Madras High Court
Mohamed I. Unjawala And Others vs Assistant Commissioner Of Income-Tax on 1 November, 1994
JUDGMENT Rangasamy, J.
1. All these petitions have been filed under section 482, Code of Criminal Procedure, to quash the criminal proceedings in C. C. Nos. 143 to 145 of 1991 on the file of the Additional Chief Metropolitan Magistrate (Economic Offences II), Madras. The first accused in these cases is a partnership firm dealing in cutting tools, hand tools and general hardware items. The other accused are partners. The respondent-Income-tax Officers had filed complaints in the abovesaid cases for offences under sections 276C(1), 277 and 278B of the Income-tax Act, 1961, and also under sections 120B, 193, 196 and 420 read with section 511 of the Indian Penal Code for concealment of income. In C. C. No. 143 of 1991, it is alleged that the accused persons for the assessment year 1986-87 filed the return of income declaring a total income of Rs. 2,21,575. The Income-tax Officer assessed the income on the basis of the statement computing the total income at Rs. 2,41,695. But during 1987-88, the Income-tax Officer, suspecting the correctness of the amount, issued notice to the first accused and also their seller, Messrs. Addison and Company, for production of their account books for verification of the purchases. Thereafter, the accused filed the revised statement for the additional income of Rs. 4,80,420 stating that a mistake was found out in totalling the amount of Messrs. Addison and Co. Ltd., and therefore, they were offering the additional income for assessment. As the assessee did not reveal the actual income for 1986-87, penalty proceedings were initiated and the complaint in C. C. No. 143 of 1991 was filed before the Additional Chief Metropolitan Magistrate (E. O. II), for the abovementioned offences, Similarly, for 1987-88 also, though the return was field declaring the income at Rs. 2,93,960, after the notice to the accused and Messrs. Addison and Co. Ltd., the accused persons filed revised returns admitting an additional income of Rs. 4,18,220. Therefore, for this concealment also, C. C. No. 144 of 1991 was field in the same court for prosecution under the abovementioned offences apart from initiating the penalty proceedings. The accused field the return for 1988-89 declaring a total income of Rs. 3,09,940. In the course of the assessment, the account books were perused and it was found out that the closing stock came to Rs. 18,84,585 showing a deference of Rs. 9,24,449 from the closing stock mentioned in the return. The accused field a revised statement admitting the closing stock to the value of Rs. 18,84,585. For this discrepancy also, the complaint in C. C. No. 145 of 1991 was filed in the Court of the Additional Chief Metropolitan Magistrate and penalty proceedings were also initiated under the Act. It is to quash these three cases against the accused persons that these petitions have been filed invoking the inherent powers of the High Court.
2. The six partners in the partnership firm have field Petitions Nos. 4165, 4162, 4168, 4174, 4177 and 4180 of 1991 to quash the proceedings in C. C. No. 143 of 1991, Petitions Nos. 4166, 4163, 4169, 4172, 4175, 4178 and 4181 of 1991 have been filed to quash the proceedings in C. C. No. 144 of 1991 and Petitions Nos. 4167, 4164, 4170, 4173, 4176, 4177 and 4182 of 1991 are to quash the proceedings in C. C. No. 145 of 1991. In all these petitions the grounds urged for quashing the proceedings are common In the petitions, they have stated that their accountant by name Jeevaraj D. Vohra was maintaining the accounts of the firm but suddenly he expired on February 17, 1986, that, therefore, they found it difficult to finalise their accounts and the son of the previous accountant had taken over the post of accountant, that with little experience, he prepared the accounts for the submission of the returns, that, therefore, mistakes had occurred in the totalling of the purchases from Messrs. Addison and Co. Ltd. and on account of this mistake the discrepancy had occurred. They have further stated that when this mistake was found out later in 1989, they filed the revised returns for 1986-87, 1987-88 and 1988-89 voluntarily disclosing the correct income and, therefore, there was no intention to cheat the exchequer by concealing their income, that as they revealed the income voluntarily by filing the revised returns, they filed the writ petition (Writ Petition No. 3952 of 1991) in this court for forbearing the respondent-Income-tax Officer from filling a complaint and also sought for an interim injunction restraining him from filing a complaint, that the discrepancy in the account was a bona fide mistake, that the complaints against them will amount to abuse of the process of the court that, further, all the partners are not in charge of the affairs of the firm and, therefore, the complaints are not maintainable against all of them. So, on these grounds, the petitioners sought for quashing the proceedings. Even though interim injunction was passed in the above writ petition, the complaints were field even before the filing of the writ petition. Subsequent to the filing of these petitions, the Income-tax Appellate Tribunal has quashed the penalty proceedings accepting the contention of the petitions that the discrepancy in the income is a bona fide mistake in totalling the amount. Therefore, now the main ground in these petitions for quashing the proceedings is the order of the Income-tax Appellate Tribunal setting aside the penalty proceedings.
