Bangalore District Court
The Income Tax Department vs Kondavadi Srinivasa Rao ... on 15 February, 2024
KABC090000752014
Presented on : 21-03-2014
Registered on : 21-03-2014
Decided on : 15-02-2024
Duration : 9 years, 10 months, 25 days
BEFORE THE SPECIAL COURT FOR ECONOMIC
OFFENCES: AT BENGALURU
Dated this the 15th day of February 2024
:Present:
Sri. VISHWANATH C GOWDAR., B.A.L., LL.M .,
Presiding Officer,
Special Court for Economic Offences,
Bengaluru
C.C. No.76/2014
Complainant: The Income Tax Department
By its Assistant Commissioner of Income Tax,
Circle-6(1),
No.14/3, 5th Floor, Rastrothana Bhavan,
(Opp: RBI), Nrupathunga Road,
Bengaluru - 560 001.
(Reptd. By Spl. Pubic Prosecutor)
Vs.
Accused : Mr. Kondavadi Srinivasa Rao Ashwathnarayana,
Techno Power Corporation,
Unit-1, 3428, 9th Cross,
Peenya Industrial Area,
Peenya IV Phase,
Bengaluru - 560 058.
(Reptd. By Sri. CSR., Advocate)
2 C.C.No.76/2014
: JU DG M E N T :
The instant case emanates from the complaint made by
the complainant against the accused for having committed
the offence punishable U/s.276C(2) of the Income Tax Act,
1961 (hereinafter referred to as 'IT Act').
2. The complainant's case in nutshell is as under:
The accused is an assessee, engaged in the business of
manufacture and sales of power transformers. It is the
complainant's allegations that, the accused filed his ITR
pertaining to the assessment year 2012-13 on 29.09.2012
declaring the total income of Rs.66,17,830/- by disclosing the
total tax liability of Rs.20,34,072/- including the interest for
the relevant period in the said returns. The said ITR reflected
advance tax paid by the accused for the tune of Rs.2,00,000/-
and TDS for the tune of Rs.1,64,511/-, the total balance tax
payable was reflected to be Rs.16,69,560/-. It is the specific
case of the complainant that, in the said ITR, the accused did
not pay the self assessment tax as contemplated U/s.140A of
the IT Act along with ITR. The accused was issued with a
notice on 08.11.2012, despite service of the said notice, the
accused has not chosen to neither reply nor comply the terms
of the said notice.
3. Thereafter, the aforesaid ITR was processed on
17.01.2013 U/s.143(1) of the IT Act and demand of
Rs.17,30,680/- was raised. The accused on service of
3 C.C.No.76/2014
demand notice, being raised by the complainant Department,
addressed a letter dated 28.01.2013, agreeing to pay 50% of
the outstanding taxes on or before 31.01.2013 and balance
tax on or before 07.02.2013, on account of financial
difficulties being faced by him in his business. It is the
complainant's case that, the accused made partial payments
of Rs.2.5 lakhs each on 26.11.2013 and 07.03.2014
respectively.
4. Pursuant to failure on the part of the accused to
comply with his undertaking, the Assessing Officer, on
25.07.2013, issued a notice U/s.221(1) of the IT Act calling
upon to show cause, as to why penalty should not be levied.
The accused fail to neither reply nor comply with the terms of
the said notice. Again, the Assessing Officer issued the
notices U/s.221 of the Act on 19.09.2013 as well as on
30.10.2013. It is further the complainant's case that,
accused paid Rs.2.5 lakhs on 26.11.2013, he also addressed
a letter dated 27.11.2013 and undertook to pay Rs.5 lakhs
each on 15.12.2013 and 31.12.2013, by clearing the entire
arrears by 15.01.2014.
5. The Assessing Officer intimated the accused as to he
shall pay the entire outstanding balance by 06.12.2013, on
account of failure, pursuant to default by the accused the
Assessing Officer levied penalty of Rs.1,40,000/- vide order
dated 31.12.2013.
