Crl Op/27473/2009 Of Mrs.banumathi v. Income Tax Officer

1.Banumathi 2.Sangeetha Associates represented by P.Rajagopal 3.P.Rajagopal...Petitioners/Accused 2 to 4-Vs- Income Tax OfficerO/o. The Appropriate AuthorityIncome Tax DepartmmentNo.121, M.G.Road, Chennai – 34....Respondent/Complainant Criminal Original Petition filed under Section 482 of CriminalProcedure Code to call for the records of the complaint in EOCCNo.177 of 2005 on the file of the learned Additional ChiefMetropolitan Magistrate (Economic Offences-I) Egmore, Chennai andquash the same. For Petitioners: Mr.R.SrinivasFor Respondent : Mr.K.Ramasamy Special PP for IT cases*****O R D E R The petitioners who are accused 2 to 4 in case pending in EOCCNo.177 of 2005 on the file of the learned Additional ChiefMetropolitan Magistrate (Economic Offences-I) Egmore, Chennai havecome forward with this petition to quash proceedings in such case asagainst them. 2.In such case, four persons are accused of offences underSections 269UC and 269UL(2) of the Income Tax Act, 1961 (hereinafterreferred as Act) punishable under Section 276 AB of such Act. Theaccused 1 and 2 in the case are husband and wife. Being personsseparately assessed to tax, they held individual propertiescomprising of flats and independently have sold their respectiveholdings to the 3[rd] accused viz., M/s.Sangeetha Associates representedby P.Rajagopal and 4[th] accused P.Rajagopal in his individualcapacity. https://hcservices.ecourts.gov.in/hcservices/ 3.Heard the learned counsel for the petitioners andMr.K.Ramasamy, learned Special Public Prosecutor (IT cases). 4.The prosecution as against the 1[st] accused in the case has beenquashed by order of this Court in Crl.O.P.No.16623 of 2006 dated03.12.2009. I have had the benefit of perusing such order and I findthat the contentions now raised by either counsel excepting for oneadditional submission by the learned Special Public Prosecutor (ITcases) are the same. When the facts and the law applicable iscorrectly stated in the order, I can do no better than reproducingwhat is stated in the said order. The said order reads as follows: "The petitioner, who is the accused in EOCC No.177 of2005 on the file of the Additional Chief MetropolitanMagistrate (Economic Offences), Egmore, Chennai, wherein heis facing trial for the alleged offences under Sections 276ABr/w 269UC and 269UL(2) of the Income Tax Act, 1961(hereinafter called as 'Act'), has filed the above Crl.O.P.seeking to quash all further proceedings therein. 2. A perusal of the complaint filed by the respondentagainst the petitioner and others reveals the followingallegations:- a.That in pursuance of Sec. 269 UC of Chapter XXC ofthe Income-tax Act, 1961 no transfer of any immovableproperty of such value exceeding Rs.25 lakhs shall be effectedexcept after an agreement for transfer is entered in betweenthe transferor and the transferee in accordance with theprovisions of sub-section (2) at least four months beforethe intended date of transfer. Both the transferor and thetransferee have got a legal obligation to file with theAppropriate Authority, Income Tax Department the particularsof such agreement in Form No.37-I prescribed under Rule 48 Lof the Income Tax Rules, 1962 within the statutory time limitprescribed thereunder. a.That in pursuance of Sec. 269 UC of Chapter XXC ofthe Income-tax Act, 1961 no transfer of any immovableproperty of such value exceeding Rs.25 lakhs shall be effectedexcept after an agreement for transfer is entered in betweenthe transferor and the transferee in accordance with theprovisions of sub-section (2) at least four months beforethe intended date of transfer. Both the transferor and thetransferee have got a legal obligation to file with theAppropriate Authority, Income Tax Department the particularsof such agreement in Form No.37-I prescribed under Rule 48 Lof the Income Tax Rules, 1962 within the statutory time limitprescribed thereunder. b.The accused 1 and 2 are the owners of the landedproperty comprised TS No.23, Block No.30 of Kottur Villagebearing Corporation Door No.7, I Main Road Gandhi Nagar,Adyar, Chennai measuring an extent of 13,642 sq.ft. the valueof which exceeds Rs.25 lakhs. Therefore, the above propertyfalls within the jurisdiction of the Appropriate Authority,Income Tax Department, 121, Nungambakkam High