M/s Shiv Vani Oil & Gas Exploration Services LTD Vs Income Tax Office (ITO)

Delhi District Court
IN THE COURT OF SH. SANJAY KUMAR AGGARWAL
SPECIAL JUDGE-03: (PC ACT) CBI : DELHI.
Criminal Appeal No.: 173/2017
1. M/s Shiv Vani Oil & Gas Exploration Services Ltd.
5Th Floor Tower-I, NBCC Plaza,
Pushpa Vihar, Sector-5, New Delhi.
2. Mr. Prem Singhee
Managing Director
M/s Shiv Vani Oil & Gas Exploration Services Ltd.
Pushpa Vihar, Sector-5, New Delhi.
3. Mr. Padam Singhee
Director
M/s Shiv Vani Oil & Gas Exploration Services Ltd.
Pushpa Vihar, Sector-5, New Delhi..... Appellants
versus
Income Tax Office (ITO)
Through Sh. A.L. Prasad, DCIT
Central Circle 11, New Delhi..... Respondent
CC No.: 519490/2016 u/s 276CC r/w 278B of Income Tax Act, 1961.
JUDGMENT
Vide this order I shall dispose off an appeal filed against the judgment dt.
24.06.2017 and order on sentence dt. 24.07.2017passed by the court of Ld.
©Rupesh Srivastava PH: 9986028041 Email: ropsrivastava@gmail.com Page 1

ACMM, (Special Acts), Central District, Tis Hazari Courts, Delhi, hereinafter
called impugned judgment and impugned order on sentence.
2. Facts relevant for the decision of the present appeal are that a complaint
was filed before the Ld. ACMM by Dy. Commissioner of Income Tax, Central
Circle-11, New Delhi with the allegations against the appellants inter alia that a
search under the provisions of Income Tax Act was conducted on 06.01.2011
against the appellant no. 1 M/s Shiv Vani Oil & Gas Exploration Services Ltd.
and other companies by the Investigation Wing of the Income Tax Department,
New Delhi of which the appellant no. 2 & 3 were informed to be persons
responsible and Incharge of day to day affairs of the appellant no. 1 company.
The case of the appellant was centralized vide order u/s 127 of Income Tax Act.
It has been mentioned in the complaint that as per provisions of Section 139(1)
of the Income Tax Act, the appellant was under obligation to file the return of
income on or before 30.09.2011 and the appellant failed to fulfill this
obligation. A notice u/s 142 (1) of Income Tax Act dt. 25.04.2012 was issued to
the appellant calling them to file the return of income on or before 03.05.2012
for assessment year 2011-2012. The appellants did not file the return of
income within the stipulated period. Another notice u/s 142(1) Income Tax Act
dt. 05.09.2012 was issued and served upon the appellants to file the return of
income by 13.09.2012 but no return was filed by them. Thereafter, another
notice u/s 142(1) Income Tax Act dt. 08.10.2012 was issued and served to the
appellants to file the return on or before 18.10.2012. The grudge of the
respondents/complainant i.e. the Income Tax Department was that no return
was filed by the appellant willfully despite being granted repeated
opportunities/notices.
3. It has been averred in the complaint that finally appellants filed the return of
income on 17.12.2012 declaring the income to be as 69926040/-(INR) in the
prescribed format digitally signed by appellant no. 3 Padam Singhee relevant
to the assessment year 2011- 2012 and the balance sheet, profit and loss
account etc. were signed by appellant no. 2 & 3. Thereafter, appellant filed
revised return for the assessment year 2011-12 on 15.3.2013 duly signed and
verified by appellant no. 3, declaring income to be as 109926040/-(INR).
4. It was highlighted in the complaint that the assessment done by the Income
Tax Department u/s 143(3) of Income Tax Act for assessment year 2011-12
could assess a total income of the appellants to be as 1250228894/-(INR) and

the tax demand by way of assessment was determined as 366977696 (INR).
The demand notice was issued u/s 156 of the Income Tax Act.
5. The prosecution of the appellants was sought for the offences u/s 276-CC
r/w Section 278B of the Income Tax Act for the assessment year 2011-2012 on
the grounds that the appellants had willfully not filed the return of the income
for the assessment year 2011-2012 on or before the due date and further that
appellants even had not filed the return of income in response to various
notices issued by Income Tax Department as detailed down above u/s 142(1)
of IT Act.
6. The Ld. ACMM was pleased to frame charges for the offences u/s 276-CC
r/w Section 278B & 278E of Income Tax Act. The evidence was led by the
parties. The respondent examined PW-1 A.L. Prashad who was the
complainant. The appellants also examined DW-1 Kailash Jogani.
The PW-1 A.L. Prasad proved the complaint Ex.PW1/1 besides the sanction
granted for the prosecution Ex.PW1/2. He reiterated the contents of the
original complaint in his testimony on oath before the court during pre-charge
evidence. The appellants/accused had reserved their right to cross-
examination while the pre-charge evidence was being recorded and they could
cross-examine this witness at the post charge stage.
The DW-1 Kailash Jogani was the Chartered Accountant of the appellants
wherein he brought to light before this court the factum regarding imposition
of penalty u/s 271F of Income Tax Act by the Assessing Officer. It was
submitted on oath before the court by DW-1 that against the very order of
penalty u/s 271F of the Income Tax Act, the appellants preferred an appeal
before CIT(A) and CIT(A)-24 who by his order dt. 23.05.2015 set aside the
penalty order passed by Assessing Officer, holding that there was no willful
default on the part of accused company and thus there was no contravention.
He proved the copy of the order Ex.DW1/1 i.e. the order of the Commissioner
of Income Tax (Appeals)-24.
7. Vide the impugned judgment, the Ld. ACMM convicted the appellants for
the offences u/s 276-CC r/w Section 278B of IT Act and vide impugned
sentence he sentenced the appellant no. 1 to pay fine of Rs. Ten lacs, and the
remaining appellant no. 2 Prem Singhee and appellant no. 3 Padam Singhee to
undergo RI for three years and further sentenced each to pay fine of Rs. Five