6. It has been categorically alleged that, the accused by
virtue of the aforesaid penalty order, was bound to pay
4 C.C.No.76/2014
Rs.13,70,680/- towards ITR for the assessment year 2012-13
having not bothered to pay the aforesaid outstanding amount
by complying to his own earlier commitments by way of
letters, inclined the Commissioner of Income Tax to issue
show cause notice dated 24.02.2014 before initiation of
prosecution U/s.276C(2) of the IT Act. The accused
responded to the said show cause notice by replying as to
himself undergoing financial loss and unable to secure bank
loans on account of his business being collapsed. Further it is
the case of the complainant that, the Principal Commissioner
of Income Tax having not been satisfied with the reply of the
accused, proceeded to pass the order of sanction authorizing
the complainant to prosecute the accused for having
committed the offence punishable U/s.276C(2) of the IT Act.
Hence, this complaint.
7. This court on having received the complaint, the
sworn statement of the complainant was dispensed as the
said complainant was a public servant in view of the Section
200(a) of the Cr.P.C. Thereafter, this court took cognizance of
an offence punishable U/s.276C(2) of the Act.
8. In pursuance of the summons issued to the accused,
on his appearance, he was enlarged on bail. Thereafter, the
substance of the accusation was framed, the accused pleaded
not guilty and claimed to be tried.
9. The complainant in order to substantiate, the claim
putforth in the complaint, got examined himself as PW-1 and
5 C.C.No.76/2014
got marked 13 documents as Ex.P-1 to Ex.P-13 and got
closed its side of evidence.
10. The accused denied the incriminating materials
appearing against him in the testimony of the CW-1/PW-1,
while recording his statement U/s.313 of Cr.P.C. The accused
got examined himself as DW-1 and got marked 3 documents
as Ex.D-1 to Ex.D-3 and got closed his side of evidence.
11. Heard the arguments canvassed by the learned
counsels for complainant and accused. The learned counsel
for the accused has also filed his written submissions along
with authorities.
12. On considering the complaint, evidence on record
and arguments addressed by either parties, the following
points would arise for the determination of this court viz.:
1. Whether the complainant proves beyond all
reasonable doubts that, accused willfully and
deliberately with an intention to evade payment
of taxes, failed to pay the legitimate taxes as per
ITR for the assessment year 2012-13 by
defaulting in payment of self assessment taxes
for the tune of Rs.13,70,680/- and thereby
committed the offence punishable U/s.276C(2)
of IT Act, 1961?
2. What order?
13. The findings of this court on the above said points
are as under:
Point No.1: In the Negative
Point No.2: As per final order
for the following:
6 C.C.No.76/2014
REASONS
14. Point No.1 : The complainant in order to establish
the guilt of the accused, got himself examined as PW-1 and
got marked 13 documents as Ex.P-1 to Ex.P-13.
15. The complainant in his examination-in-chief has
reiterated and deposed as to the accused being an individual
assessee during the relevant period, filed ITR on 29.09.2012
for the assessment year 2012-13 declaring the total self
assessment tax to be paid by him as Rs.16,00,000/-. It has
been specifically accounted as to the accused has not paid
the self assessment tax U/s.140A of the IT Act despite
issuance of notice U/s.221(1) of the IT Act thrice by his
predecessor in his office. He has further deposed as to having
imposed penalty of Rs.1,40,000/- on accused, vide penalty
order dated 31.12.2013. So also, regarding Commissioner of
Income Tax, Bengaluru having issued show cause notice to
accused as to why the prosecution should not be launched
U/s.276C(2) of the IT Act, thereafter the order of sanction
being passed authorizing him to prosecute the accused.
16. In support of the said oral testimony in all 13
documents have been got marked as Ex.P-1 to Ex.P-13.
