Punjab-Haryana High Court
Jaswant Rai Mittal And Co. And Ors. vs Income-Tax Officer And Ors. on 11 September, 1991
Equivalent citations: [1992]196ITR414(P&H)
JUDGMENT G.S. Chahal, J.
1. Jaswant Rai Mittal & Co., which is a partnership firm and has petitioners Nos. 2 to 5 and respondents Nos. 2 to 4 as its partners, has moved this criminal miscellaneous petition under Section 482, Criminal Procedure Code, for setting aside the order of the Additional Sessions Judge dated April 2, 1990, annexure P-9, and for quashing of complaint No. 21, dated February 16, 1985, under Sections 276C and 277 of the Income-tax Act, 1961, and under sections 193/196, IPC, pending in the court of the Chief Judicial Magistrate, Sangrur, against the petitioners and further proceedings.
2. The facts as gathered from the impugned complaint annexure P-5, may briefly be narrated :
Jaswant Rai Mittal & Co. is a partnership firm, consisting of Ashok Kumar, Ramesh Kumar, Bans Raj Garg, Jaswant Rai, Smt. Kaushalya Devi, Smt. Salochana Devi, Smt. Pushpa Devi and Smt. Santi Dcvi. For the assessment year 1977-78, in the case of the firm, Jaswant Rai Mittal & Co., the accused, declared the income of the firm at Rs. 97,480 and, along with the return, they submitted copies of the trading account and profit and loss account, balance-sheet and capital account of the partners. At page 2 of the return, the following declaration was filed :
"I, Jaswant Rai, S/o Sh. Lal Chand, solemnly declare that to the best of my knowledge and belief, the information given in this return and the annexures and statements accompanying it is correct and complete and that the account of total income and other particulars shown therein are truly stated and relate to the previous year(s) relevant to the assessment year commencing on the first day of April, 1977. I further solemnly declare that during the said previous year,
(a) No other income accrued or arose to or was received by me ..... the person for and on whose behalf this return is furnished the person in, respect of whose total income I am assessable from any asset held in my name ..... The name of the person for and on whose behalf this return is furnished ..... the name of the person in respect of whose total income I am assessable or in the name of any other person.
(b) there is no other income, including income of any other person in respect of which, I am ..... the said person is chargeable to tax under the Income-tax Act, 1961.
I further declare that I am making this return in my capacity as partner and that I am competent to make this return and designation (sic).
Verify it . . .".
3. This verification was signed by Jaswant Rai, partner of the firm. The firm was a building contractor and, during the period from April 1, 1976, to March 31, 1977, it undertook a contract for the construction of MIG houses on behalf of the Punjab Housing Development Board, Chandigarh. A gross receipt of Rs. 9,78,946 was shown for the accounting period. However, on verification from the bank, it was found that the assessee had actually received a payment of Rs. 10,03,100 and thereby there was concealment of income of Rs. 24,154. The firm was called upon to explain and the firm claimed that a cheque for Rs. 19,370 issued by the said Board was not accounted for in the books of account since the same had been encashed in April, 1977. This plea was not accepted since the firm had been maintaining account books on mercantile basis. The firm could not give any explanation with respect to Rs. 4,784. With respect to this addition made by the Income-tax Officer, no appeal or revision was filed. Later on, a penalty of Rs. 15,920 was imposed on the firm under Section 271(1)(c) of the Income-tax Act for concealment of income. An appeal was preferred against this order of penalty, but was rejected by the Commissioner of Income-tax (Appeals), vide order dated July 23, 1984. On different occasions during the assessment proceedings and penalty proceedings for the year 1977-78, Jaswant Rai, partner of the firm, had been appearing before the Income-tax Officer. Rs. 24,154 was evidently and definitely the concealed income of the assessee on the basis of the facts stated earlier. The accused, knowingly and intentionally, made a false statement in verification and declaration in the return, delivered the accounts and statements which were knowingly false to evade payment of correct taxes and, thus, committed an offence under Sections 276C and 277 of the Act and, in view of the fact that he prepared the books and statements of account wherefrom they filed the same in support of the declared income during the assessment proceedings with the intention to conceal taxable income and the process relating thereto (sic). The accused had, thus, further committed an offence under sections 193/196, IPC.
