Delhi District Court
Ito vs Bal Kishan Saraf on 22 February, 2022
IN THE COURT OF MS. MANU VEDWAN
ADDL CHIEF METROPOLITAN MAGISTRATE (Spl. Acts)
CENTRAL, TIS HAZARI COURTS, DELHI
ITO vs BAL KISHAN SARAF
U/s 276CC of Income Tax Act
CC No.516168/2016
JUDGMENT
(a) CNR No. of the case : DLCT02-002632-2015
(b) Ct.Case No. : 516168/2016
(c) Date of commission of offence : Assessment year 2012-13
(d) Name of complainant : Sh. G.P.Singh
DCIT, Central Circle-26,
Income Tax Department,
New Delhi
(e) Name, parentage, residence : Bal Kishan Saraf
A-5, Diwanshree Apartments,
30, Firozeshah Road,
New Delhi
(f) Offence complained of/ proved : U/s 276CC of Income Tax Act
(g) Plea of accused : Pleaded not guilty
(h)Final order : Acquitted
(i)Date of such order : 22.02.2022
Date of Institution of complaint: 23.03.2015
Arguments heard/order reserved: 17.02.2022
Date of Pronouncement of Judgment : 22.02.2022
Brief statement of the reasons for the decision:-
1. The complainant Shri. G.P.Singh, Deputy Commissioner of Income Tax, filed the present complaint against accused pertaining to assessment year ITO vs Balkishan Saraf CC No.516168/2016 Page No.1 of 14 2012-13 for the offence punishable u/s 276CC of the Income Tax Act (hereinafter to be referred as 'Act').
2. The short facts for filing of the present case are that accused did not file the return of income for the assessment year 2012-13. Notice under Section 153-A of the Income Tax Act, dated 24.10.2013, was issued, and, return was filed by the accused for the assessment year 2012-13. The, aforementioned return, filed in response to the notice under Section 153-A of the Income Tax Act, as on, 31.03.2014, only after expiry of stipulated time as mentioned in the notice. Thereafter, a show cause notice, under Section 279(1), of the Income Tax Act dated 23.02.2015, was issued by the Learned Principal Commissioner of Income Tax for launching of prosecution against the accused under Section 276-CC of the Income Tax Act. Reply to the show-cause notice filed by the accused. It is alleged that despite issuance of show cause notice under Section 153-A of the Act, in which it is directed to the accused to file return within stipulated time, accused has willfully failed to file the same. Thus, accused has committed an offence u/s 276CC of the Act. Hence, present complaint.
3. Accused was summoned. Copies of complaint alongwith documents were supplied. After concluding of pre-charge evidence, charge was framed against the accused u/s 276-CC of the Act, to which he pleaded not guilty and claimed trial.
4. In order to substantiate his allegations, complainant Mr.G.P.Singh at the pre-charge stage as well as at post charge stage got examined himself as CW1. Mr.G.P.Singh has been examined as CW1. During the course of his examination- in-chief, CW-1 deposed that he has filed the present complainant which is Ex.CW1/1 for the relevant year qua accused persons. CW-1 has further deposed ITO vs Balkishan Saraf CC No.516168/2016 Page No.2 of 14 that for filing of this complaint, he had obtained the sanction, under Section 279(1), of Income Tax Act, from Principal Commissioner of Income Tax, Mr.R.K.Gupta. The said sanction is Ex.CW1/2. Order under Section 127 of the Income Tax Act centralizing the case to the erstwhile, Central Circle-2, is Ex.CW1/3 and list of witnesses is Ex.CW1/4.
CW1 further deposed that he had issued a notice dated 24.10.2013, under Section 153-A, of the Income Tax Act, to the accused for the relevant assessment year, thereby calling, for filing the income tax return within 16 days. The aforesaid notice signed by CW-1 which is Ex.CW1/5 (OSR) was sent through speed post, and concerned acknowledgment encircled at point B. CW-1 further deposed that accused willfully not filed any reply of the notice within the stipulated period. The return of the income tax for the relevant year was filed in the prescribed form duly signed and verified by the accused only on 31.03.2014, copy of the same is Ex.CW1/6 (OSR).
