Jay Frozen Foods and Others v. Income Tax Officer — 1990 DIGILAW 852 (MAD)

Judgment :- PADMINI JESUDURAI J. The petitioners who had been convicted by the Additional Chief Metropolitan Magistrate (Economic Offences I) Egmore, Madras, in E. O. C. C. No. 629 of 1983 for offences under sections 120B, 193, 196, 420, 467 and 471 of the Indian Penal Code, 1860, and section 277 of the Income-tax Act, 1961, and sentenced to various terms of imprisonment and fine, which convictions have been confirmed in C. A. No. 328 of 1984 by the Principal Sessions judge, Madras, with slight modification in the sentence relating to petitioners Nos. 2, 4 and 5, have filed the present revision challenging the convictions and sentences The gravamen of the charge against the petitioners was that, though the third petitioner was not really a partner of the first petitioner-firm from April 1, 1977, onwards, all the petitioners conspired together for the purpose of getting the income-tax of the first petitioner assessed at lower rate and made it appear as if the third petitioner continued to be a partner even after April 1, 1977, fabricated the partnership deed dated April 1, 1977, fabricated the day-books by omitting to enter the real profits due to petitioners Nos. 2 and 4, fabricated the ledger by showing false capital account and false current account, produced these false documents before the Income-tax Officers and, on the basis of the misrepresentation contained in those documents, made the Income-tax Officers pass assessment orders for the assessment years 1978-79 and 1979-80 at reduced rate, delivered before the Income-tax Officers false returns and false statements, forged the signatures of the third petitioner in the registration deed and in the partnership deed, used the above forged documents as genuine, falsely made verification in the returns for the above years for continuing the registration that there was no change in the constitution of the firm, delivered these false verifications before the Income-tax Officers and committed the above offences in pursuance of the conspiracy and made themselves liable for punishment under sections 120B, 193, 196, 420, 467 and 471 of the Indian Penal Code, 1860, and section 277 of the Incometax Act, 1961The prosecution case is briefly as follows. The first petitioner is a registered firm carrying on export business in marine foods like prawns and shrimps to foreign countries. Originally, the firm when it was constituted in 1976, consisted of four partners as per exhibit P-3(a). The first petitioner is a registered firm carrying on export business in marine foods like prawns and shrimps to foreign countries. Originally, the firm when it was constituted in 1976, consisted of four partners as per exhibit P-3(a). One of the partners, Joseph, retired from the partnership on March 31, 1977. The firm was reconstituted with petitioners Nos. 2 to 4 as partners, with 25 per cent. share of profits for the second petitioner, 25 per cent. for the third petitioner and 50 per cent. for the fourth petitioner. The fifth petitioner who was the manager of the first petitioner firm was the brother-in-law of petitioners Nos. 2 and 3. Petitioners Nos. 2 and 3 are brothers. According to the prosecution, from March 31, 1977, the third petitioner ceased to be a partner of the firm. However, in the application for registration of the firm and in the returns filed for assessment, it was shown as if the third petitioner also continued to be a partner of the firm for the assessment years 1978-79 and 1979-80. Declarations were filed on behalf of the firm, signed by the second petitioner that the firm had not undergone any change for the year 1979-80. The assessment was completed on the basis that the third petitioner was also a partner of the firm. Later on, it came to light that the first petitioner-firm was making huge profits which were not disclosed. Hence, a search of the business premises of the first petitioner-firm as well as the residence of petitioners Nos. 2 to 5 was conducted simultaneously by various Officers of the Department under section 132 of the Income-tax Act, 1961, and, during the search, several account books, documents and various slips of papers were seized. Petitioners Nos. 2 to 5 and original co-accused No. 6 who was the maternal uncle of the fourth petitioner were all examined and their statements were recorded. In particular, as far as this case is concerned, a diary, exhibit P-24, was seized from the residence of the second petitioner and certain slips of paper, exhibit P-31 series, were seized from the residence of the fifth petitioner. Exhibits P-24 and P-31 series showed that the profit from the first petitioner-firm was shared equally between the second and fourth petitioners and no profit was paid to the third petitioner. Exhibits P-24 and P-31 series showed that the profit from the first petitioner-firm was shared equally between the second and fourth petitioners and no profit was paid to the third petitioner. When the third petitioner was questioned by the officers, he stated that he did not know anything about the day-to-day management and affairs of the firm, that his share in the business was 25 per cent. but beyond that he did not know anything about the actual profit due to