Delhi District Court
Ito vs Sh Harsh Bhatia on 30 August, 2024
1 of 15
IN THE COURT OF MAYANK MITTAL
ADDL. CHIEF JUDICIAL MAGISTRATE (Spl. Acts)
CENTRAL, TIS HAZARI COURTS, DELHI
INCOME TAX OFFICE vs. HARSH BHATIA
CC No. : 535780/2016
CNR No. : DLCT02-009019-2016
Date of Institution : 31.03.2016
Name of the complainant : Income Tax Office
its registered office through
Shri U.K. Das, ITO
Ward-50(3)
Dr. S.P. Mukherjee Marg,
New Delhi.
Name of accused : Harsh Bhatia
her parentage and residence R/o 24/17, Second Floor,
Rajender Nagar, New Delhi-110007.
Offence complained of : U/s. 276C(1)/277 of The Income
Tax Act, 1961
Date of Reservation : 01.08.2024
Date of Judgment : 30.08.2024
Plea of accused : Pleaded not guilty.
Final Judgment : Conviction.
Brief facts and reasons for decision of the case:-
1 That the case of the complainant is that accused had filed return of
income for the relevant assessment year on 19.09.2011 declaring
income of Rs.5,37,900/- duly signed and verified by accused.
1.1 Upon scrutiny, notice under Section 143(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act) dated 27.09.2012 and questionnaire dated 23.08.2013 were issued to accused. 1.2 That accused in response to the said questionnaire sent letter dated 16.09.2013 stating that assessee was not maintaining any books of accounts. However, during the assessment proceedings, CC No. 535780/2016 2 of 15 it transpired that accused was receiving income from some other trucks / vehicles, which were not declared to be owned by him and accused admitted said fact vide letter dated 27.12.2013. 1.3 That vide letter dated 13.01.2014 accused offered net income @ 10% of the receipts in respect to the trucks / vehicles not owned by him comes to Rs.14,76,950/-. That after completion of assessment under Section 143(3) of The Act for the A.Y. 2011- 12, an order dated 15.01.2014 was passed wherein taxable income of accused was assessed at Rs.20,29,600/- against the returned income of Rs.5,04,000/- and additional tax demand of Rs.5,88,780/- was raised. However, accused had not challenged the said order and same was attained finality. 1.4 That penalty orders dated 30.07.2014 under Section 271(1) (C) of The Act were passed against the accused and levied penalty of Rs.4,60,903/- and penalty under Section 271A and 271B of The Act were also levied amounting to Rs.25,000/- and Rs.91,840/- respectively. That accused had challenged the said penalty orders before the CIT(A) which was dismissed vide order dated 04.11.2015 and further challenged the order of CIT(A) before ITAT, however, same is pending. 1.5 That show cause notices dated 22.02.2016, 11.03.2016 under Section 279(1) of The Act were issued by Pr. CIT, Delhi to accused for launching of prosecution which was served upon accused through speed post. In response to said notices, reply dated 21.03.2016 was filed by accused, which was considered by Pr. CIT before granting sanction, however, same was not found satisfactory and found that accused willfully not declared his CC No. 535780/2016 3 of 15 true income and by making a false statement in verification and by delivering statements which was false and he either knew or believed to be false for A.Y. 2011-12 committed offence punishable under Section 276-C(1) / 277 of The Act. 2 The recording of pre-summoning evidence was dispensed with, in terms of proviso (a) of section 200 of The Code of Criminal Procedure, 1973 (hereinafter called 'Cr.P.C') as the AR of complainant was a government servant who filed the complaint in discharge of his official duties. Vide summoning order dated 31.03.2016, the accused was summoned. Upon appearance, copy of complaint and supporting documents were supplied to the accused. After recording of pre-charge evidence, charge was framed against accused on 04.01.2019 to which he pleaded not guilty and claimed trial.
3 The complainant examined two witnesses to substantiate the allegations levelled against the accused. Sh. U.K. Dass as CW-1 whereas Sh. G.K. Ravi was examined as CW2 as follows:-
3.1 CW-1: Sh. U.K. Dass stated that he was posted as Income Tax Officer, Ward-50(3) from July 2015 to October 2016 and he had jurisdiction on the case of the accused. CW-1 deposed that present complaint Ex. CW 1/1 was filed under Section 276-C(1) and 277 of The Act for A.Y. 2011-12 against the accused by him in discharge of his official duties after receiving sanction under Section 279 of The Act Ex. CW 1/2 accorded by Pr. CIT-17, New Delhi Sh. Satish Kumar Sharma and corrigendum to order dated 22.03.2016 was passed on 28.03.2016 Ex. CW 1/3 by Sh.