CW-1, further deposed that show-cause notice, under Section 279(1) of the Income Tax Act, was also issued by the Principal Commissioner of Income Tax, Central-3 Mr.R.K.Gupta which is Ex.CW1/7. The said notice was sent through speed post, acknowledgment is encircled at point B. CW-1 also deposed that, reply dated 02.03.2015 duly signed by the attorney of the accused was received by the complainant department. In that reply accused had admitted that Ex.CW1/5 i.e. notice dated 24.10.2013, was received by the accused on 29.10.2013. CW1 further deposed that accused had submitted in that reply that photocopies of the seized material be supplied to him. CW-1 also clarified that photocopy of the seized materials were supplied to the accused through attorney before the issuance of Ex.CW1/5 i.e. notice dt.24.10.2013 under Section 153(A) of Income Tax Act. Reply of the accused is Ex.CW1/8 (OSR).
CW-1 was cross-examined at length by the learned counsel for the accused. During the course of cross-examination, CW1 had submitted that accused asked ITO vs Balkishan Saraf CC No.516168/2016 Page No.3 of 14 for the copy of the seized material vide letter dated 15.03.2013 addressed to Deputy Director Income Tax, Investigation, copy of the same is Ex.CW1/D-1 and the documents were duly supplied to the attorney as found mentioned in the order- sheet entry dated 02.04.2013. During the course of further cross-examination, CW-1, has also submitted that the common search/investigation was carried out in a group of cases of M/s Orchid Infrastructures and Developers Private Limited, including the accused. CW-1 has also submitted that after perusal of the record, it comes out that the statement of accused was recorded during the course of post search investigation by the investigation team only after 02.04.2013. CW-1 was also not sure of the exact date of drawing of Panchnama.
CW1 also admitted that the letter asking for the supply of copies of documents for the second time was filed before him by the accused though, the documents asked through second application were already given to the accused vide Ex.CW1/D-2. During, the course of further cross-examination, once again CW1, has submitted that no separate investigation specific to each assessee had been conducted instead, the investigation had been conducted in a group of cases including cases of Orchid Infrastructures & Developers Private Limited, Rajiv Gupta, Dhruv Gupta, Bal Kishan Saraf and Madhu Saraf. CW-1 has also submitted that on basis of common search individual cases were filed against the accused. The relevant portion of cross-examination of CW-1 by the learned counsel for accused has been reproduced for the sake of brevity.
".......Ques : Whether the documents supplied to the accused persons on 02.04.2013 were supplied as a group or as an individual assessee?
Ans. As per entry on the order-sheet mentioned by the investigation wing, all seized documents alongwith digital documents were received by the AR of the assessee group and this fact is not mentioned in the ordersheet. Ques : Whether an application dated 11.11.2013 for supply of documents and extension of time for filing the return was made before the Assessing Officer by the group of assesses?
ITO vs Balkishan Saraf CC No.516168/2016 Page No.4 of 14 Ans : It is correct that an application dated 11.11.2013 was made before the Assessing Officer by the group of assesses.
Ques : Is it correct that the group of assesses had filed a reminder application dated 20.02.2014 for demand of documents and for extension of time for filing the returns? Ans : It is correct. In response to this letter dated 20.02.2014, assessee was requested vide letter dt.24.02.2014 to attend the office on any working day between 10.30 a.m. to 4.00 p.m. with pre-intimation to the witness and get copies of the relevant documents in office time and take copies of seized materials and documents already furnished.........."