lacs each. In default of payment of fine, appellant no. 2 & 3 were ordered to
undergo SI for a period of three months each.
8. During the pendency of the present appeal filed by the appellants, an

application was moved by ld. Counsels for appellant no. 1 with a request
therein to withdraw their vakalatnama on behalf of appellant no. 1 on the
grounds that the Hon'ble High Court had passed an order dt. 28.07.2017 in
which provisional official liquidator was appointed to manage the day to day
affairs of appellant no. 1 company. Discharge from
representation/vakalatnama was sought by all the Ld. Counsels as the
appellant no. 1 company had gone into liquidation. On the same day,
immediately after the proceedings were over, Ld. Counsel Sh. Neeraj Kumar
who was appointed by official liquidator for representing appellant no. 1
appeared and sought time for filing vakalatnama on behalf of appellant no. 1
which was filed and entertained on the next date of hearing. He appeared as
previous Ld. Counsel for the appellant no. 1 was also stated to have informed
the official liquidator regarding present appeal prior to date of hearing.
9. The arguments on behalf of appellant no. 1 were carried on by Sh. Neeraj

Kumar, Adv. appointed by official liquidator and arguments on behalf of
remaining appellants were carried on by counsel Sh. Tanvir Ahmed Mir, Adv.
The arguments on behalf of respondent were carried on by Sh. Manjeet Singh
Arora, Ld. Special Public Prosecutor for Income Tax Department.
10. The arguments carried on by ld. Counsels for appellant no. 1 and that of
appellants no. 2 & 3 were almost common.
11. The arguments of the ld. Counsels for the appellants in the appeal were
based on the grounds taken in this appeal. The focus of the Ld. Counsels for
the appellant was not much on the evidence led by the parties but their
arguments were confined to the legal position of law as laid down by Hon'ble
Supreme Court of India and Hon'ble High Court of Delhi. They reiterated that
the impugned judgment and impugned order on sentence passed by Ld.
ACMM is not sustainable in the eyes of law. They elaborated during arguments
that the present complaint was filed by the respondent on 01.08.2014 before
the court of Ld. ACMM and prior to that the assessing officer vide his order dt.
28.02.2014 had already imposed a penalty of Rs. 5000/- on appellant no. 1 for
its failure of filing of return of income of the relevant assessment year on the
grounds that the assessee filed the return beyond the period prescribed. It was

further strenuously argued by Ld. Counsel for appellants no. 2 & 3 that when
the recording of the testimony of PW-1 was in progress, the appellant herein
preferred an appeal before the Commissioner of Income Tax (Appeals) against
the order dt. 28.02.2014 passed by the Assessing Officer vide which the
penalty of Rs. 5000/- was imposed upon the appellants. The worthy
Commissioner of Income Tax (Appeals) vide the order Ex.DW1/1 quashed the
penalty imposed by the Assessing Officer on the grounds that this was not the
case for non filing of return, but it was a case for delay in filing of return of
income. It has been mentioned in the order of Commissioner of Income Tax
(Appeals) Ex.DW1/1 that the delay had occurred due to the reasons that the
returns u/s 153A Income Tax Act were also pending and the assessee had
adhered to surrender in such proceedings, that in fact had filed the returns of
the current assessment year on the same day for which returns of remaining
assessment years u/s 153A Income Tax Act were filed. The dates of filing of
return u/s 153A Income Tax Act and date of filing of return of income tax for
the assessment year 2012 were stated to be almost same in all group cases
and hence he ordered for deletion of the penalty imposed by Assessing Officer.
12. The Ld. Counsel for the appellants no. 2 & 3 further argued that as on the
date of filing of complaint, the assessment has not attained finality and hence
the complaint became premature and hence no offence had taken place as the
provisions of section 276 of the Act was not satisfied. Ld. Counsel pointed out
that unless and until it is shown that failure to file the return was 'willful' or
'deliberate', no prosecution under section 276CC Income Tax Act could be
initiated and that whether the appellants had committed an offence or not
was to depend upon the final assessment of income and tax liability
determined by appropriate authority and not on the basis of assessment made
by Assessing Officer. He stated that could be the only interpretation that could
be given to section 276CC of Income Tax Act.
13. Ld. Counsel for the appellants no. 2 & 3 had also drawn the attention of
this court towards the word 'willful' as contained in provisions of Section 276-
CC Income-Tax Act explaining that the non filing of the return either u/s 139
Income Tax Act or subsequent thereto after issuance of notice u/s 142 Income
Tax Act by the appellants was neither intentional and nor it was for the
purpose of evading income-tax by the appellants. He argued that the ld.
ACMM jumped to the conclusion by mentioning in the impugned judgment
that since the income of the appellant was assessed to be 1250228894/- on

