Case at a glance
Case Name: Shiv Kumar Jaiswal v. State of UP
- Subject
- Prosecution after penalty deleted by the CIT(A) and ITAT
- Issue
- Can criminal prosecution under Sections 276C(1) and 277 continue once the concealment penalty it was based on has been deleted in appeal?
- Citation
- (2026) 349 CTR 228; 182 taxmann.com 684 (All)
- Court
- Allahabad High Court
- Provisions
- Sections 271(1)(c), 276C(1) and 277, Income-tax Act 1961
- Outcome
- In favour of assessee
Background
Facts of the Case
- The assessee and his wife gifted a hotel property to a family friend. The assessee voluntarily surrendered the long-term capital gain and paid the tax.
- The AO accepted the capital gain as taxable but levied penalty under Section 271(1)(c), treating it as concealed income.
- While the penalty appeal was pending, the AO obtained sanction and filed a complaint under Sections 276C(1) and 277 before the Special Chief Judicial Magistrate, Lucknow. A summoning order and a bailable warrant followed.
- The CIT(A) then deleted the penalty, and the ITAT upheld the deletion. The assessee applied to the High Court to quash the criminal proceedings.
The ruling
Summary of Decision: What the High Court Held
- Once the ITAT had set aside the penalty order, it would not be appropriate to allow criminal proceedings to continue against the assessee.
- The penalty was the very basis on which the prosecution was launched. With that basis gone, and the Department having failed to sustain the penalty in appeal, the prosecution after penalty deleted could not survive.
- The application was allowed, and both the complaint proceedings and the summoning order were quashed.
Practice point
Key Takeaway on Prosecution After Penalty Deleted
- A prosecution under Sections 276C or 277 that rests on a concealment penalty falls once that penalty is deleted in appeal.
- When the ITAT confirms deletion, apply promptly to quash the complaint and place the CIT(A) and ITAT orders on record.
- If prosecution is launched while the penalty appeal is pending, raise this ruling to seek a deferral until the appeal is decided.
- The ruling is from the Allahabad High Court, so it binds courts in Uttar Pradesh and is persuasive elsewhere.
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