Delhi District Court
Ito vs M/S Kohinoor Service Ltd. on 23 July, 2012
IN THE COURT OF SH. GORAKH NATH PANDEY,
ADDL CHIEF METROPOLITAN MAGISTRATE (Spl. Acts) CENTRAL
TIS HAZARI COURTS, DELHI
ITO vs M/s Kohinoor Service Ltd.
U/s 276CC of Income Tax Act
JUDGEMENT CC No.126/4
(a)Serial no. of the case : 02401R0034551999
(b)Date of commission of offence : Assessment year 199293
(c)Name of complainant : R.K. Choubey
Deputy Commissioner of Income Tax
Company Circle 25(5), Darya Ganj,
New Delhi.
(d)Name, parentage, residence: 1) M/s Kohinoor Service Ltd.,
4675/A21, Ansari Road,
Darya Ganj, New Delhi.
2) Rakesh Kumar Govil,
3) Vijay Kumar Govil both
Director and Principal Officer of
Accused no.1.
(e)Offence complained of/ proved : U/s 276CC of Income Tax Act
(f)Plea of accused : Pleaded not guilty
(g)Final order : Acquitted
(h)Date of such order : 23.07.12
Date of Institution of complaint: 31.03.99
Date of Reservation of Judgment : 18.07.12
Date of Pronouncement of Judgment : 23.07.12
Brief statement of the reasons for the decision:
1.Sh. R.K. Choubey, Deputy Commissioner of Income Tax filed a complaint u/s 276CC of the Income Tax Act against the aforesaid accused persons stating therein, that for the assessment year 199293, the accused no.1 was under
ITO vs Kohinoor Service Ltd. 1 of 12 obligation to file the duly signed and verified return of income along with profit and loss account and balance sheet on or before 31.12.92 as per the provisions of Section 139(1) of the I.T. Act. As contended, the return was filed on 17.06.93 i.e. after 5 months and 16 day, declaring the income of Rs.
2,50,460/ and the return was duly signed and verified by accused no.3 Vijay Kumar Govil. The return was processed vide intimation dated 26.08.93 creating a demand of Rs.14,210/. As contended, the tax liability of the accused company after giving credit to the advance tax paid and TDS comes to Rs.1,28,887 + interest. It is alleged that accused committed default u/s 139(1) of the Act and thus rendered themselves liable for the prosecution u/s 276CC of the Income tax Act, as the return was filed after the expiry of the assessment year and the tax liability was also more than Rs.3000/. It is further alleged that in response to the letter, the accused have stated that the return could not be filed due to the shortage of funds, but the explanation given by the accused was not reasonable and tenable in law as such, the default is willful.
2. The instant complaint was filed on 31.03.99. The accused was summoned for the offence u/s 276CC of the IT Act for the assessment year 199293. The complainant examined himself as PW1 and Sh. SP Singh, the then ACIT as PW2. After precharge evidence, charge was framed against the accused no.1 to 3 for the offence u/s 276CC of the Act on 10.11.2000 to which they pleaded not guilty and claimed trial. The case was thereafter fixed for prosecution ITO vs Kohinoor Service Ltd. 2 of 12 evidence.
3. In order to substantiate the allegations, complainant/PW1 and Sh. SP Singh/ PW2 was examined in post charge evidence. The complainant/PW1 reiterated the facts of the complaint and deposed that the accused failed to file its return of income for the Assessment Year 199293 in time and the tax demand was more than Rs.3000/. The witness further deposed that the return of income was filed on 17.06.93 which was to be filed on or before 31.12.92. The witness also proved on record the sanction to launch present prosecution Ex. PW1/1 and list of witnesses as Ex. PW1/2.
