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2012 DIGILAW 1188 (JHR)

Kejriwal Brothers v. State of Jharkhand

2012-08-07

H.C.MISHRA

body2012
ORDER H.C. Mishra, J. - Heard learned counsel for the petitioners, learned counsel for the State as also learned counsel for the Revenue. 2. The petitioners have challenged the order dated 20.12.2002 passed by the learned 2nd Subordinate Judge-cum-Special Judge Economic Offences, Dhanbad, in Complaint Case being C.A. No. 303 of 1992, whereby the application for discharge filed by the petitioners under Section 245 of the Cr PC, has been rejected by the Court below Petitioner No. 1 is a partnership firm and the rest of the petitioners are the partners therein. 3. The complaint case was med by the complainant. Union of India through the Assistant Commissioner of Income Tax, Investigating Circle-I, Dhanbad, against the accused firm and its partners alleging that for the assessment year 1988-1989 the accused firm had filed its return of income showing total income of Rs. 86,100/-. Subsequently, a search operation under Section 132 of the Income Tax Act was conducted in the premises of the accused persons and during search one of the partners namely Shiv Kurnar Kejriwal, whose statement on oath was recorded under Section 132(4) of the Income Tax Act, declared/surrendered Rs.5,00,000/- as undeclared income for the assessment year 1988- 1989. Alleging that a reasonable opportunity was given to the assessee to explain under what situation/circumstances the concealed income of Rs. 5,00,000/- was not shown in the return of assessee for the assessment year 1988-1989, but no satisfactory explanation to this effect was furnished. the said complaint petition was filed alleging that the accused No.1 in connivance with accused Nos. 2 to 6 had willfully attempted to evade taxes by concealing the particulars of their true income and by furnished false statement in verification portion of their return and had thus rendered themselves liable for prosecution under Sections 276-C and 277 of the Income Tax Act and proper sanction, therefor, was also obtained. 4. It appears from the impugned order that prima-facie case was found against the petitioners and the petitioners were, summoned to face the trial. 4. It appears from the impugned order that prima-facie case was found against the petitioners and the petitioners were, summoned to face the trial. It also appears that trial was going on, in which one witness was examined on behalf of the Revenue and some documents were also marked as exhibits, when the application under Section 245 of the Cr PC was filed by the accused persons for discharge, submitting that the order of penalty passed under Section 271(1)(c) of the Income Tax Act for the same alleged undeclared income was reversed by the Income Tax Appellate Tribunal in I.T.A. No. 531 (Pat.)/1993 by order dated 22.7.1996 and the penalty imposed upon the partners were directed to be refunded by the Income Tax Appellate Tribunal. By the impugned order dated 22.12.2002 the application filed by the petitioners was rejected by the Court below holding that in the present case the complainant had brought evidence under Section 244 of the Cr PC, oral as well as documentary, and if these evidence be left unrebutted, they would warrant the conviction of the accused persons. It has also been held by the learned Court below that the penalty proceeding cannot be a condition precedent for initiation of the prosecution against the accused persons and as such, the reversing of the order of penalty cannot bar the criminal proceeding against the accused persons. As the Court found sufficient materials oral as well as documentary on the record, which if unrebutted would warrant conviction against the accused persons, the petition filed under Section 245 of the Cr PC was rejected by the Court below by order dated 20.12.2002 which has been challenged in the present revision application. 5. Before coming to the respective submissions of the learned counsels for the either sides, it would be appropriate to refer to the order passed by the Income Tax Appellate Tribunal in I.T.A. No. 531(Pat.)/1993, which has been brought on record as Annexure-2 to this application. From the perusal of this order it appears that a search and seizure operation was held at the residential premises of one of the partners of the firm namely. Shiv Kumar Kejriwal, whose statement on oath was recorded under Section 132(4) of the Income Tax Act, in which he had stated that he would like to surrender Rs. From the perusal of this order it appears that a search and seizure operation was held at the residential premises of one of the partners of the firm namely. Shiv Kumar Kejriwal, whose statement on oath was recorded under Section 132(4) of the Income Tax Act, in which he had stated that he would like to surrender Rs. 5,00,000/- in M/s. Kejriwal Brothers for the assessment year 1988-1989 and tax will be paid. He had further stated that he was making the declaration on behalf of all the partners of the firm