Gujarat High Court
R.A. Varma, Assistant Commissioner Of ... vs Laxmi Induction And Ors. on 19 December, 1994
Equivalent citations: [1995]216ITR555(GUJ)
JUDGMENT K.J. Vaidya, J.
1. Quite an important question that arises for consideration in the present group of 11 criminal revision applications is regarding the interpretation of the expression "shall also be liable to fine equal to the amount of such loan or deposit" appearing in s. 276DD of the IT Act, 1961.
2. That since the fact-situation and the law governing all these criminal revision applications and the point raised for consideration are quite identical and common, but for some minor details here and there regarding names and addresses of the respondents, amounts of loans or deposits, and different Courts where the complaints came to be filed, etc., at the joint request and consent of the learned advocates appearing for the respective parties, they are heard and finally decided together by this common judgment.
3. In order to appreciate and interpret the said s. 276DD of the IT Act, 1961 (for short, "the Act"), in its true, correct perspective it is necessary first of all to have a look at a few relevant facts of the case as they broadly emerge from various complaints. Accordingly, respondent No. 1 firm in each of these petitions, appears to be a registered partnership firm operating in various towns in the State of Gujarat, and the rest of the respondents are just its partners carrying on the business of the concerned firm collectively and were in charge of and responsible to the firm for the conduct of its business. It further appears from all these complaints that the respondent-firm and its partners were answerable and liable for any default or contravention of any provisions of the Act and the Rules made thereunder that may be committed by the firm by virtue of s. 278B of the Act. It further appears that in due course, the respondent-firm furnished the income-tax returns for the relevant assessment year, declaring the various amounts received by it, as stated in detail in the complaints. On scrutinising the said returns of the firms, it is alleged that the respondents had accepted loans and/or deposits of various amounts from various persons, otherwise than by account payee cheques or account payee bank drafts, which on the face of it was quite contrary to the restrictions imposed by ss. 269SS and 269T of the Act and failure to comply with the said provisions is punishable under s. 276DD of the Act. On the basis of these allegations, as many as 11 different complaints came to be filed against the accused-firms and their partners for the alleged offence punishable under s. 276DD of the Act, before the various Courts, as stated in detail in the complaints. On the basis of these complaints, after the cases came to be registered, the concerned learned magistrate issued summons and on the respondents appearing before the Court and pleading guilty, they came to be convicted for the alleged offences punishable under s. 276DD and s. 276E of the Act, and were sentenced till the rising of the Court (1) and to pay fine of Rs. 250 only; (ii) and in default to undergo simple imprisonment for seven days. Feeling aggrieved by the impugned order of sentence, the original complainants have preferred the present group of revision applications for enhancement of the sentence.
4. Mr. B. B. Naik, the learned Additional Central Government Standing Counsel for the petitioner, submitted that the impugned orders of sentences, apart being ex facie unduly lenient and manifestly unjust, were illegal also inasmuch as the concerned learned magistrates have clearly misinterpreted the impression "shall also be liable to fine equal to the amount of such loan or deposit" appearing in s. 276DD of the Act while imposing the flea-bite of a fine in question, relying upon a judgment of the Andhra Pradesh High Court rendered in the case of ITO vs. Lakshmi Enterprises (1990) 185 ITR 595 (AP). In order to make good the point, Mr. Naik has first of all invited the attention of this Court to ss. 276DD and 276E of the Act, which read as under :
"Section 276DD : If a person takes or accepts any loan or deposit in contravention of the provisions of s. 269SS, he shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine equal to the amount of such loan or deposit.
Section 276E : If a person repays any deposit referred to in s. 269T otherwise than in accordance with the provisions of that section, he shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine equal to the amount of such deposit."