him. On the basis of this material, the prosecution case is that the third petitioner had ceased to be a partner of the firm from April 1, 1977, and, consequently, the statements made to the Department, the returns filed, the declarations made and all connected records on the basis of which the assessment orders for the assessment years 1978-79 and 1979-80 had been passed were also false. The admitted signatures of the third petitioner in the warrant of authorisation for the search, in the panchnama relating to the search and in the sworn statement recorded after the search, were compared with the application for registration of the firm for the year 1978-79, with the new partnership deed and it was found by the document expert that the signatures in the two latter documents were not those of the third petitioner. On the basis of this evidence, the prosecution sought to establish its caseDuring trial, on behalf of the prosecution, PWs-1 to 10 were examined and exhibits P-1 to P-69 were marked. The petitioners, when questioned, stated that the third petitioner had continued to be a partner of the firm and his share of profit was duly paid to him and the third petitioner in particular stated that the signatures found in the new partnership deed, as well as the application for re-registration of the first petitioner-firm, were his signatures and that they were not forged. Exhibits D-1 to D-33 were marked on their side. The learned Magistrate accepted the prosecution case and convicted the first petitioner of offences under sections 120B, 196 and 420 of the Indian Penal Code, 1860Income-tax Act, 1961, under three counts and petitioners Nos. 4 and 5 under two counts, and sentenced to undergo imprisonment for a period of six months and to pay a fine of Rs. 250 for each count. 4 and 5 under two counts, and sentenced to undergo imprisonment for a period of six months and to pay a fine of Rs. 250 for each count. The third petitioner was convicted of an offence under section 193 of the Indian Penal Code, 1860, and sentenced to undergo imprisonment for a period of six months and to pay a fine of Rs. 500. The sentences of imprisonment were ordered to run concurrentlyIn appeal, the learned sessions judge confirmed the conviction, but modified the sentence of one year imprisonment on petitioners Nos. 2, 4 and 5 wherever it occurs, to imprisonment for a period of six months. This revision challenges the above conviction and sentence. Thiru N. C. Raghavachariar, learned senior counsel appearing on behalf of the petitioners, put forth several contentions, both on law as well as on facts. Extensive submissions were made referring to the caselaw touching on the various aspects which the learned public prosecutor, by way of lengthy submissions and by referring to case-law, sought to meet. However, in view of my finding on one question which is the crux of the prosecution case, namely, whether the prosecution has proved that the third petitioner was not a partner even after March 31, 1977, it is needless to refer to all the other submissions, both on facts and on law, made by the respective learned counsel. The entire prosecution case is built on the allegation that the third petitioner ceased to be a partner of the firm on March 31, 1977, and thereafter, he was not a partner and the partnership consisted only of the second petitioner and the fourth petitioner and that, for the purpose of getting a concession under the Income-tax Act, 1961, in the matter of assessment, all the petitioners conspired together and made it appear, as if the third petitioner also continued to be a partner of the firm. It is, on this premise that the entire prosecution case is built up. We have, therefore, to find out whether, as a fact, the prosecution has succeeded in establishing that the third petitioner was not a partner of the firm after March 31, 1977. No doubt, both the courts have held that the third petitioner was not a partner subsequent to March 31, 1977, and consequently, all the other offences have been committed by the petitioners. No doubt, both the courts have held that the third petitioner was not a partner subsequent to March 31, 1977, and consequently, all the other offences have been committed by the petitioners. The trial court as well as the lower appellate court are courts of facts and it is for them to render findings on facts. This is a revision and the powers of this court in a revision such as this, against concurrent findings of fact, are considerably limited. It is not for this court, during such a revision, to reassess the facts, reappraise the evidence and disturb the findings of fact, if they are arrived at properly. However, it would be the duty of this court, in exercise of its revisional jurisdiction, to set aside a finding of fact concurrently arrived at, if this court is satisfied that a material piece of evidence has been overlooked or the evidence has been appreciated in a perverse manner. As far as this case is concerned, though the finding on this issue is concurrent still we find that, before the learned sessions judge, during the criminal appeal, on application by the petitioners, they had been permitted to adduce additional evidence. PW-1 had been recalled and exhibits D-13 to D-17 had been marked. In addition, DWs-1 