Sanju Phangcho vs Income Tax Department

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GAHC010174582022

2026:GAU-AS:12880
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : Crl.Pet./896/2022
M/S FLAMINGO BREWERIES PVT LTD AND 2 ORS
HAVING ITS REGISTERED OFFICE AT H. NO. 316, NEAR AMOLAPATTY L.P.
SCHOOL,
WARD NO. 6, DIPHU 782460, KARBI ANGLONG, ASSAM, REPRESENTED
HEREIN BY ITS DIRECTORS, SRI SANJU PHANGCHO AND SRI BIJOY
PHANGCHO.
2: SRI SANJU PHANGCHO
S/O SRI LONGKI PHANGCHO
R/O TARALANGSO TINIALI
MANJA-DIPHU ROAD
DIPHU 782462
DIST. KARBI ANGLONG
ASSAM
3: SRI BIJY PHANGCHO
S/O SRI HOREN PHANGCHO
R/O AMOLAPATTY
NEAR BAPTIST CHURCH
DIPHU
DIST. KARBI ANGLONG
ASSA
VERSUS
INCOME TAX DEPTT
REP. BY SRI SAIKAT MITRA ACIT, INCOME TAX OFFICER, TINSUKIA,
CIRCLE, TINSUKIA, PIN-786125, ASSAM

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Linked Case : Crl.Pet./168/2022
BIJOY PHANGCHO
S/O SRI HOREN PHANGCHO
R/O AMOLAPATTY
NEAR BAPTIST CHURCH
P.O. AND P.S. DIPHU
DIST. KARBI ANGLONG
ASSAM
VERSUS
INCOME TAX DEPARTMENT
REP. BY SRI SAIKAT MITRA
ACIT
INCOME TAX OFFICER
TINSUKIA
CIRCLE TINSUKIA
PIN-786125
ASSAM
Linked Case : Crl.Pet./165/2022
SANJU PHANGCHO
S/O SRI LONGKI PHANGCHO
R/O TARALANGSO TINIALI
MANJA-DIPHU ROAD
DIPHU 782462
DIST. KARBI ANGLONG
ASSAM
VERSUS
INCOME TAX DEPARTMENT
REP. BY THE SRI SAIKAT MITRA
ACIT
INCOME TAX OFFICER
TINSUKIA
CIRCLE TINSUKIA
PIN-786125
ASSAM

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- BEFORE -
HON’BLE MR. JUSTICE ROBIN PHUKAN


Advocate for the petitioner : Mr. S. Borthakur,
Mr. V. Rajkhowa

Advocate for the respondent : Mr. D. Borah, Sr. S.C,
Mr. J. Chopra, S.C Income Tax

Date on which judgment is reserved : 20.08.2026

Date of pronouncement of judgment : 02.09.2026

Whether the pronouncement is of the : No
operative part of the judgment ?

Whether the full judgment has been : Yes
pronounced?




JUDGMENT & ORDER (CAV)


Heard Mr. V. Rajkhowa, learned counsel for the petitioners. Also heard Mr.
J. Chopra, learned Standing Counsel appearing for the respondent in Income
Tax department.
2. By this common judgment and order, it is proposed to dispose of three
criminal petitions being, (i) Crl. Petition No. 896 of 2022, (M/s Flamingo

