Crl Rc/111/2011 Of Sayarmull Surana v. Income Tax Officer

IN THE HIGH COURT OF JUDICATURE AT MADRAS RESERVED ON: 28.11.2018PRONOUNCED ON: 14.12.2018 THE HON'BLE MR.JUSTICE P.N. PRAKASH Crl.R.C. No.111 of 2011 & Crl.M.P. No.1 of 2011 Sayarmull SuranaRevision Petitioner The Income Tax OfficerBusiness Ward XII (3)ChennaiRespondent Criminal Revision Case filed under Sections 397 and 401 ofCr.P.C. seeking to set aside the order dated 03.01.2011 passedby the Additional Chief Metropolitan Magistrate (E.O.-I),Chennai in Crl.M.P. No.2435 of 2010 in E.O.C.C. No.82 of 2005and thereby, discharge the accused. For revision petitionerMr. P. Ramesh KumarFor respondentMr. N. BaskaranPublic Prosecutor for I.T. Department ORDER This Criminal Revision Case has been preferred seeking toset aside the order dated 03.01.2011 passed by the AdditionalChief Metropolitan Magistrate (E.O.-I), Chennai in Crl.M.P.No.2435 of 2010 in E.O.C.C. No.82 of 2005 and thereby, dischargethe accused. 2The facts in brief, leading to the filing of thiscriminal revision case, are as under: 2.1The Income Tax Department launched a prosecution inE.O.C.C.No.82 of 2005 before the Additional Chief MetropolitanMagistrate (E.O.I), Egmore, Chennai, against Sayarmull Surana,the petitioner herein/accused, for the offence under Section276C(2) of the Income Tax Act, 1961 (for short “the IT Act”). 2.2It is the case of the Income Tax Department that forthe assessment year 1998-1999, the accused filed income taxreturns on 16.06.1998, wherein, he had shown his total income atRs.48,150/-; the Income Tax Department conducted investigation https://hcservices.ecourts.gov.in/hcservices/ and found that his total income was Rs.29,05,126/- anddetermined the tax payable, including interest, at Rs.16,02,601;the accused filed an appeal before the Commissioner of IncomeTax (Appeals) and by order dated 15.09.2003, the Commissioner ofIncome Tax (Appeals) determined the total income of the accusedand the tax payable at Rs.26,69,470/- and Rs.14,84,199/-respectively; thereagainst, the accused filed an appeal beforethe Income Tax Appellate Tribunal; however, the Income TaxAppellate Tribunal dismissed his stay petition on 23.02.2004;hence, the accused is liable to be punished under Section 276C(2) of the IT Act for non-payment of the determined tax. 2.3On summons, the accused appeared and the prosecutioncommenced in terms of Chapter XIX-B - Cases instituted otherwisethan on police report of the Cr.P.C.. On behalf of the IncomeTax Department, three witnesses were examined and they werecross-examined by the accused. In all, 35 exhibits were markedthrough the officials, both in examination-in-chief as well incross-examination. After the Income Tax Department closed thepre-charge evidence, the accused filed Crl.M.P.No.2435 of 2010in E.O.C.C. No.82 of 2005 under Section 245(1) Cr.P.C. fordischarge, which has been dismissed by the trial Court by orderdated 03.01.2011, aggrieved by which, the accused is before thisCourt. 3At the outset, it may be necessary to state here thatthe accused has not filed this petition to quash the prosecutionat the threshold under Section 482 Cr.P.C. The Trial Court hasrecorded the pre-charge evidence of three prosecution witnessesand on the closure of the prosecution evidence, the accusedprayed for discharging him from the prosecution, which plea wasnegatived, challenging which, the accused has filed the presentcriminal revision case. 4Before adverting to the rival submissions on facts, itmay be apposite to allude to Section 276C(2) of the IT Act whichreads as under: “Wilful attempt to evade tax, etc.: 3At the outset, it may be necessary to state here thatthe accused has not filed this petition to quash the prosecutionat the threshold under Section 482 Cr.P.C. The Trial Court hasrecorded the pre-charge evidence of three prosecution witnessesand on the closure of the prosecution evidence, the accusedprayed for discharging him from the prosecution, which plea wasnegatived, challenging which, the accused has filed the presentcriminal revision case. 4Before adverting to the rival submissions on facts, itmay be apposite to allude to Section 276C(2) of the IT Act whichreads as under: “Wilful attempt to evade tax, etc.: 276C(2)If a person wilfully attempts in any mannerwhatsoever to evade the payment of any tax, penaltyor interest under this Act, he shall, withoutprejudice to any penalty that may be imposable on himunder any other provision of this Act, be punishablewith rigorous imprisonment for a term which shall notbe less than three months but which may extend to twoyears and shall, in the discretion of the Court, alsobe liable to fine.” Explanation: For the purposes of this section, awilful attempt to evade any tax, penalty or interestchargeable or imposable under this Act or the paymentthereof shall include a case where any person -- (i)has in his possession or control any booksof account or other documents (being books of accountor other documents relevant to any proceeding underthis Act) containing a false entry or statement; or (ii) makes or causes to be made any false entryor statement in such books of account or otherdocuments; or (iii)wilfully omits or causes to be omittedany relevant entry or statement in such books ofaccount or other documents; or (iv) causes any other circumstance to existwhich will have the effect of enabling such person toevade any tax, penalty or interest chargeable orimposable under this Act or the payment thereof. The expression “wilfully admits” employed in the above provisionis an inclusive one, despite which, it does not, in any way,change the common and fundamental meaning of it. The allegationagainst the accused in this case cannot be fitted into any ofthe clauses, viz., clause (i) to clause (iv) set out in theExplanation. 