Punjab-Haryana High Court
Income Tax Officer vs Kamra Trading Company And Ors. on 6 January, 2004
Equivalent citations: (2004)187CTR(P&H)536, [2004]267ITR170(P&H)
Author: K.C. Gupta
Bench: K.C. Gupta
JUDGMENT K.C. Gupta, J.
1. This appeal has been filed by ITO, Ward I, Abohar, against judgment dt. 14th Aug., 1997 passed by Chief Judicial Magistrate, Ferozepur, whereby M/s Kamra Trading Co., Abohar, and others were acquitted of the charge under Sections 276, 277 and 278B of the IT Act (for short, "the Act").
2. Briefly stated, the facts are that the appellant filed a complaint against M/s Kamra Trading Co. Abohar, through its partners, namely, Dewan Chand Kamra, Smt. Sangeeta Kamra, Smt. Parkash Wati (now dead) and Smt. Har Devi (now dead) under Sections 276(c), 277 r/w Section 278B of the Act for the asst. yr. 1986-87.
It was averred that Dewan Chand Kamra to the extent of 30 per cent, Smt. Sangeeta Kamra and Smt. Parkash Wati to the extent of 25 per cent each and Smt. Har Devi to the extent of 20 per cent were the partners of M/s Kamra Trading Co. Abohar, which is a registered firm.
3. It was further alleged that the said firm filed a return along with annexures, declaring the income of Rs. 1,28,050 on 12th Aug., 1986 and the verification was signed by Dewan Chand Kamra. During the course of assessment proceedings, ITO collected information regarding purchase of demand drafts by M/s Kamra Trading Co. from Central Bank of India, Abohar, in the name of self and its supplier (for payment to them) without entering the same in its account books, which are detailed as under:
Sr.No. Date of purchase of demand drafts D.D. No. Amount of draft Date on which the demand draft was actually entered in books
1.
15-3-1996 941685 50,000 4-8-1986
2. 22-3-1986 941764 15,000 2-4-1986
3. 25-3-1986 941802 20,000 1-4-1986
4. 25-3-1986 941803 20,000 27-3-1986
5. 25-3-1986 941804 20,000 3-4-1986
6. 25-3-1986 941805 50,000 4-8-1986 It was further averred that during the assessment proceedings, the statement of Dewan Chand, respondent (accused) was recorded. The books were got produced and impounded and the firm could not explain the purchase of aforesaid demand drafts and consequently, the addition of Rs. 1,75,000 was made in the declared income and assessment was completed at a net taxable income of Rs. 3,15,020 vide order dt. 30th Dec., 1987. Penalty proceedings under Section 271(1)(c) of the Act were initiated. The respondents preferred an appeal against the said order, which was dismissed by the CIT(A), Chandigarh, on 7th March, 1988.
4. The statutory show-cause notice was issued to the respondents to explain as to why penalty under Section 271(1)(c) of the Act be not imposed against them. After giving a reasonable opportunity of being heard, the penalty of Rs. one lakh was imposed by the ITO.
It was, therefore, prayed that since M/s Kamra Trading Co. and its partners had wilfully attempted to evade tax/penalty/interest, so, they had committed an offence punishable under Section 276(c) of the Act. The verification of the return filed by the respondents was also false, which is punishable under Section 277 of the Act and thus, all of them had committed an offence punishable under Sections 276(c) and 277 r/w Section 278B of the Act. Since Dewan Chand, respondent No. 2, was managing partner and the remaining respondents Nos. 3 to 5 were in charge and responsible for the firm for conducting the business of the firm in day-to day working, so, they were all liable.
The complaint was filed in the Court of Chief Judicial Magistrate, who, vide his order dt. 31st March, 1990, after finding sufficient grounds for proceedings against the respondents, summoned them under Sections 276(c), 277 r/w Section 278B of the Act.
5. During the pendency of the proceedings in the trial Court, Smt. Har Devi and Smt. Parkash Wati died and as such, their names were struck of from the array of respondents.
6. The appellants examined six witnesses in pre-charge evidence.
After the conclusion of pre-charge evidence and hearing counsel for the parties, the respondents were charged under Sections 276(c) and 277 r/w Section 278B of the Act vide order dt. 22nd Nov., 1994, to which they pleaded not guilty and claimed trial.