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Breweries Pvt. Ltd. & 2 Others vs.Income Tax Department), (ii) Crl. Pet. No. 165
of 2022 (Sanju Phangcho -vs. Income Tax Department, (iii) Crl. Pet. No. 168 of
2022, (Bijoy Phangcho vs.- Income Tax Department), for quashing and setting
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aside the C.R Case No. 1103C of 2019, C.R Case No. 1099 /2019 & C.R
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Case No. 1100 /2019, under Section 276D/277 of the Income Tax Act, 1961,
pending against them in the Court of learned Judicial Magistrate First Class,
Kamrup (M), Guwahati, instituted by the respondent herein these petitions,
pursuant to the same Assessment Order, dated 21.12.2018, being Order No.
ITBA/AST/S/144/2018-19/1014486281(1), passed by the respondent No.1, as a
common question of law is involved in all the three petitions and also being the
parties involved are same in all the three petitions.
3. It is to be noted here that in Crl. Petition No. 896 of 2022, under Section
482 of the Code of Criminal Procedure, 1973, three petitioners, namely: (i) M/S
Flamingo Breweries Private Limited, (ii) Shri Sanju Phangsho and (iii) Shri Bijoy
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Phangsho have prayed for quashing the C.R Case No. 1103 of 2019, pending
against them. And in Crl. Petition No. 165/2022, the petitioner, namely, Shri
Sanju Phangsho has prayed for quashing and setting aside the C.R Case No.
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1099 /2019, pending against him and in Crl. Petition No. 168/2022, the
petitioner, namely, Shri Bijoy Phangsho, has prayed for and quashing and setting
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aside the C.R Case No. 1100 /2019, pending against him. All the three cases
are registered under Sections 276D/277 of the Income Tax Act, 1961, pursuant
to the same Assessment Order No. ITBA/AST/S/144/2018-19/1014486281(1),
dated 21.12.2018, are pending in the Court of learned Judicial Magistrate First
Class, Kamrup (M), Guwahati.

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4. The background facts leading to filing of the present petitions are briefly
stated as under: -
“ The petitioner No. 1 is a Private Limited Company, registered under
the Companies Act, 1956, bearing Registration No. 07898 of 2005-
2006, which deals with the business of Indian Made Foreign Liquor
bonded (Wholesale) warehouse, in the district of Karbi Anglong and
the petitioner Nos. 2 and 3 are the Directors of the said company.
The other Directors of the said company are Smt. Joyshree
Phangcho, wife of Sanju Phangcho, and Smt. Narola Aier, wife of Sri
Bijoy Phangcho, who are only shareholding Directors and not
involved in day-to-day operations of the business.
The assessee company (hereinafter referred to as ‘assessee’) filed
its return of income tax for the Assessment Year 2016-17 on
17.10.2016, declaring total income of Rs. 8,01,508/-. Then the
respondent had selected the case for scrutiny and assessment
under Section 144/143(3) of the Income Tax Act, 1961 (hereinafter
as Act) was completed on 21.12.2018, determining the taxable
income at Rs. 35,66,191/- against declared income of Rs.
8,01,508/.
The respondent herein had found the assessee remained partly
non-compliant to all the statutory notices and show-cause notices,
served upon it. Further he found discrepancies in the balance sheet,
and P&L A/C vis-à-vis notes on financial statement, as the assessee
was asked to provide explanation. But, the assessee remain non-
compliant. The Assessing Officer, therefore, rejected books of

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account of the assessee.
The respondent had also found that the above assessee has made a
willful attempt to evade tax by not disclosing its actual income to
Income Tax Department, particularly when the assessee were fully
aware of its income. Also, the assessee failed to produce correct
accounts and documents willfully by not complying with statutory
notices issued and served on it."
5. Thereafter, the respondent herein, had filed three complaint petitions on
05.03.2019, under Section 200 Cr. P.C, in the learned Chief Judicial Magistrate,
Kamrup (M), Guwahati, alleging inter-alia amongst others, the aforesaid facts.
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5.1 Upon the aforementioned complaints, (i) CR Case No. 1103 of 2019,
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against three petitioners, as stated above, (ii) C.R Case No. 1099 of 2019,
against the petitioner, namely, Shri Sanju Phangsho and (iii) C.R Case No.
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1100 /2019, against Shri Bijoy Phangsho, were registered under Sections
276D/277 of the Income Tax Act, 1961, and thereafter, the learned Judicial
Magistrate First Class, Kamrup (M), to whom the cases were made over, took
cognizance of the offences, under Sections 276D/277 of Income Tax Act and
issued summons to the petitioners, vide order, dated 15.07.2022.
5.2 While, the aforesaid cases were pending for disposal, the petitioners herein
had challenged the assessment order, dated 21.12.2018, so passed by the
respondent herein, under Section 144 of the Income Tax Act, 1961 by filing an
appeal before the Commissioner of Income Tax (Appeals), Dibrugarh. Then the
Commissioner of Income Tax (Appeals), Dibrugarh, passed the appellate order
dated 28.02.2020, under Section 250 of the Income Tax Act, 1961, and gave a

