Delhi District Court
Ratna Kumar vs Principal Director Of Income Tax ... on 7 February, 2018
1
IN THE COURT OF KOVAI VENUGOPAL, SPECIAL JUDGE,
P.C. ACT (CBI-09), CENTRAL, TIS HAZARI COURTS: DELHI
C.R No. 9/17 (329/17)
RATNA KUMAR
R/O 10, THE GREEN, RAJOKARI,
NEW DELHI-110038. ........REVISIONIST
VERSUS
PRINCIPAL DIRECTOR OF INCOME TAX (INVESTIGATION)-I,
DELHI
E-2, ARA CENTRE, JHANDEWALAN EXTENSION,
NEW DELHI-110055.
........RESPONDENT
Date of Institution :26.07.2017
Date of Arguments :08.01.2018
Date of Judgment :07.02.2018
JUDGMENT
1. The present Revision Petition u/s 397 Cr.P.C. has been filed by the Revisionist challenging the order dated 24.05.2017 passed by the court of Sh. Ajay Garg, Ld. ACMM (Spl. Acts), Central District, Tis Hazari Courts New Delhi in CC No. 515961/2016, whereby the Ld. ACMM put the matter for framing of charge against the accused person for 2 commission of offences under Section 277 read with Section 181 of the Indian Penal Code.
2. Brief facts necessary for the disposal of this Revision Petition as revealed from the Trial Court Record are as under:-
On 26.06.2015, the Respondent herein has filed a Complaint under Section 277 of the Income Tax Act 1961 and under Section 181 of the Indian Penal Code, whereby Respondent herein has alleged that the Revisionist herein has made false statement on oath to a public servant, in respect of her alleged investment of 25,000$ equivalent to Rs.11,21,750/- (approximately) in M/s. Ridgeway Consulting Ltd. incorporated in British Virgin Islands under the BVI Business Companies Act 2004.
The Respondent herein after filing the complaint, has filed an application for filing additional documents on 23.09.2015.
Vide order dated 01.10.2015, the Ld. Trial Court had summoned the Revisionist herein, who appeared before the Trial Court and was admitted to bail on 27.11.2015.
Thereafter, the matter was fixed for Pre-Charge Evidence.
CW-1 and CW-2 were examined during the Pre-Charge 3 Evidence. On 25.04.2017 after hearing the arguments on charge, the Trial Court has fixed the matter for clarification /order on point of charge for 24.05.2017 and vide order dated 24.05.2017, the Court was of the view that there was sufficient material available on record to frame charge against the accused as she has contravened the provisions of Section 277 of the Income Tax Act & Section 181 IPC.
3. Revisionist being aggrieved with the impugned order dated 24.05.2017 has challenged the order on various grounds as mentioned in the revision petition.
4. Reply filed by the Respondent. It is stated in the reply that the respondent received an information from the newspaper Indian Express that few Indians are having financial interests in foreign entities. On search of the website of www.icij.org., it was found that the petitioner is the Director in an offshore company namely Ridgeway Consulting Ltd.
registered in British Virgin Islands (hereinafter referred to as the BVI).
The respondent had checked the website of icij.org wherein such an information was available.
5. It is further stated in the reply that the respondent had sought 4 information from the concerned authorities of BVI, Tax authorities regarding the directorship of the petitioner in the said company registered in BVI. Vide letter dated 30.09.2014, the concerned authorities of BVI had supplied the relevant information like Memorandum of Association, Articles of Information and Certificate of Incorporation dated 06.10.2006, Register of Directors and Register of Shareholders stating that the petitioner was appointed as the Director of the company on 13.11.2006 giving her passport number and the current address of Delhi. It was also revealed that the petitioner along with her husband jointly holds 50000 shares in the said company and the value of each share is USD 1 dollar.
6. It is further stated in the reply that pursuant to the information received from BVI, the statement of the petitioner under Section 131 I. T. Act was recorded, wherein the documents received from BVI were confronted to the petitioner and was asked a specific question with regard to the directorship in any foreign entity, financial interest in any foreign entity and also with regard to the holding of any bank account in any foreign country, to which the petitioner blatantly denied.
