Copal Lal Dhamani v. I. T. O. — 1986 DIGILAW 348 (RAJ)

SHARMA, J.—All the above numberred revision petitions involve a common question of law and therefore, it will be in the interest of justice to deal with them by a common order. It is also necessary to deal with them under a common order because the complaint out of which the above numberred revision petitions arise, were filed after proceedings under S. 132(5) of the Income Tax Act, 1961 hereinafter referred to as (The Act) will finalised and they arose out of a raid organised on 20th May, 1983, by the Income-tax Officer, Central Circle-1, Jaipur. 2. The common question of law which is involved in all the cases is as to whether for filing complaint under Section 276(c) of the Act it is necessary that there should be a regular assessment under the Act, against the assessment? 3. On May 20, 1982, under the provisions of Section 132 (1) and (1A) of the Act, a search was conducted in the business premises and residential house of the accused situated in Dhamani Market and also at Sodala Farm, Jaipur, after obtaining a search warrant. During that search it is alleged that cash, precious and semi-precious stones and jeweilary as well as certain documents were found. The I.T.O. after affording reasonable opportunity to the petitioners of being heard and after making an enquiry under the provisions of the Act, with the approval of the Inspecting Assistant Commissioner, made an order under subsection (5) of S. 132 of the Act. for the various assessment years in respect of the petitioners. In the said order the amount of tax on the income estimated to be undisclosed income was also calculated. Thereafter complaints were filed against the accused petitioners under Section 276-C of the Act, for the assessment years 1980-81, 1981-82, 1982-83, 1983-84 and 1984-85. The complaints filed at the instance of Commissioner, Income-tax, served under S. 279 of the Act. 4. Application were filed in all the cases on behalf of the accused petitioners that the complaint was premature and there were no reasonable ground for prosecuting the petitioners The learned Chief Judicial Magistrate (Economic Officers), Jaipur, dismissed the applications. 5. The main contentions of the learned counsel for the petitioners is that the prosecution has been launched on uncertain facto. Application were filed in all the cases on behalf of the accused petitioners that the complaint was premature and there were no reasonable ground for prosecuting the petitioners The learned Chief Judicial Magistrate (Economic Officers), Jaipur, dismissed the applications. 5. The main contentions of the learned counsel for the petitioners is that the prosecution has been launched on uncertain facto. He contends that when the complaints were filed, the regular assessment orders had not been made in any of the cases and it cannot be said as to how much tax is imposable against the accused petitioners. He has further contended that the order under S. 132 (5) of the Act, was not made under the provisions of the Act with the approval of the Inspecting Assistant Commissioner, as required under sub-section (5) of Section 132 of the Act, as it is not so averred in the complaints. He contends that unless a regular assessment order is made it cannot be said definitely that the accused petitioners how wilfully evaded many manner payment of any tax penalty/interest chargeable under the Act, and he cannot be prosecuted under Sec. 276-C of the Act. His contention is also that even if it be assumed that they can be prosecuted they should not be so prosecuted and the Asstt. Income-tax Commissioner should not rush for prosecution of the accused unless there is a regular assessment order from which it can be said that the accused petitioners willfully attempted in any manner whatsoever to evade any tax/penalty or interest chargeable or imposable under the Act. His further contention is that on the account of tax sought to be evaded two different kinds of imprisonments are provided under clauses (i) and (ii) of sub-section (1) of S. 276-C of the Act, and therefore, it will not in the interest of justice to launch the prosecution unless the liability is established in a regular assessment by the assessing authority. In support of his contention Mr. Khandelwal, learned counsel for the petitioner placed reliance on the case of Uttam Chand Vs. In support of his contention Mr. Khandelwal, learned counsel for the petitioner placed reliance on the case of Uttam Chand Vs. The I.T.O., Central Circle, Amritsar(i) in that case it was held that: "In view of the finding recorded by the Income-tax appellate Tribunal that it was clear on the appraisal of the entire material on the record that Smt. Jank Rani was a partner of the assessee-firm and that the firm was a genuine firm, we do not see how the assessee can be prosecuted for filling false returns". 