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particular relief to the petitioner's company, by holding that the Assessing
Officer had estimated the net profit of the petitioner's company as 7%,
considering the company as IMFL retail outlet, whereas the company is an IMFL
bonded (wholesale warehouse) and thereafter, the Commissioner had directed
the respondent No. 1, vide aforementioned Appellate Order dated 28.02.2020,
to apply the net profit as 2.33% and not 7% in calculating the income of the
petitioner's company.
5.3 Even though the appellate order dated 28.02.2020, gave partial relief to
the petitioner's company, yet, since the petitioners could not get full and
complete relief, they had preferred an appeal against the Appellate Order, dated
28.02.2020, of the Commissioner of Income Tax (Appeals), Dibrugarh, before
the Income Tax Appellate Tribunal, Kolkata Bench (SMC), Guwahati.
5.4. The said Income Tax Appellate Tribunal, (hereinafter referred as Tribunal),
vide order dated 18.03.2021, passed the following order: -
“
3. At the outset, Ld. counsel for the assessee has
invited my attention to the impugned assessment
order and submitted that no proper opportunity was
provided by the Learned Assessing Officer (in
short, the Ld. AO) to the assessee to reconcile
about the figures of account. He has mentioned in
his assessment order that since the proceedings
u/s. 143(3) of the Income-tax Act, 1961 (in short,
the 'Act') would get barred by limitation of time,
therefore, he proceeds to frame the assessment u/s.
144 of the Act ignoring the books of account of the
assessee. The plea of the Learned Counsel of the
assessee has been that the return of income was
filed online and the concerned accountant of the

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assessee uploaded certain documents, balance
sheet/accounts of the assessee, which were not
relevant for the A.Y. under consideration.
Therefore, there was a mistake in uploading the
papers/accounts. This matter was brought to the
knowledge of the Ld.AO, however, he did not notice
of the same. This plea was also raised before the
Ld. CIT(A), but the Ld. CIT(A) has brushed aside
the plea observing that the assessee had not
pursued the case before the Ld. AO and now
production of reconciliation of accounts before him
was an afterthought. The Ld. Counsel of the
assessee, therefore, has submitted that the
assessee may be given an opportunity so that the
matter may be decided as per merits of the case.
The Ld. Counsel for the assessee, therefore, has
requested before this Tribunal that the matter may
be restored to the file of the Ld. AO for
adjudication on the issue afresh. The Ld. D.R has
not objected to the same.

4. In view of the above submissions of both the Ld.
Representatives’, the impugned order of the learned
CIT(A) is set aside and the matter is restored to
the file of the learned AO to decide the issue
afresh. The learned AO will allow the assessee to
present/submit necessary evidence / account books,
details, etc., and to present its case before him.
Thereafter, the learned AO will decide the issue
afresh by way of a speaking order."

5.5 Thereafter, the respondent herein had passed the assessment order, dated
24.03.2022 and he found the net profit of the petitioner company as Rs.
11,87,032 and thereafter he had initiated separate proceedings under Section

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271(1)(c) of the Income Tax Act and also proceeding under Section 271(1)(b) of
the said Act for non -compliance with the Notice under Section 142(1) of the
Income Tax Act and thereafter, the petitioner herein had paid the outstanding
demand of Rs.10,00,000/, on 05.04.2023.
Grounds taken by the petitioners: -

