K.C. BUILDERS AND ANR. versus THE ASSISTANT COMMISSIONER OF INCOME TAX

Citation: [2004] 1 S.C.R. 1134 · Decided: 28-01-2004 · Supreme Court of India · Bench: B.N. AGRAWAL · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
K.C. BUILDERS AND ANR. 
v. 
THE ASSISTANT COMMISSIONER OF INCOME TAX 
JANUARY 28, 2004 
B 
[B.N. AGARWAL AND DR. AR. LAKSHMANAN, JJ.] 
Income Tax Act, 1961: 
Section 271 (J)(c)-A Ys 1983-84 to 1986-87-Concealment of income-
C Prosecution for-Imposition of penalty-Assessee engaged in the business of 
construction and sale of flats submilled original ret11rns-S11bsequent/y, assessee 
submilled revised retums based on approved valuer's report-Assessing 
authority treated difference in income between original and revised returns as 
concealed income and levied penalty-Therea.fier, complai/1/s against assessee 
D were filed before Magistrate-ITAT held that there was no concealment of 
income and cancelled the penalty-Assessing authority gave effect to /TAT's 
order-ITAT's order not challenged and became final-Held: Under such 
circumstances, prosecution could not be sustained 
Section 27 I (I )(c)(iii)-Penalty-Levy of-A Ys 1983-84 to i 986-87-
E Prosecution and penalty-Interrelation between-Assessing authority levied 
penalty on the assessee for concealment of income and la1111ched prosecution-
B11t /TAT held that there was no concealment of income and cancelled the 
penalzv-Held: Levy of penalty and prosec11tion simultaneo11s-Once penalty 
was cancelled quashing of prosecution under S. 276- C is automatic-Moreover, 
F 
G 
H 
ITAT's order superseded that of assessing officer and the entire prosec11tion 
became del'Oid ofj11risdiction-lt would be an idle and empty formality to 
require the assessee ro exhibit the ITAT's order as a defence document. 
Penal Code, I 860: 
Section 420-Cheating-lngredients of-Held: Accused must have 
fraudulent or dishonest inte/1/ion at the time of making the promise or 
misrepresentation-Mere failure to keep up the promise subsequently not a 
gro11nd for making the presumption that dishonest and fraudulent intention 
existed right at the beginning. 
1134 
K.C. BUILDERS v. ASST COMMR OF INCOME TAX 
1135 
Words and Phrases: 
"Concea/me11t"-Meani11g of-In the context of S. 271 of the Income 
Tax Act, 1961. 
A 
The appellant-assessee was a partnership firm engaged in the 
business of construction and sale of flats. The appellant submitted original B 
returns for the Assessment years (AYs) 1983-84 to 1986-87. Subsequently, 
the appellant filed revised returns as per the approved valuer's report for 
the said A Ys, which were accepted by the respondent. 
However, the respondent/assessing authority treated the difference 
between the income as per the original return and the revised income as C 
concealed income and imposed a penalty on the appellant under Section 
27l(l)(c)(iii) of the Income Tax Act, 1961. The order levying the penalty 
was upheld by the CIT(Appeals). Thereafter, the respondent filed 
complaints before the Additional Chief Metropolitan Magistrate under 
Sections 276-C(2), and 278-B of the Act and under Sections 120-B and 420 D 
of the Pl'nal Code, 1860. 
The appellant preferred an appeal before the Income Tax Appellate 
Tribunal (ITAT) against the consolidated order passed by the 
CIT(Appeals) for the A Ys 1983-84 to 1986-87. The IT AT, after verifying 
the records, found that the additions were based on settlement between E 
the assessce and the Department and represented voluntwy offer made by 
the assessee. The IT AT, therefore, held that there was no concealment of 
income by the assessee and accordingly the penalties were cancelled. This 
order of the ITAT was not appealed against and thus it became final and 
conclusive. The assessing authority, therefore, cancelled the penalties levied 
under Section 27l(l)(c)(iii) of the Act. The respondent's application under F 
Section 256(1) of the Act for making a reference to the High Court was 
rejected. 
The appellant, thereafter, filed an application before the Additional 
Chief Metropolitan Magistrate for permission to file a copy of the IT A T's G 
order. However, the Magistrate permitted the appellant to mark the said 
order in evidence at the appropriate stage of the trial. 
The High Court dismissed the criminal revision petition filed by the 
appellant under Section 397 read with Section 401 of the Code of Criminal 
Procedure, 1973. Hence the appeal. 
H 
1136 
SUPREME COURT REPORTS 
[2004] I S.C.R. 
A 
On behalf of the appellant, it was contended that under Section 254 
· of the Act the order of IT AT not only superseded the order passed by the 
Assessing Officer under Section 143(3) of the Act but also set aside the 
findi

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