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2002 DIGILAW 1114 (PNJ)

Ajay Tent House v. Income-tax Officer

2002-10-23

VINEY MITTAL

body2002
Judgment Vinay Mittal, J. 1. The present petition under Section 482 of the Code of Criminal Procedure, has been filed by the petitioners for quashing of the complaint dated December 12, 1989, filed under sections 276C(1), 277 read with Section 278B of the Income-tax Act, 1961, and Section 193 of the Indian Penal Code. The complaint has been appended as annexure P1 with the petition. 2. A perusal of the complaint shows that the petitioners had filed a return for the assessment year 1986-87 declaring the income of Rs. 17,080 on October 6, 1986. The aforesaid return was signed and verified by Raj Kumar, petitioner No. 3, who was a partner of the firm, Ajay Tent House--petitioner No. 1. The return was accompanied by trading account, profit and loss account, partners accounts and balance-sheet, etc. The original assessment was completed on October 28, 1986, under Section 143(1) of the Income-tax Act at a total income of Rs. 17,080. As per the averments made in the complaint, subsequently, proceedings under Section 143(2)(b) were initiated and as a result thereof a detailed questionnaire was issued to the assessee on September 1, 1987. In response thereto a detailed reply was filed by Baldev Krishan--petitioner No. 2. The allegation in the complaint is that during the course of assessment proceedings it was found that proper accounts were neither maintained nor produced and there were other discrepancies as well. Thus, it was taken that Rs. 43,000 was the income of the assessee from undisclosed sources. The assessment was finalised at a total income of Rs. 89,850. Consequently, penalty proceedings for the alleged concealment under Section 271(1)(c) of the Income-tax Act were also initiated and Rs. 23,750 were levied as penalty vide order dated January 25, 1989. Accordingly, the complaint in question was filed against the petitioners. 3. In the present petition, it has been averred by the present petitioners that against the order imposing penalty, an appeal was filed by the assessees before the Deputy Commissioner of Income-tax (Appeals). However, the aforesaid appeal was dismissed on November 9, 1989. Accordingly, against the aforesaid order, the matter was taken up in the second appeal before the Income-tax Appellate Tribunal. Vide order dated April 4, 1991, the aforesaid second appeal filed by the assessees was allowed. The aforesaid order dated April 4, 1991, has been appended as annexure P2 with the present petition. 4. Accordingly, against the aforesaid order, the matter was taken up in the second appeal before the Income-tax Appellate Tribunal. Vide order dated April 4, 1991, the aforesaid second appeal filed by the assessees was allowed. The aforesaid order dated April 4, 1991, has been appended as annexure P2 with the present petition. 4. At this stage, it may be relevant to notice certain observations made by the Income-tax Appellate Tribunal in the aforesaid order annexure P2 : "8. From the foregoing facts and circumstances, it is abundantly clear that the assessees made an attempt to evade the tax, penalty or interest chargeable or imposable under the Act and have thus rendered themselves liable to punishment under Section 276C(1) of the Income-tax Act. The assessees also made a statement under the verification in the return and delivered the accounts/statements which were false which they either knew or believed to be false or did not believe to be true and they have thus rendered themselves liable to punishment under Section 277 of the Income-tax Act read with Section 278B of the Income-tax Act and Section 193 of the Indian Penal Code, for intentionally filing false income-tax return. 9. That the Commissioner of Income-tax, Haryana, Rohtak, has duly authorised and sanctioned the prosecution of the accused under Section 279(1) of the Income-tax Act, 1961. The original authorisation dated November 29, 1989, is attached herewith." 5. After the aforesaid order had been passed by the Tribunal, the present petitioners filed an application under Section 245 of the Code of Criminal Procedure, before the learned trial magistrate for dropping of the proceedings. It was averred in the aforesaid application that because of the subsequent passing of the order by the Tribunal and quashing of the order imposing the penalty upon them, the complaint should not have continued any further. Vide order dated February 18, 1994, the learned Judicial Magistrate, First Class, Gurgaon, dismissed the aforesaid application filed by the petitioners. Reliance was placed by the learned Magistrate upon a judgment of the Delhi High Court in Rinkoo Steels v. K.P. Ganguli, ITO [1989] 179 ITR 482; [1989] 2 Chandigarh Law Reporter 444, and also a judgment of the Supreme Court of India in P. Jayappan v. S. K. Perumal First ITO [1984] 149 ITR 696. 6. A reply to the petition has been filed by the respondent. 6. A reply to the petition has been filed by the respondent. Although the claim for quashing of the complaint has been contested by the respondent, but all the same the facts as narrated in the petition, had not been controverted. Under these circumstances, it is the admitted position between the parties that vide order dated April 4, 1991, the Income-tax Appellate Tribunal had quashed the order imposing the penalty upon the petitioners. 7. I have heard Shri Ajay Mittal, learned counsel for the petitioners, and Sh.R.P. Sawhney, learned senior advocate appearing with Sh. N. G. Sharma, advocate. 8. Shri Ajay Mittal, learned counsel for the petitioner, has relied upon a judgment of the Supreme Court in G. L. Didwania v. ITO [1997] 224 ITR 687. On the basis of the aforesaid judgment of the apex court, Shri Mittal has submitted that since the order of imposing of penalty itself has been quashed by the Tribunal and positive finding has been recorded by it that there was no concealment by the assessees, therefore, the question of continuing with the criminal proceedings could not arise. Shri Mittal has submitted that the learned Judicial Magistrate, First Class, should have accepted the application filed by the petitioners for dropping of the proceedings, but, however, has erred in dismissing the application filed by them. 9. On the other hand, Shri R. P. Sawhney, learned senior counsel appearing for the respondent, has submitted that in view of the law laid down in P. Jayappan v. S. K. Perumal, First ITO [1984] 149 ITR 696 (SC), the proceedings in the criminal court could continue and the criminal court had to give an independent finding in the matter in spite of the fact that the original order imposing the penalty had been quashed by the higher authority or the Tribunal. 10. I have given my thoughtful consideration to the entire matter and am of the opinion that the present petition deserves to succeed. 11. It is not in dispute that the order imposing the penalty has been set aside by the Income-tax Appellate Tribunal, vide order dated April 4, 1991, annexure P2. The relevant findings given by the Tribunal have been reproduced by me above. 11. It is not in dispute that the order imposing the penalty has been set aside by the Income-tax Appellate Tribunal, vide order dated April 4, 1991, annexure P2. The relevant findings given by the Tribunal have been reproduced by me above. It is apparent that the Tribunal has not quashed the order of penalty merely on some technicality but on the firm finding of fact recording that there was no concealment by the assessees and under these circumstances the question of imposing the penalty did not arise. Another order of the Tribunal dated August 29, 1991, is appended as annexure P3, vide which the Tribunal declined to refer the matter to the High Court. 12. In these circumstances, the observations made in G.L. Didwanias case [1997] 224 ITR 687 (SC) are fully attracted to the facts of this case. It was observed by the apex court in G.L. Didwanias case [1997] 224 ITR 687 as follows (page 690) : "In the instant case, the crux of the matter is attracted and whether the prosecution can be sustained in view of the order passed by the Tribunal. As noted above, the assessing authority held that the appellant-assessee made a false statement in respect of income of Young India and Transport Company and that finding has been set aside by the Income-tax Appellate Tribunal. If that is the position then we are unable to see as to how criminal proceedings can be sustained." 13. As a result of this, the present petition succeeds. The order annexure P5 and the complaint annexure P1 are hereby quashed.