D. R. KHANNA. J. ( 1 ) THESE three criminal petitions havebeen moved against similar orders. dated 28/02/1984 ofadditional Chief Metroropolitan. Magistrate whereby the application of the petitioners in each of the three cases pendingagainst them for quashing of prosecution proceedings wasrejected. ( 2 ) BRIEFLY staled the allegations against the petitioners asper complaints filed against them by Mr. P. P. Suri, Income-tax. Officer, Control Circle XX, New Delhi are that the petitioner No. 1 which is a private limited company paid interestto 8 parties who had effected deposits with the company orwere its creditors While doing so. income-tax deductions weremade by the petitioner No. 1 from the amount of interest paidto them. In other words, income-tax was. deducted at source bythis petitioner on interest payments effected. Under the law thedeductions so made should have been deposited with the Centralgovernment within one week of the payments. However, thiswas not done and the deposits were effected much later Theposition in this regard has been as under :a Since there were aef!iu!ts in the case of ,-, credit-ors, one Com-plaini case was Ck\l with regard to 3 crc,l iors. second withregard to the other 3 and the third quo the remaining 2 creditors. The complaints have been under Section 276 B ol the Inconietax Act. 1961, which reads as under :if a person, without reas .)riab!. , cause or excuse, tailsto deduct or after dedlieting. tails to pay the l:i\as required by or under the provisions of si. sh-eclion 1. 9) of beetion 80e or Chapter XV!!-U. njshall be punishable : (I) In case where the amount of tax which hehas failed to deduct or pay exceeds one handred thousand rupees, with rigorous inipris^n- (I)MEIIL for a term which shall noi be less thansix iiioiiths but which may extend To sev^nvears ai . d with fine: (II) in any other ease with rigorous imprisonmmentfor a term which shall not be less lthan threemonths but which may extend to thice yearsarid with fine. "petitioner Nos. 2 to 4 were impleaded as directors of the petitioner No. 1company and they are also sought to be madecriininiiilv liable. ( 3 ) THE Income Tax Officer had well commenced penaltyproceedings under Section 201 (1) and 22] of the Income Taxact for the failure of the petitioner No. 1 to deposit the saiddeductons of tax at soruce within the timeprescribed. ( 3 ) THE Income Tax Officer had well commenced penaltyproceedings under Section 201 (1) and 22] of the Income Taxact for the failure of the petitioner No. 1 to deposit the saiddeductons of tax at soruce within the timeprescribed. Thatsection 201 (1) rearts as under : "if any such person and in the case referred to in section 194 the principal otticer and the company ofwhich he is the principal officer does not deduct orafter deducting fails to pay the tax as required byor under this Act. he or it shuit, wilhout prejui-lieeto any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax :provided that no penalty shall be charged undersection 221 from such person, prinicipal oificer orcompany unless the Income-tax Officer is satisfiedthat such person or principal officer or company,as the case may be, has (without good and sufficientreasons) failed to deduct and pay the tax. "a penalty of Rs. 20,000 was then levied by the Income-taxofficer under these provisions against the petitioner no. 1. Thelatter, however, went in appeal before the Commissioner whoi) by an order dated 24-3-83 quashed that panelty. The relevantoperative part of that order was as under : "however, the contention of the learned representativethat there had been good and sufficient reason for non-payment of the tax on account of the financialstringency appears to be correct. The appellantcompany in fact did not pay the creditors out theiraccounts were only credited with the amounts reduced by the tax that would have been deductable in respect thereof. Moreover, the deduction of taxin these cases was notional only. Further the I. T. O. had charged interest u/s 201 (IA) in respect ofthe delay of payment of tax deducted at source. The appeal against the order u/s 201 (ia) hasbeen rejected by me in a separate order upholdingthe levy of the interest. Considering the various facts and circumstancesof the case and the fact that there had been sufficient and good cause, I hold that the Income Tax Officer was notjustified in levying penalty us 201 (1) 221 and assuch the same is cancelled. In result the penalty of Rs. 20,000 is cancelledand appeal is allowed. Considering the various facts and circumstancesof the case and the fact that there had been sufficient and good cause, I hold that the Income Tax Officer was notjustified in levying penalty us 201 (1) 221 and assuch the same is cancelled. In result the penalty of Rs. 20,000 is cancelledand appeal is allowed. "as a iesult of the cancellation of the penalty the petitioners moved the trial court in the present criminal cases and sought that the prosecutions could no longer be sustained and theyshould be quashed. This, however, did not prevail with thelearned trial Court and it was noted that the appeal of the Department against the order of the Commissioner of Income-Taxwas pending before the Income-tax Appellate Tribunal and therefore the order could not be treated as final. It was furtherobserved that even otherwise the findings of the Commissionerwere not binding on the criminal court which was entitled toindependently go into the matter. The fact that there weredelays in the deposits of tax