6. It is the contention of the petitioners that the subject matter of CR Case
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No. 1103 of 2019, against three petitioners, C.R Case No. 1099 of 2019,
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against petitioner namely, Shri Sanju Phangsho and C.R Case No. 1100 /2019,
against Shri Bijoy Phangsho, pending in the Court of learned Judicial Magistrate
First Class, Kamrup (M), Guwahati, and the subject matter in Order dated
18.03.2021 passed by the Income Tax Appellate Tribunal, (herein after
Tribunal) Kolkata Bench, is one and the same, and therefore, the Order dated
18.03.2021 passed by the Income Tax Appellate Tribunal, has a direct bearing
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upon the (i) CR Case No. 1103 of 2019, (ii) C.R Case No. 1099 of 2019, and
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(iii) C.R Case No. 1100 /2019. And as such it is a fit case for the interference of
this Court.
6.1 It is the further contention of the petitioners that the subject matter of CR
C C
Case No. 1103 of 2019, C.R Case No. 1099 of 2019, and C.R Case No.
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1100 /2019, pending before the Court of learned Judicial Magistrate First Class,
Kamrup (M), Guwahati, was under appeal before the learned Tribunal. The
Tribunal, vide order dated 18.03.2021, remanded the matter back to the
respondent No. 1, by setting aside the order of the Assessing Officer, Income
Tax Department, respondent herein these petitions, to decide the case afresh
and also allowed the petitioner's company to present/submit necessary

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evidence/account books, details, etc.
6.2 Further contention of the petitioners is that since the subject matter, which
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forms the basis of CR Case No. 1103 of 2019, C.R Case No. 1099 of 2019, and
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C.R Case No. 1100 /2019, has been set aside and the matter has been
remanded to the Assessing Officer, then nothing survived in the aforesaid
complaint cases, and as such the same are liable to be set aside and quashed.
6.3 It is also the case of the petitioners that the legal maxim 'sublato
fundamento cadit opus' which means when foundation is removed,
structure/work falls and this principle is applicable to the present case also and
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on such count, the CR Case No. 1103 of 2019, C.R Case No. 1099 of 2019,
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and C.R Case No. 1100 /2019, are liable to be set aside and quashed.
6.4 The petitioners also contended that the cause of action will now arise only
subsequent to fresh assessment being conducted by the respondent, as directed
vide order, dated 18.03.2021, passed by the Tribunal and under such
circumstances, the criminal proceeding got no legs to stand upon and liable to
be interfered with, as it is an abuse of the process of the Court if any further
action against the petitioners were allowed to proceed, as nothing survives in
the aforesaid three cases.
Submissions of learned counsel for the petitioners: -
7. Mr. V. Rajkhowa, learned counsel for the petitioners, submits that the CR
C C
Case Nos. 1099 of 2019, against Sanju Phangcho; CR Case No. 1100 of 2019,
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against Bijoy Phangcho; and CR Case No. 1103 of 2019, against M/S Flamingo
Beverages Private Limited and its two Directors, namely, Sanju Phangcho and

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Bijoy Phangcho, were instituted by the Income Tax Officer, Tinsukia, having
found anomalies in filing return for the Assessment Year 2016-17, on
17.10.2017, declaring total income at Rs. 8,01,508. But, the Assessment Officer
has determined the taxable income at Rs. 35,66,191/- against the declared
income of respondent—declared income of Rs. 8,01,508/- and that he also
submits that the Assessment Order dated 21.12.2018, by which the income of
the petitioner was determined at Rs. 35,66,191/- is challenged before the
Commissioner of Income Tax (Appeals) and the said appellate authority partially
allowed the appeal and upheld the assessment order by directing net profit as
2.33% and not 7%, in calculating the income of the petitioner's company.
7.1 Mr. Rajkhowa also submits that against the order of the Appellate Authority,
dated 28/02/2020, the petitioner had preferred an appeal before the Income
Tax Appellate Tribunal, Kolkata Bench (SMC), Guwahati Bench, and vide order,
dated 18/03/2021, the Tribunal set aside the impugned order of the learned
CIT(A) and restored the file to the Assessment Officer to decide the issue
afresh, and also allowed the assessees to present/submit necessary evidence
and account books details, etc., and to present its case before him, and
thereafter, directed the Assessing Officer to decide the issue afresh, by speaking
order and subsequently, the Tribunal has interfered with the appellate order and
restored the matter to the file of the Assessment Officer.
7.2 Mr. Rajkhowa, learned counsel, further submits that the petitioners have
filed an additional affidavit, bringing on record the copy of Assessment Order
dated 24/03/2022, wherein, the net profits of the assessees came to at Rs.
11,87,032/- and the respondent herein had initiated separate proceedings,
under Section 271(1)(c) of the Income Tax Act, 1961, and also the penalty

