Madras High Court
R. Rajendran, S.V. Sivalinga Nadar And ... vs Income-Tax Officer on 5 March, 1998
Equivalent citations: [2000]242ITR368(MAD)
JUDGMENT R. Balasubramanian, J.
1. In C. C. No. 76 of 1982 on the file of the Additional Chief Metropolitan Magistrate (E.O.I.), Egmore, Madras, six accused were tried for the following offences :
A-1--Under sections 120B, 193 and 420 read with Section 511 of the Indian Penal Code ;
A-2--Under sections 120B, 193 and 420 read with Section 511 of the Indian Penal Code, and 277 of the Income-tax Act (4 counts) ;
A-3--Under sections 120B, 193 and 420 read with Section 511 of the Indian Penal Code, and 277 of the Income-tax Act (3 counts);
A-4--Under sections 120B, 193 and 420 read with Section 511 of the Indian Penal Code, and 277 of the Income-tax Act ;
A-5--Under sections 120B, 193 and 420 read with Section 511 of the Indian Penal Code, and 277 of the Income-tax Act ;
A-6--Under sections 120B, 193 and 420 read with Section 511 of the Indian Penal Code, and 277 of the Income-tax Act.
2. At the end of the trial, all the accused were convicted as follows :
A-1, being a company, was found guilty for the offence punishable under Sections 120B, 193 and 420 read with Section 511 of the Indian Penal Code, and sentenced to pay a fine of Rs. 1,000 under each count (three counts), A-2 to A-6 were found guilty for the offences punishable under Sections 120B, 193 and 420 read with Section 511 of the Indian Penal Code, and each one of them was sentenced to undergo rigorous imprisonment for three months together with a fine of Rs. 1,000 each carrying a default sentence and A-2 to A-6 were also found guilty of the offence punishable under Section 277 of the Income-tax Act and each one of them was sentenced to undergo rigorous imprisonment for three months. No separate sentence was awarded against them for the offence punishable under Section 193 of the Indian Penal Code. Except the first accused, the other accused filed appeals before the Court of Sessions, Madras, and they were taken on files as follows :
C. A. No. 126 of 1991 (A-2 and A-4); C. A. No. 127 of 1991 (A-5); C. A. No. 129 of 1991 (A-3) ; C. A. No. 128 of 1991 (A-6). The learned appellate judge disposed of all the appeals by a common judgment dated August 1, 1996. The conviction and sentence imposed by the trial court on A-6, who was the appellant in C. A. No. 128 of 1991 was set aside and accordingly the appeal was allowed. All the other three appeals were dismissed thereby confirming the conviction and sentence imposed on those accused by the trial court. The first accused had not filed any appeal before the lower appellate court. Aggrieved against the judgment of the courts below, convicted A-5 filed Crl. R. C. No. 557 of 1996 ; convicted A-2 and A-4 filed Crl. R. C. No. 568 of 1996 and convicted A-3 filed Crl. R. C. No. 570 of 1996.
3. I heard Mr. P. Jagadeeswaran, learned counsel appearing for the revision petitioner in Crl. R. C. No. 557 of 1996 ; Mr. M. Ravindran, learned senior counsel appearing for the revision petitioners in Crl. R. C. No. 568 of 1996 ; Mr. N. T. Vanamamalai learned senior counsel appearing for the revision petitioner in Crl. R. C. No. 570 of 1996 and Mr. Ramasamy K., learned Government counsel appearing for the respondent, in all these three cases. Since all the revisions arise out of a judgment of conviction in one calendar case which gave rise to four appeals before the lower appellate court and three revisions before this court, I am inclined to dispose of all these three revisions by a common judgment. In this judgment, the parties to all the three revisions are referred to in the same rank in which they were arrayed before the trial court.