Road, Chennai-34 for the purpose of Chapter XXC of the Income Tax Act, 1961.c.The accused 1 and 2 by two separate sale deeds, dated28.3.2002 have sold the above mentioned property in favour ofthe accused 3 represented by accused 4 herein for a totalconsideration of Rs.30 lakhs. The accused 1 by the registeredsale deed No.773/2002, dated 28.3.2002 has conveyed his undivided right, title and interest having a proportionateshare 500/22,000 of 13,642 sq.ft. of the entire landedproperty. The market value of the undivided above share wasmentioned in the sale deed as Rs.15 lakhs. The total extentof the landed property as a whole was mentioned underSchedule A of the sale deed as 13,642 sq.ft. and undividedshare of the 933 sq.ft. was mentioned under Schedule B ofthe sale deed. d.The accused 2 on the same date on 28.3.2002 by theregistered sale deed No.774/2002 has transferred herundivided right, title and interest having a proportionateshare 500/22,000 of 13,642 sq.ft. of the entire landedproperty. The market value of the undivided above share wasmentioned in the sale deed as Rs.15 lakhs. The total extentof the landed property as a whole was mentioned underSchedule A of the sale deed as 13,642 sq.ft. and undividedshare of the 933 sq.ft. was mentioned under Schedule B ofthe sale deed. e.Though two separate sale deeds have been executed byaccused 1 and 2 in favour of Accused 3 the property conveyedwas a single unit measuring a total area of 13,642 sq.ft. asmentioned in Schedule A of each sale deed. Therefore, themarket value of the property as a single unit which wastransferred by the accused 1 and 2 to the accused 3 wasRs.30 lakhs. f.That in pursuance of Sec.269UC of the Income Tax Act,1961 both the transferors, the accused 1 and 2 and thetransferee, the accused 3 represented by the accused 4herein, have legal obligation to file Form 37-I prescribedunder Rule 48L of the Income Tax Rules, 1962 within thestatutory time limit prescribed thereunder, since the valueof the property situated at Door No.7, 1[st] Main Road, GandhiNagar, Adyar, Chennai-20 exceeded Rs.25 lakhs. g.It is further alleged in the complaint that the abovelegal obligation of filing Form 37-I as required underSection 269UC of the Income Tax Act, both the transferors andthe transferee have wilfully and deliberately split up thesale transaction into two registered two sale deeds valued atRs.15 lakhs each though the property conveyed was a singleunit measuring 13,642 sq.ft. valued at Rs.30 lakhs. Thusthe accused 1 to 4 contravened the provisions of Sec.269UC ofthe Income Tax Act, 1961 which constitutes an offence underSection 276AB of the Income Tax Act, 1961. h.It is further alleged in the complaint that underSection 269UL(2) no person has got any right to transfer g.It is further alleged in the complaint that the abovelegal obligation of filing Form 37-I as required underSection 269UC of the Income Tax Act, both the transferors andthe transferee have wilfully and deliberately split up thesale transaction into two registered two sale deeds valued atRs.15 lakhs each though the property conveyed was a singleunit measuring 13,642 sq.ft. valued at Rs.30 lakhs. Thusthe accused 1 to 4 contravened the provisions of Sec.269UC ofthe Income Tax Act, 1961 which constitutes an offence underSection 276AB of the Income Tax Act, 1961. h.It is further alleged in the complaint that underSection 269UL(2) no person has got any right to transfer https://hcservices.ecourts.gov.in/hcservices/ any immovable property the value of which exceeds Rs.25 lakhswithout obtaining a No Objection Certificate from theAppropriate Authority, Income Tax Department. The accused 1and 2 by transferring the said property by two registeredsale deeds without obtaining No Objection Certificate asrequired under Section 269UL(2) of the Act to the accused 3and thereby contravened Section 269UL(2) of the Act, which ispunishable under Section 276AB of the Act. i.The accused 4 representing accused 3 and signing saledeeds on behalf of the accused 3 is a person interested inthe above transaction and therefore, he is liable for thecommission of the offences along with the accused 1 to 3. 3.A complaint was filed after sending a show-causenotice and considering the reply received from the accusedand the same was taken on file for the aforesaid offencesagainst the accused. 