PW2 also reiterated the facts as deposed by PW1 deposing that the assessee did not file the return of income u/s 139(1) of the Act as required and the letter to file the return was issued dated 25.01.93 Ex. PW2/1. The witness deposed that the assessee did not file the return even after issuance of letter and thereafter notice u/s 142(1) of the Act was issued dated 06.02.93 Ex. PW2/2. The witness further deposed that the assesse was to file the return on or before 15.02.93 but the same was not filed. The witness also proved the letter Ex. PW2/3 i.e. reply of the accused dated 12.02.93 mentioning the explanation for not furnishing the return which was stated to be found unsatisfactory. Income tax return was proved as Ex.PW2/4 and the demand is Ex. PW2/5. PW2 again deposed that return of income was filed after closing of the assessment year only. The PE was thereafter closed.
4. Accused no.1 was being represented through accused no.2 Rakesh Kumar ITO vs Kohinoor Service Ltd. 3 of 12 Govil. Statement of all the accused was recorded u/s 313 Cr.P.C. read with section 281 Cr.P.C. In their statements accused no.2 and 3 admitted they are/were the director and persons responsible for the acts of accused no.1. Accused further admitted that there was delay in filing the return of income but they stated that there was no willful default. They further stated that at the relevant time accused was having some money in its account but the money was not sufficient to pay the tax liability, hence, there was delay in filing the return of income.
5. Accused no.2 examined himself as DW1. In support of claim and contentions, accused relied upon certified copy of bank statement mark 'A' and stated that due to paucity of funds return was not filed within time. Accused further stated that the cash in hand with the accused company deposited in the bank account was Rs.11,000/ approximately which was not sufficient to meet the tax liability.
6. I have heard the final arguments on behalf of both the parties and gone through the record the relevant records. I have also considered the relevant provisions of the Income Tax Act and written arguments filed on behalf of accused. The accused has relied upon judgments reported as "2001 VII AD (Delhi) 900, [2002] 253 ITR 551 (Delhi) titled as Sheela Gupta vs Inspecting Assistant Commissioner and Ors, 137 (2007) Delhi Law Times 608" in support of claim and contentions. It is argued by the learned counsel for the complainant that the PW1 has proved the case against the accused ITO vs Kohinoor Service Ltd. 4 of 12 and therefore, prayed that accused be punished in accordance with law.
7. It is necessary and relevant to mention the relevant provisions of section 276CC which is reproduced as below for reference: [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 subsection (1) of section 115WDE or by notice given under subsection (2) of the said section or section 115WH or] time the return of income which he is required to furnish under subsection (1) of section 139 or by notice given under [clause (i) of subsection (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, which rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and 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:
Provided that a person shall not be proceeded against this section for failure to furnish in due time [return of fringe benefits under subsection (1) of section 115 WD or return of income under subsection (1) of section 139] i. for any assessment year commencing prior to the 1st day of April, 1975;
or ii. for any assessment year commencing on or after the 1st day of April, 1975, if
(a) the return is furnished by him before the expiry of the assessment year; or
(b) the tax payable by him on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source, does not exceed three thousand rupees.]
8. Present complaint was filed by the complainant u/s 276CC for not filing the return of income for the assessment year 199293 within the stipulated period. In view of section 139(1) of the Act, every person, if his total income during the previous year exceeds the maximum amount which is not chargeable to incometax, is bound to furnish a return of his income in the prescribed form ITO vs Kohinoor Service Ltd. 5 of 12 and verified in the prescribed manner before the expiry of four months from the end of the previous year or before the 30th day of June of the assessment year which ever is later. Admittedly, in this case the accused has not filed the return of income in time. The return of income of the accused no.1 was due to be filed by 31.12.92. Late filing of return is not disputed at all. In their statement recorded u/s 313 Cr.P.C as well as in his defence evidence accused admitted that there is delay in filing return of income and and explained the reasons for late filing of return on income that due to paucity of funds return was not filed within time. The PW2 has deposed that as the accused did not file the return within time u/s 139(1) of the I.T. Act, letter Ex. PW2/1 dated 25.01.93 was issued but of no avail. Again notice u/s 142(1) of the Act was issued to the accused on 06.02.93 Ex. PW2/2 but the return was not filed. Rather reply Ex. PW2/3 was received dated 12.02.93 which was found unsatisfactory. The late file of return of the accused was processed u/s 143(1) of the I.T. Act. vide demand Ex. PW2/5. The testimony of the PW2 remained uncontroverted.