and that the payment of tax on the surrendered amount would be his personal liability. On the basis of the said statement on oath it was found by the Assessing Officer that there was concealment of the amount of Rs. 5,00,000/- by the assessee for which they were also liable under Section 271(1)(c) of the Income Tax Act for penalty and accordingly, a penalty of Rs. 2,60,000/- was imposed upon the assessee firm and its partners. The relevant portions of the order passed by the Assessing Officer imposing the penalty have been quoted by the Income Tax Appellate Tribunal in its order contained in Annexure-2, which shows that actually there was no seizure of any asset or cash by the department in course of search, but the penalty was imposed on the mere declaration of one of the partners. The Tribunal relying upon the various decisions of the Honble Supreme Court, came to the conclusion that an act of concealing income is a conscious positive act and the same has to be established by the Revenue by cogent material and evidence, but the same was absolutely lacking in the present proceeding and the penalty was imposed without holding that there had been conscious concealment of the income. Without giving any such independent finding based on valid enquiry regarding the concealment of the income to the extent of Rs. 5,00,000/- by the firm, the penalty was so imposed. The Tribunal also held that if one is to go purely by the findings contained in the assessment order then there could be no two opinions on the question that those findings miserably failed to establish the guilt of concealment. 5,00,000/- by the firm, the penalty was so imposed. The Tribunal also held that if one is to go purely by the findings contained in the assessment order then there could be no two opinions on the question that those findings miserably failed to establish the guilt of concealment. It was also held by the Tribunal that mere admission does not establish the guilt of concealment of income authorizing imposition of penalty under the concealment provisions of Section 271(1)(c) of the Act and accordingly, the order imposing penalty upon the petitioners was reversed by the Income Tax Appellate Tribunal by order dated 22.7.1996 and the penalty imposed was directed to be refunded, if the same had been realized. 6. Learned senior counsel arguing on behalf of the petitioners has submitted that the impugned order passed by the learned Special Judge Economic Offences, Dhanbad, rejecting the application filed under Section 245 of the Cr PC by the petitioners cannot be sustained in the eyes of law, in as much as, it is well settled principle of law that once the penalty proceeding under Section 271(1)(c) of the Income Tax Act is dropped the consequent prosecution of the assessee for the offence under Section 276C for concealing the income and the prosecution under Section 277 of the Income Tax Act for giving false statement in the verification portion of the return cannot be sustained in the eyes of law. In this connection learned counsel has placed reliance upon the decision of the Hon'ble Supreme Court of India in the case of Uttam Chand and others v. Income Tax Officer. Central Circle, Amritsar, reported in (1982) 133 ITR 909, wherein the I.T.O. had cancelled the registration of the firm on the ground that the firm was not genuine and had initiated prosecution upon the 'partners of the firm under Section 277 of the Income Tax Act for having filed false returns, and subsequently it was found that the firm was genuine, the Supreme Court quashed the prosecution of the partners of the firm under Section 277 of the Income Tax Act. Reliance has also been, placed on the decision of this Court in the ease of M/s. Tata Ropbins Fraser Ltd. v. State of Jharkhand and others, reported in 2005 (3) JCR 397 (Jhr), wherein this Court took into consideration' the decision of the Supreme Court of India in the case of K.C. Builders and another v. The Assistant Commissioner of Income Tax, reported in JT 2004 (2) SC 100, wherein it was held as follows : "15. ........ The word "concealment" inherently carried with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if takes out the case from the purview of non-disclosure, it cannot by itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention of desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In order that a penalty under Section 271(1)(iii) may be imposed, it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income........" xxxxxx "26. In the instant case, the penalties levied under Section 271 (1)(c) were cancelled by the respondent by giving effect to the order of the Income-tax Appellate Tribunal in I.T.A. Nos. 3129 and 3132. It is settled law that levy of penalties and prosecution under Section 276C are simultaneous. Hence once the penalties are cancelled on ground that there is no concealment, the quashing of prosecution under Section 276-C is automatic." (Emphasis supplied). Relying on the said decision this Court also quashed the proceeding initiated against the company