4. Being aggrieved by that, the accused 1/petitionerherein has come before this Court. a.Section 269UC of the Income Tax specifically states notransfer of any immovable property in such area and of valueexceeding Rs.25 lakhs shall be effected except after anagreement for transfer is entered into between the transferorand the transferee. The petitioner herein even according tothe prosecution has sold his property through a separateregistered sale deed for Rs.15 lakhs only. Thus there isabsolutely no violation of Section 269UC of the Income TaxAct. b. Further, Section 269 UC(2) also is not attracted asit states that no one should transfer the property unlesshe gets no objection certificate from the appropriateauthority on the submission of a statement as contemplatedunder Sec. 269UC(3) of the Income Tax Act. The aboveprovision is also not attracted since it applies only whenSec.269 Income Tax Act can be invoked. Since the transaction of the petitioner is less than Rs.25 lakhs none of theseprovisions are attracted. https://hcservices.ecourts.gov.in/hcservices/ similarly the second accused, who is the wife of the firstaccused, is also an independent Income Tax Assessee and bothof them have honestly shown the purchase and sale of theproperty concerned promptly in their respective income taxreturns for the corresponding year. The learned counselfurther submitted that the petitioner sold a separate anddistinct immovable property valued at Rs.15 lakhs andtherefore, no offence is committed. 8.The learned counsel submitted that the complaintproceeds on misconception that the accused 1 and 2 are theowners of the entire property measuring 13,642 sq.ft. whichis shown as 'A' Schedule in their respective sale deeds,which has resulted in a miscarriage of justice. 9.On the aforesaid submissions, the learned SpecialPublic Prosecutor for the Income Tax Cases was heard. 8.The learned counsel submitted that the complaintproceeds on misconception that the accused 1 and 2 are theowners of the entire property measuring 13,642 sq.ft. whichis shown as 'A' Schedule in their respective sale deeds,which has resulted in a miscarriage of justice. 9.On the aforesaid submissions, the learned SpecialPublic Prosecutor for the Income Tax Cases was heard. 10.The learned Special Public Prosecutor submitted thatsince the undivided share of 500/22,000 of 13,642 sq.ft.each has been sold by the first and second accused, theprovisions contained in Section 269UC is attracted. Insupport of the said contention, the learned Special PublicProsecutor based reliance on the decision of the Apex Courtreported in 248 ITR 342 (Appropriate Authority and Another v.SMT. Varshaben Bharatbhai Shah and Others). In the saiddecision, the Apex Court has laid down as under:- "What, in our opinion, therefore, has to be seen forthe purposes of attracting Chapter XX-C is : what is theproperty which is the subject-matter of transfer and whatis the apparent consideration for such transfer. This hasto be seen in a real light with due regard to the objectof the Chapter and not in an artificial or technicalmanner. If the apparent consideration for the transfer ismore than the limit prescribed for the relevant areaunder rule 48K, what has then to be seen is whether theapparent consideration for the property is less than themarket value thereof by 15 per cent. or more. If so,the notice for pre-emptive purchase can be issued andit is then for the parties to the transaction to satisfythe appropriate authority that the apparent considerationis the real consideration for the transfer. Now, in the present case, the said agreement is forthe sale of the said immovable property. That the equalshares of the second and third respondents therein are tobe transferred to the first respondent is a necessaryincident of such sale. The parties to the transactionfiled Form No.37-I with the appropriate authority and correctly stated that what was being sold was the saidimmovable property and not the one-half shares of thesecond and third respondents therein. It also stated,correctly, that the total apparent consideration for thetransfer of the said immovable property was Rs.47 lakhs.This leaves us in no doubt at all that what was to betransferred was the said immovable property and that theconsideration for such transfer was the sum of Rs.47lakhs. It is of no