4. The petitioners allege that the Income-tax Officer was not satisfied with the return filed and he had assessed his income at Rs. 10,03,100 and thus found a difference of Rs. 24,154 and called upon the petitioner-firm to explain that discrepancy. Petitioner No. 1 explained that a cheque for Rs. 19,370 was issued by the Board on March 31, 1977, and since it was got encashed in April, 1977, the same was not accounted for during the financial year ending on March 31, 1977. The Income-tax Officer was not satisfied with the explanation and, accordingly, he assessed and added the sum of Rs. 24,154 to the income of the petitioner-firm. The Income-tax Officer also imposed a penalty of Rs. 15,920. An appeal was preferred before the Commissioner of Income-tax (Appeals) who dismissed the same on July 23, 1984. The petitioner-firm then preferred a further appeal before the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh. The Tribunal, while basing its findings on the affidavit filed by the petitioner and other facts given by him, reached a conclusion that the assessee should not have been visited with any penalty and, accordingly, cancelled the penalty order, vide order dated March 21, 1986, and allowed the appeal. Immediately after the passing of the order, annexure P-2, a com plaint was instituted in the court of the Chief Judicial Magistrate, Sangrur.
5. The petitioners then moved an application dated September 10, 1986, annexure P-6, before the learned Chief Judicial Magistrate and argued that the penalty imposed having been cancelled by the Income-tax Tribunal, vide its order dated March 21, 1986, no prosecution under Sections 276C and 277 of the Income-tax Act, read with Sections 193 and 196, IPC, could be instituted. The complaint was dismissed by Shri D. S. Chhina, Chief Judicial Magistrate, Sangrur, vide his order dated March 21, 1987, annexure P-8. On revision, this order was set aside by Shri Dalbara Singh, Additional Sessions Judge, Sangrur, vide his order dated April 2, 1990, annexure P-9, who remanded the case while holding that the order of the Tribunal was not conclusive proof of the fact that there was no concealment and that the observations of the Tribunal with regard to verification and veracity of the affidavit, the respondent-Income-tax Officer could verify the veracity of the affidavit and thereafter take action for filing a wrong affidavit.
6. The plea taken by the petitioner that the entire proceedings of adding the income had been set aside and thus the conclusion that there was no concealment of income on the part of the petitioner to the tune of Rs. 24,154 cannot be accepted. The order of the Tribunal only set aside the penalty clause. The relevant observations of the Tribunal may be noted as under :
". . . We, however, on the strength of the said affidavit and admission of the assessee that he got the said cheque after March 31, 1977, and the photostat copy of payment of memorandum and two reconciliation statements, one coming to total payment of Rs. 9,61,794, shown by the assessee and the chief engineer, we are of the view that assessee1` should not have been visited with any penalty especially when the executive engineer himself was a gazetted officer and was a wing of the PWD, the assessee could not be subjected to any penalty. However, the Revenue shall be at liberty to verify the veracity of the said calculations and papers in the form of affidavit and photostat certificate and signatures and in case the same are found to be false, the doors for taking action against the assessee are not closed."
7. The affidavit, referred to in this order, relates to the affidavit separately filed with respect to the amount of Rs. 19,370 having been received by a cheque dated March 31, 1977. It has, however, nothing to do with the verification made by the petitioner on the return itself. The respondent-authorities have not started prosecution on the basis of falsity of the affidavit given by the petitioner with respect to the discrepancy in the income when explanation was called for. It is, rather, on the basis of the false declaration given at the time of filing of the return. The Tribunal had, no doubt, set aside the order of penalty, but it did not set aside the order of addition of income, nor did it hold that, in fact, there was no discrepancy in the income, as calculated by the Income-tax Officer. The order, annexure P-8, is thus not a complete defence to the prosecution against the petitioner.
8. There is, however, one other aspect of the case to be considered in favour of the petitioners rather than the firm. Prosecution in respect of offences by companies is covered by Section 278B of the Act and the relevant portion when extracted reads :
"278B. (1) Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly :
Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence."
9. In the impugned complaint, annexure P-5, the allegations made are only against Jaswarit Rai, partner of the firm. In paragraph 7, it is stated that it was Jaswanl Rai who had signed the verification/declaration and in paragraph 9, it is stated that it was Jaswant Rai who had been appearing on different occasions in the assessment proceedings and penalty proceedings. With respect to the other partners, except for describing that they were partners of the firm, no allegations are made that they were in charge of, or responsible to, the firm for the conduct of its business. In a similar situation, in Puran Devi v. Z. S. Klar, ITO [1988] 169 ITR 608 (P & H), I. S. Tiwana J. quashed the proceedings against the partners against whom no such plea had been taken. I subscribe to the same view. There being no allegation against the petitioners Nos. 2 to 5 and respondents Nos. 2 and 4, the impugned complaint qua them cannot proceed and the complaint and order of the Additional Sessions Judge, anncxure P-9, qua them are hereby quashed. The prosecution shall, however, continue against Jaswant Rai Mitlal & Co. and its partner, Jaswant Rai. The criminal miscellaneous petition stands disposed of accordingly. '