Crlatr/40/2018 Of M/S. Medravathi Agro Farms Pvt. Ltd v. Dy. Commissioner Of Income-Tax

IN THE HIGH COURT FOR AT HYDERABAD FRIDAY, THE SEVENTEENTH TWO THOUSAND AND PRESENTTHE HON'BLE DR. JUSTICE [D.NAGARJUN] CRIMINAL APPEAL[(TR) ][NOS : ] [0F ][2018] CRL.A. [(TR) ]NO.9 0F [2018:] criminal Appeal under [Section ][37 ][4(2) ][of ][cr.P.c ][against ][the ][Judgment dated]ogto1t2o14 in cc No.124 [of ][2011 ][on the ][file of the ][court ][of ][the ][Special ][Judge ][for]Economic Offences at [HYderabad.] Between: 1. Smt B.Nandini Raju, [W/o.Sri B.Ramalinga Raju, Dlrector of ][M/s ][Medravathi]Agrot"rms Pfi L[d,, H.No.8-3-222lB17t35,36, [& ][93, Flat ][No.304, ][sri]Rimana Enclave, Iv!adhura [Nagar, Hyderabad-500038]Agrot"rms Pfi L[d,, H.No.8-3-222lB17t35,36, [& ][93, Flat ][No.304, ][sri]Rimana Enclave, Iv!adhura [Nagar, Hyderabad-500038]Z. Sri A.Rama Raju, [S/o.Sri ][B.Ramaling'a ][Raju, aged about ][36 ][years' ][Direclor ][of]M/s Medravathi Agro Farms [Plt ][Ltd., H.No.8-3-222lB ][17135' ][36, ] [92 & ][93']Flat No.304, Sri Rimana Enclave, [Madhuranagar, ][Hyderabad-500038 ]. ^ ^ -.....APPellants/ Accused [3 ][& ][5]M/s Medravathi Agro Farms [Plt ][Ltd., H.No.8-3-222lB ][17135' ][36, ] [92 & ][93']Flat No.304, Sri Rimana Enclave, [Madhuranagar, ][Hyderabad-500038 ]. ^ ^ -.....APPellants/ Accused [3 ][& ][5] AND Dv.Commissioner of lncome Tax, [Central Circle-8, ][Aayakar ][Bhavan, Room ][No'805,]8'6floor,Basheerbagh,Hyderabad-S0O004. .....Respondenucomplainant8'6floor,Basheerbagh,Hyderabad-S0O004. .....Respondenucomplainant For the Appellants : SRI [DESHPANDE, ][Sr. ] SRI V.SURENDER RAO For the Respondent : SRI [B.NARASIMHA SHARMA' ] [l.T'] CRIMINAL APPEAL [(TR) ][NO.4O ] [2018:] criminal Appeal under section [37 ][4(2) ][ot ][cr.P.c. ][against ][the ][Judgment ][dated]ogto1l2o14 in cc No.124 [of ][2011on ][the ][file of the ][court ][of ][the ][Special Judge for]Economic Offences at Hyderabad. Between: 1. lt//s. tvledravathi Agro Farms [Pvt. Ltd., ][H.No.B-3-2221817135,36,D-92 ][& ][93,]Ftat uo.ao+, Sri R6mana [Enclave' ][Madhura Nagar, Hyderabad, ][rep ][by ][Sri]K.Gopala Krishnam RajuFtat uo.ao+, Sri R6mana [Enclave' ][Madhura Nagar, Hyderabad, ][rep ][by ][Sri]K.Gopala Krishnam Rajuz. Srl- [(.Copala ]Krishnam [Raju, ][aged ][abou! ]9l [y{t]{!- [y-e-{s, ][Dlle^clol ]{!- [y-e-{s, ][Dlle^clol ]Medrabvaihi Agro Farms [Pvt'Ltd., ][H-No.8-3-22218,17135,36 ] [& 93' ][Flat]No.304, Sri Ramana Enclave, [Madhuranagar, Hyderabad-500038]No.304, Sri Ramana Enclave, [Madhuranagar, Hyderabad-500038] 3. Sri M.V.Suryanarayana Raju, Sio.M.V.Ramakrishnam Raju, aged about 36years, Direr;tor of M/s. lt/edravathi Agro Farms Pvt. Ltd., H.No.8-3-22218.17135,36, D-92 & 93, Flat No.304, SriRamana Enclave, [lt4adhuranagar, ][Hyderabad-]500038years, Direr;tor of M/s. lt/edravathi Agro Farms Pvt. Ltd., H.No.8-3-22218.17135,36, D-92 & 93, Flat No.304, SriRamana Enclave, [lt4adhuranagar, ][Hyderabad-]5000384. Sri NSLR Prasad Raju, Shri N.S.L.R.Prasad Raju, S/o.Venkat RAju, agedabout 48 [years, ]Director, M/s.lvledravathi Agro Farms [Pvt. ][Ltd., H.No. ]B-3-2221B.17135,36, D-92 & 93, Flat No.304, SriRamana Enclave, Madhuranagar,Hyderabad-500038.about 48 [years, ]Director, M/s.lvledravathi Agro Farms [Pvt. ][Ltd., H.No. ]B-3-2221B.17135,36, D-92 & 93, Flat No.304, SriRamana Enclave, Madhuranagar,Hyderabad-500038. .....Appellants/ Accused 1, 2, 4 & 6 And Dy.Commissioner of lncome -Tax, Central Circle [-8, ]Aayakar Bhavan, RoomNo.805, 8" Floor, Sasheerbagh, Hyderabad-500004. For the Apperant : sRr vrNoD KU MAR DESH.A;E, ::"J:T:"1::::'il:"'SRI G.ASHOK REDDY For the Respondents : SRI B.NARASIMHA SHARMA, SC FOR l.T. The Court delivered the following: JUDGIMENT THE HON'BLE DR. JUSTICE D.NAGARJUN CRIMINAL APPEAL ITRlNos.9 and 40 of2018 COMMON JUDGMENT: .....Appellants/ Accused 1, 2, 4 & 6 And Dy.Commissioner of lncome -Tax, Central Circle [-8, ]Aayakar Bhavan, RoomNo.805, 8" Floor, Sasheerbagh, Hyderabad-500004. For the Apperant : sRr vrNoD KU MAR DESH.A;E, ::"J:T:"1::::'il:"'SRI G.ASHOK REDDY For the Respondents : SRI B.NARASIMHA SHARMA, SC FOR l.T. The Court delivered the following: JUDGIMENT THE HON'BLE DR. JUSTICE D.NAGARJUN CRIMINAL APPEAL ITRlNos.9 and 40 of2018 COMMON JUDGMENT: Crl.A.