Ex.P-1 is the original sanction order dated 19.03.2014,
wherein the complainant/PW-1 has been authorized to
launch prosecution against the accused for the offence
punishable U/s.276C(2) of the IT Act. Ex.P-2 is the attested
copy of the return of income submitted by the accused, duly
verified by the accused pertaining to the assessment year
7 C.C.No.76/2014
2012-13. Ex.P-3 is the attested copy of the notice dated
08.11.2012 calling upon the accused to pay the arrears of tax
within 7 days from the receipt of the said notice. Ex.P-4 is the
attested copy of demand notice U/s.143(1) of the IT Act dated
17.01.2013. Ex.P-5 is the attested copy of letter dated
28.01.2013 addressed to complainant by Chartered
Accountant of accused, wherein accommodation has been
sought to make the payment of arrears of tax. Ex.P-6 to
Ex.P-8 are the attested copies of notice dated 25.07.2013,
19.09.2013 and 30.10.2013 respectively issued by the
complainant Department U/s.221(1) of the IT Act. Ex.P-9 is
the attested copy of the response dated 29.11.2013 issued by
accused to the complainant, wherein challan dated
26.11.2013 showing remittance of Rs.2,50,000/- is enclosed
and accommodation is sought to make good arrears on or
before 15.01.2014. Ex.P-10 is the attested copy of the
penalty order dated 31.12.2013 passed by complainant
against the accused. Ex.P-11 is the attested copy of the show
cause notice dated 24.02.2014 issued by Commissioner of
Income Tax, Bengaluru-III, Bengaluru calling upon the
accused to give explanations as to why he should not be
prosecuted U/s.276C(2) of the IT Act. Ex.P-12 and Ex.P-13
are the attested copies of the reply dated 10.03.2014 by the
accused to the Commissioner of Income Tax in response to
Ex.P-11 by way of objections.
17. PW-1 has been subjected to cross-examination,
wherein it has been elicited as to accused being an individual
assessee and not assessed as a proprietor of M/s. Techno
8 C.C.No.76/2014
Private Limited. It is also deposed by the PW-1 as to the
accused has filed his ITR by virtue of being an individual
assessee on the basis of his PAN. It is also admitted as to by
virtue of accused being an individual assessee, he has to pay
the tax pertaining to his proprietorship concern. The PW-1
has admitted as to U/s.4 of the IT Act, Income Tax shall be
levied on the total income of an assessee. It has been
specifically admitted by the PW-1 as to as per Ex.P-2, the
complainant is following the mercantile system of the
accounting. The PW-1 has categorically deposed as to the
accused cannot claim the scrutiny, the said scrutiny will be
done by the complainant authority. The witness has
categorically deposed as to he is not aware of the "Theory of
the Real Income". The suggestions as to while following
mercantile accounting system, even income actually not
received amount will be categorized and treated as deemed
income has been specifically denied by the witness. The
witness has categorically deposed as to he has not personally
examined regarding the accused undergoing loss as per the
balance sheet as well as profit and loss account.
18. The accused in support of his defence, got examined
himself as DW-1 and deposed as to himself running business
of electrical transformers at Peenya and the said products
being capital goods, which includes 85 to 90% raw materials
and balance in respect of the labours, interest and nominal
income. It is also accounted as to the major customers being
Government Departments, corporates and private contractors
and the said products being sold on the credit basis to the
9 C.C.No.76/2014
aforesaid customers. The accused has claimed the total
turnover on the basis of the cash receipts and sundry
debtors. It is further deposed as to the accused is following
mercantile accounting system and as per the balance sheet,
he vowed approximately Rs.6.5 crores from the sundry
debtors, having initiated legal proceedings to recover the said
dues. The accused has specifically claimed himself being
under financial loss and same being disclosed in his IT
returns. He has also accounted regarding the arrears of tax
claimed by the complainant Department is on account of
outstanding dues from his customers and he has shown the
hypothetical income to be paid by the customers in the
course of time. It is also deposed as to on account of his
financial crisis, he is unable to initiate legal proceedings to
recover the dues from the customers.
19. In support of his aforesaid testimony, he has
produced and got marked certified copy of judgment and
decree in Commercial O.S. No.14/2020, the same is marked
as Ex.D-1. The profit and loss details is marked as Ex.D-2
subject to objections of the complainant's counsel on the
ground of production of proof. 12 notices issued by the
accused are collectively marked as Ex.D-3, subject to
objections as to the proof of having dispatched the said
notices not being furnished.
