Delhi District Court
Ito vs M/S Marudhar Leasing Ltd. on 18 December, 2012
IN THE COURT OF SH. GORAKH NATH PANDEY
ADDL CHIEF METROPOLITAN MAGISTRATE (Spl. Acts): CENTRAL
TIS HAZARI COURTS, DELHI
ITO vs M/s Marudhar Leasing Ltd.
CC No.38/4
JUDGEMENT
(a)Serial no. of the case : 02401R0022651998
(b)Date of commission of offence : Assessment year 198586
(c)Name of complainant : Sh. SS Khemwal, ACIT,
Central Circle 10, New Delhi
(d)Name, parentage, residence: 1)M/s Marudhar Leasing Ltd.
4, Community Centre
East of Kailash, New Delhi
2) Mahaveer Dass Saad (PO)
r/o C29, Krishna Nagar
Shahdara, Delhi
3) Chandra Lekha Mehta
r/o C52, Soami Nagar, New Delhi
both directors of
M/s Marudhar Leasing Ltd.
(e)Offence complained of/ proved : U/s 276C(2)/278B of IT Act, 1956
(f)Plea of accused : Pleaded not guilty.
(g)Final order : Accused no.1 and 3 acquitted
(h)Date of such order : 18.12.12.
Date of Institution of complaint: 28.03.98 Date of Reservation of Judgment : 18.12.12.
Date of Pronouncement of Judgment : 18.12.12.
Brief statement of the reasons for the decision:
1. The complainant Sh. S.S. Khemwal, the then Assistant Commissioner of Income Tax had filed the present complaint u/s 276C(2)/278B of the Income Tax Act, 1961 (hereinafter to be referred as Act) against the accused persons.
ITO vs M/s Marudhar Leasing ltd. 1 of 10 As per the prosecution story, the accused persons are facing allegations of offence punishable u/s 276C(2) r.w.s 278B of the Act with the allegations that for the Assessment Year 199192, accused company and accused no.2 and 3 who are/were directors and looking after its affairs, filed the return of income on dated 28.06.85 declaring a loss of Rs.23,350/ but the assessment was completed on 31.03.94 and taxable income of the accused was assessed at Rs.15,93,814/ and accused were asked to pay the tax amounting to Rs.15,61,380/. Accused filed the appeal against the said assessment order but the CIT(A) vide his order dated 08.11.89 confirmed the assessment order. Thereafter, accused filed second appeal which was also dismissed by the Hon'ble ITAT vide order dated 01.09.94. Since the accused had not made payment of the above said demand, present complaint is filed by the complainant for commission of an offence punishable u/s 276C(2) read with section 278B of the Income Tax Act, 1961, against the accused persons.
2. Since beginning accused no.2 Mahaveer Dass Saad absented himself and accordingly he was declared Proclaimed Offender vide order dated 18.10.01.
3. After precharge evidence, charge was framed against the accused no.1 company (being represented through accused no.3) and accused no.3 Chanderlekha Mehta on 06.05.03 u/s 276C(2) r.w.s. 278B of the Income Tax Act, to which she pleaded not guilty and claimed trial.
4. In order to substantiate the allegations against the accuseds, the complainant ITO vs M/s Marudhar Leasing ltd. 2 of 10 SS Khemwal examined himself as PW1. In his evidence PW1 reiterated the facts of the case and proved on record the return of income Ex.PW1/1, assessment order Ex.PW1/2, demand notice Ex.PW1/3, order of CIT(A) Ex.PW1/4, order of the ITAT Ex.PW1/5, penalty order/proceedings u/s 221(1) vide Ex.PW1/6, Ex.PW1/7 and Ex.PW1/9, another demand notice Ex.PW1/8, complaint Ex.PW1/10 and sanction to file present prosecution Ex.PW1/11.
5. Statements of accused was recorded u/s 313 Cr.P.C. In her statements accused denied the allegations and stated that no notice has been served upon her. She has never been responsible and incharge of accused no.1, all affairs of the accused no.1 were handled and taking care of by accused no.2. She was just a nominee director, she never conducted the business affairs of the company and was not acquainted with the business transactions and the income tax return submitted by the company. All the business transactions and affairs of the accused no.1 company were effected and executed by accused no.2 and moreover, the department has already seized the assets of the accused no.2 and attached the accounts of number of parties to whom the accused no.1 company had business relations and the Department has already recovered the amount much more than the liability.
In defence evidence the accused no.3 examined Sh. Satish Bansal, Manager Accounts, M/s Orient Obrasives Ltd. as DW1, Sh. HC Bantwal (ITO) as DW2, Sh. Suresh Chand Sharma, employee of M/s Ram Lal Prahlad Kumar as DW3, Sh. Chand Singh Sarsar (ITO) as DW4 and Sh. Sanjay Kumar (ADIT ITO vs M/s Marudhar Leasing ltd. 3 of 10 Systems) as DW5.
