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Madhya Pradesh High Court · body

2002 DIGILAW 1019 (MP)

Raghunath Prasad Mohanlal v. Union Of India

2002-11-13

S.L.KOCHAR

body2002
JUDGMENT : This Revision Petition, has been filed by applicants against judgment dated 6th April, 1994 passed in Criminal Appeal No. 62/94 by VII ASJ Indore, arising out of order dated 19th August, 1994 passed in Criminal Case No. 23/1986 by Additional Chief Judicial Magistrate, (Economic Offences) Indore, thereby convicting the applicants for the offence punishable under Sections 276C, 277/278-B of the Income Tax Act (for short, 'the Act') and sentencing applicant No. 1 with fine of Rs. 200/- and applicants No. 2 to 4 RI for 3 months each with fine of Rs. 200/- on each count. 2. The case of the prosecution as unfolded before the trial Court was that applicant No. 1, through applicant No. 2, Mohanlal, had submitted return of income for the assessment year 1981-1982, on 20-9-1983 showing taxable income of Rs. 47,000/-. During search by Sale Tax Department, in the premises of applicants, some loose papers Udarat Bahi etc. were found and the same were seized. The entries available in loose papers were not mentioned in the Account Books. 3. As per Account books, total sale was shown to be Rs. 3,20,000/- and the tax was assessed on the sale amount of Rs. 2,67,941/-. The assessee has declared total income of Rs. 47,000/- including Rs. 14,500/- income from out side Account books. On assessment Income Tax Officer (for short, 'the ITO') assessed income of Rs. 80,238/- and the same has been reduced by the Income-tax Commissioner upto Rs. 63,238/- and again by the tribunal upto Rs. 59,000/-. Charge was denied by the applicants. Learned trial Court, after examination of ITO Bhalchandra Kulkarni (PW 1) and hearing both the parties, convicted the applicants and the same has been affirmed by the Appellate Court. Therefore, this Revision before this Court. 4. Learned counsel for the applicants Mr. Satish Bagadia, Senior Advocate with Mr. Chhabada, submitted that the conviction is based on soliatory testimony of ITO Mr. Kulkarni (PW 1) and the material documents i.e. Udarat Note book, loose papers etc. on the basis of which ITO assessed the income more than the declared income in the return by the applicants, where not filed. Therefore, the statement of the witness could not be relied upon. Kulkarni (PW 1) and the material documents i.e. Udarat Note book, loose papers etc. on the basis of which ITO assessed the income more than the declared income in the return by the applicants, where not filed. Therefore, the statement of the witness could not be relied upon. He further submitted that assessment order is based on guess work and only on the basis of the assessment order, it could not be said that the applicants committed evasion of tax and filed false return. In support of the contention reliance is placed on the judgments passed in the case of Union of India and ors. vs. Govindji Laxmidas and Co. and Ors. (1992 (20) ITC 56); I.T.O. vs. Sovasaria Motor Parts and Accessories Ltd. and Ors., ITR 524 (Gauhati High Court); Prem Kumar Keshri vs. State of Bihar and Ors,. 1998 ITR (230) 252 and ITO vs. Mohinder Pal Ajay Kumar and another, 1993 ITR (203) 866. Learned counsel also put forth that all applicants/partners of the Firm could not be held responsible for the alleged offence. The only person who was the in-charge of and responsible to the firm for the conduct of his business besides the firm is liable. For this proposition, he cited the case of Sat Pal and another, vs. State of Punjab and another (1993) ITR (200) 139 and Jaswant Raj Mittal and Co. and Others vs. Income Tax Officer and Ors., 1992 ITR (196) 414. 5. In contra, learned counsel for the NAs supported the prosecution case. 6. Having heard learned counsel for the parties and after perusing the entire record, this Court is of the opinion that conviction of the applicants is not sustainable. The Income Tax Officer Mr. Kulkarni (PW 1) has admitted in his statement in para 20 that he assessed the tax on the basis of seized Udarat note book and loose papers but both the documents have not been filed by the prosecution in the present case. There is no gain saying that both these documents are very foundation for Income Tax Officer to hold that applicants had filed false return and therefore, evaded tax. Both the documents are falling within the purview of documentary evidence and the same should