5. On the basis of the clear language employed in the aforesaid provisions. Mr. Naik submitted that the interpretation of s. 276DD made by the Andhra Pradesh High Court in the case of ITO vs. Lakshmi Enterprises (supra), with utmost respect, cannot be said to be legal and proper. Mr. Naik further submitted that once we find that s. 276DD is not capable of any other interpretation save and except, the plain, unambiguous and natural meaning flowing out of it, the amount of fine shall have to be enhanced so as to be equal to the amount of loans or deposits in question. Mr. Naik, on the basis of these submissions, finally urged that the present group of criminal revision applications accordingly deserve to be allowed, quashing and setting aside the impugned orders of sentence, replacing them by appropriate orders enhancing the sentences, as warranted by the said ss. 276DD and 276E of the Act.
6. Countering the above submissions of Mr. Naik, Mr. K. H. Kaji, learned counsel appearing for the respondent-accused, submitted that the learned magistrate has quite rightly relying upon the reported decision in the case of ITO vs. Lakshmi Enterprises (supra) has imposed a fine of Rs. 250 only. Mr. Kaji further submitted that when s. 276DD vested a discretion with the learned magistrate as to what amount of substantive sentence and sentence of fine are to be imposed, unless and until it is shown that the discretion so exercised by him was manifestly illegal and perverse, the same cannot be interfered with on the mere wishing of the complainant. Further, according to Mr. Kaji, the word "liable" has been correctly interpreted in the aforesaid decision rendered in the case of ITO vs. Lakshmi Enterprises (supra). Emphasising this point, Mr. Kaji has invited the attention of this Court to the relevant paragraph of the said judgment, which reads as under :
"Thus, according to s. 276DD, a person who contravenes the provisions of s. 269SS is given punishment with imprisonment for a term which may extend to two years and shall also be liable to fine equal to the amount of such loan or deposit. Thus, so far as the sentence of imprisonment is concerned, the word 'punishment' is used and, so far as the fine is concerned, the word 'liable' is used."
7. Learned counsel for the respondent contended that the word 'liable' occurring in many statutes has been held as not conveying the sense of an absolute obligation or penalty but merely importing a possibility of attracting such obligation, or penalty, even where this word is used along with the words 'shall be'. So, it was contended that the section only gives a right to impose a fine and that it does not prescribe any minimum punishment as contended. Even in the provisions of s. 302 of the IPC, the phrase 'shall also be liable to fine' are found but it is always construed that it does not convey any mandate, but leaves it to the discretion of the Court convicting an accused of the offence of murder, to impose or not to impose a fine in addition to the sentence of death or life. So the word 'liable' used in the section gives a discretion to the Court as regards imposition of fine. So, the power to impose the sentence of fine is discretionary. When such is the case, it cannot be said that when once the Court chooses to impose a fine, it should be equal to the amount of the deposit. When the legislature has chosen to leave the matter regarding imposition of fine to the discretion of the Court, it cannot be construed that the legislature would have intended to curtail that discretion by prescribing a minimum amount of fine when the fine is proposed to be imposed....."
8. Mr. Kaji, on the basis of the aforesaid submissions, vehemently contended that the provision contained in s. 276DD as regards the punishment clearly vests unfettered discretion in the learned magistrate to impose any substantive sentence of imprisonment and any amount of fine, which according to him is just and proper. Mr. Kaji further submitted that the expression "shall also be liable to fine equal to the amount of such loan or deposit" is required to be split up into two parts in order to appreciate its real connotation in its proper perspective. Mr. Kaji further submitted that the term "liable" is indeed quite wide and vests discretion in the concerned Court to pass any just, fair and appropriate order of fine. Making good this submission, Mr. Kaji has invited the attention of this Court to the various dictionary meanings as well as the interpretation of the said term "liable" made by the various Courts. With a view to further elaborate his submissions, Mr. Kaji has in fact read before this Court the dictionary meaning of the terms "liable", "shall" as well as the expression "shall also be liable to fine" from (i) Mitra's Legal and Commercial Dictionary, Second Edn., page 451, (ii) Venkataramaiya's Law Lexicon, 1975 Edn., Vol. I, page 792, and Vol. II, page 1512, (iii) Black's Law Dictionary, Fifth Edn., Vol. I, page 63, and (iv) Prem's Judicial Dictionary, 1993 edition, Vol. 1, page 969. Mr. Kaji also invites the attention of the Court to the interpretation of the said terms "liable" and "shall" as well as "shall also be liable to fine" made by various Courts. Some of them are in the case of State of Madhya Pradesh vs. Azad Bharat Finance Co. AIR 1967 SC 276; in the case of Superintendent and Remembrancer of Legal Affairs to Govt. of W. B. vs. Abani Maity AIR 1979 SC 1029, in the case of State vs. Amru Tulsi Ram AIR 1957 Punj 55, in the case of Tetar Gope vs. Ganauri Gope AIR 1968 Patna 287 and in the case of Everett Orient Line Incorporated vs. Jasjit Singh AIR 1959 Cal 237.