DW1 Sh. Satish Bansal deposed that his company had transaction with accused no.1 but he does not remember the period of transaction. DW1 further deposed that he does not remember as to how much loan was taken by his company from accused no.1 and how much loan was repaid by his company and as per his calculation there was a balance of about Rs.15,000/ outstanding towards accused no.1. DW2 also deposed that in compliance of letter 31.01.96 he deposited a sum of Rs.15,000/ (due against accused no.1 company) to the Income Tax Department by Debit Voucher dated 15.02.96.
DW2 Sh. HC Bantwal deposed regarding deduction of TDS of different parties and deposit of same with Central Government and also proved on record some TDS certificates issued in favour of accused no.1 Ex. DW2/A to Ex.DW2/C in this respect.
DW3 is Sh. Suresh Chand Sharma. From the statement of this witness it is cleear that a fire took place on 22.06.93 vide certificate Ex.DW3/B issued from Fire Services, at the business premises of M/s Ram Lal Prahlad Kumar due to which he could not produce the original relevant record.
DW4 Sh. Chand Singh Sarsar proved on record regarding deduction TDS of from different parties and deposit of the same and proved on record some TDS certificate vide Ex.PW4/1 to Ex.PW4/3 in this respect. PW3 also deposed that agricultural land was attached by TRO against the tax demand outstanding but he does not know the details of the same. While PW4 Sh. Sanjay Kumar deposed that he cannot tell regarding the documents i.e. ITO vs M/s Marudhar Leasing ltd. 4 of 10 assessment records and TDS certificate. The witness further deposed that the assessment records relevant to Assessment Year 198787 to 199091 are presently not traceable. The witness further deposed that he has no knowledge whether the tax demand amounting to Rs.5.5 lacs for AY198586 was recovered from Jain Brothers and tax demand amounting to Rs.50,000/ with interest for AY 198586 was recovered from Ram Lal Prahlad Kumar after attaching the account and the copy of the ledger and the attachment letter was given to the accused.
DW5 is Sh. Sanjay Kumar who deposed regarding the document Ex.DW5/1 supplied to the accused under RTI application.
6. I have heard the arguments on behalf of both the parties and gone through the records of the case. I have also gone through the written arguments filed on behalf of accused and considered the relevant provisions of the Income Tax Act, 1961.
7. This complaint is filed by the complainant to punish the accused u/s 276C(2) read with section 278B of the Act and the charge was framed against the accuseds vide order dated 31.01.06 u/s 276C(2) r.w.s. 278B of the Act. The relevant provisions of section 276(2) and 278B are reproduced herein below: Section 276C(2). If a person willfully attempts in any manner whatsoever to evade the payment of any tax, penalty or interest under this Act, he shall, without prejudice to any penalty that may be imposable on him under any provisions of this Act, be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend three years and shall, in the discretion of the court, also be liable to fine.
ITO vs M/s Marudhar Leasing ltd. 5 of 10 Explanation. For the purposes of this section, a willful attempt to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof shall include a case where any person i. has in his possession or control any books of account or other documents (being books of account or other documents relevant to any proceeding under this Act) containing a false entry or statement; or ii. makes or causes to be made any false entry or statement in such books of account or other documents; or iii. willfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents; or iv. causes any other 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 the payment thereof.] [278B. Offences by companies. (1) where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
Provided that nothing contained in this subsection shall order render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
8. During the course of argument, learned defence counsel argued that the tax demand was to be created after adjustment of all prepaid taxes and tax deducted at sources and the said factum has duly been admitted by PW1 in his cross examination but in the present case the Assessing Officer did not take into consideration all the prepaid taxes, tax deducted at sources and the amount recovered from various parties and bank (by attaching the account of the accused company), therefore, alleged tax demand is liable to be disbelieved and the complainant failed to prove that the accused did not pay the taxes in accordance with law. It is further argued that while coming to the ITO vs M/s Marudhar Leasing ltd. 6 of 10 alleged tax demand, the Assessing Officer did not consider the amount of taxes deducted by various parties while paying the interest on loan advanced to them. It is also argued that the Assessing Officer while coming to the conclusion of alleged attempt to evade the tax, has not considered the amounts recovered through attachment of assets/accounts etc. from various parties. Learned defence counsel further argued that only 'tax' is to be recovered from the 'directors and no other demand i.e. 'interest' or 'penalty' can be recovered from the director(s) u/s 179 of the IT Act. Learned defence counsel also relied upon the judgment reported as "Sanjau Ghai vs Asstt. CIT & ors in WP(C) 2303/2012 & 5175/2012 dated 11.10.12(DHC)" in support of claim and contentions.