4. The facts are not in controversy in this case and they are as follows :
A-1 is the company in which A-2 is the managing director ; A-3 is the director ; A-4 is the accountant-cum-cashier ; A-5 is the broker and A-6 is the manager-cum-secretary. The registered office of the first accused company is at Villupuram in South Arcot District and A-2, A-4 and A-5 are residents of Madras. The return of income of the first accused company for the assessment year 1975-76 (exhibit P-l) was delivered to the Income-tax Officer on September 25, 1975. Along with this return a printed statement entitled "report and accounts for the year ending March 31, 1975" (exhibit P-2) and a typed statement entitled "memo showing computation of total income" (exhibit P-3) were also filed. All these three exhibits were signed by the second accused as the director-in-charge of administration. These documents disclosed the payment of interest of Rs. 5,802.74, Rs. 2,321.10, Rs. 2321.10, Rs. 2,901.37 and Rs. 4,773.70 to Thirupandia Nadar, Rajen-dran, Chokalinga Nadar, Jayalakshmi Animal and Kandasamy, respectively. There were several debit entries on the interest account and the above five entries alone are relevant for the purpose of this case. On July 30, 1976, the premises of the first accused company was searched and several records were seized. Among them the relevant documents are the counterfoils of cheques relating to the payment of interest amounts to the five persons above mentioned, besides payment to one Prabhakaran. The corresponding honoured cheques were seized from Lakshmi Vilas Bank and Indian Bank, both at Villupuram. A scrutiny of those honoured cheques disclosed that the payee's names were different from the names found in the counterfoils of the cheques concerned. In other words, the names as found in the counterfoils of the cheques referred to above disclosed the names of the five persons referred to above towards interest account and one Prabhakaran. Their respective names did not find place in the honoured cheques. Further it came to light that the counter-foils of the cheques were crossed "account payee only" whereas the honoured cheques were found to be bearer cheques. All the honoured cheques referred to above were in the name of the fifth accused.
5. Thereafter the Income-tax Officer commenced further proceedings in regard to the discrepancies referred to above and such proceedings are statutorily defined to be judicial proceedings. The statement of A-4 and A-5 were recorded on July 30, 1976, followed by the statement of A-2 on September 18, 1976, thereafter again on December 26, 1977, January 20, 1978, January 30, 1978 and March 10, 1978, the statement of the accused came to be recorded. All of which have been marked in this case. The statements of A-4 and A-5 each dated July 30, 1976, is marked as exhibit P-34 and exhibit P-36 and the statement of A-2 dated September 18, 1976, is marked as exhibit P-32. Exhibits P-45 and P-46 are the statements dated January 20, 1978, of A-5 and A-4 respectively. Exhibit P-47 is the statement dated January 30, 1978, given by A-2. Exhibit P-50 is the statement dated January 30, 1978, given by A-6. Exhibit P-53 is the statement dated March 10, 1978, given by A-3. It is no doubt true that the statements above referred to were given by them in a judicial proceeding conducted by the Income-tax Officer. A-5 in his statement dated July 30, 1976, had admitted that he encashed all the cheques relating to the five persons under the interest account referred to above as well as that of Prabhakaran and paid the proceeds thereof to A-4. A-4 in his statement dated July 30, 1976, had admitted the writing of the name of A-5 in all the above mentioned cheques as well as preparing the counterfoils in the names of the five persons above referred to as well as one Prabhakaran. However, he would state that he did so only on the instructions of A-2. A-2 in his statement dated September 18, 1976, had admitted to giving instructions as spoken to by A-4 in the preparation of cheque leaves as well as the counter foils. However, A-2 would state that since the persons who were entitled to receive the money wanted the money in cash, such an arrangement was entered into. He would also state that he was not aware of the six persons whose names were written in the counterfoils of the concerned cheques. The Income-tax Department therefore had sent notices to all the accused to give more details about the persons who were paid interest as stated above (five persons) and the details about Prabhakaran, to whom payments were made. In the subsequent statement, A-2 would state that A-6 was the man in charge and he alone knew all those persons who were paid interest as well as Prabhakaran and since A-6 was not in service, he was not in a position to give any information regarding those transactions. A-5 in his subsequent statement had stated that he would have paid the money so encashed by him in the manner stated above either to A-4 or A-6. A-3 in his statement had admitted that he received a sum of Rs. 1,00,000 on June 14, 1974, and a sum of Rs. 1,00,000 on June 15, 1974, from A-6 on account of one Prabhakaran, the intending buyer of Vanaspathi. He had further admitted that he transferred the sum of Rs. 2,00,000 from the company's account at Madras to Villupuram and beyond that he did not know anything. He had even stated that he did not know Prabhakaran at all. A-6 in his statement had stated that he did not know Prabhakaran ; he did not arrange any transaction for and on behalf of the said Prabhakaran and did not hand over any money to A-3. He had also stated that he did not receive any money from A-5.