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proceedings under Section 271(1)(b) of the Income Tax Act, allegedly, for non-
compliance with the notice under Section 142(1) of the Income Tax Act and
thereafter, he also submits that the petitioner herein had paid out the
outstanding demand of Rs. 10,000/- on 05.04.2023, and since for the alleged
offence, the proceedings under Sections 271(1)(b) and 271(1)(c) of the Income
Tax Act have already been drawn up against the petitioner, the complaint cases,
pending before the learned Judicial Magistrate First Class, Kamrup (M),
Guwahati, become infructuous and if the petitioners are prosecuted for the
same offence twice. It is the further submission of Mr. Rajkhowa that since the
Assessment Order dated 21.12.2028, which is the very foundation of the
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complaint case No. 1103 of 2019, is set aside, the complaint case No. 1099 of
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2019 and C.R Case No. 1110 of 2019 got no legs to stand upon and the same
falls apart and under such circumstances, he has contended to allow this
petition by quashing and setting aside the complaint cases.
7.3 In support of his submissions, Mr. Rajkhowa has referred to a decision of
the Hon’ble Supreme Court in the cases of K.C Builders and Another -vs-
, reported in ;
Assistant Commissioner of Income Tax (2004) 2 SCC 731
and the
Commissioner of Income Tax, Panchkula -vs- Jai Laxmi Rice
and another decision
Mill, Ambala City , reported in (2016) 16 SCC 673 ;

of the Telangana High Court in Deccan Tobacco Processors Limited and
Another -vs- Union of India , represented by Commissioner (Prosecution),
Customs and Central Excise, Hyderabad, reported in 2021 SCC OnLine TS
3694 .
Submissions of learned counsel for the respondent: -

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8. Per contra, Mr. J. Chopra, learned counsel for the respondent, has
vehemently opposed the petition. According to him, though the assessment
order has been set aside by the Tribunal, yet, the offence remains the same, as
the petitioner has submitted false statement in verification of return of income
tax, and that they failed to produce accounts and documents by not complying
with the statutory notice and as such, the offences under Section 276D and
Section 277 of the Income Tax Act are clearly made out against the petitioners,
and that the penalty proceeding and criminal prosecution can go together, and
that there is no merit in this petition, and therefore, he has contended to
dismiss the same.
8.1. In support of his submission, he has referred to a decision of the High
Court of Madras in (i)
Criminal Miscellaneous Petition No. 6705 of
, (
1985 Madras Vanaspati Limited and Others -vs- S. Subramaniam ,
Income Tax Officer) , (ii) Vrindavan Pathak & Another -vs- Union
of India through the Income tax Department, reported in 2026: AHC:118689 ,
(iii) P. Jayappan -vs- S.K Perumal, First Income Tax Officer,
passed in .
Tuticorin S.L.P(Criminal) No. 1923 of 1984
Discussion and analysis: -
9. Having heard the submissions of learned counsel for both the parties, this
Court has carefully gone through the petition and the documents placed on
record, and also perused the complaint case lodged before the court of learned
Judicial Magistrate First Class, being C.R. Case No. 11003c of 2019, and also the
decisions referred to by learned counsel for both the parties.
10. Notably, in the case of P. Jayappan (supra), it has been held that

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assessment/penalty proceeding is of civil in nature, and that the criminal
prosecution under the IT Act are independent in the sense that prosecution can
be launched even while assessment/appeal is pending.