which tax was determined to be @ Rs. 366977696/- which could have been
evaded if the failure would not have been discovered. The Ld. Counsel asserted
that Ld. MM has erroneously declared the actions of appellants to be "willful"
and it was based on wrongful assumptions, conjectures and surmises. He also
stated that mere fact that a huge gap has come up in the assessment made by
the appellants and the income-tax authorities does not ipso facto leads to
presumption that there was willful defiance on the part of the appellants to file
the return in time either u/s 139 Income Tax Act or subsequent to notice u/s
142 Income Tax Act given the circumstances when the penalty imposed by the
assessing officer has already deleted in the adjudicatory proceedings. He also
argued that how can the defiance be willful when a whooping sum of Rs. 7
crores were already deposited by the appellants as advance tax by the
appellants.
14. Upon being quizzed by this court, the Ld. Counsel for the appellants stated
that the matter regarding the actual assessment of the income pertaining to
the year in dispute is still pending before the Assessment Commissioner-
Income Tax and hence the complaint was not maintainable. The Ld. Counsels
further refuted that ld. ACMM has committed an error in coming to conclusion
that the return was not filed for the purposes of evading the tax, this is
because the issue herein was not as to how much the assessee was to be
assessed for income-tax but issue was confined merely to the late filing of the
return.
15. Ld. Counsel for appellants more particularly for appellants no. 2 & 3 relied
upon the judgment of Hon'ble Supreme Court of India in K.C. Builders & Anr.
Vs The Assistant Commissioner of Income Tax (2004), 2 SCC 731, and the
judgment of Hon'ble High Court of Delhi in Income Tax Officer Vs M/s Rajan &
Company, Crl. Revision Petition 33/2005 DOD 02.01.2007.
16. Per contra, the Ld. Counsel for respondent submitted that the impugned
judgment and impugned order on sentence does not suffer from any illegality
or incorrectness and has been passed within the periphery of law. It was
agitated that the prosecution before the court of Ld. ACMM and the
proceedings before the assessing officer or Commissioner of Income Tax
(Appeals) or the Appellate Tribunal- Income Tax are independent, and that
simply because the penalty has been deleted by the order of Commissioner of
Income Tax (Appeals), it cannot be ipso facto taken to mean that the

appellants cannot be asked to face prosecution or convicted if the offences are
proved. He stated that since the two platforms i.e. the adjudication
proceedings under Income Tax Act and the prosecution under Income Tax Act
are independent, the authorities acted within the purview of their own sphere.
He stated that ld. Counsel for the appellants is not right in his submission that
the impugned judgment and impugned order on sentence cannot stand on its
own legs as the penalty has already been deleted by the Commissioner of
Income Tax (Appeals).
17. Ld. Counsel for the respondent further carried on that the appellants are
harping on the order dt. 25.5.2015 passed by Commissioner of Income Tax
(Appeals) regarding quashing of the deletion of penalty u/s 271 (F) Income Tax
Act which was slapped upon appellant in connection on non compliance of
section 139 Income Tax Act. It has been claimed that as per section 139(1)
Income Tax Act, the appellant no. 1 was statutorily bound to file the return on
or before 30.09.2011. It has been explained by ld. Counsel for respondent that
ld. ACMM has convicted the appellants for non compliance of the notice u/s
142(1) which is admitted to have been served to the appellants Ex.PW1/7 dt.
08.10.2012. It was further highlighted that there was a time gap in issuing
notice u/s 142(1) Ex.PW1/7 dt. 08.10.2012 and the deletion of penalty for non
compliance of the provisions of Section 139 of Income Tax Act according to
which the return ought to have been filed by 30.09.2011, though as per
appellant the time was still 30.09.2011. Upon being questioned by this court
during arguments, the Ld. Counsel for the respondent has clarified that no
adjudicatory proceedings were initiated against the appellant by the Assessing
Officer of Commissioner of Income Tax (Appeals) for non compliance of the
notice u/s 142(1) Ex.PW1/7. Ld. Counsel for the respondent further referred to
Section 278(E) Income Tax Act wherein it has been mentioned that the court
shall presume the existence of culpable mental state on the part of the
accused. He further stated that Ld. ACMM had categorically dealt with the
issue regarding distinction with respect to the implications of non filing of
return u/s 139 and Section 142 Income Tax Act coupled with Section 278(E)
Income Tax Act.
18. Ld. Counsel for the respondent referred to the judgment of Hon'ble High
Court of Delhi in V.P. Punj Vs Assistant Commissioner Income Tax DOD
03.08.2001 and also of Hon'ble Supreme Court of India in Prakash Nath Khanna
Vs. Commissioner Income Tax (2004) 9 SCC 686, DOD 16.02.2004 and Radhe

Shyam Kejriwal vs State of West Bengal (2011) 3 Supreme Court Cases 581. Ld.
Counsel for respondent heavily relied upon the three Judges Bench judgment
of Hon'ble Supreme Court in Radhe Shyam Kejriwal case (supra) with the
arguments that it was held in the said judgment that adjudicatory proceedings
and criminal proceedings can be launched simultaneously which he claimed it
to be in contrast to the two Judge Bench judgment relied upon by the ld.
Counsel of the appellants in K.C. Builders case (supra).
19. Ld. Counsel for the respondent has further drawn the attention of this
court towards Section 276-CC Income Tax Act proviso in order to refute the
arguments of ld. Counsel for the appellants for the word 'willful' as contained
in section 276-CC Income Tax Act with arguments that the proviso of the said
section provided that the person shall not be prosecuted if even after payment
of advance tax his income does not exceed Rs. 3000/-. He highlighted that the
proviso can be taken to mean that in any case if the income of the assessee is
assessed for a sum more than Rs. 3000/- even after the adjustments of
advance tax, he can be prosecuted.
20. Rebutting the arguments of ld. Counsel for the respondent, ld. Counsels for
the appellants more particularly Ld. Counsel for appellants no. 2 & 3 with all
vehemence at their command argued that the ld. Counsel for the respondent is
trying to confuse the provisions of Section 139 and Section 142 Income Tax Act
and have not read/understood the same in its true letter & spirit. He argued
that when once the penalty has already been deleted by the Commissioner of
Income Tax (Appeals) which was imposed for non compliance of provision of
Section 139 Income Tax Act and while deleting the penalty the Commissioner
of Income Tax (Appeals) have also detailed down the reasons and the
compulsions of the appellants for non filing of the return within the prescribed
period u/s 139 Income Tax Act, how can the appellant be convicted for non
compliance of the notice u/s 142 Income Tax Act which can only be pursuant
to the non filing of the return within the prescribed period of Section 139
Income Tax Act. He further argued that the job of the income tax authorities is
primarily the collection of tax and not the prosecution, and that when the CIT
(Appeals)-24 could not find legible reasons for imposition of penalty for
defiance of provision of Section 139 Income Tax Act, the prosecution cannot be
lanched for defiance of subsequent steps i.e. for non compliance of notice u/s
142 of Income Tax Act. He stated that both the provisions are inter related.