6. Until now I have referred to the undisputed facts in this case. I summarise them once again.
7. The company is not in a position to give details about Thirupandia Nadar, Rajendran, Chocklinga Nadar, Jayalakshmi Ammal and Kandasamy to whom interest amount is stated to be paid though entries were made in the books of account and the counter foils of the cheques were prepared. The counterfoils of the cheques in respect of those payments are in the names of the above referred to individuals and the entries show that they were account payee cheques but all the corresponding cheques were uncrossed bearer cheques and they were in the name of A-5, i.e., Rajendran. The company is not in a position to give details about the source of receiving the money from them as a loan. Likewise the company is not in a position to give details about who Prabhakaran is, from whom Rs. 2,00,000 had been received and at a later point of time it was returned and the counterfoil of the cheque concerned which is in the name of Prabhakaran (account payee cheque) but the corresponding cheque is an uncrossed bearer cheque in the name of Rajendran (A-5). All the above mentioned cheques were encashed by A-5. All the accused have given statements as referred to above.
8. From these undisputed facts, the question that falls for consideration is whether the offence complained of against all the accused have been made out or not. Let me now take up the case of A-2 and A-4 first for consideration.
9. It is alleged in the complaint that exhibit P-l was signed and verified by the second accused, who is the director in charge of the administration. He is stationed at Villupuram where the registered office of the company is situated. A-2 in his statement would admit that he instructed A-4 to prepare cheques payable to bearer in the name of A-5 and the counter-foils in the names of all the other concerned persons. A-4 also would state in his statement that he prepared the counterfoils of the cheques as now put forward by the prosecution, only on the instructions of A-2. A-4 is also employed in the company at Villupuram. A-2 is the managing director and A-4 is the accountant cum-cashier of the said company. There is no other allegation in the complaint that except A-2, any other person is in charge of the administration of the company. Though there is no allegation against A-4 in this regard, yet in view of his being present in the company at Villupuram in his capacity as an accountant-cum-cashier, it can be safely presumed and accepted that he is aware of the ins and cuts of the affairs of the company as a whole. The statement of A-2 and A-4 is more or less confessional in nature. A-2 is not in a position to disclose the identity of those persons concerned in the cheques referred to above, namely, the persons to whom interest had been paid and the person from whom a sum of Rs. 2,00,000 had been received and to whom it was returned. A-2 being bodily and physically present as the director in charge of the administration in the company is certainly bound to give the correct details about the same to the Income-tax Department. Therefore, if he is not in a position to give the source, then it is open to the Income-tax Department to treat those amounts as taxable income. Probably with a view to avoid showing of any taxable income it appears that the entries had been made in the names of the five persons as though they had lent money to the company and for which interest is being periodically paid to them. As already stated, the identity of the person from whom Rs. 2,00,000 is stated to have been received is also not established. Therefore, the repayment of the said sum to the alleged person is also not free from any doubt. Accused No. 2 in his capacity as the director-in-charge of the administration, is definitely answerable and legally bound to place all the correct particulars in respect of the transactions above referred to, to the Income-tax Department, A-4 as a person physically present in the company knowing the day-to-day affairs of the company, is responsible along with A-2 in the commission of the offence referred to above against them. Under these circumstances, the conviction rendered by the learned trial court and affirmed by the learned appellate court against A-2 and A-4 cannot be interfered with and accordingly it is sustained.
