Punjab-Haryana High Court
Anand Swarup Trehan And Sons And Others vs Income-Tax Officer on 19 November, 1998
Equivalent citations: [1999]238ITR708(P&H)
Author: R.L. Anand
Bench: R.L. Anand
JUDGMENT R.L. Anand, J.
1. By this order I am disposing of two Criminal Revisions Nos. 1228 and 1229 of 1998 titled as Anand Swarup Trehan v. ITO as in the opinion of this court there is a common question of law which is supposed to be discussed for the purpose of disposal of both the revisions, For the facts purposes only I have quoted the facts from Criminal Revision No. 1228 of 1998.
2. The Income-tax Officer, Chandigarh, filed a complaint under section 276B of the Income-tax Act, 1961, against Anand Swarup Trehan and Sons alleging that the petitioner claimed to have engaged certain sub-contractors in order to carry out the works and claimed to have paid a total sum of Rs. 2,37,621.45 to the sub-contractors as per details given in annexure-B attached with the complaint. Accused No. 1 was required to deduct tax at source at the rate of one per cent. from the subcontractors before making the payments to them as required under section 194C of the Income-tax Act. Accused No. I had failed to deduct the tax at source as required under the Act without reasonable cause or excuse for the assessment year 1985-86, the return of which was filed on June 10, 1985. To this effect a show-cause notice was issued to accused No. 1 asking as to why the prosecution should not be launched against them for non-deduction of tax at source. The said show-cause notice was served on the assessee-firm through its accountant. A reminder to this effect was sent on February 4, 1986, and the departmental notice server visited a number of times at the given address of accused No. 1 several times but no partner was available. Ultimately, the show-cause notice was served by affixation asking the assessee to file a written statement. Despite the fact that three opportunities were given to file the written statement, respondent No. 1 of the complaint of which respondents Nos. 2 to 7 are the partners and in charge of the conduct of the business, did not give any reply and as such the respondents of the complaint are jointly and severally liable for the punishment under section 276B of the Income-tax Act.
3. The pre-charge evidence in the shape of testimony of Shri B. S. Sandhu was recorded. It was closed on August 19, 1997. The learned Magistrate in the impugned order dated September 29, 1998, formed an opinion that a prima facie case for an offence punishable under section 276B of the Income-tax Act was made out and he decided to frame the charge. Aggrieved by the order, the present Revision No. 1228 of 1998 has been filed.
4. In Criminal Revision No. 1229, the contractor paid a sum of Rs. 3,00,149 to the sub-contractors for the assessment year 1984-85 the return for which was filed on August 1, 1984. In Criminal Revision No. 1229 of 1998 the impugned order was passed on September 29, 1998, by adopting the same reasons which were given in the impugned order out of which Revision No. 1228 arose. The order vide which learned Chief judicial Magistrate, Chandigarh, decided to frame the charge against the petitioner is contained in paras. 7 to 13 of the order which I would like to quote as follows :
"Initiating his arguments, it is contended on behalf of the accused that no offence under section 276B of the Income-tax Act, is made out because there is no averment in the complaint that the accused was to make the payment of more than Rs. 10,000 as contemplated under section 194C of the Act. It is further his plea that the amount so calculate by the Department is less than Rs. 10,000 and, therefore, there is no liability on the part of the accused to deduct the amount of tax from the payment made to the sub-contractor. It is further contended by him that the prosecution was launched without reasonable cause and excuse and no chance was given to the accused as contemplated under sections 220 and 221 of the Act. He further urged that the amount is still lying deposited with the Department and it is only the technical default and both the accused deserve to be discharged at the very outset. To support his views, he has relied upon the case in Bee Gee Motors and Tractors v. ITO [1996] 218 ITR 155 (P&H), Hanuman Rice and Oil Mills v. State of Bihar [1997] 226 ITR 401 (Patna) and Sequoia Construction Co. Pvt. Ltd. v. P. P. Suri, ITO [1986] 158 ITR 496. (Delhi).