20. DW-1 has been subjected to cross-examination,
wherein, it is categorically admitted as to as per Ex.D-1,
Techno Power Corporation is LLP and M/s. Skill Tech
Engineers and Contractors Pvt. Ltd., is also another partner
10 C.C.No.76/2014
of the said firm. It is also deposed as to the he used to receive
the raw materials from the various persons on the credit
basis, wherein, he used to make the payments to the said raw
materials purchased on credit basis within 30 to 90 days. It
has been specifically admitted as to he has not issued any
legal notice to his sundry debtors as they were his regular
customers. DW-1 has categorically admitted as to having
sought for accommodation to make good the arrears of tax. It
is also deposed as to DW-1 was anticipating the receipt of
goods from the sundry debtors. The other suggestions as to
DW-1 is deposing falsely, he is liable to pay the arrears of tax
has been categorically denied by the witness.
21. The learned Spl. PP for the complainant vehemently
argued that, the accused being the assessee defaulted in
payment of the Income Tax as per the returns filed by him at
Ex.P-2 and it is emphasized as to on the basis of the self-
assessment by the accused, he was liable to pay the tax and
he has willfully evaded the payment of tax and in result, the
notices were issued to the accused under the provisions of IT
Act. The accused has evasively replied to the said notices and
has also paid the partial arrears of Income Tax. It is also
highlighted regarding the documents got marked on behalf of
the complainant, so also, the testimony of the PW-1. The
learned counsel has also emphatically stressed regarding
Section 5 of the IT Act, so also, the self-assessment as
contemplated U/s.140A of the IT Act. It is also argued as to
there is no any enquiry mandated U/s.142(1) of the IT Act. It
is also stressed regarding the accused having not discharged
11 C.C.No.76/2014
the burden of proving his defence beyond all reasonable
doubts as contemplated U/s.278E of the IT Act. It is also
highlighted regarding the very ingredients of Section 142(2)
and 143(3) of the IT Act as to the assessment order will not be
applicable as the ITR has been filed by the accused by self
assessing his income. By relying upon the following
decisions, the Spl. PP has sought for convicting the accused.
i. (1953) 2 SCC 782 (Commissioner of Income
Tax/Excess Profits Tax V/s. M/s. Bhogilal
Laherchand)
ii. Crl. Appeal No.655/1995 (Sri. P. Gopala Rao
V/s. M/s. Steel House and others)
iii.(2002) 254 ITR 388 (N.K. Jain V/s. Union of
India)
iv. ILR (2001) II Delhi 148 (V.P. Punj V/s. Asst.
Commissioner of Income Tax & another)
v. (2014) 5 SCC 139 (Sasi Enterprises V/s. Asst.
Commissioner of Income Tax)
vi. (2016) 326 Taxman 27 (Kalluri Krishan
Pushkar V/s. Deputy Commissioner of Income
Tax
22. The learned counsel for the accused vehemently
argued that, in absence of the assessment order U/s.142(2)
and 143(3) of the IT Act, the instant proceedings against the
accused is untenable. It is highlighted as to admission by the
PW-1 as to there is no any assessment order passed on the
basis of ITR as per Ex.P-2. It is also emphasized as to the
complainant authority has totally disregarded the sundry
debtors as reflected in Ex.P-2 for a sum of Rs.6,59,15,322/-.