21. I have heard Ld. Counsel for appellant No. 1 Sh. Neeraj Kumar, Ld. Counsel
for appellants no. 2 & 3 Sh. Tanveer Ahmad Mir and Special PP for respondent
Sh. Manmeet Singh.
For the purposes of arriving at conclusion, this court would first of all discuss
the arguments of Ld. Counsel for the appellant that the proposition whether
the appellant has committed an offence or not will depend upon the final
assessment of Income tax and tax liability determined by appropriate authority
and not by the assessment made by Assessing Officer and that the assessment
has not attained finality for which the complaint has become pre mature on
the date of filing the same and hence the no offence is attracted under section
276-CC of the Act. In this regard the Hon'ble supreme Court has categorically
laid down clear ratio in the aforementioned judgment in Sasikala's case
wherein the same issue was dealt with in detail by Hon'ble Supreme Court as
laid by the Ld. Counsel for the defence in the case in hand. The Hon'ble
Supreme Court has laid down the following dictum- "28. We also find no basis
in the contention of the learned senior counsel for the appellant that pendency
of the appellate proceedings is a relevant factor for not initiating prosecution
proceedings under Section 276CC of the Act. Section 276CC contemplates that
an offence is committed on the non-filing of the return and it is totally
unrelated to the pendency of assessment proceedings except for second part
of the offence for determination of the sentence of the offence, the
department may resort to best judgment assessment or otherwise to past
years to determine the extent of the breach. The language of Section 276CC, in
our view, is clear so also the legislative intention. It is trite law that as already
held by this Court in B.Permanand v. Mohan Koikal (2011) 4 SCC 266 that " the
language employed in a statute is the determinative factor of the legislative
intent. It is well settled principle of law that a court cannot read anything into a
statutory provision which is plain and unambiguous." If it was the intention of
the legislature to hold up the prosecution proceedings till the assessment
proceedings are completed by way of appeal or otherwise the same would
have been provided in Section 276CC itself. Therefore, the contention of the
learned senior counsel for the appellant that no prosecution could be initiated
till the culmination of assessment proceedings, especially in a case where the
appellant had not filed the return as per Section 139(1) of the Act or following
the notices issued under Section 142 or Section 148 does not arise."

22. Now, I shall deal with the arguments advanced by ld. Counsel for the
respondent that the strict interpretation must be given to the provisions of
Section 278E of Income Tax Act wherein the Act provides for the presumption
as to culpable mental state and the said provision has also been mentioned in
the charges, herein above explained. Though, Section 278E Income Tax Act
provides that in an prosecution for an offence under this Act which requires a
culpable mental state on the part of accused, the court shall presume the
existence of such mental state but it shall be a defence of the accused to prove
the fact that he had no such mental state with respect to the act charged in
that prosecution. Meaning thereby the presumption as contained in section
278E Income Tax Act is rebuttable and the defence can prove that the
appellant had no such culpable mental state, intention, motive, knowledge of a
fact or belief or a reason to believe a fact. Therefore, it was obligatory on the
part of the defence to rebut the said presumption. To appreciate the
provisions of section 278E of the Income Tax Act, I am being supported for my
views by the judgment of Hon'ble Supreme Court of India in Sasi Enterprises Vs
Assistant Commissioner of Income Tax Crl.Appeal No.62,63 and 64 of 2007,
where the Hon'ble Supreme Court discussed as to what is the scope of section
278E of the Act and at what stage the presumption can be drawn by the Court.
The Hon'ble Supreme Court has held as under:- "30. Section 278E deals with
the presumption as to culpable mental state, which was inserted by the
Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986. The
question is on whom the burden lies, either on the prosecution or the
assessee, under Section 278E to prove whether the assessee has or has not
committed willful default in filing the returns. Court in a prosecution of
offence, like Section 276CC has to presume the existence of mens rea and it is
for the accused to prove the contrary and that too beyond reasonable doubt.
Resultantly, the appellants have to prove the circumstances which prevented
them from filing the returns as per Section 139(1) or in response to notices
under Sections 142 and 148 of the Act."
To fulfill its obligation to rebut the presumption u/s 278 Income Tax Act, the
defence has examined its own witness DW-1 Kailash Jogani who placed on
record and proved the order of the Commissioner of Income Tax (Appeals)-24
dt. 25.05.2015 Ex. DW1/1 vide which a penalty was imposed by Assessing
Officer on the appellant for defiance of provisions of Section 139 Income Tax
Act was deleted.