3. Therefore, the two points that were urged or determination are : (1) whether all the petitioners were not in charge of the firm so that they could not be prosecuted; and (2) whether the order of the Income-tax Appellate Tribunal setting aside the penalty proceedings will exonerate the accused persons from the criminal proceedings initiated against them before the Additional Chief Metropolitan Magistrate, Madras.
4. Learned counsel for the petitions, Mr. Mani, contended that it is not specifically alleged in the complaint that the accused persons 2 to 7 are in actual administration of the first accused firm and, therefore, all of them cannot be prosecuted and the prosecutions against the partners of the first accused have to be quashed. He draws support from the decisions in Puran Devi v. Z. S. Klar, ITO [1988] 169 ITR 608 (P & H) and K. Subramanyam v. ITO [1993] 199 ITR 723 (Mad) for his argument. In the first decision, it is held that only the person or the partner, who was in charge of and was responsible to the firm for the conduct of its business at the time of the alleged offence, is liable for the commission of the offence. In the latter decision, this court has held that nothing was alleged against the petitioner who was the third accused in that case that he was responsible for the conduct of the business of the firm and, therefore, the criminal proceedings against him were liable to be quashed. But learned counsel for the respondent, Mr. Ramaswamy, contended that in these three complaints again the petitioners, a specific allegation has been made against all the accused, that in paragraph 6 of the complaint it is mentioned that the second accused had signed the balance-sheet and other statements, that in paragraph 4, it is specifically mentioned that accused Nos. 2 to 7, who are the partners of the first accused firm, were in charge of and were responsible for the conduct of the business of the first accused firm during the relevant period and in paragraph 7, it is mentioned that the fourth accused filed the revised return and in paragraphs 8 and 9 also it is specifically mentioned that all the accused conspired to prepare false statements by inserting the credit in the name of Messrs. Addison and Co. Ltd., and they all delivered the false return to the Income-tax Officer and, therefore, all the partners are liable to be punished and when there are such specific allegations against all the partner in the abovementioned paragraphs, the complaints are maintainable against these accused persons. In the abovementioned paragraphs, specific allegations have been made against all the accused partners. When it is alleged that all of them had conspired together to inflate the credit bills of Messrs. Addison and Co. Ltd., it cannot be stated that all the partners were not in charge of the administration of the firm. Therefore, the first contention raised by learned counsel for the petitioner deserves to be rejected.
5. The second contention is the most vital and important argument of this case. The Income-tax Officer imposed penalty for concealment of income during the years 1986-87, 1987-88 and 1988-89. On appeal before the Income-tax Appellate Tribunal in Income-tax Appeals Nos. 119, 120 and 121/(MDS) of 1991, dated November 20, 1992, the Tribunal has found that there was no concealment of the income, that the mistake in the account was unknown to the partners of the firm, that as it was a bona fide mistake it was not possible to hold that there was concealment of income and on this finding the penalties imposed on the assessees were cancelled. Learned counsel for the petitioner, relying upon the order of the Tribunal, contends that the fact-finding authority under the Act, viz., the Tribunal, itself has held that as the mistake in the account was not known to the partners of the firm, the criminal court going against this finding of the Tribunal cannot attribute means rea alleging fabrication of the accounts and, therefore, the criminal proceedings against the petitioners have to be quashed.