10. Coming to the case of A-5, there is no allegation in the complaint that he was responsible in any manner either in the running of the company or in the administration of the company. He is admittedly a broker and he is not an employee of the said company. It is no doubt true that A-5 in his first statement had stated that he received all the cheques concerned in this case as bearer cheques, encashed the same and paid back the money to A-4. It is also on record that A-4 had denied of having received the money from A-5. In the latter statement, A-5 would state that he did not remember whether he gave the money to A-4 or A-6. A-6 in his statement had denied having received any money from A-5. The fact remains that A-5 had encashed all these cheques which as per the counterfoils of the concerned cheques were intended for different individuals. The case of the Income-tax Department is that since A-4 and A-6 in their respective state ments had denied the receipt of any money from A-5, the statement of A-5 that after encashing the cheques he handed over the same either to A-4 or A-6 is false and such statement having been given in a judicial proceedings attracts Section 277 of the Income-tax Act and Section 193 of the Indian Penal Code.
11. However, it is argued by learned counsel for the fifth accused in this revision that the truth or otherwise of the statement of A-5 cannot be judged from the statements of the other accused, namely, A-4 or A-6, and the lower courts having done so, had definitely committed an error of law. In other words, the sum and substance of the argument of learned counsel for the fifth accused is that the statement of the co-accused, namely, A-4 and A-6, cannot be made use of to discredit the statement of A-5 and then convict him on that, in the absence of any other evidence to support the case of the prosecution. Learned counsel for the accused would also add that when there is independent evidence, against any of the accused, then the statement of the co-accused can be utilised as lending assurance to the prosecution case and not otherwise. In this context, the submission of learned counsel for the fifth accused is that the statement of the co-accused in the same case alone cannot form the sole basis for holding the co-accused guilty of making any false statement. How far the statement of A-4 and A-6 can be used as against A-5 for holding him guilty will be discussed in detail when the case of A-3 is considered. Suffice it to say at this stage that except the statement of A-4 and A-6, there are no other materials to hold that the statement of A-5 is false.
12. As far as the case of A-3 is concerned, his statement before the Income-tax Officer is not inculpatory in nature. In other words it is not a confession statement. All that his statement discloses is that he is in charge of the Madras office ; he is responsible only for the transactions in the Madras office ; both on June 14, 1974 and on June 15, 1974, he received a sum of Rs. 1,00,000 from A-6. A-6 told him that it is an advance given -by one Prabhakaran an intending purchaser of vanaspati ; A-3 immediately telegraphically transferred these two sums to the company at Villupuram ; since A-6 told him that A-2 knew that transaction, he did not enquire further and that he did not know anything beyond that. It is not the case of the prosecution that A-5 is also in charge of the day-to-day affairs of the company at Villupuram. It may be true that he is also a director, but at the same time it should not be forgotten that he is stationed 200 kms. away from Villupuram where A-1-company is situated and has its office. In the absence of any allegation in the complaint or even evidence before court, that A-3 is also in charge of the day-to-day affairs of the company, it is not possible to impute any knowledge to him for the offence committed by the company and A-2. It is no doubt true that A-6 in his statement would state that he did not know Prabhakaran and that he did not arrange for any transaction as stated by A-3. But the fact remains that the sum of Rs. 2,00,000 received by A3 in the manner stated above was telegraphically transmitted by him to the A-1-company at Villupuram which is reflected in the books of account of the A 1-company. It is also on record that this sum of Rs. 2,00,000 is stated to have been paid over to Prabhakaran by drawing a bearer cheque and it had been encashed by A-5. How far A-3 would have knowledge about this act of A-2 and A-4 in preparing the cheques, counterfoils as stated earlier and enabling A-5 to encash the money is a matter for evidence and proof by the prosecution. The prosecution except relying upon the statement of A-G denial of arranging any transaction on behalf of Prabhakaran with A-3, do not want to rely upon any other material to connect A-3 with the crime alleged. Therefore, I am of the opinion that since there are no other materials excepting the statement of A-6 to discredit the statement of A-3, the prosecution cannot succeed on that evidence alone. In this case also the question that arises for consideration, which is common to A-5 also, is how far the statement of the co-accused can be used against another accused in-the same case.