After framing of the charge, the witnesses examined in pre-charge evidence, were produced and further cross-examined by the respondents.
7. After closure of the prosecution evidence, statements of the respondents were recorded under Section 313, Cr.PC, wherein they denied the allegations of the complainant and pleaded false implication. Dewan Chand, respondent, further stated that he had preferred an appeal before the Tribunal against the orders dt. 30th Dec., 1987 and 7th March, 1988 and both the orders had been set aside and the Department had not given any final decision. Prior to 1987, he was a patient of high blood pressure and hypertension and further in 1987, he suffered a serious heart attack and about 3 years back, his hips were fractured and he got fitted artificial hips and unable to move properly. He further stated that artificial limbs in the left leg had also been fixed and the doctor had advised that operation for the third time could not be done.
8. Sangeeta Kamra also pleaded innocence and stated that she had no concern with day-to-day functioning of the firm. She further stated that the Department never issued her any notice, nor she filed any return and she had no knowledge about the dealings of the firm.
9. In defence, they examined DW1 Ramesh Lal, son of Jasraj, He stated that he knew Dewan Chand of M/s Kamra Trading Co. who was a heart patient and was not attending the shop for the last 11-12 years and due to illness, he had lost his memory and had received 2-3 fractures and was unable to move. He further stated that one of the fractures was of hip. To the same effect is the statement of DW-2 Surinder Kumar, son of Dewan Chand. He also stated that his wife Sangeeta was a partner in papers only and she knew nothing about the working of the shop. The respondents closed the defence evidence on 13th Aug., 1997.
10. After hearing learned PP for the State and the defence counsel, the Chief Judicial Magistrate, Ferozepur, vide his judgment dt. 14th Aug., ,1997, acquitted the respondents.
11. Aggrieved by the said judgment, the complainant has filed the* present appeal. Vide order dt. 16th July, 1998, the Division Bench of this Court granted leave to appeal and the appeal was admitted and the presence of the respondents was ordered to be secured through bailable warrants.
12. I have heard Dr. N.L. Sharda, counsel for the appellant, Mr. Gourav Chopra, counsel for the respondents and carefully gone through the record.
13. It is an admitted fact that Smt. Parkash Wati and Smt. Har Devi, who were partners of M/s Kamra Trading Co. Abohar, have died. The surviving partners are Dewan Chand Kamra and Smt. Sangeeta Kamra. Dewan Chand Kamra was the managing director of the company known as M/s Kamra Trading Co., Abohar, while Sangeeta Kamra is his daughter-in-law. There is no evidence on file that Smt. Sangeeta Kamra is connected with day-to-day working of the company. She had not signed the return filed for the asst. yr. 1986-87. There is no evidence on file that she had ever signed any document relating to the business of the company. Dewan Chand Kamra had admitted in his statement, Ex. PK, regarding the purchase of drafts. Otherwise also, the purchase of drafts is proved from the statement of PW-1 R.N. Swami, branch manager. He produced vouchers Exs. PA to PF and stated that through these vouchers, M/s Kamra Trading Co., Abohar, had purchased demand drafts of Rs. 50,000 on 15th March, 1986 bearing No. 941685, on 22nd March, 1986 another draft bearing No. 941764 of Rs. 15,000 and on 25th March, 1986 three drafts bearing Nos. 941802 to 941804 amounting to Rs. 20,000 each and another draft bearing No. 941805 dt. 25th March, 1986 of Rs. 50,000. He further stated that all the vouchers, Ecs. PA to PF contained the signatures of Dewan Chand, respondent and the said drafts were issued by Sh. M.L. Nagpal and Sh. K.L. Grover. He further stated that vouchers, Exs. PA and PB contained the signatures of Mohan Lal Nagpal and vouchers Exs. PC to PF contained the signatures of Sh. K.L. Grover. He further stated that Ex. PG was the photostat copy of the original information supplied and issued by their branch, confirming the purchase of the abovesaid drafts by M/s Kamra Trading Co., Abohar. As per admission made by Dewan Chand, he had purchased the drafts as mentioned in para 4 of the complaint but the entries regarding the purchase of these drafts did not exist in the books of the assessee and thus, he had wilfully concealed it and attempted to evade tax and introduced and utilised the unaccounted money not shown in the books.
