Bangalore District Court
The Income Tax Department vs Sri. Partha Pratim Ghosh on 28 September, 2022
BEFORE THE SPECIAL COURT FOR ECONOMIC
OFFENCES: AT BENGALURU
Dated this the 28th day of September 2022
:Present:
Sri. ANAND S. KARIYAMMANAVAR, B.A., LL.B., (Hon')
Presiding Officer, Special Court
For Economic Offences, Bengaluru.
C.C.No.34/2018
Complainant: The Income Tax Department
By its Deputy Commissioner of Income Tax (Inv)
Unit-2(3), C.R. Building (Annex)
Queens Road,
Bengaluru - 560 001.
(Reptd. By Spl. Pubic Prosecutor)
Vs.
Accused : Sri. Partha Pratim Ghosh,
No.116, 10th Cross,
Duo Marvel Layout,
Ananthpura, Yelahanka,
Bengaluru - 560 064.
(Reptd. By Sri. SA & BK., Advocates)
:JUDGMENT:
This is a complaint made by the complainant against the accused for the offence punishable under section 276CC of the Income Tax Act, 1961.
2. The brief facts of the case of the complainant that:
The accused is an individual and is a General Manager (P & M) of Company by name M/s. NCC Limited. The source of the income of the accused is salary and interest from the 2 C.C.No.34/2018 bank deposits and annual income of the accused approximately Rs.27.5 lakhs. Though, the accused is having taxable income, the accused did not file his return on income for the assessment year 2011-12. During the course of enquiry, the complainant came to know that the accused has not filed his return of income from 2002-03. Accordingly, summons issued U/s.131 of Income Tax Act thereby the statement was recorded and he admitted that he has not field his return of income till date and he was under impression that he need not file his return of income once Form No.16 is issued by his company. Further it is the case of the complainant that since the accused has failed to file his returns from 2002-03 and not paid the taxes and subsequently the accused paid the tax of Rs.10,900/- on 24.02.2017 for assessment year 2011-12 and submitted details of computation of income after considerable delay.
Further, it is the case of the complainant that the accused is a habitual defaulter and did not file his return of income in time. Non filing of the returns of income within time is willful and deliberate intention to evade the tax. Hence, the present complaint came to be filed.
3. Upon receiving the complaint, the sworn statement is dispensed with as the complainant is a public servant and this court took cognizance for the offence punishable U/s.276CC of Income Tax Act, 1961. Thereafter, the summons was issued to the accused and he appeared and enlarged on bail. The charge was framed and read over to accused and explained to him in the language known to him.
3 C.C.No.34/2018He pleaded not guilty and claimed to be tried. As such, the complainant was called upon to lead evidence.
4. In order to bring home the guilt of the accused, the complainant has examined its Deputy Director of Income Tax as PW-1 and got marked eight documents as Ex.P-1 to Ex.P-8.
5. After the completion of evidence on behalf of complainant, the incriminating evidence available against accused was read over as per the provisions of Section 313 of Cr.P.C. However, accused denied the same and submitted he has no defence evidence.
6. Heard the arguments advanced by both the counsels for the complainant and accused. Upon hearing their arguments and on going through the materials on record, the following points arise for determination of this court:
1. Whether the complainant proves beyond all reasonable doubt that the accused has willfully made an attempt to evade payment of tax by non filing of return of income and thereby committed offence punishable U/s.276CC of Income Tax Act, 1961?
2. What order?
7. My findings on the above said points are as under:
Point No.1: In the Negative
Point No.2: As per final order
for the following:
4 C.C.No.34/2018
REASONS
8. Point No.1: The complainant in order to prove its case examined Deputy Director of Income Tax as PW-1 and got marked Ex.P-1 to Ex.P-8.
9. PW-1 in his chief-examination, deposed that accused being the individual assessee was getting income from his salary and interest from the bank deposits. The annual income of the accused approximately Rs.27.5 lakhs. Though, the accused had taxable income, but did not file his return of income for assessment year 2011-12 and during the course of enquiry, the complainant came to know that the accused has not filed his returns since 2002-03. Therefore, summons issued to accused and in response to the same, the accused has admitted about non filing of his returns. Subsequently, he paid the tax of Rs.10,900/- for the assessment year 2011- 12 and he disclosed that the he has declared his income as Rs.21,89,397/- and TDS was Rs.5,19,594/-. Further he deposed that non filing of the returns for the above said period cannot reopen due to lapse of time. Therefore, the accused willfully and deliberately not filed his returns within time, thereby he got marked sanction order as Ex.P-1, copy of summons as Ex.P-2, statement of accused as Ex.P-3, tax challans as Ex.P-4 to Ex.P-6, notice dated 11.12.2013 as Ex.P-7 and reply given by the accused is marked as Ex.P-8.