5. Another witness, Ms.Preeti Singh, Deputy Director Income Tax is examined as CW-2. She had proved on record the copy of letter received from Chartered Accountant of accused dated 15.03.2013 which is Ex.CW2/1 and certified copy of order dated 02.04.2013 and 03.04.2013 passed by Deputy Director Income Tax, Investigation, Unit-III(2) Ex.CW2/2. She was also cross- examined at length by the learned counsel for accused. During the course of cross-examination, CW-2 has also submitted that the search in the cases of M/s Orchid Infrastructures and Developers Private Limited was conduced as a group. CW-2 had also submitted a letter dated 30.12.2015 which is now Ex.CW2/DA was written by her to ADIT, Investigation. CW2 further submitted that she did not remember whether the letter dated 04.01.2016, which is now Ex.CW2/DB, was received by her.
6. After conclusion of complainant evidence, Statement of accused was recorded u/s 313 Cr.P.C In his statement accused denied the material allegations and stated that as soon as he had received the complete set of documents comprising of pre-search and post-search investigation documents, he had filed his returns which is well within time.
ITO vs Balkishan Saraf CC No.516168/2016 Page No.5 of 14
7. In support of his claim and contention, accused examined one Mr. Umesh Kumar, Deputy Commissioner of Income Tax as DW1. DW-1 is the summoned witness and deposed that the letter dated 22.04.2013 is Ex.CW1/D-3 (OSR). During the course of further examination-in-chief, DW1 has also deposed that the letter dated 22.04.2013 was accompanied with annexures running from page nos.3-122, and these documents are collectively now, Ex.DW1/A. DW-1 was cross-examined at length by the Learned Special Public Prosecutor for the complainant. During the course of cross-examination of DW-1, he was unable to verify the contents of the documents running from page no.3 to 122 filed alongwith letter dated 22.04.2013.
8. Thereafter, on the closure of defence evidence, final arguments were heard from both the parties. All the relevant documents including the testimonies of witnesses gone through very carefully. Both the parties have also chosen to file the written submissions.
9. The complainant has filed the detailed written submissions alongwith the chronology of relevant dates in the present case in which it is specifically submitted by the complainant that search and seizure was conducted upon the company Orchid Infrastructure Developers Private Limited and other accused persons on 05.03.2013. It is further submitted that on 15.03.2013, assessee sought supply of documents seized during the course of search. On 02.04.2013, Income Tax Department had supplied the documents seized by it during the course of search to the Attorney of the Assessee, which was duly acknowledged by him. It is also mentioned by the complainant that from 02.04.2013 to 29.07.2013, post search proceedings were carried out by the complainant, wherein, many Mazharnamas were drawn, though named as Panchnamas. Statement of various persons were recorded during the post search proceedings. Further, in that ITO vs Balkishan Saraf CC No.516168/2016 Page No.6 of 14 chronology dates as found mentioned in the complaint and evidence were once again reiterated by the complainant. The complainant also stated that the accused is basically, playing hide and seek with the department and in order to delay the proceedings filed frivolous letters dated 11.11.2013 & 18.11.2013 received in the department on 21.11.2013 and, another letter, dated 20.02.2014, received in the department on 21.02.2014, were also mentioned by the complainant, whereby, the assessee asked to supply the seized material and statement recorded during the course of search. Thereafter, the complainant has submitted that the accused had been supplied with all the documents seized during the course of search on 02.04.2013. It is also stated by the complainant that instead of acknowledging the same, accused has kept writing the frivolous letters.
10. It is further stated that the accused had never supplied the list of deficient documents and mere interested in playing hide and seek with the department. It is stated in the written submission that the documents were supplied to the accused from 09.03.2014 to 24.03.2014 and immediately thereafter, the accused had filed the letter before the department on 31.03.2014 to treat the Income tax Return under Section 139(1) of the Act as the Income Tax Return under Section 153-A of the Act. It is also made questionable by the complainant that if the accused was not in possession of the documents, then how did the accused decide to treat the Income tax return under Section 139(1) of the Act as the Income tax return under Section 153-A of the Act. It is also stated that though the said letter was not accepted by the department and accused was directed to file the Income Tax Return under Section 153-A of the Act. It is also raised by the complainant that the documents were supplied to the accused till 09.12.2014.