5The learned counsel for the accused submitted that thecomplaint is not for evasion of tax, but, is for evasion ofpayment of tax. He contended that after the assessment order waspassed by the Income Tax Officer, the accused filed an appealbefore the Commissioner of Income Tax (Appeals) and by orderdated 15.09.2003, the order passed by the Income Tax Officer wasmodified; thereafter, the accused approached the Income TaxAppellate Tribunal, which, by order dated 29.06.2007, set asidethe order passed by the Commissioner of Income Tax (Appeals)holding that the order was passed without giving an opportunityto the accused to present his case and remanded the matter backto the Commissioner of Income Tax (Appeals); after the matterwas remanded, the accused placed sufficient materials before theCommissioner of Income Tax (Appeals) to repudiate the assessmentmade by the Income Tax Officer and succeeded substantially,inasmuch as the total income determined at Rs.29,05,126/- by theIncome Tax Officer was reduced to Rs.2,82,650/-; consequently,the tax amount was also reduced to Rs.59,795/-; after addinginterest and deducting tax already paid, the demand wasdetermined at Rs.1,10,402/-; therefore, the accusation in the complaint that the tax payable is a sum of Rs.14,84,199/- doesnot survive any more. complaint that the tax payable is a sum of Rs.14,84,199/- doesnot survive any more. 6Per contra, the learned Public Prosecutor for theIncome Tax Department admitted the fact that the matter wasremanded by the Income Tax Appellate Tribunal to theCommissioner of Income Tax (Appeals), who determined the incomeat Rs.2,82,650/- as against Rs.29,05,126/- that was determinedby the Income Tax Officer. However, on law, he submitted thatthe accused cannot be discharged from the prosecution, since taxwas due from him when the prosecution was launched. He placedreliance on the following judgments: ➢P. Jayappan vs. S.K. Perumal, First Income TaxOfficer, Tuticorin [1984 Supp. SCC 437] ➢Raja Corporation and others vs. the Income TaxOfficer [1992 ITR 487 (Vol.194)] ➢Sujatha Venkateshwaran vs. The AssistantCommissioner of Income Tax (order dated13.07.2018 in Crl.R.C. No.615 of 2011) The judgments alluded to above, relied on by the learned PublicProsecutor appearing for the Income Tax Department have nobearing on the facts obtaining in this case, inasmuch as, inthis case, pre-charge evidence has been adduced by theprosecution and the accused has cross-examined the witnesses andthrough P.W.1, he has marked the order dated 29.06.2007 passedby the Income Tax Appellate Tribunal as Ex.P.30. Likewise,through P.W.1, he has marked the order dated 15.05.2008 passedby the Commissioner of Income Tax (Appeals) as Ex.P.31. 7At this juncture, it may be profitable to refer to thejudgment of the Supreme Court in Commissioner of Income Tax,Mumbai vs. Bhupen Champak Lal Dalal and another [(2001) 3 SCC459], wherein, the Supreme Court, relying upon Jayappan (supra),has held as under: "3.The prosecution in criminal law andproceedings arising under the Act are, undoubtedly,independent proceedings and, therefore, there is noimpediment in law for the criminal proceedings toproceed even during the pendency of the proceedingsunder the Act. However, a wholesome rule will have tobe adopted in matters of this nature where courts havetaken the view that when the conclusions arrived at bythe Appellate Authorities have a relevance and bearingupon the conclusions to be reached in the casenecessarily one authority will have to await theoutcome of the other authority. 4.This Court in G.L. Didwania v. ITO [1995 Supp(2) SCC 724] dealt with the similar situation wherethere is a prosecution under the Act for making a falsestatement that the assessee had intentionally concealedhis income and the Tribunal ultimately set aside theassessment holding that there is no material to holdthat such income belongs to the assessee and thepetition was filed before the Magistrate to drop thecriminal proceedings and thereafter, an application wasfiled before the High Court under Section 482 CrPC toquash those criminal proceedings. This Court held thatthe whole question is whether the appellant made afalse statement regarding the income which according tothe assessing authority has escaped assessment and thisissue was dependent on the conclusion reached by theAppellate Tribunal and hence the prosecution could notbe sustained. In Uttam Chand v. ITO [(1982) 2 SCC 543 :1982 SCC (Tax) 150] this Court held that in view of thefinding recorded by the Tribunal on appraisal of theentire material on the record that the firm was agenuine firm and the assessee could not be prosecutedfor filing false returns and, therefore, quashed theprosecution. In P. Jayappan v. S.K. Perumal, First ITO[1984 Supp SCC 437 : 1985 SCC (Tax) 7] this Courtobserved that the pendency of the reassessmentproceedings under the Act cannot act as a bar to theinstitution of the criminal proceedings andpostponement or adjournment of a proceedings for undulylong period on the ground that another proceedingshaving a bearing on the decision was not proper." 