to 3 had been examined and through them exhibits D-4 to D-12 series had been marked. It is only the appellate court that had the benefit of this additional evidence before it, while deciding the main issue as to whether the third petitioner was not a partner after March 31, 1977. On a perusal of the additional evidence received in the appeal and the judgment of the appellate court, it is seen that the learned sessions judge had not considered the additional evidence and certain clinching documents produced by the petitioners which had been in existence long prior to the search and seizure and whose authenticity could never be doubted and which go a long way to shatter the prosecution case on this vital issue. The learned sessions judge has not considered these documents, and as I shall show later, rejected them for very flimsy and frivolous reasons. It has, therefore, become necessary for this court, under its revisional jurisdiction , to scrutinise the additional evidence let in by the petitioners in the appeal and test it against the prosecution evidence adduced during the trial. The learned sessions judge has not considered these documents, and as I shall show later, rejected them for very flimsy and frivolous reasons. It has, therefore, become necessary for this court, under its revisional jurisdiction , to scrutinise the additional evidence let in by the petitioners in the appeal and test it against the prosecution evidence adduced during the trial. A scrutiny of the facts, therefore, has been necessitated under the above circumstancesIt is the prosecution case that when Joseph retired from the firm and the firm was reconstituted, the third petitioner continued to be partner of the firm. This was on March 31, 1977. When that is the prosecution case, one fails to see at what stage the third petitioner had ceased to be a partner. According to the prosecution, when the partnership was first formed in 1976, the third petitioner was a partner. According to the prosecution, exhibit P-3(a) is a true document and it reflects the true facts. In the next year, according to the prosecution, Joseph alone had retired. The third petitioner had not retired. If, in 1976, under exhibit P-3(a), the third petitioner was a partner of the firm, I am unable to find at what stage the third petitioner ceased to be a partner. It is to be kept in mind that exhibit P-17 ledger as well as exhibit P-20 ledger for the expenditure and export, etc.., all show that the third petitioner also was a partner of the firm. His share of the initial investment is shown. The related day-book contains a ledger page for the third petitioner and the third petitioner's capital continues even after 1980. This would prima facie indicate that, when it is the prosecution case that the third petitioner was a partner in 1976 and it is not put forward as to when and in what manner he had ceased to be a partner in 1977, it has to be inferred that the third petitioner continued to be a partner of the firm. The prosecution seems to rest its case mainly on exhibits P-24 and P-31 series seized during the search of the premises. Learned counsel, Thiru N. C. Raghavachariar, would contend that the entries in exhibits P-24 and P-31 series are vague and inconclusive and the prosecution cannot rest its case on guess work. The prosecution seems to rest its case mainly on exhibits P-24 and P-31 series seized during the search of the premises. Learned counsel, Thiru N. C. Raghavachariar, would contend that the entries in exhibits P-24 and P-31 series are vague and inconclusive and the prosecution cannot rest its case on guess work. Learned counsel also contended that, if these documents had been seized from the business premises of the first petitioner-firm, then there would be something to connect the documents with the business of the first petitioner-firm, but since these documents have been seized not from the business premises of the firm, it could not be presumed that these writings relate to the business of the firm. I am unable to accept this contention. It is admitted by the second petitioner that he wrote exhibit P-24, even though there are writings of other persons also. A comparison of the figures mentioned in exhibit P-31 slips would correlate with the entries in the ledgers and accounts of the first petitioner-firm, though they are found in exhibit P-31 series in contraction. Both the courts below, therefore, have elaborately discussed these aspects and they have found that exhibits P-24 and P-31 series relate to the first petitioner-firm. These conclusions have been properly arrived at and I find no illegality or impropriety or error in these findings. It is, therefore, established that exhibits P-24 and P-31 series relate to the first petitioner-firmThe initial question still remains, as to whether, merely from exhibits P-24 and P-31 series, the prosecution is justified in inferring that the third petitioner had ceased to be a partner subsequent to March 31, 1977. In this prosecution, we are not concerned with the question whether true returns have been filed showing the true income of the first petitioner-firm. These questions are to be dealt with by the assessing form This court, at this stage, is concerned with the limited question as to