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1989 DIGILAW 340 (MAD)

Bharalhan v. Income-tax Officer

1989-06-22

SREEDHARAN

body1989
ORDER: Petitioner was an abkari contractor. For the assessment year 1983-84 (accounting year 1982-83) he was conducting arrack shops and toddy shops in Kazhakkottam Excise Range in Trivandrum district. He filed return of income on 6.12.1983 before the Income-tax Officer, ‘D’ Ward, Quilon offering an income of Rs 4,64,845. A search under Sec.132 of the Income Tax Act, 1961, hereinafter referred to as ‘the Act’, was conducted at the arrack depot of the accused at Kazhakooltam and at the residence of the accused on 5.3.1985. In the course of search it is alleged that certain original books of accounts disclosing sale of arrack on different rates were found out. According to the income tax authorities the return of income filed by the petitioner on 6.12.1983 was incorrect and it was filed by fabricating and manipulating false accounts. On this allegation a complaint, copy of which is marked in this case as Annexure-5, was filed before the Additional Chief Judicial Magistrate's Court (Economic Offences), Ernakulam, for offences under Secs.276-C(1) and277(i) of the Act and Secs.193 , 196 and415, I.P.C. That Court registered the complaint as C.C.No. 34 of 1987 and has issued summons to the petitioner. 2. Petitioner seeks to quash the proceedings beCourt below on two grounds: first ground is as follows: The petitioner filed return of income before the Income Tax officer D Ward, Quilon, on 6.12.1983. That officer passed the assessment order on 28.2.1986. So the offences under Secs.193 and196, I.P.C. if at all committed by the petitioner was to the Court of the Income Tax Officer, D Ward, Quilon. Only that officer or superior officer to whom that officer was subordinate could have filed a complaint. The complaint, Annexure-5 was filed by the Income Tax Officer, B-Ward, Trivandrum. That complaint is incompetent. The second ground urged is that the allegation regarding fabrication and manipulation of false accounts and other documents cannot stand in view of the decision of the Commissioner of Income Tax (Appeals) in the appeal filed by the petitioner and by virtue of the order passed by the Income Tax Appellate Tribunal, Cochin Bench, in I.T.A.No. 320 of 1987. 1 shall proceed to deal with these grounds in detail. 3. Offences alleged agaiast the petitioner are those under Secs.276-C(1) and277(i) of the Act and 193 , 196 and415 of the Penal Code. 1 shall proceed to deal with these grounds in detail. 3. Offences alleged agaiast the petitioner are those under Secs.276-C(1) and277(i) of the Act and 193 , 196 and415 of the Penal Code. The petitioner filed return of income for the assessment year 1983-84 on 6.12.1983 before the Income Tax Officer, ‘D’ Ward, Quilon. That officer passed a final order of assessment on 28.2.1986. So, it is contended that offences under Secs.193 and196, I.P.C. if at all committed must be taken to have been committed before the Income Tax Officer, D-Ward, Quilon. Sec. 136 of the Act provides that any proceeding before the income tax authorities shall be deemed to be a judicial proceeding for the purpose of Sec.196 , I.P.C., and that every income tax authority shall be a civil Court for the purposes of Sec.195 of the Code of Criminal Procedure. So, if an offence under Sec.193 or196 , I.P.C., has been committed in respect of a proceeding before the income tax authority, that authority alone can file a complaint under Sec.195 of the Code of Criminal Procedure. If that authority is not filing complaint then some other authority to which the first authority is subordinate can initiate proceedings. In the instant case, the alleged false return of income was filed before the Income Tax Officer, D-Ward, Quilon. So offence under Sec.193 or196, I.P.C. can be taken to have been committed before that officer or Court. Annexure-5 complaint was not filed by that officer. It was filed by the Income Tax Officer, B-Ward, Trivandrum. The learned counsel representing the Revenue has no ease that the Income-tax Officer, B-Ward, Trivandrum, is a superior officer to the Income Tax Officer, DWard, Quilon. In other words, the Income Tax Officer, B-Ward, Quilon, is not subordinate to the Income Tax Officer, B-Ward, Trivandrum. Therefore, the complainant is incompetent to file the complaint for prosecuting the petitioner for offences under Secs.193 and196, I.P.C. This view is supported by the decision in Income Tax Officer, Special Circle v. Kerala Oil Mills Income Tax Officer, Special Circle v. Kerala Oil Mills 1986 K.L.T. 947. 4. Therefore, the complainant is incompetent to file the complaint for prosecuting the petitioner for offences under Secs.193 and196, I.P.C. This view is supported by the decision in Income Tax Officer, Special Circle v. Kerala Oil Mills Income Tax Officer, Special Circle v. Kerala Oil Mills 1986 K.L.T. 947. 4. The learned counsel representing the petitioner contends that the decision in Income Tax Officer, Special Circle v. Kerala Oil Mills Income Tax Officer, Special Circle v. Kerala Oil Mills 1986 K.L.T. 947 is also authority for the proposition that the Income Tax Officer before whom the offences under Secs.193 and 196 , I.P.C., are committed alone can file a complaint for offences under Sec.277 of the Act. I find it difficult to accept this argument. In that decision the maintainability of a complaint filed by an officer of the Income Tax Department as per the provisions of the Act for an offence under Sec.277 of the Act was not considered by this Court. Independent of the charge under Secs.193 and196, I.P.C., a prosecution for violation of the provisions of the Act is maintainable. Offences under Secs.276-C(1) and277(i) of the Act are independent of Secs.193 and196, I.P.C. The restriction for initiation of prosecution for offence under the Act is that it cannot be initiated except with the previous sanction of the Commissioner of Income Tax. The complaint in this case is one filed at the instance of the Commissioner of Income Tax, Trivandrum, as per his proceedings No.898/ADI/87-88, dated 18.1.1988. The complaint, which is filed with the previous sanction of the Commissioner, is maintainable in so far as it relates to the offence under the Act. 5. From the above discussion it follows that the complaint against the petitioner for offences under Secs.193 and196, I.P.C, alone is unsustainable. The complaint in respect of other offences alleged therein is to be enquired into by the Court below. Ground No.1 raised by the petitioner is answered in this manner. 