(TR).No.4O of 2Ol8 is liled by A1, A2, A4 and 4.6 i.e.,Company and its two Directors respectively, whereasCr1.A.(TR).No.9 of 2018 is filed by ,{3 and A5, who are otherDirectors of A1/company, being aggrieved by the conviction andsentence imposed by the learned Special Judge for EconomicOffences at Hyderabad in C.C.No.l24 of 2011 vide Judgmentdated 09.01.2014, wherein Accused Nos. 1 to 6 were found guiityof the offences punishable under Section 27 6-C(2) read withSection 278-B of the Income Tax Act, 196 1 (for short, "the Act")consequently accused No.1 was sentenced to pay line ofCompany and its two Directors respectively, whereasCr1.A.(TR).No.9 of 2018 is filed by ,{3 and A5, who are otherDirectors of A1/company, being aggrieved by the conviction andsentence imposed by the learned Special Judge for EconomicOffences at Hyderabad in C.C.No.l24 of 2011 vide Judgmentdated 09.01.2014, wherein Accused Nos. 1 to 6 were found guiityof the offences punishable under Section 27 6-C(2) read withSection 278-B of the Income Tax Act, 196 1 (for short, "the Act")consequently accused No.1 was sentenced to pay line ofRs.10,OOO/- and in default of payment of fine to initiateappropriate proceedingsAS required under Section 421 ofappropriate proceedingsAS required under Section 421 ofCr.P.C., whereas Accused Nos.2 to 6 were sentenced to undergorigorous imprisonment for a period of one year each and to payrigorous imprisonment for a period of one year each and to payfine of Rs.1O,0OO/- each and in default of payment of fine byaccused Nos.2 to 6, to undergo simple imprisonment for a periodof one month each.accused Nos.2 to 6, to undergo simple imprisonment for a periodof one month each. Since the issues involved in these appeals are one and thesame, both the appeals are being disposed of by this commonjudgment.same, both the appeals are being disposed of by this commonjudgment. 2. For convenience, the parties herein are referred to as theyare arrayed before the trial Court. i.e., Appellant No.1 asAccused No.1/Company and Appellant Nos.2 to 6 as AccusedNos. 2 to 6. 3. The genesis of these cases, which lead the appellants-accused to prefer these appeals, are narrated in brief as under: i) Accused No.1/Company - M/s. Medravathi AgroFarms Private Limited, which was registered under theCompanies Act with the Registrar of Compalies atHyderabad as Private Limited Company, was engaged inthe business of acquisition and sale of lands. AppellantNos. 2 to 6 herein are the Directors of AccusedNo.l /Company. ii) Accused No.l/Company has acquired acquired lands to anto ananextent of Ac.6.B5 guntas in Sy.No.195 and 196 under thelimits of-E]achupally Mandal, Ranga Reddy District during Accused No.l/Company has acquired acquired lands to anto anan the finarrcial year 2002-2003 and developed the said landsby incurring some arnounts during the financial years2OO2-03 to 2007-08. Accused No.1/Company along withother companies, who have lands contiguous to the landsof Accused No.1/Company, have agreed to develop thelands jointly with M/s. Mytas Property Private Limited. Asper the said development agreement, the built up a.reaagreed to be given to Accused No.1/company, was allowedto be sold to various buyers by M/s. Mytas Property PrivateLimited and pass on the sale proceeds to AccusedNo.1/Company. ii) Accused No.l/Company has acquired acquired lands to anto ananextent of Ac.6.B5 guntas in Sy.No.195 and 196 under thelimits of-E]achupally Mandal, Ranga Reddy District during Accused No.l/Company has acquired acquired lands to anto anan the finarrcial year 2002-2003 and developed the said