6. Before I refer to the case-law relied upon by both the sides I would mentioned the argument of Mr. Ramaswamy, learned counsel for the respondent, that the criminal proceedings under the Income-tax Act are kept outside the purview of the penalty proceedings as they are dealt with in different chapters indicating their independent operation and sections 276C and 277 of the Income-tax Act, which are the prosecuting provisions before the competent court, have nothing to do with section 271(1)(c) of the same Act, which is for imposing penalty by the authority under the Act and section 271 of the Act has no overriding effect on the penal sections of the Act as they are operating independently and when the ingredients of the offence are alleged in the complaint for the violation of the provisions of the Income-tax Act, it is for the court to enquire and examine the witnesses to find out whether the offence alleged in the complaint was made out or not and, therefore, the enquiry under Section 271C by the authority under the Act for imposing the penalty cannot come in the way of the proceedings before the court and the findings of the Income-tax Appellate Tribunal will not have any bearing on the prosecution of these petitioner. Mr. Ramaswamy, learned counsel for the respondent, further contended that in the proceedings before the authorities under the Act under section 271, they simply consider the question whether penalty is livable or not taking into consideration the representations placed in papers without any evidence for the allegations made against the assessee, but in the case of the criminal prosecution, the court thoroughly considers the charges levelled against the accused person by examining witnesses and the elaborate evidence before the court is analysed by the court to find out whether the offence was made out by the prosecution and, therefore, without submitting to the test to be done by the court with regard to the charges against the assessees, they cannot escape the criminal prosecution by the order of the Tribunal, which is confining itself only to the penalty and, therefore, two independent functions, one by the authorities under the Act and the other by the court functioning outside the purview of the Income-tax Act, have their independent findings on the mattes before them and, therefore, the finding of the authority under the Act will not bind the judicial proceedings of the court. On this basis, Mr. Ramaswami would contend that these petitions are not sustainable and have to be dismissed. It is true that in K. A. Khaja v. Sixth ITO [1992] 196 ITR 627 (Mad), Arunachalam J., has held that without sufficient prima facie allegations in a complaint against the accused person the inherent powers of the High Court cannot be exercised to stultify the prosecution that can be initiated for the offence under sections 276C and 277 of the Income-tax Act. The learned judge has taken the same view in another case in P. M. Subramaniam v. P. Chadaga, Asst. CIT [1992] 195 ITR 910 (Mad). In that case also, the learned judge has observed that when it is disclosed in the complaint that the two accused persons, who were partner of the first accused firm, conspired along with the other accused to wilfully evade tax, defraud the exchequer of its legitimate revenue and deceive the concerned Income-tax Officer by fabricating false evidence in the form of books of account with false entries, those allegations were sufficient prima facie to proceed with the enquiry against the accused persons and the complaint cannot be quashed under section 482, Code of Criminal Procedure. In Madura Chit and Investments P. Ltd. v. ITO [1994] 208 ITR 228 (Mad), Pratap Singh J., has held that the criminal court has to judge the case independently on the evidence placed before it and when the allegations in the complaint contain ingredients of the offence alleged against the accused person for which the complaint was launched, the prosecution cannot be quashed. In Chand Dhawan v. Jawahar Lal, , the apex court has observed that when the allegations in the complaint prima facie constitute the offence alleged and the Magistrate being satisfied on the statement and the evidence of the witnesses examined and materials on record that cognizance should be taken, the accused cannot invoke section 482, Code of Criminal Procedure, to quash the proceedings. Therefore, from the view of these decisions, the criminal court has to find out whether the allegations in the complaint are adequate to disclose the commission of the offence for the enquiry of the offence. But the peculiar circumstance in this case is the authority under the Income-tax Act, viz., the Income-tax Appellate Tribunal, has found that there was no concealment of income by these petitioners as they were not aware of the mistake in the return and the discrepancy in the return of assessment was a bona fide mistake. Therefore, the question is whether this finding of the Income-tax Appellate Tribunal will have a bearing on the criminal proceedings pending before the Additional Chief Metropolitan Magistrate (E. O. II), Madras, Learned counsel for the petitioners argued that even though the criminal court has its independence in the enquiry regarding the offences alleged in the complaint, the finding of the Tribunal cannot be completely ignored by the criminal court, as the Tribunal are fact finding authorities and a question of fact that was answered by the Tribunal has to be respected by the criminal court and, therefore, the criminal court cannot take a different view on the same question of fact even though the enquiry may be independent. Learned counsel relies upon the observation of the Supreme Court in Patnaik and Co. Ltd. v. CIT [1986] 161 ITR 365, wherein the Supreme Court has held that the Income-tax Appellate Tribunal is a fact-finding authority under the Act and that the court has no jurisdiction to go behind the statement of fact made by the Tribunal in its separate order. That was a case in which the appellant, which dealt in automobiles and spare parts, had subscribed to certain Government loans, sustained a los is the business and had claimed that the loss was revenue loss. The Tribunal found that the loss suffered by the appellant on the sale of the investment was a revenue loss. On a reference to the High Court, the High Court held that as the investment was not connected with the orders placed by the Government, it was not a loss of revenue but was only a capital loss. In that connection, the Supreme Court observed (at page 367) :
