Delhi District Court
Ito vs M/S Shiv Nath Rai Har Narain Etc. on 9 October, 2012
IN THE COURT OF SH. GORAKH NATH PANDEY
ADDL CHIEF METROPOLITAN MAGISTRATE (Spl. Acts)CENTRAL
TIS HAZARI COURTS, DELHI
ITO vs M/s Shiv Nath Rai Har Narain etc.
U/s 276C, 276D and 277 of Income Tax Act
JUDGEMENT CC No.3980/89
(a)Serial no. of the case : 02401R0006021989
(b)Date of commission of offence : Assessment Year 198384
(c)Name of complainant : Sh. Y.K. Batra,
ACIT (Investigation) Circle 4(1)
New Delhi
(d)Name, parentage, residence: 1)M/s Shiv Nath Rai Har Narain,
4098 Naya Bazar, Delhi
2) Mauji Ram (expired)
3) Har Narain
4) Jai Narain, all partners of
M/s Shiv Nath Rai Har Narain,
4098 Naya Bazar, Delhi
(e)Offence complained of/ proved : U/s 276C/276D/277 Income Tax Act
(f)Plea of accused : Pleaded not guilty
(g)Final order : Convicted
(h)Date of such order : 09.10.12
Date of Institution of complaint: 17.03.89
Date of Reservation of Judgment : 09.10.12
Date of Pronouncement of Judgment : 09.10.12
Brief statement of the reasons for the decision:
1.The complainant Sh. Y.K. Batra, the then Assistant Commissioner of Income Tax Officer, filed the present complaint against the aforesaid accused persons pertaining to assessment year 198384 for the offence punishable u/s 276C, 276D and 277 of the Income Tax Act, 1961 (hereinafter called as the Act). As ITO vs M/s Shiv Nath Rai Har Narain etc. 1 of 14 contended accused no.1 is partnership firm and accused no.2 to 4 were its partners/incharge of and responsible for the conduct of day to day business of accused no.1 at the relevant time. As contended accused no.1 is a dealer and commission agent in food grains. During the period relevant to the assessment year 198384, accused no.1 filed its return of income tax on 19.10.83 accompanied by profit and loss account, balance sheet and other details declaring an income of Rs.1,24,420/. Assessment of accused no.1 was completed on 27.03.86 under section 144 on a total income of Rs.9,26,520/. The assessment under section 144 had to be made by the assessing authority because the accused did not produce the books of account on the plea that the assessee's books of account along with that of other three sisters concerns were completely destroyed in fire which broke out in the portion at the top floor of premises of the accused in the night of 11/12.11.85 (Diwali night). Accused also failed to furnish proof of payments of brokerage (dalali) amounting to Rs.1,24,360/. A notice u/s 142(1) of the Act was also issued on 14.03.86 calling for clarification in respect of certain creditors as mentioned in the balance sheet but not shown as such in separate list of loans as also for production of books of accounts. Accused again failed to produce the books accounts reiterating the same plea. In order to verify the claim of the accused regarding burning of books in fire, survey operation u/s 133(A) of the Act was carried out at the business premises of the accused on 21/22.03.86 and it was found that a large number of books of accounts including account books for the assessment year 198384 of accused no.1, bill books, vouchers and other ITO vs M/s Shiv Nath Rai Har Narain etc. 2 of 14 connected papers were lying there. There was also stock of Lal Kila Brand Basmati rice and labels of the same brand. A sales register was also found which revealed that the accused was carrying on retail sale to a considerable extent and therefore, accused's assertion that it was deriving income only from the agency business was incorrect. The account books and other documents were seized u/s 132 on 24th/25th March, 1986. Thereafter, considering all the facts and circumstances, the additions of Rs.7,00,000/ on account of estimated cash sale and Rs.80,000/ on account of unverifiable brokerage payments were made. It is alleged that accused willfully attempted to evade tax payable on cash sales and on account of brokerage payment and also willfully failed to produce the books of accounts and other information required in notice u/s 142(1) of the Act on false ground and thereby committed an offence punishable u/s 276C/276D read with section 277 of Income Tax Act.
2. During the course of trial accused no.2 Mauji Ram expired and accordingly proceedings against the accused no.2 were dropped vide order dated 05.06.89.