have been filed and proved as per provision under Sections 61 and 62 of the Evidence Act (Chapter V) regarding proof and contents of documents of primary evidence. Both the documents are falling within the purview of documentary evidence and the same should have been filed and proved as per provision under Sections 61 and 62 of the Evidence Act (Chapter V) regarding proof and contents of documents of primary evidence. (See Mostt. Rajwati Devi and another vs. The Joint Director, Consolidation, Government of Bihar, AIR 1989 Pat. 66 (Para 13) and Smt. Chandrakantaben J. Modi and Narendra Jayantilal Modi vs. Vadilal Bapalal Modi and Ors., AIR 1989 SC 1269 (para 14). The foundation of the prosecution case is based on these documents and the same were not filed. Even no reasons have been assigned for not doing so. Therefore, bald statement of ITO could not have been relied on for holding the applicants guilty for filing of false return and evasion of tax. 7. The Courts below have failed to consider three cordial principles of criminal jurisprudence. (i) Burden is on the prosecution to prove its case beyond all reasonable doubt. (ii) Prosecution cannot get any strength from weakness of the defence and it has to stand on its own leg. (iii) Where there are two sets of evidence available on record or two views are possible the evidence in favour of the accused or the views in favour of the accused has to be relied upon. 8. In the present case, Income Tax Officer Mr. Kulkarni (PW 1) in paras 6 and 7 has deposed that after examination of note book and loose papers, he came to the conclusion that correct account was not maintained and produced by the applicants and they had suppressed actual transaction of their income. He made an assessment on the basis of all loose papers and note books (Udarat Vahi) etc. but as stated above, all these documents have not been filed in Court. In the assessment order Exh. P/3-C (internal Page 8), total income was computed on the basis of guess work. No concrete reasons have been assigned for additions in the income. The Income Tax Officer had assessed Income Rs. 80238/- and that was deceased upto Rs. 63,238/- in appeal by the Income Tax Commissioner and thereafter, the tribunal has again reduced it upto Rs. 59,000/-. In Rs. 59,000/-, Rupees 15000/- were added as unaccountable capital and if this amount is excluded, the amount comes round about the amount as disclosed by the assessee in his return. 80238/- and that was deceased upto Rs. 63,238/- in appeal by the Income Tax Commissioner and thereafter, the tribunal has again reduced it upto Rs. 59,000/-. In Rs. 59,000/-, Rupees 15000/- were added as unaccountable capital and if this amount is excluded, the amount comes round about the amount as disclosed by the assessee in his return. Addition of Rs. 15000/- as unaccounted capital is also based on estimate and an estimate is based on all these loose papers, and chits, note book etc. Mr. Bhichandra Kulkarni (P.W. 1) in para 26 has specifically admitted that for addition of unaccounted income he did not receive any document and the amount of sale in the Account Book, is based on estimate/opinion. 9. This Court in the case of Union of India vs. Govindji Laxmidas (supra) has held as under :- "A bare reading of Section 276C would indicate that the applicants are required to prove that the non-applicants wilfully attempted to evade any tax. Similarly for proving offence under Section 277 of the Act, the applicants will be required to prove that the accounts of statements submitted by the non-applicants was not only false but that the non-applicants knew or believed it to be false or did not believe it to be true. Since the income tax Act does not lay down any different rule of evidence or proof of these ingredients is no them. The practice and procedure before learned Magistrate in such a case would, without doubt, be governed by the Criminal Procedure Code and the Evidence Act. Under these circumstances, the applicant department will have to place material on record from which it could be inferred that the non-applicants have consciously and deliberately indulged in the concealment of income. The decision of Supreme Court in CIT vs. Khoday Eswarsa, 63 ITR 369 would indicate that the more fact the explanation of the assessee was disbelieved and amount included in the assessment would not, by itself, be enough to impose penalty. The circumstances of the case must be such as to lead to the reasonable and