14. PW-3 S.R. Kailey proved documents, Ecs. PQ and PR, i.e., report of income- tax and annexures attached with the same as Ecs. R-1 to R-11. Copy of the partnership deed is Ex. PP and PO is the copy of registration of the firm. Ex. PH is the letter through which information was collected from the bank regarding the purchase of drafts, which was supplied by the bank through letter, Ex.. PG. There is no evidence on the file that Dewan Chand, managing director of the company, had concealed the purchase of drafts at the behest of Sangeeta Kamra, who is admittedly proved to be a sleeping partner. No criminal act has been attributed to her. She is not connected with the day-to-day working of the company. She cannot be held liable for wilful attempt to evade tax under Section 276(c) of the Act and for false verification under Section 277 of the Act because she has not made any verification and has not signed any income-tax return. No presumption can be raised against her under Section 278E because there was no culpable mental state on the part of Sangeeta.
15. It was observed by the trial Court in para No. 14 of the judgment as under:
"All the documents relied upon by the prosecution have been proved on record by PW1 to PW6 beyond any doubt having been submitted by accused Dewan Chand and other orders passed by the Department in due process of law in ordinary course of business and every document has come from custody and I am of the considered view that accused Dewan Chand had filed wrong return which to his knowledge was false and he is certainly proved to have committed the offence for which he was charge-sheeted.
He was simply let off in view of his age as he was aged about more than 80 years.
16. Counsel for the appellant contended that the instructions and guidelines given to the IT Department relating to the prosecution of persons above a certain age could not override the specific provisions of the Act. Thus, he contended that the acquittal of Dewan Chand, respondent, on the ground that he was aged more than 80 years, was not tenable as the guidelines could not override the statute, i.e., the specific provisions of the Act. For this contention, he has placed reliance upon an authority of Madras High Court reported as Madura Chit & Investment (P) Ltd. and Anr. v. ITO (1994) 208 ITP 228 (Mad), which supported the above contention of the learned counsel for the appellant. He further contended that if there was evasion of income-tax by a company, then Act provided both substantive sentence as well as fine and since company was a juristic person, so, it could not be made to undergo imprisonment and only punishment of fine could be awarded to the company. For this contention, he placed reliance upon an authority of Hon'ble Supreme Court in Asstt. CIT and Ors. v. Velliappa Textiles Ltd. and Ors. (2003) (4) RCR (Criminal) 695, which supported the above contention of learned counsel. It has been observed by the Hon'ble apex Court in State of Haryana v. Brij Lal Mittal and Ors. 1998 (3) JT 584 at p. 588 that where an offence is committed by the company, then 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.
17. Since Smt. Sangeeta Kamra was not in charge and responsible to the company for the conduct of day-to-day business and was admittedly a sleeping partner, so, she is not liable and has been rightly acquitted by the trial Court. However, it is proved on file that Dewan Chand Kamra had wilfully filed wrong return for the asst. yr. 1986-87 and had made false verification, knowing it to be false. So, he being the managing director and also the person who had verified the false statement contained in the return, is liable along with the company M/s Kamra Trading Co. However, M/s Kamra Trading Co. is a juristic person and as such, cannot be committed to imprisonment, so, it is fined Rs. 5,000. However, Dewan Chand Kamra is found guilty and is convicted under Section 276(c) and Section 277 r/w Section 278B of the Act.
18. Now the next question to be seen is as to what punishment should be awarded to Dewan Chand Kamra. It is in evidence that the case related to the asst. yr. 1986-87. He was aged to be more than 70 years in the year 1987 and at present, he must be more than 86 years. It is also stated that he was unable to move and work properly due to artificial hips, Therefore, keeping in view these facts, I think a lenient view should be taken and as such, he is sentenced to a fine of Rs. 10,000 and imprisonment till the rising of the Court instead of awarding him minimum sentence in view of his ill-health and extreme old age. In default of payment of fine, he would further suffer R.I. for one year.
19. Consequently, the appeal qua respondent Nos. 1 and 2 is accepted on above said terms and qua respondent No. 3, it is dismissed.