Patna High Court
Mohan Lal Agarwalla vs State Of Bihar And Anr. on 4 May, 1987
JUDGMENT L.P.N. Shahdeo, J.
1. These six criminal miscellaneous applications have been filed to quash the order of taking cognizance dated March 31, 1983, passed by the C.J.M., Dhanbad. Since in all these six criminal miscellaneous applications, common questions of law and fact are involved and as these cases have been argued together, they are being disposed of by this common judgment.
2. In all the aforesaid cases, the cognizance taken by the C.J.M., Dhanbad, for the offences under Sections 276C and 277 of the Income-tax Act, 1961, has been challenged. In all the aforesaid cases, separate complaints were filed by the Income-tax Officer, after obtaining necessary direction from the Income-tax Commissioner, as required under the law.
3. In Criminal Miscellaneous No. 2404 of 1983(R), the petitioner submitted income-tax return for the assessment year 1963-64, on July 20, 1963, show ing a total income (net profit) of Rs. 13,932 on gross sales of Rs. 8,90,913 and the petitioner was assessed on a total income of Rs. 25,550 and the tax was to be paid of Rs. 6,308 on gross sales of Rs. 8,90,913. Thereafter, on scrutiny from the Sales Tax Department, it was disclosed that for the same year, i.e., 1963-64, return for gross sales was filed at Rs. 18,42,733 and accordingly a notice under Section 148 of the Income-tax Act was issued against the petitioner and subsequently a fresh return for the same assessment year was submitted on May 13, 1981, showing a total income of Rs. 30,738 and the assessment has been completed on a total income of Rs. 60,000 and the tax payable was Rs. 33,625.
4. In Cr. Misc. No. 2405 of 1983(R), the petitioner submitted income-tax return for the assessment year 1964-65, on April 28,1965, showing a total income (net profit) of Rs. 13,600 on gross sales of Rs. 8,55,560 and the petitioner was assessed on a total income of Rs. 28,140 and the tax to be paid was Rs. 5,670 on gross sales of Rs. 8,55,560. Thereafter, on scrutiny by the Sales Tax Department, it was disclosed that for the same assessment year, i.e., 1964-65, return for the gross sales was filed at Rs. 34,10,766 and accordingly a notice under Section 148 of the Income-tax Act was issued. Thereafter, a fresh return was submitted by the petitioner on May 13, 1981, showing a total income of Rs. 28,140 and the assessment was completed on a total income of Rs. 76,730 and the tax payable was Rs. 22,371.
5. In Cr. Misc. No. 2406 of 1983(R), the petitioner firstly submitted income-tax return for the assessment year 1965-66 on April 28, 1966, showing a total income of Rs. 14,803 on gross sales of Rs. 8,22,618 and he was assessed on a total income of Rs. 31,980 and the tax to be paid was Rs. 6,338, on the aforesaid gross sales. Thereafter, on scrutiny from the Sales Tax Department, it was disclosed that for the same assessment year, i.e., 1965-66, return for gross sales was filed at Rs. 27,99,420 and accordingly a notice under Section 148 of the Income-tax Act was issued against the petitioner and thereafter a fresh return was submitted on May 13, 1981, showing a total income of Rs. 31,980 and the assessment has been completed on a total income of Rs. 64,220 and the tax payable was Rs. 16,707.
6. In Cr. Misc. No. 2407 of 1983(R), the petitioner submitted income-tax return for the assessment year 1966-67, on December 26, 1966, showing a total income of Rs. 13,668 on gross sales of Rs. 6,77,053 and he was assessed on a total income of Rs. 24,170 and the tax to be paid by him was Rs. 3,44,62 (sic) on the gross sales aforementioned. Thereafter, on scrutiny by the Sales Tax Department, it was disclosed that for the same assessment year, i.e., 1966-67, return for gross sales was filed at Rs. 30,10,205 and accordingly a notice under Section 148 of the Income-tax Act was issued against the petitioner. Thereafter, subsequently, the petitioner submitted a fresh return for the same assessment year on December 4, 1970, showing a total income of Rs. 26,738 and the assessment has been completed on a total income of Rs. 34,340 and the tax payable was Rs. 9,534.
7. In Cr. Misc. No. 2608 of 1983(R), the petitioner at first instance had submitted income-tax return for the assessment year 1967-68, on March 1, 1968, showing a total income of Rs. 13,285 on gross sales of Rs. 6,42,342 and he was assessed on a total income of Rs. 22,550 and the tax to be paid was at Rs. 3,453 on the aforesaid gross sales. After the scrutiny by the Sales Tax Department, it was disclosed that for the same assessment year, return for gross sales was filed at Rs. 36,97,183 and accordingly a notice under Section 148 of the Income-tax Act was issued on the petitioner. Subsequently, a fresh return was submitted for the same assessment year on December 4, 1970, showing a total income of Rs. 32,628 and the assessment was completed on a total income of Rs, 39,910 and the tax payable by the petitioner was assessed at Rs. 9,891.