11. It is further stated that a bare perusal of Section 153-A of the Act ITO vs Balkishan Saraf CC No.516168/2016 Page No.7 of 14 shows that the assessing officer shall provide such time, as may be prescribed in the notice, to file the return of income under Section 153-A of the Act. It is further stated in the written submissions that accused had never sought any extension to file the Income Tax Return within time frame of 16 days, instead accused kept on filing false and frivolous letters seeking supply of the documents despite the fact that the same had already been supplied to them on 02.04.2013. It is further stated that accused chose to file another letter to supply the documents seized during the course of search, firstly, on 15.11.2013 and then on 21.11.2013 after the receiving of notice under Section 153-A of the Act with the sole intention of buying time. Complainant has also relied upon the judgment of Hon'ble Supreme Court in the case of Sasi Enterprises vs. Assistant Commissioner of Income Tax (2104) 5 SCC 139 and Prakash Nath Khanna & Ors. Vs. CIT & Ors. (2004) 9 SCC 686. The Complainant has also relied upon Section 278-E of the Act, which provides a culpable mental state on the part of the accused.
12. On the other hand, accused had objected to the case of complainant by filing their set of written submission.
13. It is stated in the written submissions filed by the accused that the delay in filing the returns was not attributable to the assessee. As soon as the documents were provided to him, the return of income was filed by him on 31.03.2014. It is further stated that on 02.04.2013, DDIT (Investigation) had provided only the material seized during the search. Vide letter dated 22.04.2013, assessee had stated that as to what documents were not received by him and that one hard disk provided by Department on earlier date was also corrupted and thus, was not readable. This fact has been admitted by the Principal CIT, Central-III, in his report dated 01.02.2016, categorically stating that the said conclusion of the Assessing Officer was erroneous as he had not gone through the annexures ITO vs Balkishan Saraf CC No.516168/2016 Page No.8 of 14 submitted by the assessee alongwith the letter dated 22.04.2013. It is also stated that the investigation was continuing even after 02.04.2013 and statement of various persons were recorded, panchnamas were drawn, hence, the complete material could not have been given by the department on 02.04.2013.
It is further stated by the accused in his written submissions that as per section 132(9) and para 45 of Manual of Office Procedure Vol-III published by Directorate of Income Tax, the person from whose custody any books of accounts or other documents are seized is entitled to make copies thereof, or take extracts there from in the presence of the authorised officer (Assessing Officer) after the books of accounts and documents have been handed over to him or any other person empowered by him in this behalf. Accordingly, it was the assessee's right to be given copies of seized material and if it is not given, then it cannot be expected from the assessee to file its return. It is also submitted that, while, responding to a notice under Section 153-A, assessee will compute his income as per the income already filed alongwith income, if any, worked out as per material seized during search/post search.
It is further stated that it is right of the assessee under Section 153-A to file return depicting true and correct return after the search, otherwise he is liable to pay penalty under Section 271-AAB at progressive rate. Therefore, it is once again pressed that assessee is, accordingly, required to be provided with all the documents gathered during search and during post search enquiry. It is further stated that relevant sanctioning authorities had also not applied their mind while granting the sanction qua the accused. Learned counsel for accused has also relied upon the various judgments including this judgment passed by Hon'ble Supreme Court in cases titled as Mohd.Iqbal Ahmed vs. State of AP (1979) Crl. L.J. 633, M/s Bhagat Store Panaji vs. State 1982 Crl. L.J.744 (SC) and the judgment passed by Madras High Court in case of Assistant Collector of Customs (Prosecution) vs. Tay Teck Seng (1992) (2) MWN (Cr.) Mad.
ITO vs Balkishan Saraf CC No.516168/2016 Page No.9 of 14 It is further stated that the necessary ingredients for the applicability of Section 276 CC have not been met out in present case. The delay in filing return in response to notice under Section 153-A was because assessee did not have in its possession the copies of statements recorded and the material gathered during search and post search. The documents were supplied in the month of March, 2014 till 23.03.2014, as such the delay was not attributable to the assessee. It is further stated that the assessee vide letters dated 11.11.2013 & 20.02.2014 had categorically stated about the non-availability of copies of documents and on that basis had requested for the extension of time to file the returns under Section 153- A. It is also stated that Assessing Officer has never exercised his discretion and neither accept nor reject the said request of assessee.