6. Petitioner challenged the order of assessment passed against him for the assessment year 1983-84 before the Income Tax Appellate Tribunal, Cochin Bench in I.T.A.No. 320 of 1987. That appeal was disposed of by the Tribunal by order dated 9.9.1988 observing: “We are, therefore, left with the payments made to Excise authorities, Police and Politicians. 6. Petitioner challenged the order of assessment passed against him for the assessment year 1983-84 before the Income Tax Appellate Tribunal, Cochin Bench in I.T.A.No. 320 of 1987. That appeal was disposed of by the Tribunal by order dated 9.9.1988 observing: “We are, therefore, left with the payments made to Excise authorities, Police and Politicians. Taking all these things into account, we are of opinion that an addition of Rs.5 lakhs should be made to the disclosed income as per books. This is merely as a matter of estimate and not on the basis of any suppressed income in the books of accounts maintained by the assessee.” This order, according to the learned counsel appearing for the petitioner, shows that the petitioner did not file any false return of income by fabricating or manipulating false accounts or other documents as alleged in the complaint. 7. Learned counsel representing the Revenue submits that the Tribunal after rejecting the accounts accepted the concession made by the petitioner's counsel. Sri C. Kochunni Nair for adding Rs.5 lakhs to the income disclosed income as per the books. The Tribunal in paragraph 16 of the order (Annexure IX) observed: “We will, therefore, treat it as an ordinary case and go first into the issue of reasons for rejection of books of accounts. Shri Nair had fairly accepted before us that he would not press for acceptance of books results and a fair estimate may be made. Therefore, on concession from Shri Nair, we can treat it as a case where the proviso to Sec.145 would be applicable.” The learned counsel appearing for the Revenue went on to submit that the order of the Tribunal, Annexure-IX brings out the fact that the books of accounts produced by the petitioner were rejected. I find much force in this argument. The accounts produced by the petitioner were not acted upon by the Tribunal. The Tribunal accepted the concession made by the learned counsel representing the petitioner. So, it cannot be held that the decision rendered by the Tribunal has the effect of finding that the accounts were not fabricated or that the petitioner had not manipulated false accounts. Nor has it the effect of stating that the accounts produced by the petitioner are correct. 8. So, it cannot be held that the decision rendered by the Tribunal has the effect of finding that the accounts were not fabricated or that the petitioner had not manipulated false accounts. Nor has it the effect of stating that the accounts produced by the petitioner are correct. 8. The next argument advanced by the learned counsel appearing for the petitioner is that the penally imposed by the Income Tax Officer under Sec.271(1)(c) of the Act has been cancelled by the Commissioner of Income Tax (Appeals), Trivan-drum, by order dated 31.10.1988 and hence no prosecution for manipulation of accounts or for fabricating accounts be sustained. According to the learned counsel appearing for the Revenue, the Commissioner of Income Tax (Appeals) interfered with the order imposing penalty solely relying on the Tribunal's order. When the Tribunal refused to accept the books of accounts produced by the petitioner as correct and genuine, the decision on the appeal will not in any way alter the situation. 9. The operative portion of the order of the Commissioner (Appeals) is: “In the light of the nature of addition made as per the Tribunal's order, it is only a case of estimated addition and even this estimated addition is not based on any concealment or supression of sale proceeds or any question of facts. In view of the foregoing, the charge of concealment of income does not survive. There is no case for levy of penalty under Sec.271(1)(c) of the Act. The penalty order is cancelled accordingly.” From this it is evident that the Commissioner of Income Tax (Appeals) was basing his decision solely on the findings of the Tribunal. Therefore, the learned counsel appearing for the Revenue is well within his province when it is argued that the order of the Tribunal or of the Commissioner (Appeals) has not entered a finding that the return of income filed by the petitioner was correct. 10. The question whether prosecution for offences punishable under Secs.276(1) and277(i) of the Act and under Secs.193 and196, I.P.C., instituted by the Department while re-assessment proceedings under the Act are pending liable to be quashed on the ground that they are not maintainable, came up for consideration before the Supreme Court in Jayappan v. S.K. Perumal Jayappan v. S.K. Perumal A.I.R. 1984 S.C. 1963. Their Lordships observed: “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 proceeding 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 proceeding under the Act would be binding on the criminal Court. The 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 the 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, the conviction of such person should invariably follow in the criminal Court.” The allegation now made against the petitioner is that he filed false return of income and fabricated and manipulated false accounts and other documents while filing the returns for the assessment year 1983-84 (accounting year 1983-83). The Tribunal's order and the order of the Commissioner (Appeals), as stated earlier, have not gone to state that the accounts produced by the petitioner and the return of income filed by him are correct. So, the criminal Court has to go into the question as to whether the complainant succeeds in bringing out the offence charged against the petitioner. The 2nd ground urged by the petitioner is answered accordingly. 11. The criminal M.C. is disposed of by quashing that part of the complaint relating to the offences under Secs.193 and196, I.P.C. The other offences alleged are to be enquired into and decided on the basis of evidence to be let in. The learned Magistrate is directed to dispose of CC.No.36 of 1988in accordance with law as expeditiously as possible. B.S. ----- Complaint quashed in part.