landsby incurring some arnounts during the financial years2OO2-03 to 2007-08. Accused No.1/Company along withother companies, who have lands contiguous to the landsof Accused No.1/Company, have agreed to develop thelands jointly with M/s. Mytas Property Private Limited. Asper the said development agreement, the built up a.reaagreed to be given to Accused No.1/company, was allowedto be sold to various buyers by M/s. Mytas Property PrivateLimited and pass on the sale proceeds to AccusedNo.1/Company. iii) For the assessment year 2OOB-O9 , accusedNo.1/company has filed income tax returns on 30.09.2008under Ex.P1 by bifurcating the sale proceeds into long termcapital gains accrued from the sale proceeds of the landsand short term capital gains accrued from the saleproceeds of the constructed area by showing gross taxableincome as Rs.4,47,64,910/-, out of which an amount ofRs.2,9O,72,734 /- was shown as long term capital gain andRs.1,56,92,176 /- was shown as short term capital gains.l i") Accused No.1/Compaly is expected to pay theincome tax either by way of advance tax as required underSection 2OB ol the Act or at least along with filing ofreturns in terms of Section 140-4 of the Act. As perSection 143 (1) of the Act, the tax liability of Accused No.1was arrived at Rs. 1,32,38,986/- by therespondent/complainant and raised a d.emand underSection 156 read with Section 143 of the Act and issued anintimation to Accused No.1/Company under Ex.p2.Accused No.l/company was required to pay the taxdemanded within 30 days of service of notice, but it hascommitted default. v) Respondent/complainant has issued show_causenotice dated 17.11,.2OO9 under Section 221 (ll of the Actunder Ex.P5. wherein the appellants were asked to showcause as to why penalty should not be levied forcommitting default in payment of tax. As there was noresponse from the appellants, the complainant has issuedalother show-cause notice dated O 1.09.2010 under Ex.p6under Section 221 (ll read with Section 143_A of the Act. Finally, one more opportunity was [also ][given ][by ][the]Department by giving another [show-cause ][notice ][dated]16.09.2010 (Ex.P7) under [Section ][221 ][(I) ][read ][with ][Section]143-A of the Act. An opportunity [of ][being heard was ][also]given by the respondent/complainant [to ][Accused]No.1/Company fixing the date [of ][hearing ][as ][21.09.2010,]but there was no response, on [which ][a ][penalty ][of]Rs.2O,00,OO0/- was imposed by [way ][of ][order ][dated]22.09.2010 [(Ex.P8) ]under [Section ][221 ][read ][with ][Section]140-A(3) of the Act and the said [proceedings ][were ][served]on accnsed No.1 on 23.09.2OlO. 4. Considering the willful evasion [of ][payment ][of ][tax, ][the]respondent/complainant has [decided ][to ][initiate ][prosecution ][and]accordingly a notice was issued to [accused ][No.1/company ][and]other Directors under Section [276'C(21 ][of ][the ][Act, as ][to ][why]prosecution shall not be initiated against [them for ][willful ][evasion]of the tax. All of them have [given ][reply stating ][that ][there ][was ][no]intention to evade [payment ][of ][tax. ][Another notice ][was ][issued ][to]accused No.1/Company and [its ][directors ][under ][Exs.P1O ][to Pl5]dated O4.1O.20 1O asking [them ][as ][to ][why ][prosecution ][sha11 ][not] be initiated under Section 276-C(2\ of the Act. Again replieswere filed by accused No. 1/company and its Directors / accusedNos.2 to 6 under Exs.P16 to P2 1 stating that there was nointention of rvillful evasion of tax. be initiated under Section 276-C(2\ of the Act. Again replieswere filed by accused No. 1/company and its Directors / accusedNos.2 to 6 under Exs.P16 to P2 1 stating that there was nointention of rvillful evasion of tax. 5. As Ac:cused No. 1/Company and its Directors/ accusedNos.2 to 6 have not paid the tax in response to the demandnotice issued under Section 143 (1) of the Act ald also failed topay the penalty, the respondent/complainant after obtainingsanction or,1er dated 25.O2.2011 for launching of prosecutionliled a complaint belore the Special Court for Economic Offencesagainst accused No.1 and accused Nos.2 to 6, the otherDirectors, alleging that they have committed offence punishableunder Secticn 276-C(2) read with Section 278-8 of the Act, asthey have rviilfully evaded tax even though they were havingsufficient resources. 