To counter the same, it is contended on behalf of the complainants that on the basis of pre-charge evidence concluded by the complainant, it is abundantly clear that accused No. 1 was bound to deduct the tax at the rate of one per cent. from the payments made to the sub-contractors, and since the same has not been deducted the offence under section 276B of the Income-tax Act is complete. He further urged that none of the judicial pronouncements relied upon by learned counsel for the accused is of any help to the accused because the case is at the charge stage and the accused cannot be discharged.
Heard. The contentions of both the parties considered. Section 194C imposes a liability upon the contractor and sub-contractor. Section 194(2) of the Income-tax Act, 1961, stipulated that any person (being a contractor and not being an individual or a Hindu undivided family), responsible for paying any sum to any resident in pursuance of a contract with the sub-contractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub-contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent. of such sums as income-tax on income comprised therein. The law has imposed a duty upon the shoulders of the person who is responsible to pay any sum to the sub-contractor for carrying out any of the work to be done by him. Section 194(3) of the Act further stipulates that no deduction shall be made under sub-section (1) or sub-section (2) from any sum credited or paid in pursuance of any contract the consideration for which does not exceed Rs. 10,000. Learned counsel for the accused has tried to derive the benefit of this clause and it is his plea that the consideration was less than Rs. 10,000 for each contractor and there is no averment to this effect in the complaint itself.
After giving due consideration to this submission of learned counsel for the accused, I do not find any reason to accept the same at the. time of framing of charge. As per the averments of the complaint, a payment of Rs. 2,37,621.45 was made to the sub-contractors as per the details given in annexure-B with the complaint, It is nowhere mentioned in the Act that the payment should be made by a single contract and it should not exceed Rs. 10,000. It speaks only to the effect that the sum credited or paid in pursuance of any contract, the consideration of which does not exceed Rs. 10,000. Even if this contention of learned counsel for the accused is taken to be true at its face value, annexure B is sufficient to nullify this contention of learned counsel for the accused. As per this annexure the payment made to the sub-contractor for each contract exceeds Rs. 10,000. In the given circumstances, I am afraid to give any weight to this contention of learned counsel for the accused.
Nextly, it is the plea of learned counsel for the accused that the accused were not given an opportunity to show any reasonable cause and excuse and therefore, whole of the proceedings are vitiated. This contention of learned counsel for the accused, if analysed in the light of evidence coming before the court, does not carry any conviction with the court. As per the averments of the complaint itself, the accused was given a show-cause notice as to why the prosecution proceedings should not be launched against the accused for non-deduction of tax at source. A copy of the show-cause notice is also annexure C said show-cause notice was served upon the firm, i.e., accused No. 1, through its accountant, Subsequently, another reminder was sent on February 4, 1986, and the departmental notice server visited a number of times at the given address of accused No. 1 but no partner was available. It is further averred in the complaint that ultimately the show-cause notice was served upon, the accused by affixation by Sh. Baldev Verma, Inspector, on February 14, 1986, asking the accused to file written reply by February 20, 1986. In the given circumstances, it can be conclusively said that accused No. 1 was given reasonable opportunity to show cause as to why the prosecution should not be initiated against accused No. 1 and the remaining accused. In view of the averments contained in the complaint itself, the contention of learned counsel for the accused is liable to be rejected at the very outset. In view of the averments contained in the complaint, itself, the judicial pronouncement titled Sequoia Construction Co. Pvt. Ltd. v. P. P. Suri, ITO [1986] 158 ITR 496 (Delhi), is not applicable to the facts and circumstances of the case and is distinguishable on facts.
Nextly, the question of launching the prosecution for a petty amount has attracted the attention of the court as contended on behalf of the accused. It is urged on behalf of the accused that the amount so calculated is a very petty one and the same is already lying deposited with the complainant and, therefore, the accused should be discharged.
I have analysed this contention of learned counsel for the accuse an have found that the same lacks merit at this stage. As per the averments of the complaint and evidence coming before the court, it is crystal clear that accused No. 1 was bound to deduct one per cent. income-tax from the amount paid to the sub-contractors and he did not comply with that direction of law as contemplated under section 194C(2) of the Act. The question of giving benefit to the accused with regard to the late launching of the prosecution or the amount not exceeding Rs. 10,000 can only be considered after completing the evidence and not at the stage of framing of the charge. At the time of consideration of charge only the pre-charge evidence coming before the court is to be considered (sic) the opinion that a prima facie case for an offence punishable under section 276B of the Act is made out against both the accused accordingly. The case laws Bee Gee Motors and Tractors v. ITO [1996] 218 ITR 155 (P&H) and Hanuman Rice and Oil Mills v. State of Bihar [1997] 226 ITR 401 (Patna), are not applicable to the facts and circumstances of the case as the same are distinguishable on facts and circumstances of the case. Let charge be framed against the accused, accordingly."
