Punjab-Haryana High Court
Income-Tax Officer vs Haryana Cement Sales Corporation And ... on 28 April, 1992
Equivalent citations: [1993]202ITR849(P&H)
JUDGMENT V.K. Bali, J.
1. Ved Parkash Mittal and Sajjan Kumar Mittal, partners of Messrs. Haryana Cement Sales Corporation, Bhagat Mandi, Karnal, were tried under Sections 276C(1) and 277 of the income-tax Act, 1961, as also under Sections 193 and 196 of the Indian Penal Code. The Chief Judicial Magistrate, Karnal, who conducted the trial returned a finding of acquittal, vide his orders dated March 23, 1987, and it is against this judgment that the Income-tax Officer has preferred the instant appeal.
2. Broadly, the allegations against the accused as spelled out from the complaint lodged by the Income-tax Officer were that they had sold 7,525 bags of "Bardana" (gunny bags) to Messrs. Sushil Trading Company, a sister concern of the accused, for Rs. 10,158.75 on March 16, 1979, which were purchased by them on March 12, 1979, for Rs. 17,683.75 and in this process, they had shown a loss of Rs. 7,525. The other allegation against the accused was that they had purchased 1,591 gunny bags from Messrs. Sushil Trading Company, Karnal, on March 6, 1979, for Rs. 8,352.75 but no entry in respect of the same was made in the account books. In the manner aforesaid, the accused had made false account books and had evaded payment of tax. The appellant endeavoured to prove the offence against the accused on the strength of oral and documentary evidence.
3. P. W.-1, Bishan Devi, was examined to prove that the income-tax return of the accused was entered at Serial No. 2338. Anil Kumar, P. W.-2, had only produced in court some record relating to the case. Shri R.D. Gupta, P. W.-3, who was posted at the relevant time as the Income-tax Officer was also examined to prove that he had processed the case of the firm of which the accused are partners and passed various orders. Shri R.K. Bhiana P. W.-4, was examined to prove the allegations of the prosecution as have been detailed above. The documentary evidence consisted of return filed by the accused, profit and loss statement maintained by the accused and the various orders passed by the authorities under the Income-tax Act, 1961.
4. Besides taking general grounds, all that has been stated in the memorandum of appeal is that the accused-respondents had purchased 7,525 bags of "Bardana" (gunny bags) for Rs. 17,683.75 on March 12, 1979, from Messrs. Guru Ram Dass Rice Company, Karnal, and the said bags were shown to have been sold to Messrs. Sushil Trading Company, a sister concern of the accused, for Rs. 10,158.75 thus incurring a loss of Rs. 7,525, and that the accused-respondents had evaded payment of tax of Rs. 7,525 by creating a bogus transaction and that from the evidence on record, it was clearly established that Messrs. Sushil Trading Company was the sister concern of the accused-respondents as also the accused-respondents had purchased 1,591 bags of "Bardana" for Rs. 8,352.75 on March 6, 1979, from Messrs. Sushil Trading Company but no entry was made regarding the purchase of said bags in the account books of the accused and, thus, the accused had made false account books and had tried to evade payment of tax.
5. After going through the records of the case, as also the judgment of acquittal recorded by the Chief Judicial Magistrate, we find no substance in this appeal. In so far as the first allegation of the complainant that the accused had sold 7,525 bags of "Bardana" to Messrs. Sushil Trading Company, Karnal, a sister concern of the accused, is concerned, it shall be seen that the explanation furnished by the accused is that the gunny bags purchased by them were found to be defective and they had sold the same at a loss. This plea was taken by the accused not only before the court in their statements recorded under Section 313 of the Code of Criminal Procedure but also before the Income-tax Officer. The relevant entry shows that the accused had purchased 7,525 bags on March 12, 1979, at Rs. 235 per hundred bags and they had sold the same on March 16, 1979, at Rs. 135 per hundred bags. No evidence but for the bald statements of the prosecution witnesses have been brought on the record to suggest that Messrs. Sushil Trading Company was the sister concern of the accused. R.D. Gupta, P. W.-4, stated in his cross-examination that he had not seen the record of Messrs. Sushil Trading Company to ascertain the rate of purchase of gunny bags by them because Messrs. Sushil Trading Company was the sister concern of the accused. This would be too insignificant an evidence to prove the allegation of the appellant that Messrs. Sushil Trading Company was the sister concern of the accused and once that finding cannot be returned against the accused, the allegation of evading tax on the amount of Rs. 7,525 has to fail. The mere fact that the accused had sold gunny bags at a loss of Rs. 1 per bag to Messrs. Sushil Trading Company on March 16, 1979, would not be enough to hold that it was a case of bogus transaction entered into by the accused with a view to show loss. On the other hand, it has been established on the records that the firm represented by the accused had been purchasing gunny bags from Messrs. Sushil Trading Company, Karnal, from which it is amply made out that the accused firm and Messrs. Sushil Trading Company had business dealings. It has also come on the records of the case that the gunny bags purchased by the firm represented by the accused and later sold to Messrs. Sushil Trading Company were in a damaged condition.
6. In so far as the second and last allegation against the accused is concerned, the same is with regard to purchase of 1,591 gunny bags from Messrs. Sushil Trading Company on March 6, 1979, for a sum of Rs. 8,352.75 and no entry having been made in respect of the same in the account books. It is also the allegation of the prosecution that the accused had shown sale of gunny bags more than the quantity in stock as entered in the account books. On December 25, 1978, 5,000 gunny bags were sold by the accused as the same number of bags were found in the stock of the accused. An application for rectification was made by the accused which was accepted by the Income-tax Officer vide his order dated December 26, 1983. Once the Income-tax Officer had himself allowed rectification of a clerical mistake, no case of deliberate concealment to evade income-tax can ever be spelled out. The plea taken by the accused is that they have been borrowing some bags from Messrs, Sushil Trading Company on different dates and selling the same to the customers and that the bags so borrowed were purchased afterwards and an entry to that effect was made in the account books. 1,591 bags, sale of which was detected by the complainant on different dates, were purchased by the accused on March 6, 1979, for Rs. 8,352.75 from Messrs. Sushil Trading Company, Karnal. From the records of the case, it is clear that the accused had sold 1,591 bags on different dates to different customers by borrowing the same from Sushil Trading Company and they had made payment of the said bags to Messrs. Sushil Trading Company on March 6, 1979. No concealment of income can be spelled out from the aforesaid proved facts. The sale and purchase transactions had taken place during the year 1979-80. P. W.-3, R.D. Gupta, has admitted in his cross-examination that during the assessment year 1979-80, according to the account books, the accused had purchased 95,816 bags for Rs. 4,45,286.60 and had sold the same for Rs. 4,59,938.40. It is, thus, clear that the accused had sold the same number of bags which had been purchased by them during the relevant year. From the overall facts that had come on the records of the case, the learned Magistrate after appraisal of the entire evidence came to a correct conclusion. We find no ground whatsoever to interfere with the order of acquittal recorded by the Chief Judicial Magistrate and, finding no force in this appeal, dismiss the same.