The Karnataka High Court on Monday dismissed three criminal cases filed by the Income Tax (IT) Department against Congress leader DK Shivakumar (Income Tax Department v. DK Shivakumar).
Justice John Micheal Cunha held that the prosecution initiated against Shivakumar was bad in law and contrary to the provisions of the Code of Criminal Procedure (CrPC) and the Income Tax Act.
The IT department had moved the High Court challenging the order of the special court for elected representatives, which had discharged Shivakumar in three cases connected to the raids against him in August 2017.
“I do not find any justifiable reason to interfere with the impugned orders. As the prosecution initiated against the respondent is bad in law and contrary to the procedure prescribed under the Code of Criminal Procedure and the provisions of the Income Tax Act, the revision petitions are liable to be dismissed and are accordingly dismissed,” the Court held.
The IT Department (petitioner) had filed complaints against Shivakumar under Section 200 of the Code of Criminal Procedure (CrPC) alleging commission of offences punishable under Section 276C(1) of the Income Tax Act, 1961 read with Sections 201 (causing disappearance of evidence) and 204 (destruction of documents to prevent its production as evidence) of the Indian Penal Code (IPC).
The special court had discharged Shivakumar on February 28, 2019, in respect of three separate cases registered by the department.
The main contention of the IT department was that Shivakumar tore up a piece of paper during the raid at a resort near Bidadi. The piece of paper linked Shivakumar to various other entities, showing undisclosed income. The department claimed that interference by the special court was unwarranted and that the cases should progress, in terms of investigation.
Shivakumar contended that the IT department could not have launched prosecution even before culmination of assessment proceedings for the years 2015-16, 2016-17 and 2017-18. It was further contended that Deputy Director of Income Tax (Investigation) was not authorized to institute the criminal complaints against Shivakumar and that the complaints lodged by him under section 200 of CrPC were without authority of law.
What the Court held
On the point of the authority of the Deputy Director to institute criminal complaints against Shivakumar, the Court said that the same argument would not stand in the eyes of law.
“The authorization made in favour of Sri.T.Sunil Goutam, Deputy Director of Income Tax (Investigation), Unit-3(1), and Bengaluru, is in consonance with the provisions of the Income Tax Act and does not suffer from any error or illegality as sought to be made out by learned Senior Counsel for respondent,” the Court said.
After taking into account the relevant provisions of CrPC, IPC and the Income Tax Act, the Court observed that the special court has no original jurisdiction to take cognizance of the offences unless the accused is committed for trial.
“Thus, a conjoint reading of the above provisions make it abundantly clear that the Special Court has no original jurisdiction to take cognizance of the offences under Chapter XXII of Income Tax Act unless the accused is committed for trial. These provisions therefore lead to the conclusion that a complaint seeking prosecution of the accused for commission of the offences under Chapter XXII of the Act could be initiated only before the jurisdictional Magistrate and not directly before the Special Court.”
Further, the provisions of the CrPC are also applicable to the prosecution under Chapter XXII of the Income Tax Act, said the Court.
“In view of the above provisions, the Special Court could not have entertained the complaints as presented by the petitioner and could not have assumed jurisdiction to try the alleged offences without the accused having been committed for trial. That apart, all the offences alleged against the respondent being non-cognizable offences, the Special Court could not have proceeded in the matter based on the material collected by the authorized officer under Section 132 of the Income Tax Act for the reason that investigation in respect of a non-cognizable offence is impermissible under the Code without authorization by the jurisdictional Magistrate,” the Court held.
In its order, the Court also dealt with the ambit of section 276C (1) [wilful attempt to evade any tax, penalty or interest chargeable or imposable or under reports of the income] of the Income Tax Act. The Court observed that the Section aims to punish “attempt to evade tax, penalty or interest” and not the “actual evasion of the tax”. However, the expression “attempt” is nowhere defined under the Act or IPC.
The Court further observed that a positive act on the part of the accused is required to be established in order to bring home the charge against the accused for the offence under section 276C(2).
Even if the allegations by the Petitioner are accepted as true, the same do not prima facie constitute offences under section 276C(1) of the Income Tax Act, said the High Court.
Tax, penalty or interest could be evaded provided tax or penalty is chargeable or imposable in respect of the above transactions but there is no presumption under law that every unaccounted transaction would lead to imposition of tax, penalty or interest, held the Court.
With these observations, the Court dismissed the revision petitions.