Ajay Kumar, Pr. CIT-17. That CW-1 identified signatures of Sh.
CC No. 535780/20164 of 15 Satish Kumar Sharma and Sh. Ajay Kumar in his official capacity . CW-1 further deposed that accused had filed his return of income Ex. CW 1/4 for the relevant assessment year declaring income of Rs.5,37,900/- which was processed under Section 143(1) of The Act Ex. CW 1/5 and case of the accused was selected for scrutiny, accordingly, notice under Section 143(2) of The Act dated 18.07.2013 and questionnaire dated 23.08.2013 were issued to accused. In response to same, replies dated 16.09.2013 Ex. CW 1/6 ( stating that accused is not maintaining books of accounts under Section 44AE of The Act) and 27.12.2013 Ex. CW 1/7 were received from AR of accused. CW-1 further deposed that another letter dated 13.01.2014 Ex. CW 1/8 was received from AR of accused stating that income of accused from the trucks not owned by him be assessed at 10%. CW-1 further deposed that assessment under Section 143(3) dated 15.01.2014 of the Act was done at a total taxable income of Rs.20,29,600/- and penalty under Section 271(1)(C) of The Act was levied for concealment of true income. That penalty under Section 271A and 271B of the Act as levied by both orders dated 30.07.2014 which were challenged by accused before CIT(A), however said appeal was dismissed vide order dated 04.11.2015 Ex. CW 1/9. That Principal Commissioner of Income Tax Sh. Ajay Kumar had issued two show cause notices dated 22.02.2016 Ex. CW 1/10 and 11.03.2016 Ex. CW 1/11, which were served upon accused through speed post and same were duly responded by AR of accused vide reply dated 21.03.2016 Ex. CW 1/12.
CC No. 535780/20165 of 15 3.1.1 CW-1 during his cross examination stated that as per income tax return for A.Y. 2011-12, the accused had shown income chargeable under the head 'Business' as Rs.5,04,000/-. CW-1 admitted that accused had paid the tax calculated on the additional income as assessed by the department and order levying the penalty under Section 271B of the Act was deleted by CIT (A). CW-1 stated that the then Pr. CIT-17 Sh. Ajay Kumar has retired and department may have his permanent address. CW-1 stated that he had prepared the proposal and sent for according sanction for prosecution to Pr. CIT through Addl. CIT, however, same has not been placed on judicial record. CW-1 stated that he had not passed the assessment order and penalty order. CW-1 had not recorded the statement of accused in the present matter. CW-1 denied the suggestion that assessment orders passed by the department against the accused were time barred or that a wrong case was filed against the accused or that he deposed falsely.
3.2 CW-2 Sh. G.K. Ravi in his examination deposed that during 2013-14 he was posted as Income Tax Officer, Ward 33(4) and had assessment jurisdiction over accused. That he had passed the assessment order under Section 143(3) of The Act dated 15.01.2012 Ex. CW 2/A framing the assessment of accused for A.Y. 2011-12 determining the taxable income as Rs.20,29,600/-. That on 30.07.2014, CW-2 had passed the penalty order under Section 271(1)(C) of The Act levying the penalty of Rs.4,60,903/- on accused Ex. CW 2/B and on the same day i.e. CC No. 535780/2016 6 of 15 30.07.2014, CW-2 had passed the penalty order under Section 271A and 271B of the Act levying penalty of Rs.25,000/- and 91,840/- respectively Ex. CW 2/C and Ex. CW 2/D respectively. CW-2 deposed that prior to passing of assessment order, he had issued notice under Section 143((2) of The Act dated 18.07.2013 Ex. CW 2/E to accused and on 23.08.2013, CW-2 had issued a detailed questionnaire Ex. CW 2/F to accused. That on 16.09.2013 and 27.12.2013, the CA of accused had filed a replies. That on 13.01.2014 one more reply was sent by the CA of accused. CW-2 further deposed that after passing the assessment order he had issued penalty notices under Section 271(1)(c), 271A and 271B of the Act to which a reply was filed by the CA of accused on 30.01.2017 Ex. CW 2/G and stated that assessment order and the penalty orders were duly approved by the approving authorities.