5. Apart from dealing with the submissions raised by learned counsel, for the petitioner, Shri Baldev Kapoor, I would like to discuss with regard to the proposition as to whether it gives an absolute right to a litigant to directly come to the High Court against the order subject to revision if that order is passed by a Magistrate/Chief judicial Magistrate. In this regard I will refer to section 397 of the Code of Criminal Procedure which lays down that the High Court or any Sessions judge may call for and examine the record of any proceeding before any inferior criminal court situate within its or his local jurisdiction for the purpose of satisfying itself or himself as to the correctness, legality or propriety of any finding, sentence or order, recorded or passed, and as to the,.regularity of any proceedings of such inferior court, and may, when calling for such record, direct that the execution of any sentence or order be suspended, and if the accused is in confinement, that he be released on bail or on his own bond pending the examination of the record. Sub-section (2) of section 397 further lays down that the powers of revision conferred by sub-section (1) shall not be exercised in relation to any interlocutory order passed in any appeal, inquiry, trial or other proceeding. The scheme of Chapter XXX would also show that a second revision is totally barred. Thus only one chance of revision has been given to a litigant when an interim order is passed which is subject to revision. As per sub-section (3) of section 397 if a revision has been filed by any person either to the High Court or to the Sessions judge, no further revision of the same shall be entertained by either of them. Ours is a country which is governed by rule of law. The substantive penal offences are contained in the Code known as the Indian Penal Code. With regard to the procedure for the trial of the substantive offences the Code of Criminal Procedure is a competent enactment. On the criminal side we have four trials. Magistracy, Court of Sessions, High Court and the Supreme Court. The scheme of the Code of Criminal Procedure would show that some offences are triable by the Magistrate and some offences are triable by the Court of Sessions. The offences which are not heinous and grave as per the scheme of the Code of Criminal Procedure are being tried by a Magistrate. The offences which are serious and for which a severe punishment has been prescribed or such offence under the general or special law which the Magistrate thinks proper should be tried by the Court of Sessions or special judges, such offences are being tried by the higher courts. Thus it can be said that the Magistrate as well as the Court of Sessions frame charges against the accused. The Courts of Sessions are headed by judicial officers with a lot of experience at their command. Pains are taken by those judiciary officers in order to achieve their promotion as Additional District and Sessions judges. Lawyers with experience and with repute are appointed as Additional District and Sessions judges and they also have a great command over the case law and the procedure. Keeping those aspects of the view the Legislature thought proper to confer concurrent powers to the High Court as well as the Court of Sessions to entertain a revision against an interim order. No doubt the powers are concurrent; the desirability is also to be seen. When the Legislature has also vested the powers upon the Sessions judge to entertain a revision, its clear intention was that against the orders passed by the Magistracy, the revision should go to the Court of Sessions, and if the interim orders are passed by the Court of Sessions, against their orders the revision should come to the High Court. In the view of this court, a direct revision against the order of the Magistracy/Chief judicial Magistrate to the High Court should be discouraged, till a very complicated question of law is to be adjudicated in the grounds of revision by a litigant which calls for the attention of the High Court. If any revision has come to the High Court against the order passed by the Magistrate, the purpose of establishing the Court of Sessions will be a futile exercise.. The present two revisions have arisen against the order of the Chief judicial Magistrate. In the opinion of this court, this revision deserves dismissal on the short ground that the petitioner has knocked, at the doors of the High Court by bypassing the Court of Sessions. Counsel for the petitioner could not make out a case that a complicated question of law is supposed to be interpreted by the High Court in the matter. To proceed with this discussion, an illustration can equally be given of section 438 of the Criminal Procedure Code. An anticipatory bail is entertainable both in the Court of Sessions or in the High Court. But the High Court has always been deprecating the tendency of a litigant when he approaches it at the first instance. The High Court would always like to be enlightened by the views taken by the subordinate court in allowing or declining a particular plea. If a litigant is not satisfied by an, order passed in revision by the Court of Sessions he can again attack the order under section 482 of the Criminal Procedure Code, by making out a case within the domain of that section. He is not prejudiced in the event of the dismissal of his revision in the Court of Sessions when the impugned order is passed by a Magistrate. When a bail application is declined under section 438 of the, Criminal procedure Code, by the Court of Sessions, the aggrieved can always come to the High Court seeking anticipatory bail. With this back-ground I have taken the view that when the order is passed by a Magistrate, invariably the revision should go to the Court of Sessions, unless a complicated question of law or fact is made out.