23. To assess as to whether the adjudicatory proceedings under Income Tax
Act passed by CIT(Appeals) was based on merits and that penalty was not
deleted on technical grounds, it would also be appropriate to refer to the said
order of Commissioner of Income-tax (Appeals )-24 hereinafter called CIT
(Appeals)-24 which is Ex.DW1/1. It finds mention in the said order that it was
directed against the order dt. 28.02.2014 passed u/s 271-F Income Tax Act,
1961 by DCIT, CC-06, New Delhi. This issue is necessary to be dealt with as it
would have an impact on certain arguments of Ld. Counsel for the appellants
which are dealt with by this court in subsequent paras. It has been mentioned
in the said order that Assessing Officer had imposed a penalty amounting to
Rs. 5000/- u/s 271(1)(C) Income Tax Act against which the appeal was filed
before CIT(Appeals)-24. It has been mentioned in the order that when called
upon to show cause as to why penalty should not be levied, the appellant had
submitted that due to the following reasons, it could not submit the return in
time and that the returns for all the assesses of the group and for all the years
were filed together and also the following reasons were mentioned by the
appellants before CIT (Appeals)-24 for non filing of return in time.
a) That the group cases of Shiv Vani Group are not yet fully centralized
with the Central Circle-11, New Delhi.
b) That the group was earlier assessed at Nagpur, hence all the
photocopies of seized materials are lying at Nagpur.
c) That the counsel of the assessee company was at Nagpur.
d) That the photocopies of seized materials are in common for all

assessee, thus the assessee requires about 45 days to co- relate the
entire seized material in order to file the return of income.
e) That the assessee had already filed the return of income on 27th
November, 2012 and paid complete tax for the aforesaid assessment
year.
24. On the basis of the submissions of the appellants before the CIT(Appeals)-
24, the CIT (Appeals)-24 observed that as per the section 273-B Income Tax Act
no penalty should levied for any failure referred to section 271-F Income Tax
Act if there was reasonable cause for the said failure. It was mentioned in the

order of the CIT- Appeals-24 that the appellant therein had made considerable
disclosures of undisclosed income in the group and return has been filed after
taking into consideration of such finding etc. The CIT- Appeals-24 came to
conclusion that he was satisfied that there was reasonable cause for failing to
comply with the provisions of Section 139(1) of Income Tax Act. He also opined
that this was not a case of non filing of return, but it was a case of delay in
filing return of income and that the delay had occurred due to fact that the
returns u/s 153A Income Tax Act were also pending. It was also mentioned by
CIT-Appeals-24 in his order that he had come to conclusion after noting that
the appellants therein had adhered to the surrender made in the search
proceedings and had in fact filed returns for the current assessment year on
the same year for which the returns of the remaining assessment years (u/s
153A Income Tax Act) were filed. The dates of filing of returns u/s 153A Income
Tax Act and the date of filing of returns of income for A.Y. 2011-12 are almost
same in all group cases. After giving this finding, the CIT-Appeals-24 did not
find any merit in sustaining the penalty levied and the same was deleted.
Meaning thereby for non filing of return u/s 139 (1) Income Tax Act, when the
assessing officer had imposed the penalty of Rs. 5000/- upon the appellants,
the same was deleted by CIT-Appeals-24 vide order Ex.DW1/1. The order
Ex.DW1/1 categorically goes to suggest that the adjudicatory order was based
on merits after giving due consideration to the submissions of the appellants
and the penalty was not deleted on technical grounds.
25. Now I shall come to the arguments of the ld. Counsel for the appellants
vide which the judgment of Hon'ble Supreme Court in K.C. Builders & Anrs. Vs
Assistant Commissioner of Income Tax (2004) 2SCC 731 was referred and also
the arguments of the ld. Counsel for the respondent vide which a three Judge
Bench judgment of Hon'ble Supreme Court in Radhe Shyam Kejriwal Vs State
of West Bengal & Anr. (2011) 3 SCC 581 was relied by respondents to confront
judgment in K.C. Builders case (supra).
26. In the judgment of K.C. Builders (supra) the following issues were raised:
"9. On the above pleadings and facts and circumstance of the case, the
following questions of law arise for consideration by this Court:-
(a) Whether a penalty imposed under Section 271(1)(c) of the Income

Tax Act and prosecution under Section 276 C of the Income Tax Act are
simultaneous?

(b) Whether the criminal prosecution gets quashed automatically when
the Income Tax Appellate Tribunal which is the final Court on the facts
comes to the conclusion that there is no concealment of income, since
no offence survives under the Income Tax Act thereafter?
(c) Whether the High Court was justified in dismissing the Criminal
Revision Petition vide its impugned order ignoring the settled law as laid
down by this Court that the finding of the Appellate Tribunal was
exclusive and the prosecution cannot be sustained since the penalty
after having been cancelled by the complainant following the Income
Tax Appellate Tribunal's order no offence survives under the Income Tax
Act and thus the quashing of the prosecution is automatic?
(d) Whether the finding of the Income Tax Appellate Tribunal is binding
upon the Criminal Court in view of the fact that the Chief Commissioner
and the Assessing Officer who initiated the prosecution under Section
276C(1) had no right to overrule the order of the Income Tax Appellate
Tribunal. More so when the Income Tax Officer giving the effect to the
order cancelled the penalty levied under Section 271(1)(c).
(e) Whether the High Court's order is liable to be set aside in view of the
errors apparent on record."
After discussing the previous law on the issues, the Hon'ble Supreme Court
held as under:
"29. In our view, once the finding of concealment and subsequent levy
of penalties under section 271 (1)(c) of the Act has been struck down by
the Tribunal, the Assessing Officer has no other alternative except to
correct his order under Section 154 of the Act as per the directions of
the Tribunal. As already noticed, the subject matter of the complaint
before the Court is concealment of income arrived at on the basis of the
finding of the Assessing Officer. If the Tribunal has set aside the order of
concealment and penalties, there is no concealment in the eyes of the
law and, therefore, the prosecution cannot be proceeded with by the
complainant and further proceedings will be illegal and without
jurisdiction. The Assistant Commissioner of Income Tax cannot proceed
with the prosecution even after the order of concealment has been set
aside by the Tribunal. When the Tribunal has set aside the levy of