11. But, in the case of K.C. Builders (supra), Hon’ble Supreme Court has
held that when penalty proceeding under Section 271(1)(c) for concealment
was cancelled by the ITAT, on the finding of no concealment, the levy of penalty
and prosecution under Section 276(C), i.e. willful attempt to evade tax are
simultaneous, and once penalties are cancelled on the ground of no
concealment, quashing of the prosecution is automatic. The findings so
recorded by the Tribunal (ITAT) supersede the order of the Assessing Officer,
rendering further prosecution without jurisdiction and the said principle also
analogously extends to the offence under Section 277 (that is for false
statement in verification).
12. It is also to be noted here that in the case of G.L. Didwania and
Another -vs- Income Tax Officer , reported in 1995 Supp (2) SCC 724 ,
Hon’ble Supreme Court has held that prosecution under Section 277, for making
a false statement regarding income was quashed before the ITAT. The ITAT had
set aside the assessing authority's finding that assessee made a false statement.
The finding of the tribunal was held to be conclusive, and the very basis of the
complaint was knocked out.
13. Again, in the case of vs. reported in (
Uttam Chand ITO , 1982) 133
Hon’ble Supreme Court has held that the finding of the
ITR 909 (SC),
Appellate Tribunal favorable to the assessee (that is genuineness of the firm/no
false return) is binding upon the criminal court, and prosecution under Section
277 cannot sustain.

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14. It is to be noted that Section 276D deals with willful failure to produce
accounts/documents under Section 142(1) or comply with a direction under
Section 142(2A). And if the assessment order and any related finding of willful
non-compliance is set aside on merit, the basis of alleging willful failure typically
collapses.
15. Further, Section 277 deals with false statement in any verification under
the Act or delivery of false account/statement knowing it to be false or not
believing it to be true, the case is covered by the ratio laid down in the case of
G.L. Didwania and Uttam Chand (supra), and if the appellate order
negates the falsity of the underlying assessment, the prosecution does not
survive.
16. Thus, what can be crystalized from the aforesaid discussion is that once
the appellate order negates the falsity of the underlying assessment, and the
assessment order is set aside by CIT(A) or ITAT on merit, the prosecution does
not survive. And the assessee can move the Magistrate/High Court under
Section 482 Cr.P.C or an equivalent provision to quash the
complaint/prosecution.

17. However, in the instant case, Mr. Rajkhowa, learned counsel for the
petitioners, has pointed out that the second assessment order being passed by
the Assessing Officer, dated 04.03.2022, the assessing officer had initiated
proceedings under Section 271(1)(c) of Income Tax Act for concealment of
income and under Section 271(1)(b) of the Income Tax Act for non-compliance
of the notice under Section 142(1) of the Act and upon the same subject matter,
the complaint case has also been filed, and if the person is condemned twice for
the same offence, then it would amount to double jeopardy and on this count

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also, the complaint cases are liable to be set aside and quashed. But, the said
submission of Mr. Rajkhowa left this Court unimpressed, in as much as it is well
settled in the case of P. Jayappan (supra) that assessment/penalty
proceeding is civil in nature and that criminal prosecution, under the Income Tax
Act, are independent and the prosecution can be launched even while
assessment/appeal is pending. Instead, this Court finds substance in the
submission of Mr. Chopra, learned counsel for the respondent, who submitted
that the assessment/penalty proceeding is civil in nature and that criminal
prosecution under the Income Tax Act is independent.
18. This Court has also carefully gone through the decisions referred to by Mr.
Chopra, learned counsel for the respondent, Madras Vanaspati Limited and
Others(supra), Vrindavan Pathak & Another(supra) and P. Jayappan
As discussed herein above, in the case of
(supra). P. Jayappan
Hon’ble Supreme Court held that the mere pendency of
(supra),
reassessment (or other assessment) proceedings does not bar the initiation or
continuation of criminal prosecution, under sections 276C/277 of the Income-tax
Act (or related IPC offences) for filing false returns, etc. Criminal proceedings
are independent; there is no statutory bar; and they cannot be quashed or
stayed merely because the assessee hopes for a favorable outcome in the
parallel tax proceedings. The criminal court must decide the matter on its own
evidence.
19. However, in the case of K.C. Builders(supra) Hon’ble Supreme Court
has held that the ITAT, being the final fact-finding authority, when held that
there was no concealment, and thereafter cancelled the penalty under section
271(1)(c), and the Assessing Officer gave effect to that order by cancelling the