deducted at source it was noticedwas there. Dealing with another plea of the petitioners thatthey had already been charged interest by the Department forthe delays in the payment of those amounts to the Centralgovernment, the learned trial Court observed that the charging of such interest did not obliterate the prosecution and the Legislature has made separate provisions in this regard. It wasnoted that there were no clear findings that there were goodand suffcicnt reasons for not deducting the income-tax at source. Feeling aggrieved the petitioners have now moved the presentpetitions. ( 4 ) BEFORE proceeding further it may be mentioned that theincome-Tax Appellate Tribunal has now as well rejected theappeal of the Income-tax Officer against the deletion of that penalty. The order in this regard was made on 10/07/1984. ( 5 ) THERE is no gainsaying that the Income-Tax Act makesseparate provisions for levy of interest, penalty and criminalprosecution. The charging of interest has altogether a different purpose, and that is for compensating the revenue for depriving it of the user of the money during the period-the paymentwas withheld. The learned trial court was, therefore right inignoring the effect of the same on the present prosecutions. Infact, the Commissioner of Income-tax also rejected this contention of the assessee that the levy of interest should precludeimposition of penalty. The learned trial court was, therefore right inignoring the effect of the same on the present prosecutions. Infact, the Commissioner of Income-tax also rejected this contention of the assessee that the levy of interest should precludeimposition of penalty. It is of course another thing that whenthe revenue has been adequately compensated with interest, andthe assessee had some cause for non-deposit or laboured underignorance in good faith, relief by way of quantum of penalty orsentence may be allowed. ( 6 ) THE provisions with regard to criminal prosecutions incases of economic offences or violations of income-tax law areof recent growth and their desirability and / or necessity was feltbecause of rampant attitude of defiance displayed by someaffiuent sections of the society. The pernicious effect on theeconomy of the country that evasions and violations wereplaying naturally called for sterner measures. These prosecutionshave thus been made permissible in spite of the already existingprovisions with regard to levy of penalties by the Income-taxauthorities. The legislature s wisdom therefore to open up prosecutions and dire consequences has sound basis and annot bedoubted. There is no question of double jeopardy in such cases. The scope and purpon of penalty proceedings and prosecutionsare separate and independent. The existence of the one or theother is no bar to any of them. They are coextensive. An assessee can be livied penalty as well as punished in prosecution. ( 7 ) HOWEVER, the question arises in cases where penaltieshave been quashed on the same facts and circumstances, andthe graveman of the criminal charge is the same which wasunder purview in penalty proceedings. Can a finding given onthose very tacts by specialised bodies who have the technical expertise of the particular branch of law and are accustomed toadminister the same everyday should be entirely ignored ? Itis more in the context of the present cases where the primaryconsidration is whether the petitioners had without reasonablecause failed to effect the deposits of tax deducted at source withthe Government. The corresponding provisions under Section201 (1) of Income-tax Act are rather somewhat stringent whenthey speak of "without good and sufficient reasons". Section however, speaks of "without reasonable cause or excuseda cause may appear to be "reasonable, though still may notbe "good and sufficient". Sufficiency goes farther than merereasonableness. The distinction is of course thin. The corresponding provisions under Section201 (1) of Income-tax Act are rather somewhat stringent whenthey speak of "without good and sufficient reasons". Section however, speaks of "without reasonable cause or excuseda cause may appear to be "reasonable, though still may notbe "good and sufficient". Sufficiency goes farther than merereasonableness. The distinction is of course thin. The legislature has lather apart from sufficient cause now enjoined that itshould also be good cause for not depositing the money wheredefaults have occurred. The standard of proof and explanationand the onus to be discharged by the assesee is much higherand heavy. In the criminal case, however, the dictates of law justdemand the requirement of reasonable cause i. e. what appearsex facie to reason, which is much more milder. ( 8 ) MOREOVER, penalty proceedings under the Income-taxlaw are primarily quasi-criminal in nature. During their course,the rigour of the criminal law that the prosecution case mustentirely stand on its own legs and not on the weakness of thedefence version does not essentially operate with that infallability. However, the onus on the prosecution in criminal mattersis far ngorous and must be proved beyond reasonable doubt. The defence version to be satisfactory and plausible in criminaltrial is much lighter and it just weighed in the realm of preponderance of probability. In case therefore in any penalty proceedings under the Income-tax Law, an assessee has been aible toestablish "good and sufficient reason" for the default before thecommissioner, and then before the Tribunal, can it not