penalty, the criminal proceedings against the appellants cannot survive
for further consideration. In our view, the High Court has taken the view
that the charges have been framed and the matter is in the stage of
further cross-examination and, therefore, the prosecution may proceed
with the trial. In our opinion, the view taken by the learned Magistrate
and the High Court is fallacious. In our view, if the trial is allowed to
proceed further after the order of the Tribunal and the consequent
cancellation of penalty, it will be an idle and empty formality to require
the appellants to have the order of Tribunal exhibited as a defence
document in as much as the passing of the order as aforementioned is
unsustainable and unquestionable."
27. The Hon'ble Supreme Court in K.C. Builders case (supra) has categorically
held that after the order of the Tribunal and the consequent cancellation of
penalty, if the trial is allowed to be proceeded further, the same would be an
idle and empty formality to require the appellants to have the order of
Tribunal exhibited as a defence document in as much as the passing of the
order as unsustainable and unquestionable.
28. Consequent to the arguments addressed by ld. Counsel for respondent to

the effect that the judgment of K.C. Builders case (supra) given by Hon'ble
Supreme Court was not applicable in view of the pronouncement of later three
Judge Bench Judgment in Radhe Shyam Kejriwal case wherein it was claimed
by ld. Counsel for the respondent that the three Judge Bench of Hon'ble
Supreme Court had laid down that adjudication proceedings and criminal
proceedings can be launched simultaneously and that both are independent in
nature, this court had an occasion to go through the judgment in Radhe Shyam
Kejriwal case (supra). After going through the judgment in Radhe Shyam
Kejriwal case, it was transpired that though in the said judgment in para 38 (1)
this court could find the submissions of ld. Counsel for respondent as correct,
but the subsequent reading of said para was inconsistent with the arguments
of Ld. Counsel for respondent and was somewhat in confirmity with the law
laid down in K.C. Builders case by Hon'ble Supreme Court. Para 38 of said
judgment is reproduced as under::
"38. The ratio which can be culled out from these decisions can broadly
be stated as follows:

(i) Adjudication proceedings and criminal prosecution can be launched
simultaneously;
(ii) Decision in adjudication proceedings is not necessary before initiating

criminal prosecution;
(iii) Adjudication proceedings and criminal proceedings are independent

in nature to each other;
(iv) The finding against the person facing prosecution in the adjudication
proceedings is not binding on the proceeding for criminal prosecution;
(v) Adjudication proceedings by the Enforcement Directorate is not

prosecution by a competent court of law to attract the provisions of
Article 20(2) of the Constitution or Section 300 of the Code of Criminal
Procedure;
(vi) The finding in the adjudication proceedings in favour of the person

facing trial for identical violation will depend upon the nature of finding.
If the exoneration in adjudication proceedings is on technical ground and
not on merit, prosecution may continue; and
(vii) In case of exoneration, however, on merits where the allegation is

found to be not sustainable at all and the person held innocent, criminal
prosecution on the same set of facts and circumstances cannot be
allowed to continue, the underlying principle being the higher standard
of proof in criminal cases.
39. In our opinion, therefore, the yardstick would be to judge as to

whether the allegation in the adjudication proceedings as well as the
proceeding for prosecution is identical and the exoneration of the
person concerned in the adjudication proceedings is on merits. In case it
is found on merit that there is no contravention of the provisions of the
Act in the adjudication proceedings, the trial of the person concerned
shall be an abuse of the process of the court."
29. Accordingly, it is clear from the aforementioned judgment of Radhe Shyam

Kejriwal's case that though adjudicatory proceedings and criminal prosecution
can be launched simultaneously and are independent of each other, but it is
also been mentioned in para no.6 that if the exoneration in adjudication
proceedings is on technical ground and not on merit, the prosecution may

continue but, if the exoneration is on merits where the allegations is found to
be not sustainable at all and the person held innocent, the prosecution on the
same set of facts and circumstances can't be allowed to be continued as the
underlined principle is that the burden of proof in a criminal prosecution is of
higher standard as compared to adjudicatory proceedings. It was also held in
para no.39 that in case no contravention of Act could be found in adjudicatory
proceedings and the exoneration of the person concerned in the said
proceedings is on merit, the trial of the person concerned shall be an abuse of
process of law.
30. From the aforementioned discussion of the judgment of K.C.Builder's case

relied upon by Ld. Counsel for the appellants as well as the judgment of Radhe
Shyam Kejriwal's case (Three Hon'ble Judge Bench judgment) as relied upon by
Ld. Counsel for respondent, in no terms it can be said that the judgment
delivered in K.C.Builder's case by Two Hon'ble Judges has been over ruled by a
subsequent judgment of Hon'ble Supreme Court in Radhe Shyam Kejriwal case.
31. Contrary to arguments of Ld. Counsel for respondent, this court could find
that the verdict of the Hon'ble Supreme Court in K.C.Builder's case stands as
ratified by the subsequent judgment in Radhe Shyam Kejriwal's case (supra).
32. In the case in hand as already said, the CIT (Appeals)-24 had already
deleted the penalty imposed upon the appellants by the order of Assessing
Officer for infraction u/s 139 of Income Tax Act. Accordingly, in the
adjudicatory proceedings, the appellants were not found guilty and sufficient
cause was found by CIT (Appeals)-24 for the failure to file the return by the
income tax department and the CIT(Appeals)-24 had exonerated all the
appellants in the adjudicatory proceedings. It has already been opined in
previous paras that final decision in adjudicatory proceedings before CIT
(Appeals)-24 were based on merits. Therefore, the judgment of Hon'ble
Supreme Court in K.C. Builders case (supra) as well as Radhe Shyam Kejriwal
case (supra) is fully applicable to the given facts of this case as there remains
no dispute as far as question of law is concerned. A strict interpretation of both
these judgments would warrant that the appellant could not have been
prosecuted or convicted for the offence u/s 276-CC Income Tax Act for an
infraction u/s 139(1)(2) of Income Tax Act.
33. To decide the arguments of Ld. Counsel for respondent regarding