9. Learned counsel for the accused vehemently argued that the present complaint is not maintainable as the section 276CC of the Act is not attracted in this case. Admittedly, the assessment was processed u/s 143(1)(a) of the Act and the assessment was not framed u/s 143(3) or 144 of the Act as required u/s 276CC of the Act. To prosecute any person u/s 276CC of the Act, there must be regular assessment as defined u/s 2(40) of the Act and assessment is required to be made under sub section 3 of section 143 or 144. In this case the assessment was never framed u/s 143(3) or 144 and ITO vs Kohinoor Service Ltd. 6 of 12 admittedly same was done u/s 143(1)(a) of the Act which pertains to arithmetical error in the return or an incorrect claim, if any.
10.The definition of Regular Assessment is contained in section 2 (40) of the Act and reproduced below: "Regular Assessment means the assessment made under [sub section (3) of section 143] or 144".
11.Section 143 of the Act contains the provisions regarding the assessment of the Income Tax Return filed by the assessee as mentioned: [143. Assessment. [(1) Where a return has been made under section 139, or in response to a notice under subsection (1) of section 142, such return shall be processed in the following manner, namely:
(a) the total income or loss shall be computed after making the following adjustments, namely:
(i) any arithmetical error in the return; or
(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;
(b) the tax and interest, if any, shall be computed on the basis of the total income computed under clause (a);
(c) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax and interest, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self assessment and any amount paid otherwise by way of tax or interest;
(d) an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to the assessee under clause (c); and
(e) the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee:
ITO vs Kohinoor Service Ltd. 7 of 12 Provided that an intimation shall also be sent to the assessee in a case where the loss declared in the return by the assessee is adjusted but no tax or interest is payable by, or no refund is due to, him:
Provided further that no intimation under this subsection shall be sent after the expiry of one year from the end of the financial year in which the return is made.
Explanation. For the purpose of of this subsection,
(a) "an incorrect claim apparent from any information in the return"
shall mean a claim, on the basis of an entry, in the return, i. of an item, which is inconsistent with another entry of the same or some other item in such return;
ii. in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or iii. in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction;
(b) the acknowledgment of the return shall be deemed to be the intimation in a case where no sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been made under clause(a).
[(2) Where a return has been furnished under section 139, or in response to a notice under subsection (1) of section 142, the Assessing Officer shall, i. where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely in support of such claim:
[Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003;] ii. notwithstanding anything contained in clause (i), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessee ITO vs Kohinoor Service Ltd. 8 of 12 a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return:
[Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.] [(3) On the day specified in the notice, i. issued under clause (i) of subsection (2), or as soon afterwards as may be, after hearing such evidence and after taking into account may be, after hearing such evidence and after taking into account such particulars as the assessee may produce, the Assessing Officer shall, by an order in writing, allow or reject the claim or claims specified in such notice and make an assessment determining the total income or loss accordingly, and determine the sum payable by the assessee on the basis of such assessment;
ii. issued under clause (ii) of subsection (2), or as soon afterwords as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment:] [(4) Where a regular assessment under subsection (3) of this section or section 144 is made,
(a) any tax or interest paid by the assessee under subsection (1) shall be deemed to have been paid towards such regular assessment;
(b) if no refund is due on regular assessment or the amount refunded under subsection (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and he provisions of this Act shall apply accordingly.