be saidthat qua the criminal trial alteast on the same facts and circumstances, "reasonable cause" should be treated to exist ? I ammaking these observations in the context of those provisionswhere the provisions of law both under the penalty previsionsand prosecution are similar. ( 9 ) THE observations of the learned trial Court in the present case that there was no clear finding by the Commissionerof Income-tax that there was sufficient and good course with theassessee to not effect deposits is plainly not borne out. Rathera perusal of that order brings out that he was satisfied thatthere existed sufficient and good cause with the assessee. Thetwo reasons which pravailed with him were financial strin-gency of the assessee and that the interest payments were notin cash but merelv notional by way of credit entries in theiraccounts. Rathera perusal of that order brings out that he was satisfied thatthere existed sufficient and good cause with the assessee. Thetwo reasons which pravailed with him were financial strin-gency of the assessee and that the interest payments were notin cash but merelv notional by way of credit entries in theiraccounts. ( 10 ) FROM the side of the complainant in the present casesit has been urged that the balance sheet of the company showedthat the current liabilities were reduced by about 3. 6. lacs ascompared to the preceding year. From this circumstance, it wasurged that the company was not lacking funds, and if it couldeliminate part of those liabilities, it could have as well paid thedues of the revenues. However, the reduction of those liabilitieswere at different stages in the year, and do not essentially reflect the state of affairs of the time when deposits were to beelected with the revenue. In any case, the entire consepectus offacts and circumstances was before the Commissioner and theappellate Tribunal and if they have after consideratian cometo the view that good and sufficient reason existed with theassessee to not make deposits with the revenue within time,that finding cannot be lightly ignored and even though strictlymay not be res-judicata, is a valuable piece of evidence andoverwhelming circumstance and consideration which must weighwith the criminal court while assessing the reasonable cause prevailing with the assesee. ( 11 ) THUS. in the recent decision of the Supreme Court inthe case of P. Jayappan v. S. K. Perumal First Income-taxofficer. Tuticorin, AIR 1984 S. C. 1693 (1) it was observedat page 1695 as under : "the Criminal Court no doubt has to give due regardto the result of any proceeding under the Act having a bearing on the question in issue and in anappropriate case it may drop the proceedings inthe light of an order passed under the Act. It doesnot, however, mean that the result of a proceedingunder the Act would be binding on the criminalcourt. The criminal Court has to judge the caseindependently on the evidence placed before it. Otherwise there is a danger of a contention beingadvanced that whenever the assessee or any otherperson liable under the Act has failed to convincethe authorities in theproceedings under the act thathe has not deliberately made any false statement orthat he has not fabricated any material evidence,the conviction of such person should invariablyfollow in the criminal Court. Otherwise there is a danger of a contention beingadvanced that whenever the assessee or any otherperson liable under the Act has failed to convincethe authorities in theproceedings under the act thathe has not deliberately made any false statement orthat he has not fabricated any material evidence,the conviction of such person should invariablyfollow in the criminal Court. "this decision on which the complainant has heavily reliedclearly expounds that a criminal court can in an appropriatecase drop the proceedings in the light of the order passed underthe Income-tax Act where the result of those proceedings havea bearing on the question in issue in the criminal case. It was,of course, further observed that a result of those proceedingswould not always bind a criminal trial. This was said in thecontext whether a conviction should ipso-facto follow where apenalty has been sustained under the Income-tax Act. Naturallyin such circumstances the duty cast upon the prosecution tostill establish its case beyond reasonable doubt before the criminal court remains and is not taken away. This may, however,not be entirely the case when the position is converse i. e. whenthe penalty is dropped on the sufficiency of explanation putforth by the assessee. Such result is certainly a valueable pieceof evidence and circumstance in favour of the accused in criminal trial. ( 12 ) THUS in the case of Gulab Chand Sharma v. Shri H. P. Sharma Etc. LL. R. (1974) I Delhi 190 (2) a division bench ofthis court discussed the essentials of the general principles ofres judicata in criminal cases and observed that where a decision by a competent judicial tribunal has been finaly given anddetermines the same questions as are sought to be controvertedin a subsequent litigation and between the same parties the pleaof res judicata is available. The following pertinent observations may be reproduced here with advantage : "since the principle of issue estoppel is aimed at theexclusion of evidence to prove facts which havebeen already proved between the parties, it has notbeen held to apply against the accused though italways applies in favour of the accused. " ( 13 ) THE Allahabad High Court in Dr. D. N. Munshi