7. I have heard the Ld. Counsel for the parties. I have also perused the file and the TCR.
5Arguments by the Ld. Counsel for the Revisionist /Accused.
8. It is argued by the Ld. Counsel for the Revisionist /accused that there has been no assessment made for the financial year 2006-2007 adding the investment in the hands of the petitioner as explained under Section 69A of the Income Tax Act 1961. Even if the statement made by the Revisionist /accused is assumed to be false, it has no consequence from the Income Tax point of view. There is no tax liability relating to the concerned assessment year and hence, the launching of prosecution in this case, is not sustainable. Reliance in this regard is placed on the Judgment of Hon'ble Supreme Court of India in the case of K. C. Builders Vs. Assistant Commissioner of Income Tax (2004) 135 Taxman 461 (SC).
9. It is further argued that Section 277 or Section 272 of the Income Tax Act, conditions prescribed therein are not met. For invoking the Section 277 of the Income Tax Act, there should be evasion of tax and if there is no evasion of tax, the provisions of the said section can not be invoked. In this case, the initiation of prosecution shall depend on the quantum of the tax evaded and the same can only be determined when an assessment is completed. Since no assessment is completed, the provisions of Section 277 of Income Tax Act can not be invoked and the 6 case of the Revisionist /accused for the assessment is barred by limitation. It is also argued that the documents supplied from Singapore Authorities were not shown to the witness and these documents do not find any reference in the statement recorded of the Revisionist /accused.
It is further argued that the respondent had failed to prove the authenticity of the electronic record as per the provisions of Section 65B of the Indian Evidence Act, which is a mandatory provision. It is also argued that the Revisionist /accused has never visited BVI and no company can be incorporated without visiting BVI and the documents received from the BVI authority does not contain any signature of the Revisionist /accused.
Arguments by the Ld. Counsel for the Respondent.
10. On the other hand, the Ld. Counsel for the Respondent argued that there is a presumption against the revisionist /accused regarding the presence of mental statue for the commission of the offence under Section 278E of the Income Tax Act. It is also argued that Revisionist /accused has not only made a false statement before the Income Tax Authorities but has also filed a false Income Tax Return by not disclosing his financial interest in foreign entity and also having a foreign bank account and has thus clearly committed the offence punishable under 7 Section 277 of the Income Tax Act read with Section 181 of I.P. C.
11. It is further argued by the Ld. Counsel for the Respondent that the petitioner had deliberately concealed the information from the Income Tax Authorities and made statement which she knew was false and not correct. It is also argued that the order passed by the Ld. Trial Court is a reasoned order and requires no interference.
Findings
12. It is the main contention of the Ld. Counsel for the Revisionist that in the absence of any Assessment Proceedings, Prosecution for the offence punishable under Section 277 of Income Tax Act can not be sustained. Before the Ld. ACMM, Ms. Raja Rajeshwari, ADIT (Investigation) examined herself as CW-1. In her chief examination, she has not stated that the Assessment Proceedings for the financial year 2006-2007 are initiated against the Revisionist. During her cross examination, specific question was put to her by the Ld. Counsel for the Revisionist/accused with regard to the Assessment Proceedings, her statement is reproduced as below:-
"Q. Whether any Assessment proceedings have been initiated or concluded for the financial year 2006-2007 in respect of the alleged investment made by the accused in his Case or any other 8 case?
Ans. Enquiries with respect to the alleged investments are under process."
13. It is clear from the above answer by CW-1 that Assessment Proceedings are not yet initiated for the financial year 2006-2007 in respect of the alleged investment made by the Revisionist/accused. Section 277 of the Income Tax Act is reproduced as under:-
"False Statement in verification, etc.
277. If a person makes a statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable -
(i) in a case where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds twenty-five 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 with fine;
(ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and with fine."