9. From the aforesaid dictionary as well as the Court-interpreted meaning, the word "liable" ordinarily stands to mean : (i) that a person is responsible at law; (ii) bound or obliged in law or equity; responsible, chargeable, answerable, compellable to make satisfaction, compensation or the restitution obligated, accountable for or chargeable with condition of being bound to respond because a wrong has accorded..... condition out of which legal liability arises...... just or legally responsible, obliged, responsible, subject to, legally bound to etc.; (iii) a future possibility or probability of happening which may or may not actually occur; (iv) not conveying the sense of any absolute obligation or penalty, even where the word liable is used along with the word shall be (liable); and (v) similarly, "shall also be liable to fine" does not contain the mandate, but leave it to the discretion of the Court convicting the accused to impose or not to impose fine in addition to the substantive sentence, etc.
10. On the basis of the aforesaid meaning given to the word "liable", Mr. Kaji further submitted that once it is accepted that the legislature has vested an absolute discretion in the Court as regards the imposition of fine at all on some quantum of it, then the second fraction of the said expression "equal to the amount of such loan or deposit" cannot be read in any other way, but as "up to" the amount of such loan or deposit. Mr. Kaji further submitted that to read the expression in question otherwise than without splitting the same, as suggested by him, would be simply contradiction in terms likely to perpetrate injustice to the accused. Mr. Kaji further submitted that it is in this light only that the aforesaid judgment of the Andhra Pradesh High Court is required to be appreciated and accepted as binding. According to Mr. Kaji, once this position is accepted, by no stretch of imagination, it can be said that the learned magistrate was not vested with the discretion to impose a fine which he has imposed on the accused while they pleaded guilty. In the alternative, Mr. Kaji further submitted that by now it is indeed quite a settled legal position that in any case where the Court finds that the language of a taxing provision is ambiguous and capable of more meanings than one then the Court has to adopt that interpretation which favours the assessee, more particularly so where the provision relates to the imposition of penalty. Mr. Kaji further submitted that s. 276DD stands subsequently deleted and in that view of the matter also, this Court should interpret the word "liable" liberally in the light of the submissions made hereinabove. Mr. Kaji further submitted that ordinarily, when in any fiscal statute like the IT Act, one of the High Courts of the country has taken a particular view that should be followed by all the Courts with a view to see that homogeneity is maintained. In support of this, Mr. Kaji relied upon the decisions of some of the High Courts including this High Court. [Not referred to as broadly no dispute over the said legal position]. Mr. Kaji further submitted that merely because this Court, acting as a trial Court would have taken a different and serious view of the matter as regards the imposition of the fine, the same by itself is not a sufficient ground to enhance the same. On the basis of all these submissions, Mr. Kaji finally urged that all these revision applications for enhancement of sentence deserve to be dismissed.