M/s. Tata Ropbins Fraser Ltd. for the offence under Sections 276-C and 277 of the Income Tax Act. 7. Hence once the penalties are cancelled on ground that there is no concealment, the quashing of prosecution under Section 276-C is automatic." (Emphasis supplied). Relying on the said decision this Court also quashed the proceeding initiated against the company M/s. Tata Ropbins Fraser Ltd. for the offence under Sections 276-C and 277 of the Income Tax Act. 7. Reliance was again placed upon the decision of the Patna High Court in the case of Mahadeo Lal Agarwala v. The State of Bihar and another, reported in 1996 (1) PLJR 533, wherein also relying upon the decision of the Honble Supreme Court in Uttam Chand's case (supra), the Court had held that where the proceeding under Section 271(1)(c) has been dropped, the prosecution under Section 277 of the Income Tax Act was not maintainable. Similar view has been taken by Patna High Court, Ranchi Bench. in the case of Md. Moinul Haque and others v. State of Bihar, reported in 1996 (2) PLJR 723. Similarly, in the case of Prem Kumar Keshri v. The State of Bihar and others, reported in 1996 (2) PLJR 776 also, the prosecution under Sections 276-C and 277 of the Income Tax Act was quashed on the same ground. Placing reliance on these decisions learned senior counsel submitted that the impugned order passed by the Court below cannot be sustained in the eyes of law and it is fit to be set aside. 8. Learned counsel for the State, as well as learned counsel for the Revenue on the other hand. have submitted that there is no illegality in the impugned order, in as much as, in the present case the order imposing penalty upon the petitioners under Section 271(1)(c) of the Income Tax Act was set aside on technical ground, as the Income Tax Appellate Tribunal had found that the order imposing the penalty passed by the A.O. was a cryptic order and accordingly, the same was set aside. Learned counsel submitted that from the impugned order passed by the Court below, it would be apparent that one witness has been examined in this case and documents have also been marked as exhibits which prima facie prove the case against the petitioners, in as much as, the Court below has held that if these evidences are left unrebutted, they would warrant the conviction of the petitioners. Accordingly, the Court below was perfectly justified in rejecting the application flied under Section 245 of the Cr PC by the petitioners. Learned Counsels accordingly, submitted that there is no illegality in the impugned order worth Interference in the Revisional jurisdiction. 9. After having heard learned counsels for both the sides and upon going through the record, I find that the order dated 22.7.1996 passed by the Income Tax Appellate Tribunal, Patna Bench, Patna, reversing the order imposing penalty upon the petitioners, clearly shows that there was no seizure of any asset or cash by the department in course of search and the penalty was imposed upon the petitioners on the mere declaration made by one of the partners of the assessee firm in course of search. In K.C. Builders' case (supra), the Hon'ble Supreme Court has held that the word "concealment" inherently carried with it the element of mens rea and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention of desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon, there can be no 'concealment' and in order to impose penalty under Section 271 (1)(c) it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income. It has also been held that levy of penalties and prosecution under Section 276-C are simultaneous and hence, once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution under Section 276-C is automatic. 10. In the present case the Income Tax Appellate, Tribunal has clearly held that there was no independent finding based on valid enquiry regarding concealment of the income to the extent of Rs. 5,00,000/- by the petitioners and in that view of the matter it cannot be said that the order imposing penalty was reversed by the Tribunal merely on technical ground, rather the order clearly shows otherwise, that the Tribunal has given specific finding that there was complete lack of the finding about the conscious and positive act of concealment by the petitioners, based on cogent materials and evidence and accordingly, the penalty imposed, upon the petitioners was reversed by the Income Tax Appellate Tribunal. 11. 11. In view of the said findings, once the penalty was reversed, I am of the considered view that the prosecution under Sections 276-C and 277 of the Income Tax Act has to be automatically dropped in view of the decision of the Apex Court in K.C. Builders' case (supra). 12. In view of the aforementioned discussions, the impugned order dated 20.12.2002 passed by the learned 2nd Subordinate Judge-cum-Special Judge Economic Offences. Dhanbad, in Complaint Case being C.O. No. 303 of 1992 is hereby, set aside. Consequently, the petitioners stand discharged. This application is accordingly, allowed. Application allowed.