9. As mentioned the charge was framed against the accused vide order dated 31.01.06 for the offence u/s 276C(2) r.w.s. 278B of the Act as the accused failed to pay the due tax in view of the demand notice for the Assessment Year 198586. The prosecution has examined only one witness i.e complainant as PW1 and the prosecution did not bother to examine the most import witness i.e Assessing Officer who conducted/completed the assessment in the year 1988 to prove the contents of the complaint. The assessment order Ex.PW1/5 appears to have been proved on record in a technical manner because these documents are ten years old prior to the appointment of the witness and exhibition of these documents was also vehemently objected by the learned defence counsel. Penalty order u/s 221 of the Act dated 19.09.94 prepared by one Mr. Jai Raj Kumar is also objected by the learned defence counsel being ITO vs M/s Marudhar Leasing ltd. 7 of 10 prepared or signed prior to the appointment of the witness. It appears that the complainant/PW1 is not aware regarding most of the proceedings nor participated in any proceedings which is pending before this court and he has only filed the present complaint and deposed on the basis of socalled records. In his cross examination PW1 stated that had gone through the file several times and he can identify the writing and signature of each of the assessing officer who had dealt with the assessment of the accused. No doubt a person can identify signature/writing of any person after perusing the same again and again but a person cannot tell about the personal knowledge of the persons who conducted the assessment of the accused. It is the Assessing Officer who can tell and explain each and every thing regarding the assessment proceedings conducted by him.
The testimony of PW1 was totally shattered during the cross examination as the witness failed to answer the material questions asked during the cross examination. The witness failed to depose as to what amount was recovered through recovery/attachment of assets/accounts etc. from various parties and as to how much amount is left to be recovered. Even the complaint does not disclose as to how and in what manner the accused attempted to evade tax. In his cross examination PW1 stated that he does not remember whether any amount was recovered by the attachment of bank account of the company, of IOB, Vijay Bank and also Bank of India. The witness further stated that it is a matter of record, whether the accounts of M/s Orient Abrasives Ltd., Mr. SK Rajgaria, M/s Ram Lal Prabhat Kr. and M/s B.R. ITO vs M/s Marudhar Leasing ltd. 8 of 10 Arora and Associates and Mishri Mal Nawaji were attached to satisfied the demand made in the present complaint before filing of the complaint. The witness even failed to answer the question regarding recovery of due from the accused and proceedings conducted in this respect etc.. However, from the testimony of DWs and documents proved on record by them, clearly shows that some amounts were recovered through recovery/attachment of assets/accounts etc from various parties who had dealing with the accused. The complainant cannot be permitted to recover the tax due or continue prosecution in such a mechanical manner when the department has no answer that as to how much amount is recovered and as to how much amount is left due. Witness even failed to depose that whether there is any liability on the accused or not. Therefore, the testimony of PW1 cannot be relied and is not of much help to the complainant.
The accused have denied the allegations in statement recorded u/s 313 Cr.P.C. and contentions of the accused is corroborated by the testimony of DW1, DW2 and DW4. In his evidence DW1 clearly stated that he had deposed a sum of Rs.15,000/ to the Income Tax Department towards due against the accused no.1 company. DW2 and DW4 have also deposed that regarding deduction of TDS from different parties and from the cross examination of PW1 it appears that the prepaid taxes and taxes deducted at sources from various parties on account of accused no.1 company, was not considered by the Assessing Officer. DW2 has also admitted of various deposits of TDS and debit vouchers in his examination which shows that the Assessing Officer ITO vs M/s Marudhar Leasing ltd. 9 of 10 while assessing the income of taxable income of the accused did not consider in the same and similarly, this fact with regard to the payment by M/s Orient Abrasives Ltd. after deducting the tax was also admitted by DW1. The complainant, therefore, failed to prove the allegations leveled against the accused beyond reasonable doubt.
10.In view of the foregoing discussions and facts and circumstances of the case it is held that the complainant has failed to prove the allegations leveled in the complaint against the accused beyond reasonable doubt. Consequently, accused no.1 and 3 are acquitted of charge leveled against them. Bail bonds stand cancelled and surety is discharged. security if any be returned back after endorsement cancelled thereupon and file be consigned to the record room.
(GORAKH NATH PANDEY) ACMM(Special Acts), CENTRAL TIS HAZARI COURTS DELHI Announced in open court on 18.12.12.
ITO vs M/s Marudhar Leasing ltd. 10 of 10