14. Bare perusal of the Section 277 of the Income Tax Act makes it clear that a person making a false statement which he either knows or believes to be false, or does not believe to be true in any verification under the Income Tax Act, is an offence which is punishable either in Clause (i) or Clause (ii) of the Section 277 of the Income Tax Act. A 9 person is punishable under Clause(i), if the amount of the tax which would have been evaded exceeds 25,00,000/- rupees and under Clause
(ii) in any other case. For the purpose of punishment, under Clause (i), there has to be tax assessment and consequent fixed tax liability, as the said Clause prescribes more severe punishment. In Clause (ii) of the Section, the wording "in any other case" implies that no such tax liability need to be fixed nor any specific amount of tax, which would have been evaded, is mentioned. From the wording of the Clause (ii) of the Section 277 of the Income Tax Act, mere making a false statement in any verification under the Income Tax Act is sufficient. Essentially offence under Section 277 of Income Tax Act is about making a false statement.
15. In K. T. M. S. Mohammed Vs. Union of India (1992) 65 Taxman 130, the Hon'ble Supreme Court of India held as follows:-
"Section 277 of the Income Tax Act in general seeks to penalize one who makes a false statement in order to avoid his tax liability. In the present case, the revenue has not come forward with the case that the money represents the income of the 3rd appellant liable to be taxed but on the other hand, it is the case of the Income Tax Officer that it is not the 3rd appellant's money at all. Moreover, a cursory reading of the penal clause proposes to impose punishment depending upon the quantum of tax sought to be evaded. Here no question of evading the tax will arise........"
16. In another case titled as K. C. Builders Vs. Assistant Commissioner of Income Tax, (2004) 135 Taxman 461 (SC), the Hon'ble Supreme Court of India has held as follows:-
10"22. "In the case of G.L. Didwania Vs. ITO (1995) Suppl. (2) SCC 724, the prosecution was levelled against the assessee for making false statement. The Assessing Authority held that the assessee had intentionally concealed his income derived from 'Y' company which belonged to him, initiating prosecution against him. The appellant filed the appeal against the assessment order and the Tribunal set aside the assessment holding that there was no material to hold that 'Y' company belonged to the assessee. The assessee thereupon filed a petition before the Magistrate to drop the criminal proceedings and the application before the High Court under Section 482 to quash the criminal proceedings which were dismissed. On appeal, this Court held that the whole question was whether the appellant made a false statement regarding the income which according to the assessing authority had escaped assessment and so far as this issued was concerned, the finding of the appellate Tribunal was conclusive and hence the prosecution cannot be sustained. Accordingly, this Court quashed the criminal proceedings and allowed the appeal filed by the assessee,
23. The above judgment squarely applies to the facts and circumstances of the case on hand. In this case also, similarly, the application was moved by the assessee before the Magistrate to drop the criminal proceedings, which were dismissed by the Magistrate and the High Court also on a petition led under Section 397 and 401 of the Code of Criminal 11 Procedure 1973 to revise the order of the Additional Chief Metropolitan Magistrate has also dismissed the same and refused to refer to the order passed by the competent Tribunal. As held by this Court, the High Court is not justified in dismissing the criminal revision vide its judgment ignoring the settled law as laid down by this Court that the finding of the Appellate Tribunal was conclusive and the prosecution cannot be sustained since the penalty after having been cancelled by the complainant following the Appellate Tribunal's order, no offence survives under the Income Tax Act and thus quashing of Prosecution is automatic.
24. In the instant case, the penalties levied under Section 271 (1) (c) were cancelled by the respondent by giving effect to the order of the Income Tax Appellate Tribunal in I.T. A. Nos. 3129-
3132. It is settled law that levy of penalties and prosecution under Section 276C are simultaneous. Hence, once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution under Section 276C is automatic."
17. In all the above cited cases filed by the Ld. Counsel for the Revisionist, the facts therein reveal that there was an Assessment Order/Tribunal Order which upheld the stand taken by the Assessees and further that there was no tax liability. The order of the Income Tax Officer in K. T. M. S. Mohammed Vs. Union of India (supra) and the order of the Appellate Tribunal in K. C. Builders Vs. Assistant Commissioner of Income Tax (supra) were held conclusive and 12 therefore prosecution could not be sustained. In the present case, there is no such order from the Tribunal in favour of the Revisionist /accused to support her contention.
18. In view of the clear wording in Section 277 of the Income Tax and further Clause (ii) of the Said Section, the argument that there can not be prosecution of the person in the absence of any Assessment Proceedings or fixed tax liability, is not sustainable.
