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After rejecting the claim of third appellant, the amount of Rs. 6 lakhs said to have been received by the first appellant has been treated as the income of the first appellant from some undisclosed sources and the first appellant was assessed under the relevant provisions of the I.T. Act. According to the complainant, all the appellants have conspired together to give false evidence at all stages of the proceedings under the I.T. Act and to fabricate false evidence intending that the same might cause the Income-tax Officer to arrive at an erroneous opinion touching the nature and source of the sum of Rs. 4,28,713 which is alleged to have been recovered from the first appellant and that all the appellants thereby have committed the offences punishable under Section 120-B IPC read with Sec. 193 IPC, under Section 120-B read with Section 277 of the I.T. Act and under Section 193 (simplicitor) of Indian Code and in addition the appellants 1 and 3 were indicted under Section 277 (simplicitor) of the Act.

On the above allegations, the Income-tax Officer, Central Circle, XIV, Madras filed the criminal complaint before the Chief Judicial Magistrate, Egmore in C.C. No. 356 of 1977 on his file which proceedings have culminated to these appeals.

Be that as it may, we would like to refer certain proceedings before the Income-tax Authorities which are very much relevant for the disposal of these appeals.

The Income-tax Officer on the basis of the statement of the first appellant given before the Enforcement Authorities found that the amount or Rs. 6 lakhs was the income from other sources of the assessee (the first appellant) and that the explanation given by him was not satisfactory and included that amount in his taxable income. The Appellate Assistant Commissioner agreed with the ITO but the Income- tax Appellate Tribunal held that the department had not brought any material to show that the assessee was the owner of the money in question and that the evidence only indicated that the assessee had been engaged for disbursing the money not belonging to him but belonging to a third party. On the above finding, the Tribunal set aside the assessment order and referred the case back to the ITO to make a fresh assessment. But the ITO again made the same type of assessment. The first appellant took his statutory appeals under the Act and ultimately went before the Tribunal once again which by its order dated 12.5.1980 allowed the appeal of the assessee namely the first appellant and dismissed the cross objection of the department. In the meantime, the criminal proceedings against these three appellants were initiated in January 1977. To substantiate the case, the prosecution examined 12 witnesses and marked Exhs. P 1 to P 87. The appellants did not examine any witness but filed Exhs. D 1 to D 4. The Trial Court accepting the evidence adduced by the prosecution, convicted and sentenced the appellants by its judgment which was confirmed in C.A. Nos. 221 and 222 of 1980 on the file of the Vth Additional Judge, Madras. In the result, the three appellants stood convicted under Section 120-B read with Sec. 193 IPC and Sec. 277 of the I.T. Act besides under Sections 193 IPC and appellants No. 1 and 3 separately under Section 277 of the I.T. Act. But coming to the question of sentence, the trial court taking into consideration of the fact that the appellants were detained under COFEPOSA in respect of the amount seized and they have also undergone the ordeal of enquiries and the trial for a considerable length of time sentenced each of them to undergo imprisonment till the rising of the Court for each of the offences and to pay a total fine of Rs. 2,000, Rs. 600 and Rs. 1,500 respectively with the default clause.

The trial court after having considered the allegations of the complaint, indicted the accused inclusive of the appellants thus:

The first and second appellants wilfully caused the Advocate's letter dated 20.10.66 with a false statement; that they, thereafter gave separate statements dated 16.11.66 and 11.1.74 respectively before the ITO repudiating their earlier statements given before the Enforcement Officers and that they thereby, have committed an offence punishable under Section 193 IPC. Similarly, the third appellant not only by fabricating a letter dated 10.10.66, but also by filing a false affidavit dated 23.3.67 and thereafter by making a false statement before the ITO on 4.11.71 has made himself liable to be punished under Section 193 IPC. In addition, accused No. 1 has committed an offence under Section 277 of the I.T. Act by delivering a letter to the ITO on 27.2.71 containing a false statement that his statement under Exh. P 39 was not true and obtained under duress. Accused No. 3 has also committed similar offence under Section 277 of the I.T. Act by wilfully delivering to the ITO a false statement dated 1.3.67 claiming the amount of Rs. 4,28,713 as belonging to him.

Section 277 of the I.T. Act in general seeks to the penalise one who makes a false statement in order to avoid his tax liability. In the present case, the Revenue has not come forward that the money represents the income of the third appellant liable to be taxed but on the other hand it is the case of the ITO that it is not the third appellant's money at all. Moreover, a cursory reading of the penal clause proposes to impose punishment depending upon the quantum of tax sought to be evaded. Here no question of evading he tax will arise. Even assuming, that the third appellant has made himself liable to be punished under Sections 193 and 277 (simplicitor) of the I.T. Act, inasmuch as he has been put in a joint trial with the appellants 1 and 2 for the conspiracy of the said offences without any specific allegation or acceptable evidence to connect the third appellant with the activities of the appellants 1 and 2, there is a clear misjoinder of charges which includes misjoinder of parties also. In the facts and circumstances of the case on hand, the misjoinder of charges cannot be said to be a mere irregularity. In our considered opinion by the joint trial with misjoinder of charges, as pointed out by Mr. ATM Sampath, a failure of justice has in fact been occasioned since all the Courts below have clubbed all the allegations levelled against all the three appellants and two other accused (A 4 and A 5) together and considered the same as if all the offences were committed in the course of the same transaction pursuant to a conspiracy which is neither supported by the allegations in the complaint nor by any evidence as required under the law. Hence, the conviction under Sections 193 IPC and 277 of I.T. Act (simplicitor) also have to be set aside.