"............ We think the High Court fell into serious error in doing so. It is now well-settled that the Appellate Tribunal is the final fact-finding authority under the Income-tax Act and that the court has no jurisdiction to go behind the statements of fact made by the Tribunal in its appellate order. The court may do so only if there is no evidence to support them or the Appellate Tribunal has misdirected itself in law in arriving at the findings, of fact. But even there, the court cannot disturb the findings of fact given by the Appellate Tribunal unless a challenge is directed specifically by a question framed in a reference against the validity of the impugned findings of fact on the ground that there is no evidence to support them or they are the result of a misdirection in law........."
7. From the above expression of the Supreme Court it has to be accepted that a finding of fact given by the Tribunal has to be respected by the court unless the court takes the view that the Tribunal had erred in law in arriving at the finding of fact. Otherwise, the conclusion on the question of fact cannot be disturbed by the court. Bearing this principle posited by the Supreme Court, the question involved in this case can be carefully approached.
8. There is no argument before me that the Tribunal had erred in arriving at a conclusion that the mistake in the assessment was not known to the partners of the firm. The Punjab and Haryana High Court has taken a consistent view that when the authority under the Act has set aside the penalty proceedings, the complaint against the assessee before the criminal court for the same allegation is not sustainable. In Parkash Chand v. ITO [1982] 134 ITR 8, the Punjab and Haryana High Court has held that when the income-tax authorities have held that there was no proof for the concealment of income or that the assessee had furnished inaccurate particular and thereby cancelled the penalty, the criminal proceedings against the assessee for the offence of concealment of income cannot be allowed to continue. The same High Court Basal Tool Co. v. ITO [1987] 167 ITR 24 (P & H) has repeated that when the Commissioner (Appeals) had found that there was no concealment of income and has set aside the order of the Income-tax Officer imposing the penalty, there was no wilful attempt to evade tax by the assessee and, therefore, the prosecution of the assessee was not justified. In yet another case in D. N. Bhasin v. Union of India [1988] 171 ITR 7, the Punjab and Haryana High Court has again repeated the same finding that the income-tax authorities in the assessment proceedings are relevant and the criminal court is required to act upon them and, therefore, when the Commissioner (Appeals) deleted the addition of income accepting the original return field by the assessee, the criminal court find him guilty of submitting false returns and, therefore, the proceedings before the criminal court were liable to be quashed. The Andhra Pradesh High Court also has taken the same view in M. Murali Mohan v. State (ITO) [1987] 168 ITR 729. In that case, the assessee had introduced factious purchases of yarn in the books and the Income-tax Officer made additions to the income on the ground of suppression of the income. A complaint was lodged against the assessee under section 277 and 278 of the Income-tax Act and sections 193 and 196, Indian Penal Code. But the Appellate Assistant Commissioner set aside the order of the Income-tax Officer cancelling the additions. When the matter was taken up before the Andhra Pradesh High Court, it was held that when the assessment itself was set aside by the Appellate Assistant Commissioner, it could not be said that the assessment still continued in the eye of law and when the assessment itself was not in existence, the question of maintaining the prosecution did not arise and, therefore, the proceedings were liable to be quashed. In addition to these views of the two High Courts, which are direct on the point, the Supreme Court also has taken the same view in Uttam Chand v. ITO [1982] 133 ITR 909. Even though the fats were not discussed, the Supreme Court in its cryptic order has observed that in view of the findings recorded by the Income-tax Appellate Tribunal, it was clear on an appraisal of the entire material on record that Smt. Janak Rani was a partner of the assessee-firm and that the firm was a genuine firm, the assessee cannot be prosecuted for filing false returns, and accordingly, allowed the appeal and quashed the prosecution. It appears from the headnotes of that case that a partnership-firm was registered under the Income-tax Act and assessment was made on the partnership-firm. In 1969-70, one of the alleged partners by name Smt. Janak Rani sent a statement to the Income-tax Officer stating that she was not a partner of the firm and she did not sign the partnership agreement. Therefore, on the basis of the statement of the said Smt. Janak Rani, the Income-tax Officer cancelled the assessment as the particulars furnished for the registration of the firm were incorrect and criminal proceedings also were initiated against the other partners for having filed false returns as though Janak Rani also was a partner of the firm. But in the appeal before the Tribunal, it was held that the partner who gave the statement to the effect that she had not signed the agreement, was really a partner and, therefore, the firm was genuine. The criminal proceedings against the partners went up to the Supreme Court and the Supreme Court has made the above observation holding that in view of the Tribunal's findings that Janak Rani also was a partner, the criminal proceedings against the other partners was not sustainable.