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penalties, the prosecution under section 276C (and related provisions) becomes
unsustainable and must be quashed. Penalty and prosecution are simultaneous/
interdependent, and once the factual foundation of concealment is conclusively
negated by the Tribunal, no offence survives and continuation of the criminal
case is an abuse of process. In holding so Hon’ble Supreme Court has relied
upon its earlier decision in G.L. Didwania (supra), where it has been held
that once the Tribunal’s finding that the alleged false statement had no basis,
and it led to quashing of the criminal prosecution.
20. Further, in the case of
Radheshyam Kejriwal v. State of West

Bengal, reported in (2011) 3 SCC 581 , Hon’ble Supreme Court has
generalized the principle, though however, in the context of FERA, but it has,

drawing premises from K.C. Builders(supra) and Didwania (supra), held
that adjudication and criminal prosecution can proceed simultaneously and are
independent in principle. However, where the person is exonerated on merits in
the adjudication (allegation found unsustainable and the person held innocent),
continuation of criminal prosecution on the identical facts is unjust and an abuse
of process, given the higher standard of proof in criminal cases. It has also held
that Technical/exoneration-on-other-grounds does not automatically bar
prosecution.
21. In this context the finding recorded by Hon’ble Supreme Court in the case
of K.C. Builders (supra) , is worth noting, wherein, referring to the case of
), in paragraph-22, it has been held as under :
G.L. Didwania (supra
"22. In the case of G.L. Didwania vs. ITO, reported
in 1995 Supp (2) SCC 724, the prosecution was
launched against the assessee for making false
statement. The assessing authority held that the

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assessee had intentionally concealed his income
derived from ‘Y’ Company, which belonged to him,
initiating prosecution against him. The appellant
filed the appeal against the assessment order and
the Tribunal set aside the assessment holding that
there was no material to hold that ‘Y’ Company
belongs to the assessee. The assessee thereupon
filed a petition before the Magistrate to drop the
criminal proceeding and the application before the
High Court under Section 482 to quash the criminal
proceeding, which was dismissed. On appeal, this
Court held that the whole question was whether the
appellant made out a false statement regarding the
income which, according to the assessing authority,
had escaped assessment and so far as this issue was
concerned, the finding of the Appellate Tribunal was
conclusive and held the prosecution cannot be
sustained. Accordingly, this Court quashed the
criminal proceeding and allowed the appeal filed by
the assessee."
"Hon'bleSupreme Court has observed as under:
21.1 Again in para-26, the Hon'ble Supreme Court has observed as under:

“ 26. In our view, once the finding of the
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 to correct his order under Section 154
of the Act, as per the directions of the
Tribunal………………...”

21.2 Further, in paragraph-31, the Hon'ble Supreme Court has observed that as
under:-

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“ 31. It is a well-established principle that the
matter which has been adjudicated and settled by the
Tribunal need not be dragged into the criminal court
unless and until the act of appellant could have
been described as culpable”.


22. Again, in the case of Prakash Nath Khanna and Another -vs- CIT ,
reported in (2004) 9 SCC 686 , wherein Hon’ble Supreme Court has held that
whether there was willful failure to furnish the return is a matter that must be
adjudicated factually by the Court dealing with the prosecution case.
23. As already noticed, the subject matter of the complaint before this Court is
concealment of income on the basis of finding of the Assessing Officer. If the
Tribunal has set aside the order of concealment and penalties, then there
cannot be any concealment in the eyes of law and therefore, the prosecution
cannot be proceeded with by the complainant, and that being so further
proceedings will be illegal and without jurisdiction. In holding so, this Court
derives authority from the ratio laid down in the case of
K.C. Builders
Hon'ble Supreme Court, referring to the case of
(supra), G.L. Didwania
(supra).