whether, from exhibits P-24 and P-31 series, it could be inferred that the third petitioner had ceased to be a partner from March 31, 1977. This inference is sought to be drawn by the prosecution on the ground that the income from the first petitioner-firm is shown as having been divided equally between the second petitioner and the fourth petitioner and that no separate share has been shown as payable to the third petitioner. This inference is sought to be drawn by the prosecution on the ground that the income from the first petitioner-firm is shown as having been divided equally between the second petitioner and the fourth petitioner and that no separate share has been shown as payable to the third petitioner. Even if such an inference could be made, it would not be decisive in establishing that the third petitioner was not a partner. This would not be the only inference that could be drawn from exhibits P-24 and P-31 series. We cannot miss the fact that petitioners Nos. 2 and 3 are brothers and the fourth petitioner is the only stranger in the firm. It is the statement of the second petitioner that he is managing the business of all his sisters and his only brother, the third petitioner herein, and also the business of his late mother and the two trusts, one created by his grandfather and the other created by his senior paternal uncle. Even according to the prosecution, the third petitioner was not managing the affairs of the firm. In a partnership, it is not necessary that all the partners should know everything about the partnership. It is not necessary that they should reside in the place where the office of the partnership is situated. There could even be sleeping partners. The second petitioner has stated that he keeps a separate day-book and ledger for his brother, namely, the third petitioner, and for the three trusts he manages. Though he manages the affairs of his five married sisters, still he does not keep separate accounts for them, since they are not assessees. The third petitioner is a resident of Cochin. While apportioning the profits among the three partners, if the second petitioner who was admittedly managing the firm, totalled up his share with that of his only brother, the third petitioner, as against the share of the fourth petitioner who was an outsider, it would not lead to the inference that this share was not paid to the third petitioner and that the third petitioner was not a partner of the firm. The prosecution, when it relies upon a circumstance to prove a crime, has to bear in mind that the circumstance must be such that it leads only to one inference, namely, that of the guilt of the accused. The prosecution, when it relies upon a circumstance to prove a crime, has to bear in mind that the circumstance must be such that it leads only to one inference, namely, that of the guilt of the accused. If the apportionment of the income into two equal sums could be explained in other ways, the circumstance cannot be put forward by the prosecution as establishing the guilt of the accusedI am unable to draw the inference from exhibits P-24 and P-31 series that, from the manner of apportionment of the profits, the third petitioner could not have been a partner not only for the reason stated above, but for a more important reason which the learned sessions judge has unfortunately missed. DW-2 is the Income-tax Officer, D-Ward, Circle-1, Ernakulam. The third petitioner was an assessee under him. Through DW-2, exhibit D-6, the income-tax return for the assessment year 1978-79 of the third petitioner has been marked, while exhibit D-8 is the statement of accounts accompanying exhibit D-6. Exhibit D-9 is the assessment order for the above year. Similarly, for the assessment year 1979-80, the statement of accounts of the third petitioner is exhibit D-10 and the assessment order is exhibit D-11. Though the books of account of the first petitioner-firm continued to show that the third petitioner is a partner of the firm and continued to have his assets in the firm, the prosecution case is that these documents are all untrue and false. A simple way to test the same to find out whether the profit that is shown in the first petitioner's ledger as having been credited to the third petitioner is a false document or is mere paper entry would be to find out whether the income from the first petitioner-firm is reflected in the returns and in the statement of accounts filed by the third petitioner in his individual capacity., If they are not so reflected, the prosecution would be justified in concluding that the ledgers and account-books of the first petitioner-firm contain false entries. On the contrary, we find that, in exhibit P-8, the statement of account for the assessment year 1978-79, a sum of Rs. 22, 027 has been shown as the share of the third petitioner in the profit of the first petitioner-firm. On the contrary, we find that, in exhibit P-8, the statement of account for the assessment year 1978-79, a sum of Rs. 22, 027 has been shown as the share of the third petitioner in the profit of the first petitioner-firm. In no ambiguous terms, it is mentioned in exhibit D-8 that the share of profit from Jay Frozen Foods, Madras, is Rs. 22, 027. The evidence of DW-2 is that, on the basis of these returns, exhibit