8In Gujarat Travancore Agency vs. Commissioner of IncomeTax, Kerala, Ernakulam [(1989) 3 SCC 52], the Supreme Court hasconsidered Section 276C of the IT Act and has held as under:“4.. . . . . There can be no dispute thathaving regard to the provision is of Section 276C,which speaks of wilful failure on the part of thedefaulter and taking into consideration the nature ofthe penalty, which is punitive, no sentence can beimposed under that provision unless the element ofmens rea is established.”9Further, the expression “wilful” has been explained asfollows in P.Ramanatha Aiyar's The Law Lexicon, Second Edition,1977: “The question whether an act or omission iswilful arises oftener in criminal than in civilcauses; since in the former the general principlerequiring the presence of mens rea excludes fromcriminalityactsdoneaccidentallyand unintentionally and even acts done intentionallyunder honest but mistaken belief in the existence offacts which, if true, would have made the acts lawfulor excusable.” 10In the case at hand, the accused filed his returns on16.06.1998 showing his income at Rs.48,150/-. The Income TaxOfficer conducted investigation and determined the income atRs.29,05,126/-. Challenging the said determination, the accusedtook the matter on appeal to the Commissioner of Income Tax(Appeals), where, it was reduced to Rs.26,69,470/- vide orderdated 26.09.2003. The accused pursued the matter before theIncome Tax Appellate Tribunal, which, set aside the order of theCommissioner of Income Tax (Appeals) and remanded the matterback to him. After remand, the Commissioner of Income Tax(Appeals), by order dated 15.05.2008 (Ex.P.31), determined thetax at Rs.2,82,650/-. 11It may be necessary to state here that the authoritiescreated under the Income Tax Act are fact-finding bodies and theaccused has been knocking the doors of these bodies challengingthe determination of the income by the Income Tax Officer.There was no supine indifference on the part of the accused innot paying the demanded tax, but, on the contrary, he hadagitated before various fora and at the end of the day, thefact-finding body itself has come to the conclusion that theincome of the accused for the relevant period was onlyRs.2,82,650/- and the tax payable by him thereon was onlyRs.1,10,402/-. 12Thus, the very edifice on which the prosecution waslaunched against the accused, has crumbled like a pack of cards.There was no necessity for the Income Tax Department to havelaunched the prosecution hurriedly since the law of limitationunder Section 468 Cr.P.C. for criminal prosecution has beenexcluded by the Economic Offences (Inapplicability ofLimitation) Act, 1974. In fact, even in the complaint, theIncome Tax Officer has stated that the accused has approachedthe Income Tax Appellate Tribunal. This shows that the IncomeTax Officer was aware of the fact that the accused is agitatinghis case before the Income Tax Appellate Tribunal, which is thefinal fact-finding body. 13Thus, in the peculiar facts and circumstances of thecase, it cannot be stated that the accused was wilfully evadingthe payment of tax. But, unfortunately, the Trial Court hadfailed to appreciate the contention of the accused in the rightperspective. In the result, this Criminal Revision Case is allowed andthe order dated 03.01.2011 passed by the Additional ChiefMetropolitan Magistrate (E.O.-I), Chennai in Crl.M.P. No.2435 of2010 in E.O.C.C. No.82 of 2005 is set aside and the accused isdischarged from prosecution. Connected Crl.M.P. is closed. 13Thus, in the peculiar facts and circumstances of thecase, it cannot be stated that the accused was wilfully evadingthe payment of tax. But, unfortunately, the Trial Court hadfailed to appreciate the contention of the accused in the rightperspective. In the result, this Criminal Revision Case is allowed andthe order dated 03.01.2011 passed by the Additional ChiefMetropolitan Magistrate (E.O.-I), Chennai in Crl.M.P. No.2435 of2010 in E.O.C.C. No.82 of 2005 is set aside and the accused isdischarged from prosecution. Connected Crl.M.P. is closed. Sd/- Assistant Registrar(CS-VI) //True Copy// Sub Assistant RegistrarcadTo1The Additional Chief Metropolitan Magistrate (E.O.-I)Chennai2The Income Tax OfficerBusiness Ward XII (3)Chennai3The Public ProsecutorHigh CourtMadras+1cc to Mr.N.Baaskaran, Advocate, S.R.No.87379+1cc to Mr.P.Ramesh Kumar, Advocate, S.R.No.87794Crl.R.C. No.112 of 2011PPA(CO)SSM(07/01/2019)