3. The accused were summoned for the aforesaid offence and a charge u/s 251 Cr.P.C. was framed against the accused no.1, 3 and 4 for offence u/s 276C and 277 of the Act on 17.09.01 to which they pleaded not guilty and claimed trial.
4. In order to substantiate the allegations, the complainant examined himself as PW2 and Sh. AP Srivastava, the then IAC Range 9, New Delhi as PW1.
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5. In his evidence PW1 reiterated the facts of the complaint and proved on record copy of returns filed by the accused as Ex. PW1/1, form 12 duly signed by all the partners Ex.PW1/3, notices Ex.PW1/4 and acknowledgment Ex.PW1/5. The witness deposed that the accused could not produce the account books during the assessment proceedings and put forward the plea for non production of the records that all the account books were gutted in fire during Diwali. In order to verify the plea of the accused, PW1 conducted survey u/s 133A on 22nd and 23rd March, 1986 on the business premises of the accused and large volumes of books of accounts, sale vouchers, account register and other documents relevant to the assessment year were found. The witness further deposed that the records were seized and on the basis of seized records PW1 assessment order Ex. PW1/6 was passed and the assessment was completed at a total sum of Rs.9,26,517/. The witness further deposed that accused filed an appeal against the assessment order before the CIT wherein appeal was partially allowed vide order dated 26.03.87 Ex. PW1/7 and accused was given relief of Rs.4/ lacs and upheld the addition of Rs.80,000/. The witness also proved on record the Panchnama of survey as Ex.PW1/8 and list of documents seized as Ex. PWA1/9 on the basis of which PW1 based the conclusion that account books were deliberately withheld by the accused.
6. PW2 is a formal witness/complainant who filed the complaint. This witness has proved on record the complaint as Ex. PW2/1 and authorization to launch prosecution as Ex. PW2/2.
ITO vs M/s Shiv Nath Rai Har Narain etc. 4 of 14 As no other witness was examined by the complainant, the prosecution evidence was closed.
7. Statement of accused Har Narain and Jai Narain was recorded u/s 313 read with section 281 Cr.P.C. In their statements both the accused admitted that they filed the tax return Ex. PW1/1 declaring a net income of 1,24,420/. Accused denied rest of the allegations and stated that no books of accounts were recovered from their business premises. Despite opportunities accused did not lead any defence evidence. However, they have placed on record certified copy of the ground of appeal filed before the Hon'ble ITAT along with order sheets vide Ex.DW1/1 collectively vide order dated 16.05.07. Thereafter defence evidence was closed on dated 19.07.07.
8. I have heard the arguments on behalf of the parties and gone through the written submission filed on behalf of accused no.3 as well as relevant records. Learned defence counsel has also relied upon the judgments reported as "(i) (1990 184 ITR 414 (AP) (ii) 1995 ITO vs Sunanda Ram Deka ( Gauhati) 483
(iii) 1997 Md. Moinul Haque vs State of Bihar (Patna) 239 (iv) 818 ITR (AP) 1985 and (v) II (2000) CCR 315". I have also considered the relevant provisions of the Income Tax Act, 1961. It is argued by the learned counsel for complainant that the complainant has proved the contentions as mentioned in the complaint, the accused has willfully and intentionally attempted to evade the tax and due amount and falsely verified the income tax return. Learned counsel for complainant further prayed that as the case of complainant stand ITO vs M/s Shiv Nath Rai Har Narain etc. 5 of 14 proved, the accused may be held guilty for the offence punishable u/s 276C and 277 of the Income Tax Act.
9. The relevant provisions of section 276C(1) as well as 277 of the Act is reproduced as below: [276C. Willful attempt to evade tax, etc. (1) If a person willfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable, i. in a case where the amount sought to be evaded exceeds one 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 three years and with fine.