consequence that the second and thirdrespondents owned the said immovable property as tenants-in-common or that this is how they had shown theirownership in their income-tax returns. We are,therefore, of the opinion that the High Court was inerror in concluding that what had been sold by the secondand third respondents to the first respondent was theirequal share in the said immovable property, that theapparent consideration was, therefore, less than Rs.25lakhs and that, therefore, the provisions of Chapter XX-Cwould not apply. We should add that even if the agreement of transferhad been so drawn as to show the transfer of the equalshares of the second and third respondents in the saidimmovable property, our conclusion would have been the samefro, looked at realistically, it was the said immovableproperty which was the subject of the transfer." 11.I have considered the said submissions made on eitherside and perused the materials available on record and thedecisions relied upon by the learned counsel for therespondent. 12.In the complaint in paragraph 5, thecomplainant/respondent has stated as follows:- "The accused 1 and 2 are the owners of the landedproperty comprised TS No.23, Block No.30 of Kottur Villagewherein Corporation Door No.7, I Main Road Gandhi Nagar,Adyar, Chennai measuring an extent of 13,642 sq.ft. thevalue of which is exceeding Rs.25 lakhs." 11.I have considered the said submissions made on eitherside and perused the materials available on record and thedecisions relied upon by the learned counsel for therespondent. 12.In the complaint in paragraph 5, thecomplainant/respondent has stated as follows:- "The accused 1 and 2 are the owners of the landedproperty comprised TS No.23, Block No.30 of Kottur Villagewherein Corporation Door No.7, I Main Road Gandhi Nagar,Adyar, Chennai measuring an extent of 13,642 sq.ft. thevalue of which is exceeding Rs.25 lakhs." 13.Again, in paragraph 6, it is stated that the accused 1and 2 by two separate sale deeds dated 28.3.2002 have soldthe above mentioned property in favour of the accused 3represented by the accused 4 herein for a total considerationof Rs.30 lakhs. 14.Again, in paragraph 9 of the complaint, it is statedthat though two separate sale deeds have been executed byaccused 1 and 2 in favour of Accused 3 the property conveyed https://hcservices.ecourts.gov.in/hcservices/ was a single unit measuring a total area of 13,642 sq.ft. asmentioned in Schedule A of each sale deed. Therefore, themarket value of the property as a single unit which wastransferred by the accused 1 and 2 to the accused 3 wasRs.30 lakhs. 15.In paragraph 11 also similar averments have been made.Thus it could be seen that the complaint proceeds on thefooting that the accused 1 and 2 are the owners of theentire landed property measuring an extent of 13,642 sq.ft.comprised in T.S.No.23, Block No.30 of Kottur Village bearingCorporation Door No.7, I Main Road, Gandhi Nagar, Adyar,Chennai-20. But at the same time, in the other paragraphsof the complaint, the complainant has stated that theaccused 1 by the registered sale deed No.773/2002 dated28.3.2002 has conveyed his undivided right, title andinterest having a proportionate share 500/22000 of 13,642sq.ft. of the entire landed property. Similarly, it isstated that the accused 2 on the same date on 28.3.2002 byregistered sale deed No.774/2002 has transferred her undividedright, title and interest having a proportionate share500/22000 of 13,642 sq.ft. of the entire landed property. 16.Thus, it could be seen that there is some confusion inthe mind of the complainant as to whether the accused 1 and2 are the owners of the entire extent of 13,642 sq.ft. orthey are the owners of 500/22000 of 13642 sq.ft. each. Itcould be seen from the sale deeds that A1 and A2 havepurchased their respective share of 500/22000 of 13642 sq.ft.from their respective vendors. But in the sale deed, theentire property of 13,642 sq.ft has been described inSchedule A and Schedule B, is the property conveyed under theregistered sale deed No.773/2002, dated 28.3.2002 standing inthe name of the accused 1 and 2 and it contains thedescription of the property viz., 500/22000 share of 13642sq.ft. purchased individually by the accused 1 and 2 and thesame have been sold by them under the two independent saledeeds bearing Doc.No.773/2002, dated 28.3.2002 andDoc.No.774/2002, dated 28.3.2002. 