10. In the present case the accused have taken following defences.
1. The sanction order passed U/s.279(1) of IT Act is without jurisdiction.
5 C.C.No.34/20182. Summons issued by the complainant on 26.10.2026 is without jurisdiction.
3. The complainant filed this complaint without jurisdiction.
4. The provisions of Section 276CC of the Act is not applicable to the facts and circumstances of the case.
11. Defence No.1: The sanction order passed U/s.279(1) of IT Act is without jurisdiction: In the present case the counsel for the accused vehemently argued that Ex.P-1 which is sanction order is passed by Prl. Director of Income Tax. However, as per provisions of Section 279(1) of the Act the Prl. Director of Income Tax is not having any authority to pass sanction order thereby he relied upon Section 279(1) of IT Act, which reads as under:
"(1) A person shall not be proceeded against for an offence under section 275A, section 276, section 276A, section 276B, section 276BB, section 276C, section 276CC, section 276D, section 277 or section 278 except with the previous sanction of the Commissioner or Commissioner (Appeals) or the appropriate authority"
12. On careful perusal of above said provisions of law, no doubt the prosecution has to be initiated at the instance of Chief Commissioner or Commissioner of Income Tax, but in 6 C.C.No.34/2018 the present case the Prl. Director of Income Tax has passed sanction order.
13. On the contrary, learned Spl. PP relied upon the definition clause U/s.2(16) of IT Act, which reads as under
"Commissioner" means a person appointed to be a Commissioner of Income-tax or a Director of Income-tax or a Principal Commissioner of Income-tax or a Principal Director of Income-tax under sub-section (1) of section 117......."
14. On careful perusal of above said provisions of law the word "commissioner" also means Director of Income Tax, who is appointed U/a.117(1) of IT Act. However, learned counsel for the accused contended that the definition of the commissioner as defined in Section 2(16) of IT Act is also include the Prl. Director of Income Tax. But, these terms cannot be used inter changeable and the power delegated to one class of officers has to be exercised by that class of officers only. Thereby he once again relied upon Section 279(1) of the Income Tax Act, in which, the designation of the Prl. Director of the Income Tax is not appearing in the said section. Further, he relied upon the decision of Hon'ble Supreme Court in K. Balakrishna Rao V/s. Haji Abdulla Sait reported in (1980)1 SCD 321, in which Hon'ble Apex Court held that:
"Definition clause does not necessarily in any statute apply in all possible contexts in which the word which is defined may be found therein"7 C.C.No.34/2018
15. By relying on the above said decision, the counsel for the accused argued that the Prl. Director of Income Tax is not at all having power to passing the sanction order.
16. At the time of arguments, learned Spl. PP relied upon the Notification dated 13.11.2014 bearing No.S.O.2914(E) in which the Government of India issued a notification which reads as under:
"Directs that the Directors General of Income Tax specified in column (2) of the Schedule annexed to this notification (hereinafter referred to as the "said schedule") or the Principal Director/Director of Income Tax specified in column (4) of the said Schedule shall exercise powers under Part - C (Powers) of Chapter XIII and corresponding provisions of Chapter XXI (Penalties imposable), Chapter XXII (Offences and Prosecutions) and other provisions incidental thereto of the said Act and perform the functions relating thereto in respect of the territorial areas of whole of India"
17. On careful perusal of above said notification, it clearly reveals that even the Directors General of Income Tax or the Principal Director of Income Tax shall exercise power under chapter 13 corresponding chapters of chapter 21, powers under chapter 22 of Income Tax Act and Section 279 of the Income Tax falls under the chapter 22 of the Income Tax Act.
8 C.C.No.34/201818. Even the learned counsel for the accused submitted in his arguments stating that the notification issued by Government is not proper and correct. However, this court being a trial court is not having any jurisdiction to held that said notification is not proper and invalid. Therefore, as per provisions of Section 2(16) and as per the notification issued by Government it can be considered that even Prl. Director of Income Tax is having power to pass sanction order. In the present case, learned counsel for the accused have relied upon various decisions of Hon'ble Supreme Court and Hon'ble High Courts in respect of the interpretation of definition clauses. However, this court being trial court is not having any jurisdiction to interpret the provisions of law holding that the definition of Commissioner defined U/s.2(16) cannot be expandable even to the Section 279 of IT Act. Therefore, the defence taken by the accused in respect of the validity of the sanction does not holds good.