19. It is further contended by the Ld. Counsel for the Revisionist /accused that documents supplied from the Singapore Authority were not shown to the Revisionist and therefore, the respondent can not prosecute the Revisionist on such documents which were not even shown to her. The respondent got the documents from the Singapore Authority after filing the complaint and at the time of the recording of the statement of the Revisionist, these documents were not available with the Respondent. The alleged offence is with regard to making a false statement which the petitioner either knows or believes to be false or does not believe to be true. When the petitioner was asked specifically she was supposed to answer the questions truthfully whether any document is shown or not shown to her. Therefore, not showing the documents received from Singapore Authorities at the time of the recording of the statement of the Revisionist, does not in any way preclude the authorities from launching the prosecution.
20. Another argument raised by the Ld. Counsel for the Revisionist that there is no compliance of Section 65B of the Indian Evidence Act. It is argued by the Ld. Counsel that the respondent had failed to prove the authenticity of the electronic records as per the Provisions of Section 13 65B of Indian Evidence Act, which is a mandatory provision.
21. The Ld. Counsel for the Revisionist has relied upon the judgment of Hon'ble Apex Court Anwar P. V. VS. P. K. Basheer & Ors. Civil Appeal No. 4226 of 2012 , wherein it is held as follows:-
"The evidence relating to electronic record, as noted herein before, being a special provision, the general law on secondary evidence under Section 63 read with Section 65 of the Evidence Act shall yield to the same. Generalia specialibus non derogant, special law will always prevail over the general law. It appears, the court omitted to take note of Sections 59 and 65A dealing with the admissibility of electronic record; the same is wholly governed by Sections 65A and 65B. To that extent, the statement of law on admissibility of secondary evidence pertaining to electronic record, as stated by this court in Navjot Sandhu case (supra), does not lay down the correct legal position. It requires to be overruled and we do so.
An electronic record by way of secondary evidence shall not be admitted in evidence unless the requirements under Section 65B are satisfied.
Thus, in the case of CD, VCD, Chip, etc., the same shall be accompanied by the certificate in terms of the Section 65B obtained at the time of taking the document, without which, the secondary evidence 14 pertaining to that electronic record, is inadmissible.
22. The above argument of the Ld. Counsel for the Revisionist, is essentially on the point of admissibility of the documents which is generally decided by the Court only in Course of trial. In a noted case titled as Kundan Singh Vs. The State, in Crl. A. No. 711/2014, the Hon'ble High Court of Delhi has extensively dealt with the procedure and production of the Certificate 65B of the Indian Evidence Act in course of evidence. It has been held by the Hon'ble High Court of Delhi as follows:-
41. Paragraph 21 quoted above records and notices that in State (NCT of Delhi) Vs. Navjot Sandhu alias Afzal Guru (2005) 11 SCC 600, a responsible officer had certified the document at the time of production itself and the signatures in the certificate were also identified and, therefore, there was compliance of Section 65B of the Evidence Act. In these circumstances, we do not accept the legal ratio in Ankur Chawla Vs. Central Bureau of Investigation, (Crl. M. C. No. 2455/12 & Crl. M. A. Nos. 8308 and 8318/2014 and Crl. Rev. P. 385/2012 decided on 20th November 2014 by the Delhi High Court) wherein it has been held that the Certificate under Section 65B must be issued when the computer output was formally filed in the court and Certificate under Section 65B cannot be produced when the evidence in form of electronic record is tendered in the court as evidence to be marked as an exhibit. The said certificate can be produced when the electronic record 15 is to be admitted and taken on record, i.e. when the prosecution, defence or a party to the civil litigation wants the electronic record to be marked as an exhibit and read in evidence."