8. Similarly, in Cr. Misc. No. 2409 of 1983(R), the petitioner submitted income-tax return for the assessment year 1969-70, on August 16, 1969, showing a total income of Rs. 16,633 on gross sales of Rs. 8,00,704 and the tax was to be assessed on a total income of Rs. 28,500 and the tax was to be paid at Rs. 5,676 on the aforesaid gross sales. But from the scrutiny, it was disclosed that for the same assessment year, return for gross sales was filed at Rs. 15,23,097 and accordingly a notice under Section 148 of the Income-tax Act was issued on the petitioner and thereafter a fresh return was submitted by the petitioner, showing a total income of Rs. 13,672 and the assessment has been completed on December 15, 1971.
9. In the complaint petition, it was alleged that the first return filed by the petitioner in all the aforesaid cases was false and ihereby he committed an offence under Section 276C of the Income-tax Act. It was further alleged that the petitioner, in the aforesaid cases, wilfully attempted to evade actual income-tax payable by him and thereby he made himself liable to be punished under Section 277 of the Income-tax Act for making false verification in the return.
10. After the complaint petitions were filed for all the aforementioned relevant assessment years as stated above, cognizance was taken by the C.J.M., Dhanbad, which is being challenged in these applications.
11. It was submitted by learned counsel for the petitioner that since all the returns were filed before October 1, 1975, the offence alleged will not come within the purview of Section 276C, as at that time, this section was not in existence and as such no offence under that section could have been committed. Accordingly, the order taking cognizance under that section is bad in law and cannot be sustained. In this connection, annexure-2, the Circular issued by the Income-tax Department with regard to the implementation of Section 276C was also referred to.
12. Learned counsel for the petitioner submitted that the sanction dated March 16, 1983, is a mechanical order and it does not show the application of judicial mind. In order to buttress his argument, he relied on the case reported in Mohd. Iqbal Ahmad v. State of Andhra Pradesh AIR 1979 SC 677.
13. Section 276C of the Income-tax Act provides for punishment of any person who wilfully attempts in any manner whatsoever, to evade tax, penalty or interest chargeable or imposable under this Act, It is an admitted position that this amended Section 276C came into existence on October 1, 1975, which is also corroborated by annexure-2, which says that Section 276C will apply in relation to the offences committed on or after October 1, 1975, In these cases, it is an admitted position that they relate to the assessment years 1963-64 to 1969-70. Therefore, it is apparent that the offences as alleged were committed before the coming into force of the amended Section 276C of the Act. The Circular issued by the Income-tax Department, annexure-2, also corroborates it, that the new provision of Section 276C of the Act will apply in relation to the offences committed on or after October 1, 1975. Admittedly, in these cases, therefore, there is no direct question of evasion of tax and even if it was, it related to the assessment years before 1975. In this view of the matter, the offences alleged against the petitioners in all these six cases are not covered or punishable under Section 276C of the Act.
14. It may be noted in these cases that cognizance has been taken also under Section 277 of the Income-tax Act. Section 277 of the Income-tax Act is an independent section and it is not interlinked with Section 276C. Each relates to independent offences--one is for wilful attempt to evade tax, etc., and the other is for submission of false returns on verification, etc. Section 277 of the Income-tax Act punishes, if any 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 it to be false or does not believe to be true.
15. In all these cases, it is apparent from the complaint petition itself, as stated above in the foregoing paragraphs, that at the first instance, the petitioners had filed verified incorrect income-tax returns and when after scrutiny by the Sales Tax Department, the matter was reopened, after giving notice under Section 148 of the Act, it was found that the first returns filed by the petitioners on verification for all the assessment years in question were false and incorrect. From these, it can be easily concluded that the petitioners had submitted false returns intentionally at the first instance. Therefore, prima facie, they are liable for prosecution under Section 277 of the Act, He had knowledge of it as he had filed different higher returns for those years before the Sales Tax Department.
16. Section 277 of the Act, being an independent section, the petitioners are liable for prosecution under this section, irrespective of the fact that they may not be liable for prosecution under Section 276C of the Act.
