The Gujarat High Court (Ahmedabad Bench) has held that where the prosecution concerns undisclosed income for the block assessment period, and coordinate benches of the High Court have already held that no power vested in the Income Tax Department to launch such prosecution for that period, the necessary consequence is quashing of the criminal proceedings. Thus, where the present case is substantially similar to those earlier decisions, the same result must follow.
A Single Judge Bench of Justice Aniruddha P. Mayee noted that it was undisputed that the petitioner company was part of the group companies raided on Dec 01, 1995 and that the prosecution related to undisclosed income detected pursuant to that raid. The Bench recorded that the present case was materially similar to the earlier matters decided by coordinate benches, where prosecutions arising from the same factual background and legal issue had been quashed.
The Bench expressly accepted that the earlier coordinate bench decisions had become final, since the Special Leave Petitions filed by the Department had been dismissed. It observed that the prosecution in the present case also related to undisclosed income for the block assessment period between July 01, 1995 and Jan 01, 1997. On that basis, the Bench held that the earlier rulings governed the present matter and were binding.
Briefly, a raid was conducted on Dec 01, 1995 at the business premises of the petitioner company and the residences of its directors, and a block assessment order was passed. Thereafter, the ITAT passed an order and a show cause notice was issued, after which a sanction for prosecution under Section 279(1) of the Income Tax Act, was granted. The prosecution was initiated against N.R. Paper & Board Pvt Ltd. and its directors, after which that company subsequently amalgamated with N.R. Agarwal Industries Ltd. pursuant to the Bombay High Court’s order dated Feb 02, 2007.
The petitioner relied on earlier orders of coordinate benches quashing similar prosecutions against group companies arising from the same raid and same block period. The respondent Department did not dispute that the petitioner formed part of the same group of companies and that prosecutions against other group companies had already been quashed.
Appearances:
SN Soparkar, Sr. Counsel, With Shegun B Chokshi and SP Majmudar, for the Applicants
Rutvij R Patel, and Hardik Soni, AGPP, for the Respondents