v. N. B. Singh, 1978 (112) ITR 173 (3) took note that if the lawpermits, the order of the Tribunal may be utilised as a piece ofevidence to show that there was no offence committed by theaccused. " ( 13 ) THE Allahabad High Court in Dr. D. N. Munshi v. N. B. Singh, 1978 (112) ITR 173 (3) took note that if the lawpermits, the order of the Tribunal may be utilised as a piece ofevidence to show that there was no offence committed by theaccused. But the finding given by the Tribunal cannot by itselfbe sufficient to direct the dismissel of the complaint or acquittal or discharge of the accused under the provisions of thecode of Criminal Procedure. The facts of that case were entirely distinguishable inasmuch as during the course of originalassessment, penalty had been imposed. That assessment itslfwas set aside by the Appellate Tribunal and the matter remanded to the Income-tax Officer as he had in the meanwhile alsocommenced re-assessment proceedings under Section 147 of theincome tax Act. Since the original assessment had been knocked out and the re-assessment proceedings were going on, thetribunal set aside the assessment. Naturally, therefore, the question of levy of penalty on the completion of re-assessment proceedings still remained open and in the circumstances it was heldthat there was no bar to the criminal trial in case concealmentof income was otherwise proved. There was thus no quashingof the penalty on merits nor all possibilities closed under whichpenalty could still be levied. In fact, in the case of P. Jayappanthe Superme Court also held that the mere non-completion ofreassessment proceedings before the Income-tax Officer couldnot justify the dropping of criminal case. ( 14 ) IN the present case, however, no such re-assessment isinvolved and the penalties have been quashed on merits afteracceptance of the case of the assessee that there was good andsufficient reason for not depositing the tax with the revenuewithin time. It must, therefore, be taken that the milder proofof reasonable cause should be taken to have been establishedand in the circumstances if would be a sheer exercise in futilityand harassment of the accused to allow criminal prosecutionproceedings. Petitioners Nos. 2 to 4 were, of course, not partiesin those penalty proceedings under the Income-tax Act. Howevertheir liability is being invoked in their status as directors of thepetitioner No. 1 company and as appurtenant to its liability. The prosecutions must, therefore, be quashed. Petitioners Nos. 2 to 4 were, of course, not partiesin those penalty proceedings under the Income-tax Act. Howevertheir liability is being invoked in their status as directors of thepetitioner No. 1 company and as appurtenant to its liability. The prosecutions must, therefore, be quashed. ( 15 ) THE case of Rajinder Nath v. M. L. Khosla, Income-taxofficer, and Another (1982) (134) I. T. R. 397 is also distinguishable in asmuch as in that case the quantum of addition in thetrading account of the assessee had been knocked down by theappellant Assistant Commissioner and that decision was confirmed by the Tribunal. When in the regular assessment it was found that there was no witholding or concealment of theincome, naturally the penalty or prosecution could not be sustained. The other observations of the court with regard to themaintainability of the criminal proceedings wherepenalty hasbeen dropped were in the nature of obiter. Rather the observation that initiation of penalty proceedings is not a conditionprecedent to the initiation of the complaint under Section 277cannot be taken exception to when the Supreme Court in P. Jayappan s case has upheld the maintainability of the criminalcase even where re-asessment proceedings have still to be completed. In fact levy of penalty in such a case follows after thecompletion of re-assessment proceedings. ( 16 ) THE view of this Court in Rajinder Nath s case thatwhen addition in income is knocked out the prosecution cannot be sustained finds approval in a somewhat different situation when the Supreme Court knocked down the prosecution inthe case of Uttam Chand and others v. Income-tax Officer Central, Circle. Amritsar, (1982) (133) I. T. R. 909 (5) and foundthat the genuineness of the firm had been established in theregular assessment and, therefore, the assessee could not beprosecuted for filing false returns. ( 17 ) THE complaint has next made reference to Section279 (1 A) and pointed out that the legislature has made specificprovision for cases where prosecution cannot be maintainedwhen penalties have been reduced or waived. The prosecutionunder Section 276-B it is next pointed out is not included underthat provision and in the circumstances it is pleaded that thecancellation of penalty can have no effect on the prosecution. In my opinion, however Section 279 (1a)creats legal bar. The prosecutionunder Section 276-B it is next pointed out is not included underthat provision and in the circumstances it is pleaded that thecancellation of penalty can have no effect on the prosecution. In my opinion, however Section 279 (1a)creats legal bar. Thesame, however, does not preclude or exhaust cases which areotherwise on merits found to be already adjudicated under theincome-tax Act and there is no possibility of nor the judicialpropriety would permit taking a different view. The present aresuch cases. ( 18 ) THE result, therefore, is that the petitions are allowedand the three prosecutions pending in the trial court are quased.