17. Coming to the last submission of learned counsel for the petitioners regarding the sanction in these cases for which he has relied on the case Mohd. Iqbal Ahmed v. State of Andhra Pradesh, AIR 1979 SC 677, to show that sanction for prosecution of the petitioners was necessary and it is not an idle formality but a solemn and sacrosanct act which affords protection to Government servants against frivolous prosecution and must, therefore, be strictly complied with before any prosecution can be launched against the public servant concerned. I find that the case cited and relied upon by learned counsel is of no assistance to him. In that case, it was found that the prosecution under the Prevention of Corruption Act for which sanction was necessary under Section 6 of that Act was invalid and, therefore, the cognizance taken by the Special Judge was found to be completely without jurisdiction. In the case on hand, a distinction has to be kept in mind because in Section 279 of the Income-tax Act, the word "sanction" has not been used, nor it is required. It only lays down that the prosecution should be at the instance of the Commissioner of Income-tax. Section 279(1) of the Act lays down as follows :
"A person shall not be proceeded against for an offence under Section 2 75 A, Section 276A, Section 276AA, Section 276B, Section 276C, Section 276CC, Section 276D, Section 276DD, Section 276E, Section 277, Section 278 or Section 278A except at the instance of the Commissioner."
18. According to the requirement of the Act, it is only necessary that the prosecution should be launched against any person for commission of those offences at the instance of the Commissioner. It means that the Commissioner must have issued instruction, after applying his mind, for prosecution to the concerned officer. Therefore, the requirement which is necessary for giving sanction cannot be of the same standard when a case is to be instituted only under instruction or at the instance of the Commissioner of Income-tax. In this view of the matter, as held above, the case relied upon by learned counsel does not help him.
19. In this case, the instruction of the Commissioner or his direction is annexed along with the complaint petition which is dated March 16, 1983. It runs as follows :
"After scrutinising the assessment records and considering carefully the facts of the case, I am satisfied that Shri Mohanlal Agarwal, Kirkend, Dhanbad, had wilfully attempted to evade income-tax for the assessment years 1963-64 to 1969-70. He had also made statements in the verifications in respect of income-tax returns for these years and had delivered accounts which he knew to be false. He has, therefore, rendered himself liable to be prosecuted under Sections 276C and 277 of the Income-tax Act, 1961. I, therefore, under Section 279(1) of the Income-tax Act, 1961, direct the Income-tax Officer (Recovery)-cum-Officer on Special Duty, Dhanbad, to launch prosecution under Sections 276C and 277 of the Income-tax Act, 1961, for the assessment years 1963-64 to 1969-70 before the appropriate court."
20. The aforesaid direction of the Commissioner shows that he had applied his mind in respect of the fact constituting the offence and thereafter he had issued necessary direction as required under Section 279(1) of the Act. It is true that he had failed to take note of the fact at the time of the commission of the offence in respect of the assessment years in question, Section 276C was not in existence for which he had issued directions for prosecution of the petitioners. The offence under Section 276C is an independent offence and apart from the offence under Section 277 of the Act and, therefore, if he had missed to take note of the fact that Section 276C came into existence from October 1, 1975, for that reason, it cannot be said that the direction of the Commissioner in respect of the offence under Section 277 of the Income-tax Act is also bad. The only defect that can be detected in his direction is that he had failed due to inadvertence to take note of the fact that Section 276C of the Income-tax Act for which he had issued direction for prosecution was not in existence at the time when the offence was alleged to have been committed. In the circumstances, it cannot be said that he had not applied his judicial mind and the entire instruction issued by him is illegal to such an extent that it vitiates the initiation of the criminal prosecution in respect of the offence under Section 277 of the Income-tax Act too. In this view of the matter, prima facie, the prosecution of the petitioners under Section 277 of the Act does not appear to be either contrary to law or without jurisdiction or in any way bad in law which requires interference by this court. The direction issued under Section 279(1) of the Act is quite separable from the direction for the offence under Section 277 and that of Section 276C.
21. For the reasons stated above, I am of the view that the prosecution of the petitioners in respect of the offence alleged under Section 276C is misconceived and it is hereby quashed. So far as the prosecution of the petitioners under Section 277 of the Income-tax Act is concerned, I find and hold that they are liable to be prosecuted under that section, because of the reasons set forth in the foregoing paragraphs.
22. In the result, this application is allowed in part and as stated above, the prosecution launched against the petitioners under Section 276C of the Income-tax Act is hereby quashed but since they have been found liable under Section 277 of the Income-tax Act, the prosecution under this section shall proceed against them in accordance with law. However, it must be made clear that any observation made in this judgment, one way or the other, shall not prejudice the case of either party during the course of the trial.