Punjab-Haryana High Court
Basal Tools Co. And Ors. vs Income-Tax Officer on 4 December, 1989
Equivalent citations: [1990]184ITR303(P&H)
JUDGMENT S.D. Bajaj, J.
1. A partnership concern working under the name and style of Basal Tools Company, Factory Area, Patiala, submitted its income-tax return for the assessment year 1968-69, completed on 31st August, 1967, to the concerned income-tax authorities on June 29, 1968. At the relevant time, the partnership concern had two partners, named, Shanti Lal Kapur and Subhash Kapur. The return was filed on behalf of the partnership concern by Shri Shanti Lal Kapur, its senior partner in age.
2. The income disclosed in the aforesaid return was Rs. 85,760. In the assessment order dated October 30, 1971, the income was raised to Rs. 2,64,680. In appeal, the income was reduced to Rs. 1,03,512. After reopening of the assessment proceedings, the assessee filed a revised return through Shri Suresh Kapur--its added partner ; added after the assessment year 1968-69 of the return. On September 30, 1980, the income was assessed at Rs. 1,99,990. Penalty of Rs. 45,593 imposed on February 24, 1983, was waived by the Commissioner of Income-tax (Appeals), Chandigarh, on July 31, 1984.
3. Alleging that the partnership concern and its three partners had fabricated false evidence by furnishing inaccurate particulars of the income earned by the partnership concern up to August 31, 1967, in the return for the assessment year 1968-69 and then supported it with falsely prepared accounts, Shri D.C. Roy, Income-tax Officer, Patiala, filed against them four criminal complaints, annexure P. 4, in the court of the learned Chief Judicial Magistrate, Patiala, for their prosecution under Sections 276C and 277 read with Section 278 of the Income-tax Act and under Sections 193, 463 and 477 read with Section 109 of the Indian Penal Code.
4. All the four persons arrayed as accused in the complaints, annexure P. 4, have filed Criminal Miscellaneous No. 4394-M of 1987 for quashing the complaints, annexure P. 4, and all subsequent proceedings thereon on the ground that Subhash Kapur and Suresh Kapur have nothing to do therewith and that the partnership concern as also Shanti Lal Kapur, if at all, can both be proceeded against under Section 277 of the Income-tax Act therein.
5. I have heard Shri Balwant Singh Gupta, senior advocate, assisted by Shri Sanjay Bansal, advocate, for the petitioners, Shri Ashok Bhan, senior advocate, assisted by Shri A.K. Mittal, advocate, for the respondent, and have carefully gone-through the record of proceedings.
6. In respect of the return similarly filed by the petitioner concern for the assessment year 1967-68, it was held by this court inter partes on almost identical facts in Basal Tool Co. v. ITO [1987] 167 ITR 24 (at p. 26) :
"Now coming to the revised return filed on June 7,177, by Suresh Kapoor, petitioner No. 4, it is to be noticed that the Income-tax Officer did impose a penalty under Section 271(1)(c) of the Act on the ground that particulars of the income to a certain extent had been concealed and inaccurately furnished. However, this order was set aside in appeal (annexure P-3) as the Commissioner of Income-tax found that the facts did not justify the imposition of penalty. In other words, it was held that in the revised return neither any income had been concealed nor inaccurate particulars of such income had been furnished. In such circumstances, in view of the finding of the Income-tax Commissioner, there was no concealment of income and no furnishing of inaccurate particulars in the revised return which may have attracted the provisions of Section 276C or 277 of the Act. It cannot be said that in the revised return any wilful attempt had been made to evade tax or that a false return had been filed by petitioner No. 4 on behalf of the firm.
In view of what is stated above, the prosecution of petitioners Nos. 3 and 4, namely, Subhash Kapoor and Suresh Kapoor, is misconceived and is tantamount to abuse of the process of law. Consequently, this petition is partly allowed and the complaint (annexure P-4) and the proceedings taken in consequence thereof are quashed vis-a-vis the petitioners, Subhash Kapoor and Suresh Kapoor."
7. Regarding petitioners Nos. 1 and 2 arrayed as accused Nos. 1 and 2 in the complaint, annexure P-4, it was held by the Andhra Pradesh High Court in Veerakistiah v. ITO [1983] 139 ITR 113 (at p. 115) :
"Therefore, to this extent, viz., to the extent of offences under Sections 193, 196 and 120B, Indian Penal Code since the complaint has not been filed either by the concerned Income-tax Officer or by the Income-tax Commissioner himself, as envisaged under the provisions of Section 195, Criminal Procedure Code, the proceedings are liable to be quashed and are hereby quashed. However, so far as the offence under Section 277 of the Income-tax Act is concerned, the proceedings before the learned Magistrate would continue, because it is mentioned in the complaint itself that this complaint has been filed at the instance of the Income-tax Commissioner, Madras. Therefore, having regard to the provisions of Section 279 of the Income-tax Act, since the offence is alleged to have been committed under Sections 277 and 278 of the Income-tax Act, a complaint at the instance of the Commissioner of Income-tax by a third person is permissible."
8. To the same extent are the observations made by the Kerala High Court in ITO v. Kerala Oil Mills [1986] 162 ITR 292, which read (head-note) : "An Income-tax Officer before whom a proceeding under the Income-tax Act, 1961, is pending is deemed to be a civil court for purposes of Section 195 of the Criminal Procedure Code, 1973. A prosecution under Sections 193 and 196 of the Indian Penal Code, 1860, can never be considered to be a proceeding under the Income-tax Act. Section 127 of the Income-tax Act authorises the Commissioner to transfer any case from one Income-tax Officer to any other Income-tax Officer. It is clear, however, that the transfer can have effect only in respect of proceedings under the Income-tax Act. Hence, it follows that the court before which the offence under Sections 193 and 196 was committed should file the complaint as contemplated by Section 195(1)(b)(i) of the Criminal Procedure Code. No superior court can, by an order of transfer of the case to another court, confer jurisdiction upon the transferee court to file a complaint." A complaint under Sections 193, 463 and 477 read with Section 109 of the Indian Penal Code could, therefore, be filed against petitioners Nos. 1 and 2 by the Income-tax Officer, Central Circle, Patiala, and not by the Income-tax Officer, District 11(1), Patiala, and has to be quashed to this extent on this score.
9. It also needs to be observed that Section 276C of the Income-tax Act as it now exists, was inserted through the Taxation Laws (Amendment) Act, 1975, on October 1, 1975, and could not, therefore, be availed of and made the basis for launching prosecution against petitioners Nos. 1 and 2 retrospectively in respect of the return filed by them for the assessment year 1968-69 on June 29, 1968. The complaint, annexure P-4, is also quashed against petitioners Nos. 1 and 2 to this extent as well.
10. The net result of the foregoing discussion is that the complaint, annexure P-4, shall now proceed against respondents Nos. 1 and 2 who are petitioners Nos. 1 and 2 before this court, to a limited extent in regard to accusations under Section 277 only of the Income-tax Act. Ordered accordingly.