13. Before going into this issue, let me find out how the appellate court chose to acquit A-6, who according to me is similarly placed like A-5 and more or less similarly placed like A3. The learned appellate judge held that as the prosecution mainly relied upon the statement of the other accused to convict A-6 and since it cannot be acted upon without any independent evidence to corroborate, the conviction cannot be sustained. The learned appellate judge also held that none of the cheques or counterfoils were prepared by A-6 but, on the other hand, they were prepared by A-4. The learned judge went on to hold that in respect of the transaction relating to Prabhakaran, A-6 had not played any part and there is nothing to show apart from the statement given by the co-accused that A-6 alone arranged the funds and entrusted the same to A-3. The sum and substance of the reasons adopted by the learned appellate judge to acquit A-6 is that the statement of the co-accused cannot be used against him. I am at a loss to understand as to how the case of A-5 can be discriminated from the case of A-6. At least A-6 is the paid employee of the company whereas A-5 is not like that. From the mere fact that A-5, had encashed the cheque in question it cannot be inferred that he is a party to any offence. Under these circumstances, even on the reasons adopted by the learned appellate judge to acquit A-6 I am of the opinion that A 5, who is more or less similarly placed in circumstances and on the facts, is also entitled to an acquittal. There cannot be two opinions on the law laid down by the various courts in India, regarding the use of one co-accused statement against another accused in the same case. The statement of one co-accused can be used against another co-accused in the same case, only by way of lending assurance to materials already collected by the prosecution and placed against the other accused and not in any other case. Under these circumstances, I have no hesitation to hold that except the statement of A-6, since acquitted, to contradict the statement of A-3 and the statement of A-4 and A-6 to contradict the statement of A-5, the prosecution has not placed any other material against them to conclude that the respective statements of A-3 and A-5 are false and they do not reflect the correct state of affairs.
14. At this stage, learned counsel for the respondent brought to my notice that it is not as though A-3 is as innocent as he pleads, but there are documentary evidence available on record which exposes his guilt. For this purpose, learned counsel relied upon the fact that at least in two or three cheques out of the six cheques relating to the transactions above referred to five cheques on interest account and the other regarding Prabhakaran the signature of A-3 is found along with the signature of A-2 and, therefore, it must be held that the offence had been committed with the knowledge and consent of A-3 as well. It is no doubt true that in these cheques A-3 had also signed along with A-2 and it may throw some light on his involvement in the commission of the offence. The answer to this argument by learned senior counsel, Mr. N. T. Vanamamalai, is that the prosecution themselves did not rely upon the material referred to above before the trial court against A-3. Nobody on the side of the prosecution spoke about the third accused signing these cheques along with the second accused. Under these circumstances, the trial court had also no opportunity to put that material as the incriminating material against the third accused in his questioning under Section 313 of the Criminal Procedure Code. When there is so much of failure on the part of the prosecution on the lines indicated above, the submission of learned senior counsel is, if these facts were put against in clear terms against A-3 at any stage during trial, then he would have had the opportunity of explaining his case with reference to his signatures on those cheques. That opportunity had been denied to him and the accused thus was deprived of giving an explanation which may enter into the mind of the learned trial judge to decide one way or the other. It also appears, as pointed out by learned senior counsel, that only for the first time before this court at the fag end of the arguments, learned Government counsel relies upon that material. Opposing these submissions, learned counsel for the respondent brought to my notice the following judgments :
15. Bejoy Chand Patra v. State of West Bengal ; Keki Bejonji v. State of Bombay ; Radha Kishan v. State of U. P. ; Ajit Kumar Chowdhury v. State of Bihar and Mohan Lal v. Ajit Singh . It appears that in all the above referred cases evidence was before the court but there was no questioning of the accused under Section 342 of the Criminal Procedure Code corresponding to Section 313 of the new Code. The accused did not at any stage prior to their case reaching to the High Court or the Supreme Court raise that objection. Under those circumstances, the honourable judges, who decided those cases, held that unless prejudice is established against the accused on account of such non-questioning, such a point could not be allowed to be raised at a later stage. But the position is contra here, There is no oral evidence at all before the lower court on the material referred to above which the prosecution wants to rely upon now. Therefore, the trial court had rightly not put any question to the accused under Section 313 of the Criminal Procedure Code. Under these circumstances the question of the accused pleading prejudice or objecting to the defective questioning under Section 313 of the Criminal Procedure Code at an earlier stage does not arise at all.