6. The Special Court for Economic Offences took cognizanceof the offences against Accused No.l/Company and its Directorsi.e., Accused Nos. 1 to 6, under Section 276-C(21 read withSection 27 8-B of the Act and charges were framed against themunder Section 276 - C(2) read with Section 278-B(ll of the Act -/ and ali the accused have pleaded not guilty of the charges andclaimed to be tried. 7. In order to prove the charges leveled against theappellants, the respondent/complainant has examined PWs. 1 to3 and got marked Exs.Pl ta P22. Alter closure of evidence of thecomplainant, the incriminating evidence eiicited against theappellants was read over and explained to them under Section313 of the Cr.P.C., lor which a,11 of them have denied andreported that they did not choose to examine any witness ontheir behalf. However, they got marked Exs.Dl to D3 on theirbehalf. B. The substance of the evidence of PW1 is that after receivingof returns of income tax fi1ed by accused No. 1 / company, therespondent/ complainant has processed the same under Section143(1) of the Act and issued intimation determining the totaltaxable income as Rs.4,47,64,910 1- and tax liabiiityASRs.1,45,50,380/-. The evidence of PW2/lncome Ta-x olficer is tothe extent that he has considered the annual report of accusedNo.l/company for the financial year 2OO7 -O8 under Ex.P3 andbarrk account statements of accused No. 1 / Company udth the AXIS Bank Limited under Bx.P4 and found that accusedNo.l/Company did not pay the tax returns in spite of havingsurplus and sufficient funds. PW3 is the Income Tax Officer,who has succeeded PW2. His evidence is that he has passedpenaity order under Ex.PB imposing penalty of Rs.2O iakhs andraised demand under Ex.P9 and the same was served on theaccused. He also deposed that as there was no response fromthe accused, show cause notices under Section 226-C of the Actwere issued against all the accused through which accused wereinformed that the department is initiating criminal proceedingsand consequently the department has filed the complaint. 9. After fu11,fledged tria-l, on considering the entire material onrecord, the trial Court has found Accused No. 1/Company andA2 to A6. the Directors of 41 company, guilty of the offencespunishable under Sectiots 276-C(21 and 278-8 of the Act andwere sentenced as stated supra. Aggrieved by the said judgmentand conviction of Special Judge for Economica_l Offences atHyderabad, the present appeals are filed originally before theMetropolitan Sessions Judge Court at Hyderabad. 10. The erstwhile High Court for the States of Telangana andAndhra Pradesh has issued circular ROC.No.34. CriminalSection/2O 17, dated 28.08.2017, wherein it is clarified thatagainst arly orders passed by the Special Judge for EconomicOffences, Hyderabad, in the State of Telangana andVisakhapatnam in the State of Andhra Pradesh, the High Courthas the jurisdiction to entertain the appeals, not the SessionsCourt. In vieu, of the said circular, these appeals filed by theappellants have been transferred from Metropolitan SessionsJudge Court, Hyderabad, to the High Court lor the State ofTelangana. 