2016 on the file of Additional Chief Metropolitan Magistrate, Egmore (E.O-II), Allikulam Road, Chennai, as against the petitioner/accused.

2. The learned Counsel appearing for the petitioner would submit that the respondent has filed a complaint against the petitioner for the offence under Section 276 CC of Income Tax Act alleging that the accused during the assessment year 2013-2014 sold a property for a sum of Rs.1,05,60,000/- (Rupees One Crore Five Lakhs and Sixty Thousand only) and against which, she purchased immovable property for a sum of Rs.1,55,00,000/- (One Crore and Fifty Five Lakhs only) but failed to file her return of income for the assessment year 2013-2014 and even after the respondent/complainant issued a notice on 06.07.2015 and again on 26.04.2016, calling upon the petitioner/accused to file her return of income,she failed to file her return of income and hence, a show cause notice was issued on 29.04.2016 and upon receipt of the same, the petitioner/accused submitted her return on 24.05.2016 stating that she had reinvested the entire sale consideration in a residential property and therefore, the income was exempted from tax under Section 54 F of the Income Tax Act and there was no taxable income. However, the respondent/complainant has filed the present complaint for non-filing of return by the petitioner/accused alleging that inspite of the exemption, it was obligatory on the part of the petitioner/accused to file return of income and then claim exemption.

Hence the petitioner/accused has filed this petition to quash all further proceedings in EOCC No.161 of 2016.

3. The learned Special Public Prosecutor would submit that the trial has already been commenced and some of the prosecution witnesses have already been examined and the case is posted for further evidence on the side of the prosecution.

4. Heard Mr.P.Ramesh Kumar, learned counsel appearing for the petitioner and Mr.L.Murali Krishnan, learned Special Public Prosecutor appearing for the respondent.

5. It is relevant to rely upon the judgment of the Hon'ble Supreme Court of India passed in Crl.A.No.579 of 2019 dated 02.04.2019 in the case of Devendra Prasad Singh Vs. State of Bihar & Anr., as follows:-

" 12. So far as the second ground is concerned, we are of the view that the High Court while hearing the application under Section 482 of the Cr.P.C. had no jurisdiction to appreciate the statement of the witnesses and record a finding that there were inconsistencies in their statements and, therefore, there was no prima facie case made out against respondent No.2. In our view, this could be done only in the trial while deciding the issues on the merits or/and by the Appellate Court while deciding the appeal arising out of the final order passed by the Trial Court but not in Section 482 Cr.P.C. proceedings.

13. In view of the foregoing discussion, we allow the appeal, set aside the impugned order and restore the aforementioned complaint case to its original file for being proceeded with on merits in accordance with law.

6. Recently, the Hon'ble Supreme Court of India dealing in respect of the very same issue in Crl.A.No.1572 of 2019 dated 17.10.2019 in the case of Central Bureau of Invstigation Vs. Arvind Khanna, wherein,it has been held as follows:

“19. After perusing the impugned order and on hearing the submissions made by the learned senior counsels on both sides, we are of the view that the impugned order passed by the High Court is not sustainable. In a petition filed under Section 482 of Cr.P.C., the High Court has recorded findings on several disputed facts and allowed the petition. Defence of the accused is to be tested after appreciating the evidence during trial. The very fact that the High Court, in this case, went into the most minute details, on the allegations made by the appellant-C.B.I., and the defence put- forth by the respondent, led us to a conclusion that the High Court has exceeded its power, while exercising its inherent jurisdiction under Section 482 Cr.P.C.

20. In our view, the assessment made by the High Court at this stage, when the matter has been taken cognizance by the Competent Court, is completely incorrect and uncalled for.”

7. Further the Hon'ble Supreme Court of India also held in the order dated 02.12.2019 in Crl.A.No.1817 of 2019 in the case of M.Jayanthi Vs. K.R.Meenakshi & anr, as follows:

"9. It is too late in the day to seek reference to any authority for the proposition that while invoking the power under Section 482 Cr.P.C for quashing a complaint or a charge, the Court should not embark upon an enquiry into the validity of the evidence available. All that the Court should see is as to whether there are allegations in the complaint which form the basis for the ingredients that constitute certain offences complained of. The Court may also be entitled to see (i) whether the preconditions requisite for taking cognizance have been complied with or not; and (ii) whether the allegations contained in the complaint, even if accepted in entirety, would not constitute the offence alleged.

13. A look at the complaint filed by the appellant would show that the appellant had incorporated the ingredients necessary for prosecuting the respondents for the offences alleged. The question whether the appellant will be able to prove the allegations in a manner known to law would arise only at a later stage..."

The above judgments are squarely applicable to this case and as such, the points raised by the petitioner cannot be considered by this Court under Section 482 Cr.P.C.

8. In view of the above discussion, the quash petition cannot be entertained at this stage and this Court is not inclined to quash the proceedings in EOCC No.161 of 2016 on the file of Additional Chief Metropolitan Magistrate, Egmore (E.O-II), Allikulam Road, Chennai. The petitioner is at liberty to raise all the grounds before the trial Court. The personal appearance of the petitioner is dispensed with and she shall be represented by a counsel after filing appropriate application. However, the petitioner shall be present before the Court at the time of furnishing of copies, framing charges, questioning under Section 313 Cr.P.C. and at the time of passing judgment. However, considering that the EOCC is of the year 2016, the trial Court is directed to complete the trial within a period of six months from the date of receipt of copy of this Order.

9. Accordingly, this criminal original petition is dismissed. Crl.M.P.No.2346 of 2017 is closed and Crl.M.P.No.2347 of 2017 is disposed of with the above directions.

16.07.2020

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