D-9, assessment order, was passed in which the above profit has been accepted as the third petitioner's asset. Similarly, for the assessment year 1979-80, exhibit D-10, showed loss of Rs. 17, 746, as being his share of the loss in the first petitioner-firm, DW-2, the Assessing Officer, in exhibit D-11 assessment order, has observed as follows. "Share of loss from Messrs. Jay Frozen Foods taken provisionally as nil subject to rectification on completion of firm's assessment." * These orders are for the assessment years 1978-79 and 1979-80. These documents have come into existence long prior to the search and seizure. The authenticity of these documents, therefore, cannot be questioned. Unfortunately, the learned sessions judge, in paragraph 19 of his judgment, rejected this evidence merely on the ground that the address of the third petitioner as given in exhibit D-7 is Jew Town, Cochin-2, without the name of the street or the door number and, in exhibit D-6, the address of the third petitioner has been shown as Cochin-2 and nothing more. It is not the prosecution case that some other Ismail Hajee Jacob Sait is a partner in the first petitioner-firm. If only the learned sessions judge had considered exhibits D-8 to D-11, it would have been impossible for him to hold that the prosecution had established the fact that the third petitioner had not been a partner subsequent to March 31, 1977. The additional documents marked before the appellate court, exhibits D-13 to D-17, are reflected in the returns filed by the third petitioner referred to above. Both the courts below have been swayed by the statement given by the third petitioner that he does not know the details of his share in the firm's income. It is the consistent statement of all the partners that the third petitioner continues to be a partner. It is not necessary that the share of profits credited should have been withdrawn by the partner. It is the consistent statement of all the partners that the third petitioner continues to be a partner. It is not necessary that the share of profits credited should have been withdrawn by the partner. The third petitioner still contends that no document has been forged and that the documents contain his signatures. He knows his share of investment in the business. The profit actually to be divided each year need not necessarily be known to him, particularly when his own brother is managing the affairsBoth the courts below have placed reliance on the evidence of PW-10, the handwriting expert, whose evidence is that the person who signed as the third petitioner in exhibits P-44, P-45 and P-36 has not signed exhibits P-38 and P-40. No doubt, he had given reasons. But, it is settled law that the evidence of a handwriting expert is a very weak piece of evidence. It is not evidence, but it is only an opinion. Unlike the opinion of a fingerprint expert, the opinion of a handwriting expert could not be taken with certainty, particularly in this case, when the third petitioner whose signature is alleged to have been forged himself contends that it is his signature and that it is genuine. Further, it is also common knowledge that the handwriting of a person as well as his signature would change and vary depending upon several factors. Hence, no undue importance should be given to the evidence of PW-10. As stated earlier, when the prosecution rests purely on circumstantial evidence to establish its case, that circumstance must be such as to lead to the only inference that the facts put forward by the prosecution are proved. In the instant case, since exhibits D-13 to D-17 are reflected in exhibits D-7 to D-11 which had come into existence long prior to the search and seizure, it is impossible to hold that the prosecution has succeeded in establishing that the third petitioner had ceased to be partner after March 31, 1977. Unless that basic fact is proved, none of the offences can be said to have been committed. 1, therefore, hold that the prosecution had failed to establish the basic fact that the third petitioner was not a partner after March 31, 1977. The convictions and sentences have to be set aside. Unless that basic fact is proved, none of the offences can be said to have been committed. 1, therefore, hold that the prosecution had failed to establish the basic fact that the third petitioner was not a partner after March 31, 1977. The convictions and sentences have to be set aside. Though elaborate submissions were made by both the parties, as to who is competent to file the complaint, whether there could be a conviction of petitioners Nos. 2 to 5 for the offence under section 277 of the Income-tax Act, 1961, without a charge for the above offence against the first petitioner-firm, whether all the incriminating pieces of evidence had been put to the petitioners when questioned under section 313 of the Criminal Procedure Code, 1973, and if not, what would be the legal consequences of the failure to do so, it is needless for me to dwell upon them, since, factually, I have found that the very basis of the prosecution case has not been establishedIn the result, the convictions and sentences are set aside and the revision is allowed. The fine amounts, if paid, shall be refunded. The bail bonds, if any, shall stand cancelled.