12 C.C.No.76/2014
It is also argued as to as per the Inquisitorial Proceedings, the
assessment order is a prerequisite to initiate the proceedings
U/s.276C(2) of the IT Act and has highlighted the decisions of
the Hon'ble Apex Court. It is also emphasized regarding the
Circular of the CBDT, which is applicable to the case on hand
in so far as the arrears of tax being less than the amount
fixed as criteria to initiate the prosecution. The counsel has
also placed reliance on the decisions, wherein, the pending
matters being covered under the Circular of CBDT as per the
decision of the Hon'ble High Court of Karnataka. The learned
counsel for the accused has also stressed the cross-
examination of the PW-1 and also the testimony of the
accused i.e., DW-1 as to the financial loss being sustained by
the accused and the same being reflected in Ex.P-2. The
counsel has also highlighted the contents of Ex.D-1 to Ex.D-3
in support of his arguments as to the accused facing financial
crisis on account of non-payment of the dues by the sundry
debtors. It is emphatically argued that, as the accused is
following mercantile accounting system, the income which is
not actually received being reflected in the ITR as per Ex.P-2
cannot considered as an income, the said income which is
about to be received and not being actually received can only
be attributed as "deemed income". As such, it is argued as to
the very ingredients of Section 276C(2) of the IT Act cannot be
made applicable in the case on hand and it is also argued as
to the accused has very much discharged his burden of
rebutting the presumption as contemplated U/s.278E of the
IT Act beyond all reasonable doubts. By placing reliance
13 C.C.No.76/2014
upon the following decisions, it has been sought to acquit the
accused in the case on hand.
1. (1995) 123 CTR 0448 (Vinaychandra Chandulal
Shah V/s. State of Gujarat and another)
2. (1987) 65 CTR 0184 (G. Vishwanathan V/s.
Income Tax Officer)
3. (1990) 84 CTR 0001 (Transco Industries V/s.
Income Tax Officer)
4. (1962) 46 ITR 0144 (Commissioner of Income
Tax V/s. Shoorji Vallabhdas & Co.,)
5. (1997) 139 CTR 0564 (Godhra Electricity Co.
Ltd., V/s. Commissioner of Income Tax)
6. Circular No.24/2019 (F.No.285/08/2014-
IT(INV.V)/349)
7. (2013) 352 ITR 121 (Commissioner of Income
Tax V/s. Ranka and Ranka)
8. (2018) 13 SCC 329 (Director of Income Tax,
Circle 26(1), New Delhi V/s. S.R.M.B. Dairy
Farming Pvt. Ltd.,)
"Analysis and Evaluation of Evidence"
23. In the case on hand, the complainant has to
establish regarding the willful and deliberate attempt on the
part of the accused to evade the payment of taxes, as
morefully contained in Section 276C(2) of the IT Act. It is the
specific case of the complainant as to the accused though
declared the income in ITR at Ex.P-2, the accused defaulted
in payment of tax along with ITR or prior to filing of the ITR as
contemplated U/s.140A of the IT Act. The said default
14 C.C.No.76/2014
committed by the accused in so far as self-assessment tax is
claimed to be willful and deliberate attempt to evade the
payment of tax.
24. Per contra, the accused has claimed that, he is
following mercantile accounting system, wherein, the income
though has not been received by the accused in the actual
sense, the income which is hypothetical i.e., to be received
from the sundry creditors will be reflected in the ITR. This
particular claim of the accused as to the accused following
mercantile accounting system is very much admitted by the
PW-1 during the course of cross-examination.
25. The accused has also set out the specific defence as
to the complainant cannot initiate the instant proceedings
U/s.276C(2) of the IT Act in the absence of the assessment
order U/s.142(2) and 143(3) of the IT Act. It is pertinent to
note that, PW-1 has categorically admitted as to there is no
any scrutiny or assessment order passed in the instant case
on hand. At this juncture, the arguments of the learned
counsel for the accused as to the assessment order is a pre-
requisite before initiation of the prosecution U/s.276C(2) of
the IT Act is very much supported by the decision reported in
(1995) 213 ITR 0307 between Vinaychandra Chandulal Shah
V/s. State of Gujarat and another , wherein the Hon'ble High
Court of Gujarat has categorically laid down the ingredients
of the Section 276C(2) of the IT Act can only be made
applicable in case of evasion found after completion of the
assessment only comes within the purview of Sub Section 2 of
the 276C of the Act. The counsel has also relied upon the
15 C.C.No.76/2014
other decisions reported in (1987) 167 ITR 0103 between G.