17.Since individual undivided shares purchased by A1 andA2 have been dealt with by them under the aforesaid two saledeeds, it cannot be said that a single unit has been dealtwith by them under two different sale deeds by splitting thesingle unit. Simply because, the accused 1 and 2 happened tobe the husband and wife, the prosecution seems to have beenlaunched by clubbing two properties sold under two differentsale deeds as a single unit, which in the considered view ofthis court cannot be done. For example, if two 500/22000shares of 13642 sq.ft. of the entire landed property had been 17.Since individual undivided shares purchased by A1 andA2 have been dealt with by them under the aforesaid two saledeeds, it cannot be said that a single unit has been dealtwith by them under two different sale deeds by splitting thesingle unit. Simply because, the accused 1 and 2 happened tobe the husband and wife, the prosecution seems to have beenlaunched by clubbing two properties sold under two differentsale deeds as a single unit, which in the considered view ofthis court cannot be done. For example, if two 500/22000shares of 13642 sq.ft. of the entire landed property had been sold by two individuals, who are not related to each other,whether the complaint could be filed and in considered viewof this Court such a complaint cannot be filed. When theaccused 1 and 2 are the income tax assessees and they are twodifferent legal entities in the eye of law, the purchases madeby them under two sale deeds can be dealt with by themindividually and as such the sales effected by them cannot beclubbed together and that it cannot be alleged that the singleunit has been transferred under two sale deeds to get over theprovisions of the Income Tax Act. 18.In the decision reported in 248 ITR 342, the ApexCourt was dealing with a case, where co-owners have agreed totransfer their property rights and each co-owner is to bepaid an amount of consideration which is less than the amountspecified i.e., each co-owner-transferor will get less thanRs.25 lakhs as per the agreement and the facts of which are asfollows:- 19.On August 12, 1995 the second and third respondentsentered into an agreement to sell to the first respondentimmovable property situated in Ahmedabad for the sum of Rs.47lakhs. The appropriate authority of the Revenue came to theconclusion that the apparent consideration in respect of thesaid immovable property under the said agreement was lessthan the market value thereof by 15 per cent or more.Accordingly, a notice dated November 6, 1995 was issued tothe respondents to show cause why the said immovable propertyshould not be subjected to pre-emptive purchase under ChapterXX-C of the Income Tax Act, 1961. The respondents showedcause, but the order of pre-emptive purchase was made by theappropriate authority. This order was challenged in the writpetition. 20.Before the High Court, it was contended that what hadbeen transferred by the second and third respondents to thefirst respondent were their equal half shares in the saidimmovable property and that they owned such equal half shareswas indicated in their income tax returns and in the saidagreement which stated that the earnest money had been paidby two separate cheques to the second and third respondents.The High Court of Guajarat upheld the said contention. TheRevenue preferred an appeal to the Apex Court. In the abovefactual background, the Apex Court has considered the issueand observed that what has to be seen for the purposes ofattracting Chapter XX-C is, what is the property which is thesubject-matter of transfer and what is the apparentconsideration for such transfer. This has to be seen in areal light with due regard to the object of the Chapter andnot in an artificial or technical manner. 