Indian Kanoon - Search engine for Indian Law

If a person makes a statement in a verification mentioned in... Section 22... which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be deemed to have committed the offence described under Section 177, I.P.C.

8. On a plain reading of this provision of law an offence is committed on the day a return made under Section 22 is verified by a party. It follows that on 25th July 1927, Mr. Ganga Sagar did commit an offence under Section 177, I.P.C., if he made a statement which was false and which he either knew or believed to be false or did not believe to be true. This return was made by Mr. Ganga Sagar under Section 22, Clause (2), Income-tax Act. In the same section, Clause (3) says that where a person has not furnished a return or, having furnished a return "discovers any omission or wrong statement therein" he may furnish a return or a revised return as the case may be, at any time before the assessment is made and any return so made shall be deemed to be a return made in due time under this section. Sir Tej Bahadur argued that when Mr. Ganga Sagar furnished a revised return which was received on 7th November 1927 the earlier return, Ex. V, was "washed out" and it could not be used even for the purpose of prosecution.

20. Then again, Mr. Ganga Sagar put all his books before the Income-tax Officer. No doubt, in doing this, he wanted to act "within the law." He thought that he would not take the risk of making a false return and would let the income-tax authorities discover, if they can, from his books, what the total income was. All this would go to show that Mr. Ganga Sagar was struggling between his anxiety to save his money and fear of committing anything which was unlawful.

21. For reasons best known to them, the income-tax authorities did not take action under Section 28 of the Act. If they had taken action under that Act they would have, probably, been in a position to realize nearly Rs. 70,000 from Mr. Ganga Sagar. They, under the law, could not realize more than that, even if Mr. Ganga Sagar had managed to escape payment of lawful taxes for several years. Knowing that, the income-tax authorities tried to realise, I had almost used the word "extort," Rs. 7,00,000 from Mr. Ganga Sagar. Ultimately they came down to Rs. 3,00,000: vide the statement of Mr. Bhawan, Income-tax Officer. They were prepared to compound the offence, if Mr. Ganga Sagar paid Rs. 3,00,000. But what did the sum of Rs. 3,00,000 represent? The Government Advocate has told us that Rs. 3,00,000 were really only a small portion of the taxes Mr. Ganga Sagar should have paid in the course of several previous years. We have no evidence on the point and, even if this were true, the law did not provide for recovery of taxes on "escaped income" for more than one year see Section 34. The Income-tax authorities were, therefore, trying to realize, by the threat of prosecution, what they could not realize under the law. This is a hardly desirable conduct in officers of the Government who are really servants of the State and, therefore, of the people. Then, I am rather surprised to find that when the negotiations for compounding the offence fell through, Mr. Ganga Sagar was charged not only with an offence under Section 177, I.P.C., but also with offences under Sections 195 and 465, I.P.C. Neither the offence under Section 193 nor the offence under Section 465, I.P.C., is compoundable. If the income-tax authorities believed that Mr. Ganga Sagar had committed offences under those two sections of the Indian Penal Code, they had no right to drop the prosecution under these sections, on receipt of money. The talk of compromise could only have related to the offence under Section 177, I.P.C., read with Section 52, Income-tax Act. In that case, on the failure of the compromise, no prosecution under Sections 193 and 465 should have been ordered. The officers of the Crown, therefore, on whose behalf the learned Government Advocate is now pressing for a sentence of imprisonment, have hardly been fair in their dealings with Mr. Ganga Sagar, and the prayer for a sentence of imprisonment comes but with ill grace from their mouth.

28. It has been urged on behalf of the applicant that Exs. W and W1 should be regarded as a revised return within the meaning of Section 22(3), Income-tax Act, which permits a locus paenitentiae to the assessee. If an action, such as this, of the applicant can be properly styled locus paenitentiae and a revised return under Section 22(3) it may have the effect of relieving him of the consequences contemplated by Section 23(4), i.e., liability to be assessed according to the best judgment of the Income-tax Officer, from which no appeal is allowed, but cannot condone the offence, if any, under Section 177, I.P.C., read with Section 52, Income-Tax Act, previously committed. If once it is established that the applicant made a statement in a verification mentioned in Section 22, which was false and which he either knew or believed to be false or did not believe to be true, the offence was complete at the time when the statement was made. The essence of an offence under those sections lies in the verification of an untrue statement, and provided the statement was deliberately false or not believed to be true, subsequent rectification cannot make it any the less an offence, though it may be considered as an extenuating circumstance in awarding sentence. I have found above that the applicant did not believe on 25th July 1927 that his income from dividends during the period in question was believed by him to be what he showed in the return of that date. It follows that he committed on that date an offence under Section 177, I.P.C., read with Section 52, Income-tax Act.

29. For the reasons stated above, I agree with my learned colleague in dismissing the revision, which I hereby do.

30. As regards the sentence, I accept the reasons given by the learned District Magistrate for awarding the maximum sentence of fine without adding to it any sentence of imprisonment. As has been pointed out by my learned colleague, it is not always possible, nor desirable, that a deterrent sentence should be aimed at. The circumstances of each case have to be considered in awarding sentence, and I am not prepared to say that the course adopted by the learned Magistrate was faulty. If a sentence of fine only is to be regarded as lenient, any sentence of imprisonment, simple or rigorous, is too severe for a man in the position of the accused. It is to be noted that the income-tax authorities could have, if they had so chosen, imposed a heavy penalty equal to one year's tax under Section 28, Income-tax Act. They did not avail of the provisions of that section, because, as it appears to me, an attempt was made to recover from the applicant a very much larger sum for compounding the offence which he was alleged to have committed. It is in evidence that a sum of seven lakhs was originally demanded from him for allowing the case to be compounded. The demand was reduced to three lakhs later on. The applicant did not accede to the demand and was prosecuted not only for an offence under Section 177, I.P.C., read with Section 52, Income-tax Act, but also for serious offences like perjury and forgery, which could not be substantiated. The Act empowers the income-tax authorities to compound offences on receipt of money; but it was never the intention of the legislature that the power conferred by it should be used to obtain as much money as possible by holding out a threat of prosecution. It seems to me that action under Section 28, Income-tax Act, was not taken because the applicant refused to pay the large sum of money demanded from him for compounding the offence which he was alleged to have committed, and the anxiety to have him sentenced to a term of imprisonment for his contumatious behaviour was vindictive.