23. It has been further held in Para no. 43 by the Hon'ble High Court of Delhi as follows:-
"Anwar P. V. (supra) partly overruled the earlier decision of the Supreme Court on the procedure to prove electronic record(s) in Navjot Sandhu(supra) holding that Section 65B is a specific provision relating to the admissibility of electronic record(s) and, therefore, production of a Certificate under Section 65B (4) is mandatory. Anwar P. V. (supra) does not state or hold that the said certificate can not be produced in exercise of powers of the trial court under Section 311 Cr. P. C. or, at the appellate state under Section 391 Cr. P.C. Evidence Act is a procedural law and in view of the pronouncement in Anwar P. V. (supra) partly overruling Navjot Sandhu (supra), the Prosecution may be entitled to invoke the afore mentioned provisions, when justified and required. Of course, it is open to the Court / Presiding Officer at that time to ascertain and verify whether the responsible officer could issue the said certificate and meet the requirements of Section 65B."16
24. Therefore, in view of the above dictum laid down by the Hon'ble High Court, the prosecution can file a certificate under Section 65B of the Indian Evidence Act at the time of trial also. The present case is only at the stage of framing of charge and for the purpose of framing of charge a grave suspicion of commission of offence based on the material filed by the complainant /prosecution is sufficient.
25. It has been held by the Supreme Court of India in Superintendent and Remembrance of the Legal Affairs West Bengal Vs. Anil Kumar, 1979 Supreme Court Cases (Crl.) 1038:-
"The standard of test, proof and judgment which is to be applied finally before finding the accused guilty or otherwise is not exactly to be applied at the stage of Section 227 or 228 of the Code of Criminal Procedure,1973. At this stage, even a very strong suspicion founded upon materials before the Magistrate which leads him to form a presumptive opinion as to the existence of the factual ingredients constituting the offence alleged may justify the framing of charges."
26. In State of Maharasthra Vs.Som Nath Thapa, AIR 1996, SC 1744, it is held by the Hon'ble Supreme Court that "If on the basis of the material on record, a court could come to the conclusion that commission of the offence is probable consequence, a case for framing of charge exits. To put it differently, if the court were to think that the accused might have committed the offence, it can frame the charge, though for conviction, the conclusion is required to 17 be that the accused has committed the offence. It is apparent that at the stage of framing of charge probative value of the materials on record cannot be gone into, the material brought on record by the prosecution has to be accepted as true at that stage."
27. In State of Himachal Pradesh Vs. Kishan Lal, AIR 1987, SC 773 (Para 10), it was held by Hon'ble Supreme Court that "all that is required at the stage of charge is to see whatever a prima facie case regarding the commission of certain offences is made out. The question whether the charges will eventually, stand proved or not can be determined only after evidence is recorded in the case."
28. It has been held by our own Hon'ble High Court in case Mathura Das & Others Vs. State, 2003 II AD (Cr.) DHC 437 that "The existence of a prima facie case may be found even on the basis of strong suspicion against an accused. The assessment, evaluation and weighing of the prosecution evidence in a criminal case at the final stage is on entirely different footing than it is at the stage of framing a charge. At the final stage if two views are possible one of which suggests that the accused may be innocent, then the view favourable for the accused has to be accepted whereas at the stage of framing of the charge, the view which is favourable to the prosecution, has to be accepted for the purpose of framing charge so that in the course of the trial, the prosecution may come out with its explanations in 18 regard to the draw backs and weaknesses, if any, being pointed out by an accused."
29. At the stage of framing of charge, probative value of the material brought on record by the prosecution has to be accepted as true and the Court is not to make a roving and fishing enquiry into the pros and cons of the matter and weigh the evidence as if it is conducting the trial. Even a very strong suspicion founded upon the materials before the court which leads him to form a presumptive opinion as to existence of factual ingredient constituting the offence should justify framing of charge and if two views are possible, the one which is favourable to the prosecution has to be accepted for the purpose of framing the charge.
30. In view of the reasons stated above, I do not find any infirmity or illegality in the impugned Order. The Revision Petition is dismissed.
31. The copy of this Judgment be sent to the Ld. Trial Court along with Trial Court Record.
32. The Revision file be consigned to Record Room.
ANNOUNCED IN THE OPEN COURT KOVAI Digitally signed by KOVAI VENUGOPAL ON 07.02.2018. VENUGOPAL Date: 2018.02.07 15:22:54 +0530 (KOVAI VENUGOPAL) SPECIAL JUDGE, PC ACT, CBI-09, CENTRAL DISTRICT, THC, DELHI.