19. Defence No.2 & 3: Summons issued by the complainant on 26.10.2016 is without jurisdiction and the complainant filed this complaint without jurisdiction: Further, in the present case the counsel for the accused taken defence that the summons issued by the complainant on 26.10.2016 is without jurisdiction and consequential proceedings are bad in law. It is the strong defence of the accused that as per provisions of Section 131 of IT Act, it is the jurisdictional Assessing Officer who supposed to issue summons to the accused, but in the present case the Deputy Director of Income Tax (Investigation), Unit-2(3), has issued summons to 9 C.C.No.34/2018 accused, which is barred by jurisdiction. In order to substantiate the same, the counsel for the accused relied upon Section 131(1) of the Income Tax Act which reads as under:
131. Power regarding discovery, production of evidence, etc. (1) The 2 Assessing Officer, 3 Deputy commissioner (Appeals), 4 Deputy Commissioner 5 Commissioner (appeals) and 6 Chief Commissioner or Commissioner shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil the same powers as are vested in a court under the Code of Civil Procedure 1908 (5 of 1908), when trying a suit in respect of the following matters, namely:-
(a) discovery and inspection;
(b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath,
(c) compelling the production of books of account and other documents; and
(d) issuing commissions.
20. On perusal of above said provisions of law the Assessing Officer, Deputy Commissioner (Appeal), Chief Commissioner etc., are having power to summon, but Deputy Director of Income Tax not given power U/s.131(1) of IT Act to summon the accused.
10 C.C.No.34/201821. Further, the counsel for the accused relied upon the cross-examination of PW-1 at page No.6, in which, he deposed that "it is true that the jurisdictional Assessing Officer as far as this case is concerned Ward-5(3)(4), Bengaluru". Further, he relied upon Ex.P-2 which is summons dated 26.10.2016 it reveals that "the same has been issued by Deputy Director which is contrary to the provisions of Section 131 of IT Act". Further, the counsel for the accused relied upon the decision of Hon'ble High Court of Andhra Pradesh in A.P. Wine Dealers Association V/s. Deputy Director of Income Tax (Investigation) reported in (2005) 146 Taxman (Andhra Pradesh) in which Hon'ble High Court of Andhra Pradesh held that:
"Section 131 of the Income Tax Act, 1961 - Discovery, production of evidence, power regarding
- Whether when power has been exercised by an authority not conferred by law, such action cannot be upheld on ground that if otherwise held, it would be detrimental to public exchequer - Held, yes -Several applicants made applications along with demand drafts for grant of license to run retail liquor shop under State Excise Policy - As said policy could be declared bad by High Court, State might have to return said demand drafts - Meanwhile Deputy Director of Income Tax (Inv) purporting to exercise power under section 131 directed Superintendents of Prohibition and Excise to produce all demand drafts along with applications of applicants on ground that he had reason to suspect that large amounts of cash from undisclosed sources were involved - Petitioners filed petition assailing impugned order and sought a direction to release demand drafts to applicants
- Whether even though Income tax Department in interest of protecting public exchequer and unearthing benami monetary transactions and to 11 C.C.No.34/2018 catch hold of real persons behind transactions had commenced that move in question, but it had no legal sanction - Held, yes - Whether impugned proceedings issued by Deputy Director was without authority or jurisdiction inasmuch as Deputy Director tacked such authority under sub- sections (1) and (1A) of section 131 and, hence, impugned proceeding could not be sustained"
22. He further relied upon the decision reported in Commissioner of Income Tax, Panji V/s. Karnataka Vikas Grameen Bank, (2019) 108 Taxmann.com 493 (Karnataka) wherein it is held that:
"Section 194A, read with section 201, of the Income Tax Act, 1961 - Deduction of tax at source
- Interest other than interest on securities (Jurisdictional Assessing Officer) - Assessment year 2008-09 to 2011-12 - Assessee was a Regional Rural Bank having Head Office at Hubbali District - It had more than 451 branches spread over 9 districts of Karnataka - Out of 451 only 118 branches were situated with jurisdiction area of Assessing Officer (TDS) of Hubbali district
- In survey, it was found that all branches of assessee bank had not deducted tax at source under section 194A - Assessing Officer (TDS) of Hubbali passed order under section 201(1) for such default - Tribunal held that he would not have jurisdiction over branches other than Head Office and 118 branch offices situated in Hubbali
- It further held that treating bank as assessee-in- default- in respect of branches other than 118 branches was not in consonance with section 194A - Whether Tribunal was justified in its holding - Held, yes (Para 6) (In favour of assessee)"
23. He further relied upon the decision reported in Commissioner of Income Tax V/s. Ramesh D. Patel, (2014) 42 Taxmann.com 540 (Gujarat) wherein it is held that:
12 C.C.No.34/2018"Section 153A of the Income Tax Act, 1961 - Search and seizure - Assessment in case of search or requisition (Validity of assessment) - Assessment years 2001-02 to 2004-05 - Survey was conducted at office premises of assessee - In assessment order for same year Assessing Officer stated that search was carried out - Thus, Assessing Officer made contradictory statements with respect to assessee being subjected to search
- Tribunal after giving multiple opportunities to revenue to produce record of search and authorization, concluded that there was no search warrant against assessee - Whether in absence of a search authorization, Tribunal correctly held that assessment orders under section 153A could not have been passed - Held, yes - Whether reliance of revenue to section 124(3) would be of no avail as section 124 pertains to jurisdiction of Assessing Officer which has not relevance in so far as inherent jurisdiction for passing an order of assessment under section 153A is concerned - Held, yes (Paras 7 & 8) (In favour of assessee)"
24. Therefore, on careful perusal of above said decisions and as per provisions of Section 131(1) of IT Act, it is the jurisdictional Assessing Officer, who supposed to issue summons to accused U/s.131(1) of Income Tax Act, but in the present case, the summons has been issued by Deputy Director of Income Tax Unit-2(3), who is not having jurisdiction. Therefore, the defence taken by the accused on this point is acceptable.
25. Defence No.4: The provision of Section 276CC of the Act is not applicable to the facts and circumstances of the case: In the present case, the counsel for the accused contended that the allegations made against the accused will not attract the ingredients of Section 276CC of IT Act. In order to 13 C.C.No.34/2018 substantiate his defence, the counsel for the accused submitted that in the present case the accused not willfully failed to furnish the return of income in due time. In the present case the accused has submitted that even in the sanction order there are no allegations that the accused failed to file the return of income willfully. Further, it is submitted that the accused has filed return of income for the assessment year 2011-12 to 2015-16 along with his statement of income for the assessment year 2011-12 to 2014-15. Further, he argued that the accused is having salary income and interest on deposits and both are subject to TDS and deduction of TDS reflected in Form No.26AS and consequently a substantial portion of tax has been paid by the accused in the form of TDS. On perusal of materials available on record, it is the strong case of the complainant that the accused has failed to file his return of income from 2002-03 to 2011-12 and the said fact came to know to the complainant only when they enquired for the assessment year 2011-12. For that the accused has contended that he was under the impression that since he is a salaried person and TDS has been deducted and he was under bonafide belief that his salary income are subject to TDS and the employee provided Form No.16 and the entire tax of salary income was deducted by his employer. Therefore, it was not required for him to file return of income the same is reflected in his statement as well as reply given by him to the show cause notice issued by complainant. Therefore he was not liable to file return of income. However, he subsequently filed the entire return of income and also paid tax on 24.02.2017.
14 C.C.No.34/201826. On careful perusal of statement of accused U/s.131 of IT Act, the question No.5 which reads as under:
Q.5: Are filing Return of Income regularly? Ans: I have not filed any Return of Income till date. However, my company has issued Form-16 to me and I was of the opinion that I need not file Return of Income once Form-16 is received by me.
In which the accused has bonafidely stated that he was under
the impression that when Form No.16 is filed by his company, then there was no need to file return of income.
27. Further, he relied upon the decision of KPTCL V/s. ITO (2018) 93 Taxmann.com 89 (Bengaluru-Trib) wherein it is held that:
"Section 10(10AA) of the Income Tax Act, 1961 read with sections 192 ad 201, of the Income Tax Act, 1961 -Leave salary (Employees of statutory corporation) - Assessment year 2013-14 and 2014-15 - Assessee-KPTCL, a statutory corporation, failed to deduct tax at source on payments made to its retired employees towards unutilized leave period where such payment was made in excess of Rs.3 lakhs - Whether assessee being a statutory corporation its employees could not be regarded as State or Central Government employees and, therefore, exemption under section 10(10AA)(i) was not available and assessee was liable to deduct tax - Held, yes - Whether, however, since assessee was under bona fide belief that its employees were to be regarded as employees of State Government and that its employees were entitled to exemption of entire sum of unutilized leave encashment under section 10(10AA)(i), assessee had discharged its obligation 15 C.C.No.34/2018 under section 192 and, hence, proceedings under section 201(1) and 201(1A) ware to be quashed - Held, yes"
He further relied upon the decisions of Bengaluru Electricity Supply Company Ltd., V/s. ACIT in ITA No.639 to 676/Bang/2018 & 1018 to 1037/Bang/2018 and Indian Institute of Science V/s. DCIT in ITA No.1589/Bang/2014.