It is further stated that the submission of letter dated 31.03.2014 which stated that the return already filed be treated as return in response to notice under Section 153-A is adequate compliance of the requirement of law. The reliance is placed upon the judgment titled as G.N.Mohan Raju vs. ITO (the judgment dt.10.10.2014 in ITA NO.242-243/Bang./2013, Anand Kumar Sharma vs. ACIT (1992) 198 ITR 121). It is further stated that in the present case, there are sufficient circumstances, which prevents the assessee from filing the return within due time; firstly, the Department has conducted the search on the Orchid Group of cases as a whole; secondly, even, the post search inquiry was conducted on the group as a whole and thirdly, again no separate inquiry was conducted assessee- wise or year-wise. The post search inquiry was continued by the Investigation Wing till 07.01.2014 whereas as per the search manual, the same was to be concluded within 02 months and the entire material seized during search /gathered during post search inquiry was to be handed over to the Assessing Officer having jurisdiction, alongwith the appraisal report.
It is further stated that the complainant had committed a fundamental error of not appreciating the principle that an assessee cannot be expected to file its ITO vs Balkishan Saraf CC No.516168/2016 Page No.10 of 14 return in response to a notice under Section 153-A of the Act, without having in its possession the statements recorded during search and subsequent to search as well as the copies of all documents that were seized during search operations. Learned counsel for accused has also placed reliance upon the judgments titled as Lal Saraf vs State of Bihar (1999) 235 ITR 116, 118 (Pat.), K.Balan vs Deputy Commissioner of Income Tax (2018) 93 Taxmann.com 452 (Mad.), Vilayati Ram & Anr. vs State have (Criminal Misc. (M) No.410 of 1985 decided on 21.01.1987).
It is further stated that the Assessing Officer issued notices under Section 153A on the entire group of assessees to file the return in 84 cases within 15 days (whether this period is reasonable is a question to be considered). It is the abuse of process of law. Further, during post search inquiry, statements of various persons were recorded and various panchnamas were drawn. Before filing the return, assessee had to co-relate/consolidate/segregate/aggregate the income person-wise/ year-wise as the opportunity is given to the assessee to file the return disclosing undisclosed income so as to minimize the penalty to be imposed under Section 271AAB, if any. Accordingly, assessee vide letter dated 11.11.2013 requested the Assessing Oficer to provide copy of documents seized, copy of statement recorded during search / post search and to extend the time provided to file the return and to provide reasonable time to compile and file the return after providing the material.
It is further stated that the reminder was also sent by the assessee vide letter dt.20.02.2014 in response to which the department vide letter dated 24.02.2014 directed the assessee to get the copies of the relevant documents. The entire material was given by the Assessing Officer to the Assessee till 09.12.2014. Though the Assessee filed the return on 31.03.2014, it is also stated that Section 153-A prescribing the due date has been left to the discretion of the Assessing Officer. The such discretion must be exercised keeping in view the natural justice and not to exercise it arbitrarily. It is also stated that the deliberately very short ITO vs Balkishan Saraf CC No.516168/2016 Page No.11 of 14 time was given to file the return. The department is hellbound to launch the prosecution against the assessee. It can be easily understood that only 15 days time was allowed for filing of 84 returns and that too the department has failed to provide the complete list of documents/material seized during the search. It is also stated that after the insertion of Section 278-E, it is to be clarified that burden to prove that there was no mental state has been shifted from Department to the Assessee, but at the same time the person can be punished only when the offence is committed willfully.
Here, it is the case that Assessee immediately after the search wanted the relevant documents/paper/panchanamas for filing of revised return from the department. It is also stated that failure to file the return in time must be cogent and reliable evidence and must also be wilfull which is not so in the present case.