Vishwanathan V/s. Income Tax Officer as well as Transco
Industries V/s. Income Tax Officer reported in (1990) 84 CTR
0001 , wherein it has been laid down that, the assessment is
the mandatory aspect which needs to be complied in order to
invoke Section 276C(2) of the IT Act.
26. It is also significant to note that, the contention of
the accused as to the ITR as per Ex.P-2 reflected the
hypothetical income, as the accused was maintaining the
mercantile accounting system has been very much brought
out by the accused during the course of cross-examination of
the PW-1. It is the complainant's arguments as to the total
income as claimed in the ITR will be taxable and there is no
any distinction regarding the income which is yet to be
received or the hypothetical income, as the assessee has
claimed the said income, it is argued as to he is bound to pay
the tax for the income declared in the ITR. Per contra, the
accused has very much claimed the real income cannot be
brought under the definition of the income, as the said
income is only hypothetical and only on receipt of the said
income from the hands of debtors, the same will be liable to
tax. This arguments of the counsel for the accused is very
much supported by the decisions of the Hon'ble Apex Court
reported in (1962) 46 ITR 144 (SC) in (1962) 46 ITR 0144
(Commissioner of Income Tax V/s. Shoorji Vallabhdas & Co.
So also, in the decision reported in (1997) 139 CTR 0564
Godhra Electricity Co. Ltd., V/s. Commissioner of Income
Tax , wherein it has been laid down that income tax is a levy
on income and the Income Tax Act takes into account two
16 C.C.No.76/2014
points of time at which the liability to tax is attracted namely
the accrual of income or its receipt. If income does not result
at all, there cannot be a tax, even though in book keeping, an
entry is made about a hypothetical income, which does not
materialized.
27. In the case on hand, admittedly, the accused has
very much established the fact as to himself following
mercantile system of accounting and the sundry debtors
vowing more than 6 crores as per Ex.P-2 i.e., ITR. The said
outstanding dues from the sundry debtors is also supported
by the Ex.D-2 i.e., profit and loss account pertaining to the
accused. That being the case, this court is inclined to draw
the presumption as contemplated U/s.114 of the Indian
Evidence Act, in so far as to the hypothetical income being
reflected in ITR at Ex.P-2.
28. It is the specific case of the accused that,
explanation to Section 5 of the IT Act very much contemplates
the income treated as deemed income cannot be brought
within the purview of the income tax until actually received. It
is also contended as to the income tax will be leviable in so
far as the said income only in the year of the receipt as per
Section 41(4) of the IT Act.
" Conclusion"
29. At the outset, it is relevant to note that to constitute
the offence punishable U/s.276C(2) of the IT Act, the
complainant has to prove that, the assessee has willfully and
17 C.C.No.76/2014
deliberately made the attempts to evade the payment of tax.
Section 276C(2) of the IT Act reads as under:
"Section 276C of the Income Tax Act, 1961:
(1)................
(2) If a person willfully attempts in any manner
whatsoever to evade the payment of any tax,
penalty or interest under the Act, he shall,
without prejudice to any penalty that may be
imposable on him under any provision of this Act,
be punishable with rigorous imprisonment for a
term which shall not be less than three months
but which may extend to two years and shall, in
the discretion of the court, also be liable to fine"
For the purposes of this section, a wilful attempt
to evade any tax, penalty or interest chargeable or
imposable under this Act or the payment thereof
shall include a case where any person-
(i) has in his possession or control any
books of account or other documents
(being books of account or other
documents relevant to any proceedings
under this Act) containing a false entry or
statement; or
(ii) makes or causes to be made any false
entry or statement in such books of account
or other documents; or
18 C.C.No.76/2014
(iii) willfully omits or causes to be omitted
any relevant entry or statement in such
books of account or other documents; or
(iv) causes any other circumstance to
exist which will have the effect of
enabling such person to evade any tax,
penalty or interest chargeable or
imposable under this Act or the payment
thereof.
30. It is significant to note that, as per the Sections 4 &
5 of the Act, which deals with charge of income and scope of
income respectively, only the income received in actual can be
construed as an income which is liable to be levied with
income tax. This view of the court is supported by the
decision of the Hon'ble Apex Court reported in (1997) 225 ITR
746 (SC) .