positive conclusion that the amount represents the assessee's income. There is good deal of authority for the proposition that the finding given in assessment proceedings, though relevant and admissible in subsequent penalty proceedings, do not operate as res-judicata because the considerations arising in penalty proceedings are different from those in assessment proceedings. There is good deal of authority for the proposition that the finding given in assessment proceedings, though relevant and admissible in subsequent penalty proceedings, do not operate as res-judicata because the considerations arising in penalty proceedings are different from those in assessment proceedings. CIT vs. Kadri Mills Coimbatore (96 ITR 378). These principles were affirmed by the Supreme Court in CIT vs. Anwar Ali (76 ITR 696). In CIT vs. Khode Esware (83 ITR 369), the Supreme Court ruled that a penalty cannot be levied solely on the basis of reasons given in the order of assessment. It is because of this law that the ITAT did not place any reliance on the finding recorded against the non-applicant in assessment proceedings. If the findings of assessment proceedings do not operate as res-judicata how can they be made the sole basis of conviction in a criminal case? Permitting such a course to be an accused person. Such an argument cannot be made in the context of the basic principle of our Constitution, particularly, under Articles 14 and 21. This Court is, therefore, has no hesitation in holding that the view taken by the department in assessment proceedings has no relevance to this Criminal Case and cannot form the basis of the non-applicant's alleged criminality." 10. The pith and substance of judgments relied upon by the learned counsel for the applicants as mentioned above is that only assessment order based on estimate or opinion of the Income Tax Officer that the assessee has filed incorrect and false return to evasion of tax, is not sufficient to launch criminal proceedings and to prove the guilt of the assesee for punishment under Sections 276C, 277/278B of the Act. The prosecution is required to adduce positive material to prove criminal charges, as per principles of criminal jurisprudence. In the case of Prem Kumar Keshari (supra) High Court has held that while the Income Tax Officer made an addition of Rs. 20,000/- in the trading account on estimate basis, the Commissioner of Income Tax (Appeals) though that estimate was on the higher side and he reduced it to Rs. 10,000/-. It is difficult to comprehend any conviction based on such evidence. 11. More or less similar situation is available in the present case. 20,000/- in the trading account on estimate basis, the Commissioner of Income Tax (Appeals) though that estimate was on the higher side and he reduced it to Rs. 10,000/-. It is difficult to comprehend any conviction based on such evidence. 11. More or less similar situation is available in the present case. An addition made on estimate and guess work by the ITO were reduced not only by the Appellate Commissioner but also by the tribunal in second appeal and for adding for 15,000/- unaccounted capital, there is no material available in the case. The return was filed with signature and verification by applicant No. 2 Mohanlal. 12. As per statement of ITO Mr. Kulkarni (PW 1), in paras 19 and 28 he has deposed that in Ex. P/18, the facts were not written on the basis of which offence was made out. It was also not written that which partner was responsible for the offence, only the names of all partners are mentioned. It was not mentioned in Ex. P/18 that which record is sent to the Commissioner and under the signature of the Commissioner, no seal was affixed. Law is very clear that all Partners would not be held responsible for filing false and incorrect return for evasion of tax but only that partner will be responsible who is the in-charge of and responsible for the work of the firm. In the present case, return of the firm and the verification were signed by applicant No. 2 Mohanlal. There is no allegation that all partners were the in-charge of and responsible for the working of the firm. Therefore, prosecution of all partners was also illegal in this regard. See judgment of Jaswant Rai Mittal and Co. (supra). 13. In the light of the aforesaid discussions, the conviction of the applicants is not sustainable. Thus the same is hereby set aside. 14. Consequently, this Criminal Revision stands allowed in the terms indicated above.