23.1 This court is also of the view that the decision in P. Jayappan (supra),
would not come into assistance of Mr. Chopra, learned counsel for the
respondent, as it is on different field. And in view of the decision of Hon’ble
Supreme Court in the case of and
K.C. Builders(supra) Didwania (supra)
and in the case of the decision of Madras
Radheshyam Kejriwal (supra),
High Court in
Madras Vanaspati Limited and Others(supra), Vrindavan

Page No.# 20/22
Pathak & Another(supra), also would not come into his assistance of Mr.
Chopra.
24. Further, this Court, from a perusal of the complaint, also finds that the
respondent herein, while filing the complaint against the petitioners under
Sections 276D/277 of the Income Tax Act, relied upon Section 278E of the
Income Tax Act, which provides for drawing up presumption. But, it is well
settled that the presumption is available to the Court, not to the Assessing
Officer, and the presumption of culpable mental state, under Section 278E of the
Income Tax Act, operates during the prosecution/trial stage and not before filing
of the complaint. It is drawn up by the Court in the course of prosecution, and
the said presumption is a rebuttable presumption, and the accused may rebut
the same during Trial.
25. Though, Mr. Chopra, referring to the order of the ITAT dated 28.03.2021,
submits that the said order was not passed on merit but simply remanded the
matter back to the Assessing Officer, by setting aside the impugned order, yet
having perused the said order dated 28.03.2021, this Court left unimpressed
with the submission of Mr. Chopra. But, having perused the operative portion of
the said order, which are extracted in paragraph No.5.4, herein above, it cannot
be said that the ITAT had simply set aside the impugned order without
considering the merit of the case. It is apparent that the ITAT had considered
the submissions of learned counsel for the petitioners herein and appellant
before the ITAT, whose submissions were definitely, in respect of merit of the
appeal.
25.1 Further, in subsequent assessment by the respondent herein, the net
profit of the petitioner company is found to be Rs.11,87,032/- while he found

Page No.# 21/22
earlier the taxable income of the company as Rs. 35,66,191/ and under such
background, the respondent herein was found making false statement in return
of income tax and failure to produce accounts and non-compliance with the
notice. The petitioner had also paid outstanding demand of Rs. 10,000/-.
Another disturbing aspect is that apart from making the two Directors of the
assessee company as accused in the CR Case No. 1103c of 2019, he also filed
the other two CR Cases individually, being CR Case No. 1100c/2019, against
Bijoy Phangsho, and CR Case No. 1099c/2019, against Sanju Phangsho, based
upon the same Assessment Order, dated 21.12.2018. This seems to be an abuse
of the authority by the respondent herein. The first complaint against the
company and its two Directors is maintainable in view of Section 278B of the
Act, for the roles attributed to them. But, for the same offence, separate
complaints against the Directors are not maintainable, as they cannot be treated
in isolation, without the company as an accused; and it is contrary to the
principle laid down in the case of
Aneeta Hada Vs. Godfather Travels &
, reported in , wherein, it has been held
Tours (P) Ltd. (2012) 5 SCC 661
that for maintaining prosecution against Directors/Officers, under a vicarious
liability provision, arraigning the company as an accused, is imperative and sine
qua non.
Finding:-
26. Under the given facts and circumstances, this Court finds sufficient merits
in these three criminal petitions. And accordingly, the same stands allowed. The
C.R Case No. 1103C of 2019 in Crl. Petition No. 896/2022, C.R Case No.
1099C/2019 in Crl. Petition No. 165/2022 and C.R Case No. 1100C/2019, u/s
276D/277 of the Income Tax Act, 1961 in Crl. Petition No. 168/2022, pending

Page No.# 22/22
before the learned Judicial Magistrate First Class, Kamrup (M), Guwahati, stands
set aside and quashed, leaving the parties have to bear their own costs.

JUDGE
Comparing Assistant