16. As already stated, if the third accused had been given an opportunity to explain his signature on those cheques, he would have definitely explained his stand which the court may or may not accept, This valuable right had been denied to A-3. Under these circumstances, it is not possible for this court to take into account the signature of the third accused along with the second accused in respect of two or three cheques relating to the transaction in question and hold him guilty. The other three citations relied upon by learned Government counsel, namely, Madras Vanaspati Ltd. v. Subramanian (S.), ITO [1989] 175 ITR 172 (Mad), Kale Khan Moham-mad Hanif v. CIT [1963] 50 ITR 1 (SC) and Pratap (M. R.) v. Muthukrishnan (V. M.), ITO [1977] 110 ITR 655 (Mad) are not in any way useful to decide the correctness or otherwise of the conviction of A-3 and A-5. In Pratap (M.R.) v. Muthukrishnan (V. M.), ITO [1977] 110 ITR 655 (Mad), it was decided that the expression "person" occurring in Section 277 of the Income-tax Act, 1961, is not restricted to the assessee alone and that the said word must be given its ordinary dictionary meaning which would include any individual who fails to carry out the duty imposed on him by the specific provisions of the Act. In Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC), it was held as follows (headnote) :
"It is well established that the onus of providing the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Income-tax Act. In the absence of such proof, the Income-tax Officer is entitled to treat it as taxable income."
17. The two above referred judgments are helpful in sustaining the conviction of A-2 and A-4.
18. Under these circumstances, Crl. R. C. No. 557 of 1996 is allowed and accused No. 5 in C. C. No. 76 of 1982 on the file of the Additional Chief Metropolitan Magistrate (E.O.I.), Egmore, Madras, is acquitted of the offence alleged against him. The fine amount, if any, paid by him is directed to be refunded to him. Likewise, Crl. R. C. No. 570 of 1996 is also allowed and A-3 in C. C. No. 76 of 1982, on the file of the Additional Chief Metropolitan Magistrate (E.O.I.), Egmore, Madras, is, acquitted of the offence alleged against him. The fine amount, if any, paid by him is directed to be refunded to him. The bail bond if any, executed by A-3 and A-5 shall stand terminated forthwith. Since I am in entire agreement with the courts below in convicting A-2 and A-4, I find no merit in Crl. R. C. No. 568 of 1996. At this stage, learned counsel for the revision petitioner stated that A-2 is 76 years old as on date and A-4 is 67 years old. Therefore, learned counsel pleaded for some leniency in awarding the sentence to them. I heard Mr. Ramaswamy K., learned Government counsel for the respondent, on this aspect. Taking into consideration that the offence had taken place in the year 1975-76, the age of the second accused and the fourth accused are 76 and 67, respectively, and the mental stress, strain and agony they would have undergone all these years, I am inclined to reduce the sentence of imprisonment alone. Therefore, while confirming the conviction imposed on A-2 and A-4 in C. C. No. 76 of 1982 on the file of the Additional Chief Metropolitan Magistrate (E.O.I.), Egmore, Madras, and affirmed in C. A. No. 126 of 1991 on the file of the Principal Sessions Judge, Madras, I am inclined to reduce the period of imprisonment already imposed on them to one till the rising of the court. The fine amount imposed on each one of the petitioners (A-2 and A-4) is confirmed. With this modification in the sentence of imprisonment alone, Crl. R. C. No. 568 of 1996 is dismissed.