By TIOL News Service

NEW DELHI, APR 16, 2015: THE issue before the Bench is - Whether a summon order passed on the basis of criminal complaint filed by the Department is liable to be quashed, when the Department had not disclosed vital information to the Court which was received from the assessee at the time of filing the complaint. And the verdict goes against the Revenue.

Facts of the case

The assessee had disclosed a foreign bank account which existed with the HSBC Private Bank, Geneva, Switzerland to the Department which showed a peak amount of around USD 1.3 million lying in the said account during the year ending 31st March, 2007. The account was closed in the year 2007. The assessee’s statement was recorded in 2011 on different dates u/s 131. The Deputy Commissioner of Income Tax, issued a notice in 2012 to the assessee u/s 148. The assessee filed the return of income in August 2012 declaring the peak balance of the said foreign bank account for the AY 2006-07 and 2007-08. The assessee was issued notices u/s 142(1) calling upon the assessee to furnish details of the foreign bank account i.e. bank statement/transaction details. The assessee to the same by replies on several dates in the year 2013. The statement of the assessee was recorded in January 2015 and it was accepted by the assessee that he had voluntarily disclosed his foreign bank account with HSBC Private Bank, Geneva, Switzerland by letter dated 17th November, 2011. The Department issued a Show Cause Notice in 2015 u/s 279 (1) read with 276D informing the assessee to launch prosecution for alleged wilful failure to produce accounts and documents in terms of notices u/s 142(1). The assessee was directed to file a reply to the Show Cause Notice to which the assessee gave his reply within the stipulated time. The assessee mentioned in his reply dated January 11 and February 9, 2015 that in compliance to the notices issued u/s 142(1) with great difficulty had been able to obtain the copy of the bank statement of the Account for the entire period of operation of the said Account. Another letter dated 11th February, 2015 was sent in which the reference of letter dated 9th February, 2015 was mentioned. However, in the opinion of the Department, despite several notices issued u/s 142, the replies sent by the assessee were not found to be satisfactory and thereafter, the CIT authorized a criminal complaint on February 10, 2015 u/s 276D against the assessee. Aggrieved, this petition has been filed.

The counsel for the assessee contended that without considering the reply dated 9th February, 2015, along with which copy of the bank statement was enclosed, and suppressing the same, the Revenue has filed a criminal complaint against the assessee. It was also submitted that the assessee wants to pay the entire tax without any conditions attached.

The counsel of the Revenue acknowledged the reply of January 11, 2015 but was not sure about the receipt of the reply dated February 9, 2015. Further, it was contended that there was total non-cooperation from the side of the assessee to the notices issued u/s 142. It was submitted that the Department was not aware of the contents of the reply dated February 9, 2015 at the time of initiating criminal complaint u/s 279.

Having heard the parties, the High Court held that,

++ in case there is non-compliance of the said notices under Section 142(1) of the Act, the requisite action in accordance with law had to be taken against the petitioner who would be entitled to contest the same in accordance with law. However, it is also a matter of fact that the criminal proceedings have been initiated by the respondent against the petitioner on the basis of the sanction issued by the department on 10th February, 2015 and in case the grounds of the sanction are read, it is evident that the reply sent by the petitioner contains the copy of the bank statement filed for the period has not been mentioned/ discussed in the same;

++ even otherwise assuming for the sake of the argument that the reply dated 9th February, 2015 was not put up before the appropriate officer, when the sanction was issued, it is the admitted position that the said complaint was filed on 12th February, 2015 when the letter dated 11th February, 2015 was admittedly received by the department. The factum of receipt of the said letter is not mentioned in the complaint. Assuming for the sake of the argument that even the said letter was not placed at the appropriate desk till 12th February, 2015 as counsel for the respondent mentioned to the court that usually any letter filed at the counter is received by the appropriate desk within two days, but in the present case, the pre-summoning evidence in the above said matter was recorded on 27th February, 2015. At least on that date, the department had full knowledge of the contents of the two letters dated 9th February, 2015 and 11th February, 2015. The statement of Dr.Surjeet Singh does not contain the details of receipt of the said replies/letters. It was also not disclosed in the statement that the petitioner has already sent the bank statement for the entire period as alleged by the petitioner. It is not denied by the respondent’s counsel that the letter dated 11th February, 2015 contains the reference and details of letter dated 9th February, 2015, where the statement of bank account was enclosed. It is also not denied by the respondent that when the pre-summoning evidence was recorded, the said documents were not in the possession of the respondent. The counsel for the respondent has confirmed to the Court that the statements of bank accounts have already been received for the purpose of assessing the tax, which were not furnished by the petitioner. Thus, it is apparent that while recording the statement of the complainant and passing the summoning order dated 27th February, 2015, all the facts were not available with the trial Court otherwise the Court might have asked the respondent to produce the same and to consider the replies dated 9th February, 2015 and 11th February, 2015 before passing the summoning order or the respondent ought to have sought prayer for amendment in the sanctioning letter. The same has not happened in the present case;

++ under these circumstances, the order dated 27th February, 2015 passed in Criminal Complaint No.100/4/15 dated 12th February, 2015 titled "ITO Versus Shravan Gupta" whereby the summoning order has been passed, is liable to be quashed on technical reason.

(See 2015-TIOL-924-HC-DEL-IT)