21.The Apex Court has pointed out that in that case, thesaid agreement is for the sale of the said immovable property.That the equal shares of the second and third respondentstherein are to be transferred to the first respondent is anecessary incident of such sale. The parties to thetransaction filed Form No.37-I with the appropriateauthority and correctly stated that what was being sold wasthe said immovable property and not the one-half shares ofthe second and third respondents therein. It also stated,correctly, that the total apparent consideration for thetransfer of the said immovable property was Rs.47 lakhs. Fromthat the Apex Court came to the conclusion that theconsideration for such transfer was the sum of Rs.47 lakhs.The Apex Court has pointed out that it is of no consequencethat the second and third respondents owned the immovableproperty as tenants-in-common that this is how they had showntheir ownership in their in-come tax returns. On theaforesaid reasonings, the Apex Court reversed the judgment ofthe High Court holding that what had been sold by the secondand third respondents to the first respondent was theirequal share in the said immovable property that the apparentconsideration was, therefore, more than Rs.25 lakhs and that,therefore, the provisions of Chapter XX-C would apply. TheApex Court further observed that even if the agreement oftransfer had been so drawn as to show the transfer of theequal shares of the second and third respondents in the saidimmovable property, their conclusion would have been the samefor, looked at realistically, it was the said immovableproperty which was the subject of the transfer. 22.In the considered view of this Court the facts of thatcase are totally different from the facts of the case on hand.If in the light of the law laid down by the Apex Court, thefacts of the case on hand are considered it could be seen thatthe immovable property dealt with by the accused 1 and 2 havebeen purchased by them under two different sale deeds and thesame has been shown in their respective income tax returns.Here, individual agreements have been entered into by theaccused 1 and 2 with the accused 3 in respect of theirindividual share. Therefore, the property that has been dealtwith under the sale deed executed by the accused 1 and 2 isnot a single unit but two different undivided shares.Therefore, the legal principle laid down in 248 ITR 342 isnot applicable to the facts of this case. For the aforesaid reasons, the Crl.O.P. is to be allowed.Accordingly, the Crl.O.P. is allowed quashing the complaintin EOCC No.177 of 2005 on the file of the Additional ChiefMetropolitan Magistrate (Economic Offences), Egmore, Chennai-8. Connected Crl.M.P. is closed." 5.The additional contention raised by the learned Special PublicProsecutor (IT cases) is that the accused 3 and 4 in effect being oneand the same entity and being the purchaser of the property, hispurchase thereof in a sum above Rs.25,00,000/- would attract theapplication of Sections 269 UC and 269 UL(2) of the Act and hence, onhis non-compliance with the requisites thereof, prosecution underSection 276AB will stand. 6.I am unable to accept such contention. When the purchase isof two independent units and two distinct persons holding the same intheir individual capacity have effected sale, then, it would not beproper to club such two independent purchases and read the same asone transaction. 7.For the above said reasons, this Criminal Original Petition shall stand allowed. The proceedings in EOCC No.177 of 2005 on thefile of the learned Additional Chief Metropolitan Magistrate(Economic Offences-I) Egmore, Chennai shall stand quashed.Consequently, the connected miscellaneous petition is closed. gmTo Sd/Asst.Registrar/true copy/Sub Asst.Registrar 1.The Additional Chief Metropolitan Magistrate (Economic Offences-I) Egmore, Chennai - 8 6.I am unable to accept such contention. When the purchase isof two independent units and two distinct persons holding the same intheir individual capacity have effected sale, then, it would not beproper to club such two independent purchases and read the same asone transaction. 7.For the above said reasons, this Criminal Original Petition shall stand allowed. The proceedings in EOCC No.177 of 2005 on thefile of the learned Additional Chief Metropolitan Magistrate(Economic Offences-I) Egmore, Chennai shall stand quashed.Consequently, the connected miscellaneous petition is closed. gmTo Sd/Asst.Registrar/true copy/Sub Asst.Registrar 1.The Additional Chief Metropolitan Magistrate (Economic Offences-I) Egmore, Chennai - 8 2.The Income Tax Officer O/o. The Appropriate Authority Income Tax Departmment, No.121, M.G.Road, Chennai – 34. 3.The Special Public Prosecutor (IT cases) High Court, Madras. CRL.O.P. No.27473 of 2009andM.P.No.1 of 2009 NSM(CO)sra 12/04/2010