commission of offence u/s 276-C Income Tax Act for infraction u/s 139 Income

Tax Act and for infraction u/s 142 Income Tax Act as here in above detailed at
the outset this court would like to refer to the charges framed against the
appellants in this case which is very relevant for appreciating the rival
submissions of the parties with respect to the provisions of Section 139(1)
Income Tax Act and Section 142 of Income Tax Act which is as follows:
"that you accused no. 1 (herein appellant no. 1) willfully not filed the
return of income for A.Y. 2011-12 as required u/s 139 (1) of the IT Act
and also not filed the same in response to notices u/s 142 (1) of the IT
Act Ex.PW1/5, Ex.PW1/6 and Ex.PW1/7 within stipulated time. Accused
no. 2 & 3 (herein appellant no. 2 & 3) being the persons responsible and
incharge of day to day affairs of accused no. 1 company and thus are
also guilty of the offence u/s 276-CC read with Section 278(B) of the IT
Act for the A.Y. 2011-12. You all thus, committed offence punishable u/s
276-CC, Section 278-B and Section 278-E of the Income Tax Act, which is
within my cognizance.
And I hereby direct you all to be tried for the said offences."
34. The aforementioned charge suggests that the appellants are being tried
against the charge framed on 23.02.2015 by ld. ACMM against all the
appellants to the effect that the appellant no. 1 willfully not filed the return of
the income for A.Y. 2011-2012 as required u/s 139(1) of Income-Tax Act and
also not filed the same in response to notices u/s 142 (1) of Income-Tax Act
Ex.PW1/5, Ex.PW1/6 and Ex.PW1/7 within stipulated period. It was also
mentioned in the charge that appellant no. 2 & 3 being the persons
responsible for day to day affairs of appellant no. 1 company are also guilty for
offences u/s 276-CC & 278-B of Income-Tax Act. It is also clear from the
adjudicatory proceedings that though the Assessment Officer-Income Tax had
imposed a penalty of Rs. 5000/- vis a vis Section 271-F Income-Tax Act for
infractions u/s 139 Income Tax Act upon the appellants but they were not
imposed with any penalty for infraction u/s 142 Income-Tax Act. It was
submitted by Ld. Counsel for the respondent that even if for the sake of
assumption we accept the arguments of Ld. Counsel for the appellants as
correct that the proceedings under section 276-CC of Income Tax Act for
infraction under section 139(1) of Income Tax Act could not have been
continued for deletion of penalty in the adjudication proceedings in terms
judgment of K.C. Builders case (supra), still the appellants are liable for the

offences under section 276-CC of Income Tax Act for the infraction under
section 142 of the Income Tax Act.
35. In this case, a notice under section 142 of Income Tax Act was given by
Income tax department to the appellants asking therein to prepare a true and
correct return and to appear before the Dy.Commissioner of Income Tax. The
said notices were dated 25.04.12 Ex.PW1/5, 05.09.12 Ex.PW1/6, 08.10.12
Ex.PW1/7 etc. The said notices were issued to the Principal Officer of the
appellant no.1 company. The Income Tax Department has not taken any follow
up action after issuance of the aforementioned notices u/s 142 Income Tax Act
to the appellant no.1 company and as also admitted by the Ld. Counsel for the
respondent during the course of arguments. No penalty
proceedings/adjudicatory proceedings etc. were initiated by the Income tax
department against the appellant for the infraction under section 142 of
Income Tax Act. The prosecution has been launched directly for the said
infraction under section 142 of Income Tax Act without initiating any
adjudicatory proceedings under the Income Tax Act.
Here we may take hypothetical case where in case the adjudicatory

proceedings for imposing penalty might have been issued by the Income tax
department for the infraction under section 142 of Income Tax Act, there could
have been several possibilities. One such possibility might have been that the
Assessing Officer might not have imposed any penalty. The other one could be
that the Assessing officer might have been of view that penalty should have
been imposed like he had imposed for the infraction under section 139 of
Income Tax Act. In this second circumstance, there was one probability that
the penalty imposed for infraction under section 142 of Income Tax Act could
have been deleted by the CIT Appeals-24 for the same reasons as he had
deleted for the infraction under section 139 of Income Tax Act. In case the
penalty could not have been imposed by the Assessing Officer or if imposed by
him in case the same could have been set aside by the Appellate authorities,
the appellant could have got the benefit of the aforesaid judgments of Hon'bel
Supreme Court viz K.C.Builder's case as well as Kejriwal's case (supra) as in
both the cases the prosecution either could not have been launched or if
launched, the appellants could not have been convicted as it would have been
an abuse of process of law. No reasons has been assigned by the Income tax
department as to why the adjudicatory proceedings were not initiated by it for
infraction under section 142 of Income Tax Act and why it has chosen to