11. Now, having heard learned counsel appearing for the respective parties quite at length, there is indeed no doubt whatsoever that the learned magistrate has committed a patent and obvious error in not properly interpreting s. 276DD of the Act by inarticulately relying upon the decision of the Andhra Pradesh High Court in the case of ITO vs. Lakshmi Enterprises (supra). On going through the said judgment, with utmost respect to his Lordship, it has got to be stated that the whole attention of his Lordship appears to have been centred and anchored only on the word "liable", losing altogether sight and significance of the reference to the content of the unavoidable related fact, namely, that the same was followed by the expression "to fine equal to the amount of such loan or deposit". This expression "equal to" is absolutely unambiguous and it does not spell out and warrant any other different, alternative meaning. When such is the legal position, it is indeed not possible to agree and/or concur with the view taken by the Andhra Pradesh High Court in the case of ITO vs. Lakshmi Enterprises (supra). The word "equal to" by no stretch of imagination is capable of any other literal meaning except its own. In fact, the literal meaning of the phrase "equal to" is impossible, still much less difficult to dilute in the sense "up to". Had indeed the penalty provided in the expression "shall also be liable up to the amount of such loan or deposit" then perhaps, there was no alternative left with this Court but to hold that the legislature did vest some discretion in the trial Court while awarding the sentence of fine. Not only that, but the legislature in its place, if it intended the meaning "up to" will have surely and unhesitantly employed the term "up to" instead of "equal to". But that is precisely not done. It cannot be argued and assumed that Parliament was unaware of the meanings of "equal to" and "up to" to commit any error in selecting "equal to" in the place of "up to" while drafting s. 276DD of the Act.
12. That takes us to the next contention of Mr. Kaji regarding interpretation of the word "liable". Had indeed there been any difficulty on the part of this Court to understand the correct import of the phrase "shall also be liable to pay" ..... then in that case, in order to derive the just meaning, this Court would have surely entered into the exercise of splitting the said s. 276DD of the Act. However, in the opinion of this Court, the phrase itself is so crystal clear on the face of it that it does not call for any splitting. The legislature which has used the word "equal to" in the said phrase indeed could have surely used the word "up to" if that was in its mind. The distinction in the meaning of the words "equal to" and "up to" are clear enough to be clearly understood by Parliament when it provided the particular section. In the view of the matter, there being no substance in the said contention, the same requires to be rejected. In view of such a hard, realistic situation, merely because the question involved pertains to the interpretation of some provision of the fiscal statute, that by itself cannot make any Court mechanically follow the judgment of any other High Court on the ground of maintaining the homogeneity of judgments. The doctrine of maintaining the homogeneity of judgments is not such an inflexible doctrine where the Courts are expected to mechanically follow the same without applying their mind to the correct, proper and legal meaning of a particular word, phrase or expression used in the sections. In fact, the moment the Court feels and finds out that some apparent error has crept in in interpreting a particular word, phrase or expression of some provision of law, then to continue the same in the name of maintaining the homogeneity of judgments perpetrating the error would be quite unreasonable. This doctrine of maintaining the homogeneity in the judgments cannot be stretched to the extent of absurdity.
13. That takes us now to the further submission of Mr. Kaji, to the word "liable" as interpreted and assigned meaning by various High Courts and the various dictionaries given to it. Now, there indeed cannot be any dispute about the dictionary meaning and interpretations made of the word "liable". All these dictionary meanings and interpretations are indeed quite good at their respective places in the context and relation to the other word, phrase or expression used in the concerned section of the particular Act. The same word, phrase or expression connotes altogether a different meaning when read in the context of different words, phrases or expressions. For example, if the meaning of the relationship of "A" person is to be correctly interpreted then in order to find out as to what it is, then "A" remaining the same, if it is used in the context and relationship of person "B" wife, then "A" is the husband of "B", if it is in the context of a person "C" son, then "A" is father of "C". If it is in the context of brother "D", then "A" is brother of "D" and if it is in the context of "E", friend, then "A" is friend of "E", so on and so forth. Thus, what is the meaning, relationship of a particular phrase, word or expression ultimately depends upon how that particular word or phrase is related to other particular words, phrases or expressions in the context in which it is used. Similarly, the meaning and interpretation of the word "liable" in different dictionaries and rulings of the High Court in the appropriate context and relation are in their respective places quite good but the said meaning cannot be mechanically stretched and applied while interpreting s. 276DD of the Act, wherein the context is altogether different. Accordingly, thereby the Court when it is called upon to interpret a particular term, has to interpret it in the context of the entire phrase, expression, in which it is used. The translated and piecemeal reading of the term "liable" divorced of the context and fictitious assumption to split expression and give a different view is just impermissible, unfair and not done. In this view of the matter, it is indeed not possible for this Court to agree with the submissions made by Mr. Kaji and ultimately with the aforesaid decision of the Andhra Pradesh High Court.