9. One more decision relied upon by learned counsel for the petitioner is Vaidyanathan, ITO v. Dr. B. Mathuram and Sons [1989] 179 ITR 463, which is a decision of this court. In that case, as the assessment order was set aside by the Commissioner of Income-tax (Appeals), while the complaint was pending before the Magistrate, the learned judge has observed that the complaint had become objectless and without any basis and, therefore, the Income-tax Officer might withdraw the complaint with permission to file it again if the circumstances warranted it. The learned judge felt that as the Commissioner of Income-tax had set aside the penalty proceedings and remanded the matter, the complaint on the allegation of suppression of income was without any basis and, therefore, the Income-tax Officer, may file the complaint after the final position of the authorities under the Act. From the direction given by him to withdraw the complaint, he has expressed the view that weight must be given by the criminal court for the order of the Tribunal. Therefore, based on these views of the different High Courts and the Supreme Court, it is argued by learned counsel for the petitioner that the complaint against the petitioners before the Additional Chief Metropolitan Magistrate have to be quashed. To counteract the above argument, learned counsel for the respondent, Mr. Ramaswamy, has cited a few decisions which I am referring below. In S. R. Arulprakasam v. Smt. Prema Malini Vasan, ITO [1987] 163 ITR 487, this court has held that the filing of the revised return will not exonerate the criminal proceedings and penalty proceedings against the assessee. In that case, the assessee himself filed a revised return after the concealment has been detected by the Income-tax Officer and then proceedings were initiated against him and before the criminal court, he contended that the revised return filed by him disclosing the entire income should be accepted and it would wipe out the criminal proceedings against him. In that connection, S. A. Kader J., has observed that the filing of the revised return will not exonerate the contumacious conduct on the part of the assessee and criminal proceedings and penalty proceedings can be initiated against him. This decision does not touch upon the point in controversy with regard to the weight to be given to the findings of the Tribunal. The next decision R. N. Bajaj v. K. Govindan, ITO [1992] 198 ITR 447 (Mad) also is not on the point as it deals with the proposal of the assessee for settlement with regard to the quantum of concealment and on that basis, the assessee questioned the prosecution, which was rejected. Therefore, that decision has no bearing on the point in controversy. The third decision cited by learned counsel, Mr. Ramaswamy is Prakash Roadlines (Pvt.) Ltd. v. Union of India [1990] 184 ITR 590 (SC), wherein a transporter brought goods into the municipal territory without payment of the terminal tax and when penalty was imposed by the taxing authority under the Municipal Corporation Act, it was questioned that without a prosecution having been filed before a competent court, penalty could not be imposed by the taxing authority. The Supreme Court rejecting the contention held that the taxing authority had jurisdiction to levy penalty even without initiating any prosecution. This decision also has no bearing on the point. Another decision relied on by Mr. Ramaswamy is Gujarat Travancore Agency v. CIT . This decision of the Supreme Court also is not touching upon the point in controversy. That was a case in which the return of income-tax was not filed within the statutory period and therefore penalty proceedings were initiated by the Income-tax Officer. The Income-tax Appellate Tribunal allowed the appeal setting aside the penalty on the ground that as the element of mens rea was required to be proved for wanton delay in filing the return and that was not proved in that case, penalty could not be levied. The matter was referred to the Kerala High Court which held that for section 271(1) of the Income-tax Act, no mens rea is required for imposing penalty and, therefore, the order of the Tribunal was not correct and was liable to the set aside. When this matter was taken up before the Supreme Court, the Supreme Court cited a statement in Corpus Juris Secundum, Vol. 85, page 580, paragraph 1023, with approval, as follows (at page 458) :
"A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws."