[277. False statement in verification, etc. 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 rue, he shall be punishable, in a case where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds one 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;
in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine]
10.This complaint is filed by the complainant against the accused u/s 276C/276D/277 of the Act and the charge was framed against the accused vide order dated 17.09.01 u/s 276C/277 of the Act. As per complaint, the accused no.1 had income by way of commission on sales of food grains ITO vs M/s Shiv Nath Rai Har Narain etc. 6 of 14 including rice. It is not disputed that the firm had filed its return of Income which was duly signed by accused declaring an income of Rs.1,24,420/. The bone of contention/only issue in this case is regarding nonproduction of books of accounts relevant to the assessment year by the accused at the time of assessment on the pretext that the relevant records have been burnt due to the fire which took place in Diwali on 12.11.85. The books of accounts required by the assessing officer were not produced by the accused on the ground that the records were gutted in fire which had broken out on 12.11.85 on the business premises of the accused. The accused has produced the relevant documents in support of claim and contentions regarding fire and also filed relevant documents i.e. fire report Ex.PW1/D1, police investigation report Ex. PW1/D2, copy of FIR Ex. PW1/D3 and cutting of news paper Ex. PW1/D4 in support of claim of fire. In fact the complainant has also not categorically denied the factum of fire taking place at the godown of the accused. The only dispute is that the accused has taken false defence for not producing the documents at the time of assessment on the ground that the entire documents have been burnt but when the subsequent search was made at the premises of the accused by the department, the documents for the relevant financial yeaers were recovered. Panchnama duly proved on record in this respect is also prepared and it is contended that these documents recovered from the premises of accused were relevant for the purpose assessment but the accused did not produce the same at the relevant time and therefore, there was willful attempt to evade the tax.
ITO vs M/s Shiv Nath Rai Har Narain etc. 7 of 14
11.Learned defence counsel argued that the complainant has filed three complaints for the different assessment year i.e. 198182, 198283 and the present complaint which pertains to 198384. Out of the said three complaints, first two complaints have been dismissed and therefore, he prayed that there is no ground to continue this complaint, this complaint is filed and prosecuted due to malafide reasons, the complainant has failed to prove this complaint and prayed to dismiss the same. Learned defence counsel further argued that in this matter after framing of charge, accused filed revision which was allowed and the complainant was directed to produce the records which were seized during the survey operation. It is further argued that the complainant has not complied with the directions of the Hon'ble Sessions Court and has produced some record which is not relevant to present proceedings and that too at much later stage and whatever records produced before the court are not relevant and it no manner helps the case of the complainant. It is also argued that the provisions of section 276C(1), 276D and 277 of the Act are not attracted to the present complaint in view of the facts and circumstances of the present case.
I have perused the orders also passed regarding the other two complaints above referred by the learned counsel for accused and it appears that the above said two complaints were not disposed on merits. Further, merely that other complaints against the accused by the complainant for different financial year has been dismissed, the same by no streach of imagination can be considered a ground for dismissal of this complaint also. If the accused was aggrieved by any order of the court or if the court has not ITO vs M/s Shiv Nath Rai Har Narain etc. 8 of 14 complied any order, the accused has every liberty available as per law to seek remedy but no such steps was taken by the accused at the relevant stage or till today. Even otherwise the complainant has produced the documents seized from the premises of the accused as mentioned in the panchnama and also produced the panchanama which contained the details of the seized documents in the court after permission from the court and therefore, accused cannot be granted benefit. I have gone through the relevant document i.e. panchanama Ex.PW1/A which detailed the seized articles from the premises of accused and from the bare perusal of the same it appears that there are documents, registers, receipt books etc. also seized from the premises of the accused which is relevant for the Assessment Year in question in this complaint i.e. 19831984. Learned counsel for accused further argued that merely seizure of some documents pertaining to the assessment year in question does not mean that accused has withheld anything for willful evasion of fax and filed false return and contended that some of the documents might have been lying in other places or would have been left partly burnt which was seized by the income tax officials, panchnama was prepared and the accused was falsely implicated in this case. This contention of learned counsel for accused does not hold much water. In view of the fact that no such question was asked during the cross examination of witnesses, nor anything as such was observed before this court on any occasion. The documents were produced before the court and no such stand was taken by the accused at the relevant stage.
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12.The survey operation was conducted u/s 133A on 22 nd and 23rd March, 1986 on the business premises of the accused i.e. after alleged date of fire. PW1 stated that during the said survey operation a large volume of books of accounts, bills, vouchers and other relevant documents relevant to the assessment year 198384 were recovered. What is more, stock of Lal Kila brand Basmati rice and labels of the same brand were also found. From the statement of PW1 and material available on record, the claim of the of fire appears to be genuine. But it is hard to assume or say as to how many books were actually burnt during the socalled fire. Accused has taken stand that entire records were gutted in fire but this plea of the accused does not carry much weight. During the cross examination PW1 produced the documents copy of which is Ex.PW1/B (Y29) which indicates the bill number, names of parties and quantities of the rice to the different parties. The witness also stated that sale was to be recorded in the books of account but it was not recorded in the account books. During the course of cross examination PW1 produced the seized records and got exhibited the same on record. Bare perusal of Ex.PW1/A mention regarding the document at serial no.72 pertaining to the Financial Year 198283 (of which assessment was done during assessment year 198384). Ex.PW1/B (Y29) reflects the entries of the bill number, names of parties and quantities of the rice to the different parties. PW1/A i.e. panchnama of seized material contained the details of records and the statement of accused was also recorded.