prosecute the appellants directly under section 276CC of Income Tax Act for
the infraction under section 142 Income Tax Act.
The CIT Appeals -24 in its order Ex.DW1/1 while deleting penalty upon the
appellants has categorically mentioned that since the appellant therein (same
appellants herein) had made considerable disclosure of undisclosed income in
the group and return has been filed after taking into consideration the effect of
such finding etc. there was reasonable cause in failing with to comply with the
provisions of section 139(1) of the Act. It has also been mentioned in the order
that this was not a case of non filing of return, but it was a case of delay in
filing the return. The CIT Appeals-24 has also prescribed in the order that the
delay occurred due to the fact that the returns under section 153(A) Income
Tax Act were also pending. This as per CIT Appeals-24 led it to the frame
conclusion that appellants had adhered to surrender made in the such
proceedings and has in fact filed the return for the current Assessment year on
the same day on which the returns for the remaining assessment years under
section 153(A) Income Tax Act were filed. Meaning thereby it can very well be
assumed that in case penalty could have been imposed by the Assessing
Officer for an infraction u/s 142 Income Tax Act, it would have certainly been
deleted by the CIT Appeals-24 as the reasons assigned for non filing of return
for both the infractions under sections 139 & 142 of Income Tax Act are almost
same. Moreover, section 142 of Income Tax Act is a follow up proceedings for
the infraction under section 139 of Income Tax Act and when the CIT Appeals-
24 have already detailed down the reasons for delay and have accepted it to
be as genuine, it would be abuse of process of law if the appellants are held
guilty for the infraction under section 276CC Income Tax Act for the infraction
under section 142 of Income Tax Act in the given circumstances when the
penalty was already deleted for infraction u/s 139 Income Tax Act.
36. Further, the judgment relied upon by the ld. Counsel for the respondent in
Prakash Nath Khanna Vs Commissioner of Income Tax (Supra) is not applicable
to the given facts of this case. In the cited judgment, the Hon'ble Supreme
Court had interpreted section 276-CC with reference to Section 139 (1) & (2)
vis a vis Section 139(4) of Income Tax Act. In the cited judgment, the appellant
had taken the plea that the expression "to furnish in due time" occurring in
section 276 CC Income Tax Act means to furnish within the time permissible
under the Act and that the return furnished u/s 139(4) Income Tax Act at any
time before the assessment is made has to be regarded as a return furnished

u/s 139 (1) Income Tax Act. The Hon'ble Supreme Court taking exception to the
arguments of the ld. Counsel for the appellant held that in case the plea of the
appellant is accepted, it would mean that in a given case where there is a
infraction and where return has not been furnished in terms of Sub section 1
or in response to notice sub section 2 of Section 139 Income Tax Act, the
consequences flowing from non furnishing of the return would get obliterated.
The Hon'ble Supreme Court has further held that Section 276-CC Income Tax
Act refers to "due time in relation to sub section 1 & 2 of Section 139 Income
Tax Act and not to Section 4, had the legislature intended to cover sub section
4 also, use of expression "Section 139" alone would have sufficed and that sub
section 4 of Section 139 Income Tax Act cannot by any stretch of imagination
control sub section 1 where fixed period of furnishing return is stipulated. Here
in the present case, the issue was not with respect to section 139 (1) & (2)
Income Tax Act vis a vis Section 139 (4) Income Tax Act but the real issue raised
by ld. Counsel for the respondent was that a penalty was imposed which was
later deleted by Commissioner of Income-Tax (Appeals) only for infraction u/s
139 Income Tax Act and not for the infraction for section 142 of Income Tax
Act which has already been decided in favour of appellants. Hence, the ratio of
judgment relied upon is not applicable to given facts.
37. Though the non initiation of adjudicatory proceedings does not in any
manner bar prosecution of the appellants for offence u/s 276-CC Income Tax
Act as rightly pointed out by ld. Counsel for respondent, but due appreciation
can be given to the arguments for ld. counsel for the appellants that the basic
aim of the income-tax authorities is the generation of revenue and not the
prosecution which being a secondary one. No cogent reason has been
explained by the respondent as to why further proceedings were not carried
on by the Department of Income-tax for defiance of the provisions of Section
142 with respect to imposition of penalty.
38. Accordingly, the plea of the Ld. Counsel for the appellants that no
prosecution could have been last under section 276CC Income Tax Act as the
assessment was not yet final is rejected in terms of the aforementioned
judgment of Hon'ble Supreme Court of India.
39. To perpetuate an error is no virtue and to rectify the same is judicial

conscience. I, accordingly hold that the impugned judgment dated 24.06.2017
passed by Ld. ACMM suffers from illegality and cannot be sustained in the eyes

of law. The impugned judgment dated 24.06.2017 vide which the appellants
were convicted for the offences under section 276CC r/w 278-B of Income Tax
Act is set aside. Since the judgment itself has been set aside, the impugned
order on sentence dated 24.07.2017 automatically cannot sustain on its legs
and hence is set aside.
The fine, if any, deposited by the appellants before the court of Ld. ACMM be
refunded to the appellants. Announced in the open court on this 28th day of
October, 2017.

M/s Shiv Vani Oil & Gas Exploration Services LTD Vs Income Tax Office (ITO)

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M/s Shiv Vani Oil & Gas Exploration Services LTD Vs Income Tax Office (ITO)

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Delhi District Court

IN THE COURT OF SH. SANJAY KUMAR AGGARWAL

SPECIAL JUDGE-03: (PC ACT) CBI : DELHI.

Criminal Appeal No.: 173/2017

1. M/s Shiv Vani Oil & Gas Exploration Services Ltd.

5Th Floor Tower-I, NBCC Plaza,

Pushpa Vihar, Sector-5, New Delhi.

2. Mr. Prem Singhee