12. Section 144 relevant for the decision of this case deals with: ITO vs Kohinoor Service Ltd. 9 of 12
144. Best Judgment assessment. [1] If any person
(a) fails to make the return required [under subsection (1) of section 139] and has not made a return or a revised return under sub section (4) or subsection (5) of that section, or
(b) fails to comply with all the terms of a notice issued under sub section (1) of section 142 [or fails to comply with a direction issued under subsection (2A) of that section], or
(c) having made a return, fails to comply with all the terms of a notice issued under subsection (2) of section 143, the [Assessing Officer], after taking into account all relevant material which the [Assessing Officer] has gathered, [shall, after giving the assessee an opportunity of being heard, make the assessment] of the total income or loss to the best of his judgment and determine the sum payable by the assessee [***] on the basis of such assessment:
[Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment:
Provided further that it shall not be necessary to give such opportunity in a case where a notice under subsection (1) of section 142 has been issued prior to the making of an assessment under this section.]
13.In view of the aforesaid legal provisions mentioned above, it is clear that willful failure to furnish the returns u/s 276CC required to be furnished, shall be punishable only if the tax payable by him on the total income determined on regular assessment as reduced by advance tax, if any, paid, and any tax deducted at source, does not exceed Rs.3000/. Admittedly in this case the regular assessment as envisaged in section 2 (40) of the Act was never conducted nor any proceedings in this regard was done by the authorities.
Therefore, the accused by no stretch of imagination can be convicted and held liable for the offence u/s 276CC of the Act. In this case the assessee was ITO vs Kohinoor Service Ltd. 10 of 12 never assessed u/s 143 or 144 of the Income Tax Act and notice was issued only u/s 143(1) of the I.T. Act. Section 276CC therefore, not attracted. No regular assessment was made by the complainant in this case as required in view of section 276 CC of the Act.
14.Learned defence counsel argued that there is violation of natural justice in the present case as no show cause notice was issued by the complainant to the accused before filing of the present complaint giving opportunity of personal hearing. Learned standing counsel for complainant, on the other hand argued that the notice u/s 142(1) of the Act was issued to the accused and absence of show cause notice to the accused is not fatal to the prosecution. It is also argued that issuance of show cause notice is not required before prosecution. In my considered view, the accused should have been granted opportunity to explain his defence before prosecution as held in: "2001 VII AD (Delhi) 900"
"...Even if grant of an opportunity is not specifically provided for it has to be read into the unoccupied interstices and unless specifically excluded principles of natural justice have to be applied. Even if a statute is silent and there are no positive words in the Act or Rules spelling out the need to hear the party whose rights and interests are likely to be affected the requirement to follow the fair procedure before taking a decision must be read into the statute, unless the statute provides otherwise."
15.Learned counsel for accused further argued that no penalty was imposed for the relevant year on the accused for any such default except the penalty u/s 271(i)(b) of the Act, was dropped by the competent authority vide order dated ITO vs Kohinoor Service Ltd. 11 of 12 27.08.93, hence present prosecution is not maintainable. This argument has substance. As held in: Sheela Gupta vs Inspection Assistant Commissioner and Ors. In the instant case, the petitioner was alleged to have abetted in filing of a false return/verification - It was pleaded that prosecution under Section 276C, 277 and 278 of the Income Tax Act, 1961, would not be maintainable on account of absence of substratum to complaint - In view of the fact, it was ruled that the matter would be covered by the decision in Didwania case - Accordingly, the complaint was quashed under Article 226 of the Constitution of India.
16.Keeping in view the facts and circumstances of the case and aforesaid discussions, this court is of the considered opinion that the complainant has failed to prove the case against the accused. The present complaint is not maintainable u/s 276CC of the I.T. Act. The complaint is, therefore, dismissed. Accused no.1 to 3 are acquitted for the offence punishable u/s 276CC of the Income Tax Act.
(GORAKH NATH PANDEY) ACMM(SPECIAL ACTS) CENTRAL TIS HAZARI COURTS DELHI Announced in open court on 23.07.12 ITO vs Kohinoor Service Ltd. 12 of 12