3.2.1 CW-2 in his cross examination stated that he was posted as Income Tax Officer in the year 2013-14 of Ward 33(4), New Delhi and had assessment jurisdiction over accused. That case of the accused was selected for scrutiny assessment by issuing notice under Section 143(2) of The Act and after issuance of notice, CW-2 had received reply from accused. That during the course of assessment, the accused had filed reply dated 27.12.2013. CW-2 stated that he was not aware about the status of appeal filed against the penalty order, as he got transferred out of the charge. 4 Upon conclusion of post charge evidence, statement of accused was recorded u/s 313 Cr.P.C on 02.05.2024. The accused elected to lead CC No. 535780/2016 7 of 15 defence evidence and examined himself in defence evidence as DW-1.
4.1 DW-1 stated that he is the accused in the present matter and studied till 12th class. That all the ITRs have always been filed by his appointed CAs. And does not know how to file the income tax return neither anybody from family knows how to. That all his income tax returns were filed through different CAs change over course of time. DW-1 further stated that when he received the assessment proceedings order Ex. CW 2/F, the same was sent to his CA Sh. Ramesh Gupta and same was replied by him through reply Ex. CW 1/7. In the reply Ex. CW 1/7 all the details were provided to the department. Subsequently to show his bonafide his CA even issued a letter Ex. CW 1/8 to the department in which to show his bonafide. It was requested that the net income in respect of the trucks shall be assessed at 10%. Furthermore no records were maintained and the same was communicated to the concerned department. All the tax filings are done by the appointed CAs only. Furthermore, DW-1 had paid the difference proposed by the Income Tax Department to the tune of Rs.4,60,903/-. DW-1 further deposed that a compounding application has been moved by him to the concerned department and is still pending adjudication and that a penalty was imposed upon him and the same was set aside by the ITAT.
4.1.1 During his cross examination DW-1 stated that the ITR for A.Y. 2011-12 was filed by his CA at his instructions declaring income of Rs.5,37,900/- after duly verifying the CC No. 535780/2016 8 of 15 same. Anil Chadha & Company, Chartered Accountant Firm, were his CA. DW-1 admitted that he had received notices Ex. CW 2/E and Ex. CW 2/F, which were replied by him through Mr. Anil Chadha vide notice Ex. CW 1/6. Thereafter the reply to notices of assessment was replied by Ramesh Gupta & Company, CA Firm on his behalf vide Ex. CW 1/7, Ex. CW 1/8. DW-1 admitted that after the assessment a tax demand of Rs.4,60,093 was additionally imposed upon DW-1 or that he had not challenged the assessment order before CIT (Appeals) and accepted the additional demand. DW-1 denied the suggestion that he had deliberately concealed his true income at the time of filing his original ITR in order to evade the income tax, penalty or interest or that he had maintained the records but deliberately did not produce the same before the department to evade the income tax, penalty or interest or that he had deliberately filed the false ITR on verification in order to evade the income tax, penalty or interest. DW-1 further denied that the ITAT had set aside the penalty order only on technical ground and not on merits.
5 Final arguments in the case were concluded on 01.08.2024. 6 I have already heard the arguments perused the record including the written submissions and case law filed by parties. Before proceeding ahead, it is beneficial to refer to the relevant provisions of Income Tax Act and the cases decided by hon'ble Superior Courts with regard to question and issues which this court has to decide.
276C. (1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable [or imposable, or under CC No. 535780/2016 9 of 15 reports his income,] under this Act, he shall, without prejudice to any penalty that may be [or imposable, or under-reports his income,] on him under any other provision of this Act, be punishable,-
(i) in a case where the amount sought to be evaded [or tax on under- reported income] exceeds [twenty-five] 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 [two 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 true, he shall be punishable,--
(i) in a case where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds twenty-five 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 two years and with fine.
[278E. Presumption as to culpable mental state.-(1) In any prosecution for any offence under this Act which requires a 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.
(2) For the purposes 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 establish by a preponderance of probability."] Hon'ble Apex Court in 'Sasi Enterprises vs. ACIT' (2014) 5 SCC 139, where it is observed:
30. Section 278E deals with the presumption as to culpable mental state, which was inserted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986. The question is on whom the burden lies, either on the prosecution or the assessee, under Section 278E to prove whether the assessee has or has not committed willful default in filing the returns. Court in a prosecution of offence, like Section 276CC has to presume the existence of mens rea and it is for the accused to prove the contrary and that too beyond reasonable doubt.
Resultantly, the appellants have to prove the circumstances which prevented them from filing the returns as per Section 139(1) or in response to notices under Sections 142 and 148 of the Act."