28. By relying on the above said decisions, the counsel for the accused submitted that since the accused under the bonafide belief that the tax on the salary income was deducted by employer. Therefore there was no need to file another return of income to the department. As per the provisions of Section 276CC, there shall be willful failure to file returns to evade the tax. But in the present case, in accused's statement as well as reply notice given for the show cause notice clearly reveals that he had no intention to evade tax and the above said decisions are aptly applicable to the present case on hand. Moreover, subsequently the accused has filed return of income and same is accepted by the complainant. Again the counsel for the accused relied upon the decision of Hon'ble High Court of Karnataka in Crl.P. No.1998/2016 of C.P. Yogeshwar V/s. Income Tax Department, in which, the Hon'ble High Court of Karnataka held that:
"If the return of income had been filed belatedly or otherwise, the section cannot apply at all and therefore, the prosecution ranged against the accused is vitiated".16 C.C.No.34/2018
29. In the above referred case the accused had filed return of income belatedly. Therefore, the case registered U/s.276CC of Income Tax Act was vitiated.
30. Further, PW-1 in his cross-examination admitted that the accused has paid the entire tax along with interest and also filed the return of income till date. Therefore, on perusal of materials available on record, there are no materials to show that the accused has willfully and deliberately not filed the return of income to evade the tax.
31. Apart from the above said defences, even on the technical ground also the sanction order reveals that the complainant was permitted to file complaint for the offence punishable U/s.276(1) of IT Act as per sanction order, but in the present complaint is filed for the offence punishable U/s.276CC of the IT Act. Even on this ground also this complaint is contrary to the sanction order and the complainant not produced the corrigendum of sanction order.
32. On careful perusal of Ex.P-1 which is sanction order no where it discloses that the accused willfully and deliberately failed to file his returns. Further as per Section 272(a) if any person who fails to furnish the returns, then there shall be penalty proceedings against him. However, in this case no penalty proceedings initiated against the accused.
33. Further, the counsel for the accused relied upon Section 273(b) in which it reveals that:
17 C.C.No.34/2018"There shall not be penalty if there is a reasonable cause if accused fails to furnish returns"
34. Therefore, in the present case the complainant has not initiated penalty proceedings against the accused as there was a reasonable cause for non filing of returns. Therefore, even in the present case also the accused already filed his return of income and paid tax as per Ex.P-8, which is admitted by the complainant himself. Under the said circumstances there was a reasonable cause for non-filing the returns and the complainant has failed to prove the guilt of accused beyond all reasonable doubt. Hence, I answer Point No.1 in the Negative.
35. Point No.2: In view of my findings on Point No.1, I proceed to pass the following:
ORDER By exercising the power conferred under section 248(1) of Cr.P.C., the accused is acquitted for the offence punishable under section 276CC of the Income Tax Act, 1961.
The bail bond of accused shall stand cancelled. (Dictated to the Stenographer, same has been typed, corrected and then pronounced by me, in open court on this the 28th day of September 2022) (ANAND S. KARIYAMMANAVAR) Presiding Officer, Spl. Court for Economic Offences, Bengaluru.18 C.C.No.34/2018
ANNEXURE:
List of the witnesses examined on behalf of the Complainant:
PW-1 : Sourabh Nayak List of the Documents exhibited on behalf of the Complainant:
Ex.P-1 : Sanction Order
Ex.P-2 : Copy of Summons
Ex.P-3 : Statement of Accused
Ex.P-4 to 6 : Tax Challans
Ex.P-7 : Notice
Ex.P-8 : Reply
List of witnesses examined on behalf of the Accused:
- Nil -
List of Documents examined on behalf of the Accused:
- Nil -
Presiding Officer, Spl. Court for Economic Offences, Bengaluru.19 C.C.No.34/2018
28.09.2022 Complt.: IT Accd: SA & BK., For Judgment Judgment pronounced in the open court (vide separate order) ORDER By exercising the power conferred under section 248(1) of Cr.P.C., the accused is acquitted for the offence punishable under section 276CC of the Income Tax Act, 1961.
The bail bond of accused shall stand
cancelled.
PRESIDING OFFICER.