6. Even on the merits the petitioner has no case. Counsel for the petitioner, Shri Baldev Kapoor, made strenuous efforts to convince me that the tax involved in the present case and the period of default, is not substantial and that the amount in default has been deposited with the; Revenue and therefore prosecution ought not have been launched by the Income-tax Officer. In support of his contention, learned counsel for the petitioner has relied upon Bee Gee Motors and Tractors v. ITO [1996] 218 ITR 155 a judgment given by this court. I have had the occasion to go through this judgment, The judgment is not applicable to the facts in hand. In the cited case the first point for determination was whether the instructions, if any were contrary to the provisions of section 276B or not ? The second, point was whether it will be useful for the Government to prosecute an assessee after a period of eight years when the assessee has already deposited the tax within few months of his default ? In the light of these two aspects the High Court was pleased to hold that the Government instructions are not contrary to section, 276B of the 'Income-tax Act' and there would be no use in prosecuting an assessee after a period of eight years when he has already deposited the amount in the month of February, 1985, in the defaults committed against the orders 1982-83 and 1983-84. Here is a case where the Government did not waste time in filing criminal complaint against the petitioner. Procedure of section 194 sub-clause (c) (sic) was adhered to before filing the criminal complaint. Admittedly, the petitioners were the contractors. They engaged sub-contractors. It was their fundamental duty to deduct the tax at source and to deposit the same in the revenue. With the non-deposit of the amount the Government has suffered in the revenue. These are the cases of absolute Liability. Inquiry in this case was instituted and when no proper reply could be furnished the prosecution was launched. At the time of framing of the charge the merits of the case were not supposed to be gone through by the Chief judicial Magistrate. Even the Petitioners do not say that they had, deposited the amount at the relevant time just after the closure of the financial year. The, stand of Mr. Kapoor was that some amount of the petitioners was already lying with the Government and it was free to adjust the amount. The petitioners could explain their position before the authorities they did not do so in spite of the opportunity granted to the petitioners. In this view of the matter, I cannot say that the reasons which have been adopted by the learned Chief judicial Magistrate while framing charges against the petitioners are patently illegal or erroneous. Learned counsel for the petitioner then stated that by virtue of Common Cause's case, AIR 1996 SC 1619, continuance of the complaint against the petitioner is unwarranted. Learned counsel submitted that the proposed punishment which the Chief judicial Magistrate could grant was hardly three months. The complaint was instituted in the year 1986. Pre-charge evidence was concluded in the year 1987 and in these circumstances the learned Chief judicial Magistrate ought to have dismissed the complaint. The argument of Mr. Kapoor may look attractive at the first instance but on my deeper scanning it is devoid of any merit. The Supreme Court firstly laid down certain exceptions. The offence of absolute liability and economic offences were not excused. The Supreme Court clearly held that the directions of the Common Cause's case, AIR 1996 SC 1619, shall not apply to the cases or offences under the taxing enactment. The petitioners are being charged under section 276B of the Income-tax Act. In this view of the matter, even the judgment relied upon by learned counsel for the petitioner reported as Common Cause v. Union of India, AIR 1996 SC 1619, is not applicable. Support was also taken from Raj Deo Sharma v. State of Bihar [1998] 7 JT (SC) 1. This citation will also not come to the rescue of the petitioner in view of one of the exceptions of Common Cause's case, AIR 1996 SC 1619, quoted above. Merit in both the revisions is less rather none. Hence, I have no hesitation in dismissing both the revisions in limine.