31. This court certainly as to weigh the case of the
complainant as to whether there is any willful default or
deliberate attempt to evade the payment of taxes. In the case
on hand, having due regard to the evidence of complainant on
record, admittedly, Ex.P-2 discloses the hypothetical income,
which has not been actually received by the accused. In the
light of the decision of the Hon'ble Apex Court and other
Hon'ble High Courts, only the income which has been
received by the assessee can be construed as an income liable
for tax and rest of the income shown in the ITR shall be
treated as deemed income and same will be liable for taxation
19 C.C.No.76/2014
only in the year of which, the said income is received by the
assessee.
32. It is also relevant to consider as to the plain reading
of Section 278E of the IT Act, which is extracted below:
Section 278E of Income Tax Act "Presumption as to
culpable mental state"
278E. (1) In any prosecution for any offence under
this Act which requires a culpable mental state on
the part of the accused, the court shall presume
the existence of such mental state but it shall be a
defence for the accused to prove the fact that he
had no such mental state with respect to the act
charged as an offence in that prosecution.
Explanation.-In this sub-section, "culpable mental
state" includes intention, motive or knowledge of a
fact or belief in, or reason to believe, a fact.
(2) For the purposes of this section, a fact is said to
be proved only when the court believes it to exist
beyond reasonable doubt and not merely when its
existence is established by a preponderance of
probability.
makes it clear that there is a presumption in favour of the
complainant as to the accused had the culpable mental state
to commit an offence, the existence of the contrary shall be
proved by the accused beyond all reasonable doubts.
20 C.C.No.76/2014
33. In the light of the aforesaid presumption, the
accused has rebutted the said presumption by examining
himself as DW-1 and by establishing his defence regarding
hypothetical income as per the covenants of Ex.P-2 i.e., ITR of
the sundry debtors for the tune of Rs.6,59,15,322/- being
corroborating on the basis of Ex.D-2 i.e., profit and loss
account prepared by the competent Chartered Accountant. It
is also significant to consider as to the specific defence of the
accused as to the accused was undergoing financial loss is
forthcoming from Ex.D-1 i.e., proceedings initiated by the
accused against one of the debtors, these documents i.e.,
Ex.D-1 and Ex.D-2 being evaluated in the background of the
oral testimony of the accused, certainly inclines the court to
gather the financial crisis being undergone by the accused.
The overall examination of the said testimony of the accused,
in the background of the Ex.D-1 to Ex.D-3 as well as
covenants of Ex.P-2 very much inclines the court to hold that
the accused has very much established his defence beyond all
reasonable doubts as contemplated U/s.278E of the IT Act by
rebutting the presumption as stated therein. It is needless to
point out that, though the complainant is having the
presumption in his favour as stated supra, the initial burden
is very much upon the complainant to establish the aspects of
the willful and deliberate attempt to evade the payment of tax.
An anxious examination of the overall complainant's case, in
the light of the evidence on record as well as the relevant
provisions of the IT Act, the complainant has miserably failed
to bring home his case to the satisfaction of this court
21 C.C.No.76/2014
inconsonance to the definitions as contemplated U/s.4 & 5 of
the IT Act.
34. Without prejudice to the aforesaid discussion, it is
also justifiable to consider the Amended Circular bearing
No.05/2020 dated 23.01.2020, wherein, there is a ceiling as
to only the evasion exceeding Rs.25 lakhs only to be
prosecuted by the IT Department. In the case on hand, as
the alleged evasion being less than the aforesaid ceiling limit,
the accused is entitled to the benefit under the said circular.
The arguments of the Spl. PP as to the said circular was
subsequent to the prosecution being launched in the case on
hand, prior to the said circular will not come in the way of
giving the benefit under the said circular, as the said circular
needs to be construed benefiting pending lis by virtue of the
ratio of the Hon'ble Apex Court reported in ( 2018) 13 SCC
239 (SC) in DIT V/s. S.R.M.B. Dairy Farming Pvt. Ltd., and
ratio of the Hon'ble High Court of Karnataka reported in
(2013) 352 ITR 121 (Kar) in CIT V/s. Ranka & Ranka.