CC No. 535780/201610 of 15 Hon'ble Apex Court in Prem Dass vs. ITO Prem Dass vs. ITO (1999) 236 ITR 683 has observed :
"Willful attempt to evade any tax, penalty or interest chargeable or imposable under the Act under Section 276C is a positive act on the part of the accused which is required to be proved to bring home the charge against the accused. Similarly a statement made by a person in any verification under the Act can be an offence under Section 277 if the person making the same either knew or believe the same to be false or does not believe to be true. Necessary mensrea, therefore, is required to be established by the prosecution to attract the provisions of Section
277. We see nothing in Section 132(4)(A) which would establish the ingredients of aforesaid two criminal offence contemplated under Sections 276C and 277 of the Indian Income Tax Act. It may be noticed at this point of time that the Tribunal while interfering with the penalty imposed under section 271(1)© of the Act came to a positive finding that there is no act of concealment on the part of the assessee and he had returned the income on estimate basis. The Tribunal, further found that it is a case purely on difference of opinion as to the estimates and not a case of concealment of income or even furnishing of inaccurate particulars of income."
7 During final arguments it is submitted by learned SPP that present complaint has been filed against the accused as during the A.Y. 2011-12, the accused has not disclosed his income completely. It is submitted that as per income tax return filed by accused was in the business of transportation and had shown only the income earned by him from the trucks owned by him. It was transpired during the scrutiny / inquiries that accused earned income from trucks not owned by him, which he had taken on hire. It is submitted that accused has also not produced any books of accounts on the ground that his case does not fall within the parameters of Section 44AA and 44AB of The Income Tax Act, 1961, however, these provisions are very much applicable to accused and accused was liable to maintain books of accounts. It is submitted that as per the record accused has concealed the income of Rs.2,76,949/- from the trucks not owned by him during the A.Y. 2011-12. It is submitted that CC No. 535780/2016 11 of 15 complainant had examined two witnesses during trial Sh. U.K. Das as CW-1 and Sh. G.K. Ravi as CW-2 who have proved complaint Ex. CW 1/1, sanction Ex. CW 1/2, Corrigendum order dated 28.03.2016 Ex. CW 1/3, copy of income tax return Ex. CW 1/4, intimation regarding processing under Section 143(1) of The Act Ex. CW 1/5, copy of reply dated 16.09.2013 Ex. CW 1/6, letter dated 27.12.2013 Ex. CW 1/7, letter dated 13.01.2014 Ex. CW 1/8, copy of order of appeal under Section 271B of The Act Ex. CW 1/9, show cause notice dated 22.02.2016 Ex. CW 1/10 and show cause notice dated 11.03.2016 Ex. CW 1/11, reply to show cause notice dated 22.02.2016 (Ex. CW 1/10) is Ex. CW 1/12, assessment order Ex. Cw 2/A, penalty order under Section 271(1)(c) Ex. CW 2/B, penalty orders under section 271A Ex. CW 2/C and 271B of The Act Ex. CW 2/D, notice under Section 143(2) of The Act dated 18.07.2013 Ex. CW 2/E, detailed questionnaire Ex. CW 2/F, penalty notices under section 271(1)(c), 271A and 271B of The Act Ex. CW 2/G. It is submitted that accused has led defence evidence and shifted the burden of filing the income tax return on his CA however, during his cross examination accused has admitted that ITR for A.Y. 2011-12 was filed by his CA as per instructions and after that same has been duly verified by him. It is submitted that accused has not challenged the assessment order and has deposited the demanded tax. It is submitted that penalty imposed on accused has been deleted but the same been deleted on technical grounds. Learned SPP has relied upon judgment of Sasi Enterprises vs. ACIT (SUPRA), Mak Data Private Limited vs. CIT-II (Civil Appeal No.9772/2013), SP Murugappan Vs. ITO (MANU/TN/0223/1990), CC No. 535780/2016 12 of 15 K A Khaja vs. Sixth ITO (MANU/TN/0207/1990) to assert his point that the word evade occurring in Section 276C of The Act will take in non disclosure as well, depending upon the facts and the mense rea of the petitioner and explanation to Section 276C of The Act dealing with examples of willful attempts are only inclusive and not exhaustive and that explanation, clause-II and clause-IV of Income Tax Act would certainly permit the continuance of the prosecution for a willful attempt to evade tax which should include a case of any person having in his possession and control books of accounts or other documents containing and false entry or statement and that the voluntary disclosure does not release the assessee from the mischief of penal proceedings.