10. Accordingly, the Supreme Court held that the confirmation of mens rea was not required to be proved in the proceedings taken by the Income-tax Officer under section 271(1)(a) of the Income-tax Act, against the assessee. The point considered in that decision was whether the criminal intention of the assessee has to be proved for imposing penalty under the Act. Therefore, that decision also has nothing to do with the point in issue. Another decision relied upon by learned counsel for the Income-tax Department is Universal Supply Corporation v. State of Rajasthan [1994] 206 ITR 222, a decision of the Rajasthan High Court. The employer therein had deducted the tax at source but did not deposit it within the prescribed time. Hence the complaint was filed against the employer for prosecution under sections 276B and 278B. The accused contended that no penalty proceedings were initiated and as it was thought by the Department that it was not proper to initiate penalty proceedings against him, launching of criminal proceedings against him would amount to an abuse of the process of the court. In that connection, the Rajasthan High Court has held that non-initiation of penalty proceedings is not a bar to the prosecution of the employer. While rejecting the contention of the employer therein, the Rajasthan High Court has referred to a decision in Banwarilal Satyanarain v. State of Bihar [1989] 179 ITR 387, wherein the Patna High Court has taken a view that where an assessee has succeeded in proving good and sufficient reasons for his failure, before an authority under the Act is penalty proceeding, the process of the criminal court should not be allowed to be abused in such cases. Therefore, even though the decision of the Rajasthan High Court does not relate to the point in controversy, the decision of the Patna High Court referred to therein is a view against the contention taken by learned counsel, Mr. Ramaswamy. Yet two other decision, viz., K. A. Khaja v. Sixth ITO [1992] 196 ITR 627 (Mad) and Madura Chit and Investments P. Ltd. v. ITO [1994] 208 ITR 228 (Mad), have been already referred to by me and those decisions deal only with the prima facie allegations in the complaint for the purpose of prosecution of the assessee and the findings of the authorities under the Income-tax Act were not dealt with as there was no occasion for that situation. Therefore, those decision also are not in any way helpful to learned counsel for the respondent. Finally, the last decision cited by him is P. Jayappan v. S. K. Perumal, First ITO [1984] 149 ITR 692 (Mad). In that case also, there was no finding by the Tribunal or any other authority under the Income-tax Act but as the assessment proceedings were pending enquiry, a contention was raised for quashing the prosecution in the criminal court for the offences under sections 276C, 277, Income-tax Act, and sections 193 and 196, Indian Penal Code. For the sole reason that the assessment proceedings were pending before the authorities under the Act and that the assessee had a fair chance of success, he sought the criminal prosecution to be quashed. For the above contention, the Supreme Court in P. Jayappan v. S. K. Perumal, First ITO [1984] 149 ITR 696 has held that there is no provision that the prosecution cannot be launched until assessment proceedings are completed and in the criminal proceedings the ingredients of the offence have to be established to continue the prosecution. While disposing of this appeal, the Supreme Court has made certain observations which are very much relevant to this case. The observations are as follows (at page 700) :
"A mere expectation of success in some proceeding in appeal or reference under the Act cannot come in the way of the institution of the criminal proceedings under sections 276C and 277 of the Act. In the criminal case all the ingredients of the offence in question have to be established in order to secure the conviction of the accused. The criminal court, no doubt, has to give due regard to the result of any proceeding under the Act having a bearing on the question in issue and in an appropriate case, it may drop the proceedings in the light of an order passed under the Act. It does not, however, mean that the result of proceeding under the Act would be binding of the criminal court. The criminal court has to judge the case independently on the evidence placed before it. Otherwise, there is a danger of a contention being advanced that whenever an assessee or any other person liable under the Act had failed to convince the authorities in the proceedings under the Act that he has not deliberately made any false statement or that he has not fabricated any material evidence, the conviction of such should invariably follow in the criminal court. ....."