14. The matter does not rest here. Assuming for the sake of argument that s. 276DD of the Act did vest some discretion in the Court in the matter of awarding sentence, then even to impose a sentence till the rising of the Court and a fine of Rs. 250 only is indeed a flea-bite of a sentence, which is nothing less than mockery of the penal provision under the IT Act, where once an offence is brought home or pleaded guilty, the same is required to be strictly enforced.
15. That takes us now to the last contention of Mr. Kaji, viz., that in case, this Court was not inclined to accept the aforesaid decision of the Andhra Pradesh High Court, then in that case, it would be absolutely unreasonable to ask not only the particular firm but also its partners to pay the fine "equal to" the alleged loan or deposit because the said amount would be many-fold more than the actual loan or deposit accepted by the company for which each one of the partners cannot be saddled with the maximum penal liability. On this point, Mr. Kaji is surely treading on some stronger ground as there is indeed great substance as, to ask, over and above the partnership firm, all the partners to pay a fine "equal to" the amount of the loan or deposit received by the firm, prima facie, would be quite unreasonable and indeed could not be the intention of the legislature in the absence of some express provision. In order to appreciate and understand the actual legal position as to who could be actually "liable" to the various sentences prescribed in s. 276DD of the Act, so far as the imposition of fine is concerned, it would be worthwhile to look at the meaning of "person" used in s. 276DD. The said word "person" is separately defined in s. 2(31) of the Act which reads as under :
"2. (31) - 'person' includes, -
(i) an individual,
(ii) an HUF,
(iii) an company,
(iv) a firm,
(v) an AOP or a BOI, whether incorporated or not,
(vi) a local authority, and
(vii) every artificial juridical person, not falling within any of the preceding sub-clauses;"
16. Reading the word "person" as defined above with the opening words of s. 276DD of the Act it appears that it can be a firm and firm only which can be saddled with the ultimate responsibility for the payment of the fine under s. 276DD of the Act, more particularly in view of the phrase "equal to" used in s. 276DD of the Act. In this view of the matter, to the extent the magistrate has inflicted various amounts of fine upon the partners also, over and above the firm, the same to the said extent being ex facie illegal, requires to be quashed and set aside. So far as the partnership firm is concerned, in view of the interpretation placed by this Court on the expression "shall also be liable to fine 'equal to' loan or deposit", the partnership firm shall have to pay the fine "equal to" the amount of the alleged loan or deposit in question received by it, for which all the partners joinly and severally are liable for the same. In all these cases, since the amount of deposit in question was accepted long back in the year 1985-86, and accordingly in case for whatever reason the firm does not exist and is defunct, in such an eventuality, the partners or the proprietors will be jointly and severally liable to pay the fine and in default to undergo simple imprisonment for 15 days. Accordingly, before depositing the fine as ordered, the respondents in each one of these cases; shall (i) furnish a statement of the alleged actual amount of deposit or loans, as the case may be (ii) names and addresses of the concerned partners and their liability to pay the same and (iii) their share of contribution to the total amount. A copy of this statement shall be furnished to the complainant for verification and thereafter after hearing the complainant the same shall be accepted by the Court.
17. In the result, all these criminal revision applications are partly allowed. The impugned orders imposing sentence of fine on the partners of the firm are hereby ordered to be quashed and set aside. So far as the accused firms are concerned, they are directed to pay the fine equal to the amount of loan or deposit in question on or before 31st March, 1995. The amount of fine to be deposited by each of the accused firms as stated in detail in the respective complaints.