35. This court has very much gone through the
authorities relied upon by the complainant, the ratio laid
down therein are very much applied to the facts and
circumstances of the case on hand having regard to the
testimonies on record as well as documents on record.
36. In a nutshell, the complainant who ought to have
established the willful and deliberate attempts to evade the
payment of Income Tax by the accused in light of the
presumptions as contemplated U/s.278E of the IT Act has
failed to establish the crucial aspect, as to the income which
22 C.C.No.76/2014
though has not been actually received by the assessee being
the income which is covered U/s.4 & 5 of the IT Act. The
complainant has failed to establish the so called hypothetical
income which is claimed by the accused, which is yet to be
received from the sundry debtors is also covered within the
purview of the tax which is liable to be levied with income tax.
Without any hesitation, having due regard to the evidence
adduced by the accused and defence set out by the accused,
this court holds that the accused has rebutted the rebuttable
presumption by establishing his defence beyond reasonable
doubts as contemplated U/s.278E of the IT Act. Per contra,
the complainant has very much failed to establish the very
ingredients of the Section 276C(2) of the IT Act, which is
crucial to hold the accused as guilty under the aforesaid
provision. This court is justified to hold that the
complainant's case is tainted with substantial improvements,
omissions and contradictions.
37. In the light of the discussion made supra, this court
without any inhibition, proceeds to answer Point No.1 in the
Negative .
38. Point No.2: In view of the findings on Point No.1,
this court proceeds to pass the following:
ORDER
By exercising the power conferred under section 255(1) of Cr.P.C., the accused is acquitted of the offence punishable under section 276C(2) of the Income Tax Act, 1961.
23 C.C.No.76/2014Consequently, the accused is set at liberty.
The corresponding bail bond of the accused stands canceled.
(Dictated to the Stenographer, transcribed, corrected and then pronounced by me, in open court on this the 15th day of February 2024) (VISHWANATH C GOWDAR) Presiding Officer, Spl. Court for Economic Offences, Bengaluru.
24 C.C.No.76/2014ANNEXURE:
List of the witnesses examined on behalf of the Complainant:
PW-1 : Amrith Raj Singh List of the Documents exhibited on behalf of the Complainant:
Ex.P-1 : Original Sanction Order Ex.P-2 : Attested copy of Income Tax Returns Ex.P-3 : Attested copy of Notice Ex.P-4 : Attested copy of Demand notice Ex.P-5 : Attested copy of Letter Ex.P-6 to 8 : Attested copies of Notices Ex.P-9 : Attested copy of Reply Ex.P-10 : Attested copy of Penalty Order Ex.P-11 : Attested copy of Show Cause Notice Ex.P-12 & 13: Attested copies of Reply List of witnesses examined on behalf of the Accused:
DW-1 : K.S. Ashwathnarayana List of Documents examined on behalf of the Accused:
Ex.D-1 : C/c. Of Judgment & Decree in Com.
O.S. No.14/2020 Ex.D-2 : Profit and Loss Details Ex.D-3 : Notices (12 in Nos.) Presiding Officer, Spl. Court for Economic Offences, Bengaluru.25 C.C.No.76/2014
15.02.2024 Complt.: IT Accd: CSR For Judgment Accused absent.
IA filed U/s.353(6) of the Cr.P.C., for exempting personal appearance of accused. Heard, Perused and satisfied. As the judgment is one of acquittal the grounds to exempt appearance of accused for the day being satisfactory, the IA stands allowed.
Judgment pronounced in the open court (vide separate order) ORDER By exercising the power conferred under section 255(1) of Cr.P.C., the accused is acquitted of the offence punishable under section 276C(2) of the Income Tax Act, 1961.
Consequently, the accused is set at liberty.
The corresponding bail bond of the accused stands canceled.
PRESIDING OFFICER.