11. Learned counsel, Mr. K. Ramaswamy, referring to the above observation would contend that in the view of the Supreme Court, in criminal court has to judge the case independently on the evidence placed before it and the result of the proceedings under the Act will not be binding on the criminal court and, therefore, from this proposition set out by the Supreme Court, there cannot be any difficulty in arriving at a conclusion that the finding of the Income-tax Appellate Tribunal in favour of the petitioners cannot stand in the way of the criminal prosecution of these petitioners and, therefore, these petitions are liable to be dismissed. Even though the Supreme Court has made the observation that the result of the proceedings under the Act is not binding on the criminal court and the criminal court has to judge the case independently on the evidence placed before it, a rider also is provided expressing that the criminal court no doubt has to give due regard to the result of any proceedings under the Act, having a bearing on the question in issue and, in an appropriate case, it may drop the proceedings in the light of an order passed under the Act. Therefore, it cannot be treated that every finding of the authorities under the Income-tax Act had to be disregarded and ignored for the criminal prosecution. On the other hand, due regard must be given and in appropriate cases, the criminal prosecution has to be dropped. Therefore, in deserving cases, the criminal court has to give weight to the findings of the authorities under the Income-tax Act and it is not in all cases to ignore the conclusions of the Tribunal.
12. So the question arises in which matters the criminal court may disregard the findings of the authorities under the Income-tax Act and in which matter weight has to be given to such findings. In this connection, I have to refer to the view of the Supreme Court in Patnaik and Co. Ltd. v. CIT [1986] 161 ITR 365, which I referred to above. The Supreme Court has accepted that the findings of the Income-tax Appellate Tribunal on the facts are final and the court has no jurisdiction to go behind the statements of fact made by the Tribunal. Therefore, the criminal court is bound to accept the findings of the Tribunal on questions of fact. The Tribunal in its order has held that the assessees did not attempt to conceal the amount as they themselves produced the registers for verification and that the person who made the mistake, viz., the accountant was dead and, therefore, the mistake in the return was unknown to the partners of the firm making it a bona fide mistake. In the view of the Tribunal, the partners were not aware of the mistake in the return of assessment as the returns were prepared by the inexperienced accountant after the death of the previous accountant who wrote the accounts. In my considered view, as the Tribunal has concluded that the mistake was not known to the partners, this finding on fact has to be accepted by the court which deals with the criminal prosecution of the petitioners.
13. Learned counsel, Mr. Ramaswamy, contended that if the findings by the Tribunal in this case have to be accepted by the criminal court, the same principle has to be followed if the Tribunal confirms the penalty proceedings in which case the accused persons before the criminal court are bound to plead guilty in view of the findings of the Tribunal, but such things will not happen because the criminal court has to independently try the case and, therefore, the finding of the Tribunal which is favourable to the assessee cannot be binding upon the criminal court. When the Tribunal in the penalty proceedings gives a finding against the assessee, who is facing the criminal prosecution, he cannot be convicted on the basis of the findings of the Tribunal because the criminal court has to follow the procedural law for trying an offender according to the Code and, therefore, the court cannot deviate from the Code for the reason that a finding has been arrived at by the authorities under the Income-tax Act. Only on account of such a situation, the criminal court is expected to try the case independently according to the Code. But the facts found by the Tribunal in favour of the assessee cannot be disturbed by the court as the Appellate Tribunal is the fact-finding authority under the Income-tax Act as held by the Supreme Court. Therefore, the contention of learned counsel, Mr. Ramaswamy, will not prevail and the submissions of learned counsel for the petitioner have to be accepted.
14. In view of the reasons give above, on the findings of the Income-tax Appellate Tribunal, the prosecutions against the petitioners cannot be allowed to continue and they are liable to be quashed. In the result, the proceedings, in C. C. Nos. 143 to 145 of 1991 before the Additional Chief Metropolitan Magistrate (E. O. II), Madras, are quashed. The petitions are allowed.