8 Learned counsel for accused has submitted that accused has been co-operating with the complainant department in good faith during the inquiries by the department and during the trial of this case. It is submitted that accused is not a well educated person and has been relying on his CAs for filing of his ITRs. It is submitted that books of accounts was not maintained by the accused as his case was covered under Section 44AA and Section 44AB of The Act and as a result of which, the accused could not disclose his income from the trucks which were not owned by him. It is submitted that neither he had been advised nor he knew that he has to disclose income earned from the trucks not owned by him as well. It is submitted that as complainant could not show any willfulness on the part of the accused, the accused should be acquitted in the present case. 9 From the perusal of record and consideration of arguments and written submissions, there is no doubt that accused has not CC No. 535780/2016 13 of 15 disclosed his complete income / profit earned by him in his ITR for A.Y. 2011-12 and during scrutiny / inquiry accused himself has furnished details of income earned by him from sources other than the trucks owned by him. The perusal of the order passed by CIT(A)-17 dated 04.11.2015 shows that accused was duty bound to maintain books of accounts, however, the penalties for not auditing the books of accounts was deleted on the ground that he has already been penalized for not maintaining the books of accounts. The question which this court has to decide is whether the non disclosure of complete income in A.Y. 2011-12 by accused was willful and whether accused is liable to be convicted for offence under Section 276C(1) of The Act.
10 The complaint mentions in paragraph No.9 that the facts mentioned in preceding paragraph shows that accused has willfully not mentioned his true income in the ITR for A.Y. 2011-12, however, neither CW-1 Sh. U.K. Das nor CW-2 Sh. G. K. Ravi has stated in their examination in chief that the non disclosure of complete income by accused during A.Y. 2011-12 was willful. Though there is presumption of existing mense rea on the part of accused under Section 278E of The Act, however, in case of Prem Das (SUPRA) hon'ble Apex Court has explained the scope of Section 276C of The Income Tax Act, 1961 where it has been explained that for conviction under Section 276C(1) of The Act, the prosecution has to show some positive act on the part of the accused so as to make the act of accused in non disclosure or non payment, a willful act. In the case at hand, the non disclosure of true income has been explained by the accused on the ground that the income CC No. 535780/2016 14 of 15 tax return was being filed by his CAs as he is not much qualified person, however, he had admitted during his cross examination that return was being filed as per instructions and on his verifications. It is not the case of accused that his return of income for A.Y. 2011-12 was filed without his authority or without his knowledge. The non disclosure of substantial income by the accused does not seem to be an act of inadvertence or mistake of his disclosing his true income to his CA who had filed his return for A.Y. 2011-12 and the same fact of non disclosure of his true income by inadvertence or otherwise has not been deposed by accused in his defence evidence where he himself appeared as DW-1. From the facts on record and cross examination of the complainant's witnesses and examination of accused himself, the substance is found in the submissions advanced by learned SPP that accused is taking a false plea that he has not maintained the books of accounts and even if this plea of accused is to be accepted, accused has not yet explained either during the inquiries before the department nor during evidence before this court that why he has not produced the account book (may be not in appropriate form as required for the purpose of audit) where accused writes his income and his expenses. The court finds substance in the submission of learned SPP that the conduct of accused falls within explanation-IV to Section 276C of The Act which states "causes any circumstance to exist which will have the effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this act or payment thereof". The court further finds substance in the submission of learned SPP that on the face of it non disclosure of true and correct income is willful CC No. 535780/2016 15 of 15 on the part of accused and further that non production of books of accounts proves the absolute willfulness on the part of accused as accused has closed all the doors to determine the true and correct income by the department on the ground that he has not maintained the same. It seems hard to believe that a person who is carrying on business of transport with trucks owned by him as well as trucks taken on rent / hire, does not maintain an account of his earning by way of his own trucks and by way trucks taken on rent / hire by him.
11 On the basis of above discussion, the court has reached to a considered finding that non disclosure of true income which is an admitted fact on the part of accused was willful as well. Accordingly, accused is convicted under Section 276C(1) read with Section 277 of The Income Tax Act, 1961.
12 Digitally signed by MAYANK MAYANK MITTAL Announced in Open Court MITTAL Date: 2024.08.30 17:42:54 +0530 on 30th August, 2024 MAYANK MITTAL ACJM(Special Acts), CENTRAL TIS HAZARI COURTS DELHI This judgment consists of 15 pages and each and every page of this judgment is signed by me.
CC No. 535780/2016