13. No, doubt The quitessence of the offence under Section 276 CC of the Income Tax Act, 1961, lies in the willfulness of delay in filing return as observed in UOI vs. Bhanecha Machinery and other (2010) 320 ITR 263 (MP). With respect to present case, let us first of all understand Section 276CC of Income Tax Act, 1961, which is read as under ;
[276CC. Failure to furnish returns of income. - If a person willfully fails to furnish in due [the return of fringe benefits which he is required to furnish under sub-section (1) of section 115WDE or by notice given under sub-section (2) of the said section or section 115WH or] time the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under [clause (i) of sub-section (1) of section 142] or [section 148 or section 153A], he shall be punishable,-
(i)in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and ITO vs Balkishan Saraf CC No.516168/2016 Page No.12 of 14 with fine;
(ii)in any other case, with imprisonment for a term which shall not be less than three months but which may extend to three years and with fine......
14. Search and Seizure operations under Section 132 of the Income Tax Act, 1961 were conducted in respect of M/s Orchid Infrastructures and Developers Private Limited. This included the search in the premises occupied by the accused persons. Thereafter, a common notice dated 24.10.2013 under Section 153A of the Income Tax Act, 1961 was issued qua accused persons calling upon them to furnish returns as found mentioned in that notice, within the period of sixteen days of the service of said notice. Thereafter, a show-cause notice dated 23.02.2015 was issued by the Principal Commissioner of Income Tax requiring from the assessee that why returns for relevant assessment years were not filed by them within the time. Accused persons responded to the said notice and stated that on earlier dates, that is even before the issuance of aforementioned show-cause notice, by the department, accused had requested for giving the requisite material seized during search. Moreover, it was also clarified that return filed earlier be accepted and treated in response of notice under Section 153A of the Act. The oral contentions as well as written submissions of the accused detailing the short span of time for filing fresh return in compliance of Section 153A of the Act and that there was no willful default on it's front as there was deficiency of documents, raised, which was objected to by the complainant with request to treat them as dilly delaying tactics.
15. It is relevant to observe that it is an admitted case that the copies of all documents, which were seized during the search and seizure operations, were not provided to the accused. Accused, no doubt has sent various letters asking for supply of deficit documents. During the course of defence evidence, defence ITO vs Balkishan Saraf CC No.516168/2016 Page No.13 of 14 witnesses had admitted the filing of letter dated 22.04.2013 by the accused alongwith detailed annexures regarding the deficit documents. It is an admitted fact that post search proceedings were also taken up by the complainant. Panchnamas were prepared and accused had made several written requests for supplying the copies of the statements as well as of seized material. Accused persons kept on raising the demand for supply of deficit documents at all the relevant stages of the case. Reliance is also placed upon the judgments titled as Lal Saraf vs. State of Bihar (1999) 235 ITR 116 (Patna), K.Balan vs. Deputy Commissioner of Income Tax, Central Circle-II(2), Chennai (2018) 93 taxmann.com 452 (Madras) and Assistant Commissioner of Income vs. V.K.Gupta Crl. L.P.263/2017 & Crl. M.A. No.7410/2017.
16. Now, in the totality of the circumstances, when accused is time & again raising the issue of deficit documents before the department, it is safe to accept that the accused is successful in rebutting the presumption of culpable mental state on it's part. The returns for the relevant assessment year had already been filed in due course. The accused was called through fresh notice by the department to once again file the return pursuant to the allegedly incriminating material seized during the search and seizure operation. Plainly, in the circumstances, it would be necessary for the accused to examine all the material documents seized during the search and seizure operations before filing the fresh return. Accordingly, accused is acquitted for the offence punishable u/s 276 CC of the Income Tax Act, 1961.
Compliance of Section 437-A Cr.P.C. is made in the order-sheet.
Announced in open Court (MANU VEDWAN )
on 22nd February, 2022 ACMM(Special Acts) CENTRAL
TIS HAZARI COURTS DELHI
ITO vs Balkishan Saraf CC No.516168/2016 Page No.14 of 14