6. In the aforesaid case when the appeal was pending before the appellate tribunal the I.T.O. initiated the prosecution of the partner of the firm under S. 277 of the Income-tax Act, for filling false returns. It was not held in the aforesaid case of the Uttam Chand Vs. The S.T.O. (Supra) that during the pendency of the appeal the I.T.O has no jurisdiction to initiate the prosecution. This case of Uttam Chand Vs. The I.T.O. (Supra) came-up for consideration before their Lordships of the Supreme Court in P. Jayappan Vs. S.K. Perumal First Income Tax Officer Ttlcoria (2) it was observed that: "It is true that as observed by this court in Uttam Chand Vs. The I.T.O. Central Circle Amritsar (1) the prosecution once initiated maybe quashed in the light of a finding favourable to the assessee recorded by an authority under the Act, subsequently in respect of the relevant assessment proceedings but what decision is no authority for the prosecution that no proceedings can be initiated at all under S. 276-C and S. 277 as long as some proceeding under the Act, in which there is a chance of success of the assessee is pending." 7. Their Lordships further observed as under:- "An appeal or reference under the Act cannot come in the way of the institution of criminal proceedings under S. 276C of the Act. In the criminal case all the ingredients of the offence in question have to be established in order to secure the conviction of the accused. The Criminal court no doubt has to give due regard to the result of any proceedings under the Act having a bearing on the question in issue and in an appropriate case it may drop the proceedings in the light of an order passed under the Act. The Criminal court no doubt has to give due regard to the result of any proceedings under the Act having a bearing on the question in issue and in an appropriate case it may drop the proceedings in the light of an order passed under the Act. It does not, however mean that the result of a proceedings under the Act would be binding on the criminal court. A criminal court has to judge the case independently on the evidence placed before it otherwise there is a danger of a contention being advanced that whenever assessee or any other person liable under the Act has failed to convince the authorities in the proceedings under the Act that he has not deliberately made any false statement or that he has not fabricated any material evidence conviction of such person should invariably follow in the criminal court." 8. It will therefore, be clear that in the case of P. Jayappan vs. S.K. Peru-mal (Supra) the Honble Supreme Court has categorically held that mere pendency of proceedings of assessment, re-assessment under the Act against an assessee is not a bar of initiation of criminal prosecution for the offence punishable under S. 276C or S. 277 of the Act. In any criminal case before the prosecution can succeed it has to establish all the ingredients of the offence. No doubt, in case any assessment or re-assessment order is passed in favour of the assessee during the criminal proceedings the criminal court has to take note of it and may drop the proceedings. 9. In the case of PWB Finance and Industries Ltd vs. Miss Gita Kriplani, Income-tax Officer Company Circle X, New-Delhi (2) on which reliance has been placed by Mr. Khandelwal, learned counsel for the petitioners it has been observed as under: "In case of offence, under the tax-laws, it would be improper for the Department to rush with the prosecution without a proper determination by a competent authority under the Act. of liability, which is sought to be made the basis of the prosecution, even, though such prosecution may not be incompetent." It appears from to perusal of the above judgment that it has been held that the prosecution may not be incompetent in the absence of determination of tax liability. 10. of liability, which is sought to be made the basis of the prosecution, even, though such prosecution may not be incompetent." It appears from to perusal of the above judgment that it has been held that the prosecution may not be incompetent in the absence of determination of tax liability. 10. In the instant case, after show cause notice to the petitioners and after affording reasonable opportunity of being heard and making enquiry an order under sub-section (5) of S. 132 of the Act, was made. Sub-section (5) of Section 132 of the Act, basically provides for retention by the Income Tax Officer in his custody the assets seized or part thereof as are in his opinion sufficient to satisfy aggregate of the amount referred to in its clauses (ii), (ii-a) and (iii) and in a summary manner to make an enquiry. The order has also to contain the estimate of the undisclosed income to the best of his judgment on the basis of such materials as are available with him. The order is also required to calculate the amount of tax in the income so admitted in accordance with the provisions of the Act. No doubt, a regular assessment order has to follow there-after. A bare look on Section 276-C of the Act, will show that under it. is not necessary that the prosecution can only be launched after a regular assessment has been made. As already stated earlier the ingredients of the offence of Section 276-C will have to be proved by the prosecution in order to succeed. 