13.Inventory of books of accounts and documents found and seized vide ITO vs M/s Shiv Nath Rai Har Narain etc. 10 of 14 Ex.PW1/A clearly mentioned the document (that might be pass book or statement of account) of Punjab and Sind Bank at serial no.72 pertaining to the relevant assessment year. Similarly, inventory of books of accounts found and seized Ex.PW1/9 (i.e. bill books) clearly mentioned the documents from serial. no.1 to 16 pertaining to the relevant assessment year. Likewise inventory of books of accounts and document (AnnexureY) mentions the documents at serial no.2, 3, 5, 8, 14 and 15 and document (AnnexureZ) mentions the documents at serial no.2, 4, 5, 6, 16, 22, 23, 25 and 26 pertaining to the relevant assessment year. The list of seized materials also mentions the documents at serial no.4 (sales books), 8 (Y33 Talpatti), 10 (Y15) and at serial no.66 (Y35) are pertaining to relevant Financial Year i.e. 198283. The documents (Y35) Ex.PW1/C (running into 57 pages) pertain to 05.03.82 to 20.04.83. which are relevant for financial year 198283.
14.In this case the accused filed its return of income for the assessment year 198384 on 19..10.83 declaring an income of Rs.1,24,420/. The assessment was completed on 27.03.86. The assessment u/s 144 was made by the assessing authority because the accused did not produce the books of account on the lea that the books of accounts were completely burnt in the fire which broke out in the premises of accused. No doubt, that accused must have checked as to how many books/documents/articles were actually burnt during the socalled fire on the night of 11/12.85 (Diwali night). To ascertain the genuineness of plea of accused, search and seizure operation was conducted and completed in two days i.e. 22/23 March, 1986 after a gap of about more ITO vs M/s Shiv Nath Rai Har Narain etc. 11 of 14 than three months in which aforesaid exhibited documents/articles along with other documents were recovered from the premises which the alleged fire broke out. The recovery of aforesaid documents from the premises show malafide intention of accused and it appears that in the garb of socalled fire incident, accused intentionally did not produce the relevant document on the pretext that entire record were burnt in the fire incident.
15.Section 278E of the Income Tax also raises presumption as to culpable mental state of the accused to prove the willful evasion as well as false statement and verification of the return. The relevant provision is reproduced as below: [Section 278E. Presumption as to culpable mental state. (1) In any prosecution for any offence under this Act which requires culpable mental state on the part of the accused, the court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution.
Explanation. In this subsection, "culpable mental state" includes intention, motive or knowledge of a fact, or belief in, or reason to believe, a fact.
(2) For the purpose of this section, a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability.] Section 278E stated above is itself sufficient to show culpable mental state of the accused and presumption in this respect. It is observed that the judgments relied upon by the learned defence counsel are not applicable to the peculiar facts and circumstances of the present.
16.In view of the aforesaid facts and circumstances, it is held that the prosecution ITO vs M/s Shiv Nath Rai Har Narain etc. 12 of 14 has proved its case against the accused beyond reasonable doubt. Accordingly, it is held that accused concealed their actual income for the assessment year 198384 and eventually evaded tax, consequently, they are held guilty for the offence punishable u/s 276(C)(1) of the Act. Since this return of income was not correct, hence, it is to be held that false statement in regard to their income was made by the accused in the return of income. Accordingly accused no.1 company, no.3 Har Narain and no.4 Jai Narain are also held guilty for the offence punishable u/s 277 of the Act.
(GORAKH NATH PANDEY) ACMM(Spl. Acts) CENTRAL TIS HAZARI COURTS DELHI Announced in open court on 09.10.12 ITO vs M/s Shiv Nath Rai Har Narain etc. 13 of 14 ITO vs M/s Shiv Nath Rai Har Narain etc. 14 of 14