11. In the instant case so far as Gopal Lal Dhamani, petitioner is concerned, in 3 of the complaints filed against him, it appears that after the search was conducted and an order under sub-section (5) of S. 132 was made, returns were filed under S. 148 of the Act, for the assessment year 1980-81 and under S. 139 of the Act for the assessment years 1981-82, 1982-83, 1983-84 and 1984-85. Regular assessment orders have been made in respect of the assessment years other than 1930-81 and 1984-85. So far assessment year 1980-81 and 1984-85 are concerned, the regular assessment proceedings are still pending. So far as Laxmi Narain Dhamani, is concerned, his regular assessment orders have been made for the years 1982-83, 1983-84 and for the assessment year 1984-85, proceedings are pending. So far assessment year 1980-81 and 1984-85 are concerned, the regular assessment proceedings are still pending. So far as Laxmi Narain Dhamani, is concerned, his regular assessment orders have been made for the years 1982-83, 1983-84 and for the assessment year 1984-85, proceedings are pending. It may be stated that these assessment orders as aforesaid were only made by the I.T.O. having jurisdiction in the matter after the complaints had already been filed under S. 276-C of the Act So far as petitioner Gopal Lal Dhamani, is concerned, for the assessment years 1981-82, 1982-83 and 1983-84 in his returns filed on 28th September, 1983. he had show his income as Rs. 17 700/- Rs. 14,612/- and Rs. 15,000/- respectively. Under the assessment orders his income for the aforesaid years have been assessed as Rs. 9,40.720/-, Rs. 2,19,620/- and Rs. 4,88,970/-. The tax liability alongwith the interest for the above three years as determined by the I.T.O. is Rs. 10.37,935/, Rs. 1,84,695/-and Rs. 4,87,131/-. respectively. So far as Laxmi Narain is concerned, for the assessment years 1982-83, 1983-84 and 1984-85 he had filed his returns showing his income as Rs. 22,110/-, loss of Rs. 1,36,660/-and loss of Rs. 1,73,506/-respectively. The assessment for the years 1982-83 and 1983-84 have been finalised, though after filing of the complaints and the I.T.O. has fixed the liability and has assessed income on Rs. 2,10,210/- and Rs. 17.60,810/-. The tax liability for the aforesaid two years including interest has been fixed on Rs. 1,64,480/- and Rs. 17,36,640/- respectively. The proceedings in respect of assessment for the year 1984.85 is pending. 12. The aforesaid assessment orders made in respect of petitioners Gopal Lai Dhamani and Laxmi Narain, are said to be subject of appeal by the assessees before the Appellate Income-tax Commissioners Tribunal Be that as it may, in my opinion, as stated earlier in view of the law laid down by their Lordships of the Supreme Court in case of P. Jayappan vs. S.K. Perumal (supra) to me appears to be no bar in law for the initiating proceedings under S. 276-C of the Act, against the petitioners merely because the regular assessment proceedings were pending and had not been finalised or if have been finalised in few cases appeals are pending. As already stated earlier the prosecution will have to establish the ingredients of the offence under Sec. 276-C of the Act, independently on the evidence placed before the court. No doubt, as in few cases regular assessment orders have been made, the court perhaps may have to take note of them. Similarly, if here-in-after for the remaining years assessments are made or the assessment orders already made or to be made, at any future dates are modified or set-aside by the appellate-court, the criminal court may have to take note of them. It may be that if proper application is made before the learned trial-court bringing circumstances there-in and a request is made to stay the further proceedings of the complaints till the assessment orders in the remaining cases are made or the appeals are decided, the criminal court is bound to take them into consideration and pass necessary orders in accordance with the law. Even in the case of P. Jayappan Vs. Perumal (Supra) in para 6, as observed:- "It may be that in an appropriate case the criminal court can adjourn or postpone the hearing of a criminal case in exercise of the discretionary power under S. 309 of the Cr.P.C. if the disposal of any proceeding under the Act which has a hearing on the proceedings before it is imminent so that it may take also into consideration the order to be passed therein. Even here the discretion should be exercised judicially and in such a way as not to frustrate the object of the criminal proceedings. There is no rigid rule which makes it necessary for a criminal court to adjourn or postpone the hearing of a case before it indefinitely or for an unduly long period only because some proceedings which may have some bearing on it is pending else where." 13. In one case I have taken a view that the complaint should be allowed to proceed till the end and if it reaches the stage of hearing the arguments and till then the appeal against the assessment order is not decided and the request is made by the accused petitioners before the criminal court to stay the further proceedings, the court will consider it judicially on the facts of a case in accordance with the law. But in my opinion, it cannot be said that there is any bar in initiation of proceedings under S. 276-C of the Act, merely because the regular assessment orders have not been made or are subject of appeal. 14. Consequently, all the above numbered revision petitions are dismissed. Any observation on merits if made limited to these reasons. No observation made herein will have any effect either way on the complaints and are only confined for disposal of the revision petitions.