11. The summary of grounds of appeal as filed by theappellants in brief are as under: 10. The erstwhile High Court for the States of Telangana andAndhra Pradesh has issued circular ROC.No.34. CriminalSection/2O 17, dated 28.08.2017, wherein it is clarified thatagainst arly orders passed by the Special Judge for EconomicOffences, Hyderabad, in the State of Telangana andVisakhapatnam in the State of Andhra Pradesh, the High Courthas the jurisdiction to entertain the appeals, not the SessionsCourt. In vieu, of the said circular, these appeals filed by theappellants have been transferred from Metropolitan SessionsJudge Court, Hyderabad, to the High Court lor the State ofTelangana. 11. The summary of grounds of appeal as filed by theappellants in brief are as under: a) The trial Court has failed to see that accusedNo.l/company was not having funds to pay the tax on the duedate as reflected in Ex. P4-bank statements and that accusedNo. t has not received any sale proceeds from M/ s. MytasProperty Private Limited, thereby the respondent/complainanthas not produced any evidence to show that accused No. 1 / Companl, has received sale proceeds lrom M / s. MytasProperty Prir,.ate Limited. b) The trral court has misconstrued the presumption underSection 278-E of the Act and erred in holding that the burden ofproof is on the accused to prove that there was no wiilful evasionof payment of tax. c) The tr:al Court erred in holding that the accused faiied toprove non-eristence of culpable mental state in non-payment oftaxes on the, date of filing returns and as on the date of demandnotice and that the triai Court failed to appreciate that in spite ofnot having any cogent evidence to show that ali the accusedhave wi11fu1ly evaded the tax, the trial Court has concluded thataccused have committed willful evasion in payment of tax. d) The trial court failed to see that all the assets belong toaccused No. 1/Company were attached under Section 28 1-B ofthe Act and due to paraJyzing of financial activities of accusedNo.1, tax could not be paid in time. e) The trial court failed to consider the admission of PW3 that the amouni received by Accused No. l/Company is towards t> share application money does not attract tax liability and thatthe trial Court could not consider that accused No.1 has [not]received Rs.4 crores 47 lakhs from M/s. Mytas Property [Private]Limited. The Trial Court should not have concluded that accusedf) Nos.2 to 6 are responsible for day to day affairs of [accused]No. 1/company and should have taken into consideration [the]notices issued under Section 278-B of the Act [proposing ][the]prosecution did not refer accused Nos. 2 to 6 as principai oflicersand thereby accused Nos.2 to 6 should [have been ][acquitted.] 12. Heard Sri Vinod Kumar Deshpande, learned Senior [counsel]for the appellants and Sri B. Narasimha Sharma, learnedStanding counsel for the income tax department, [considered the]entire materia-l on record, relevant [provisions ]of the Act and [the]authorities cited. 13. Appellant No.1/company has filed an application [under]Section 39 1 Cr.P.C., along with the appeal for [receiving ]of [two]documents i.e., (1) Common order [passed ]by the [Appellate]Tribunal in ITA.No. 1004 of 20 14, dated 22.05.2015 and [(2)] 12. Heard Sri Vinod Kumar Deshpande, learned Senior [counsel]for the appellants and Sri B. Narasimha Sharma, learnedStanding counsel for the income tax department, [considered the]entire materia-l on record, relevant [provisions ]of the Act and [the]authorities cited. 13. Appellant No.1/company has filed an application [under]Section 39 1 Cr.P.C., along with the appeal for [receiving ]of [two]documents i.e., (1) Common order [passed ]by the [Appellate]Tribunal in ITA.No. 1004 of 20 14, dated 22.05.2015 and [(2)] consequential order, dated 21.03.2016 passed by the AssessingOfficer, Assistant Commissioner of Income Tax, Central Circle-Officer, Assistant Commissioner of Income Tax, Central Circle-3(2), Hyderabad, as additional evidence. As per the commonorder of the Tribunal, dated 22.05.2015 (document No.1), theorder of the Tribunal, dated 22.05.2015 (document No.1), theassessment order dated O2.l2.2OlO on which the prosecution isinitiated was directed to be modified. Basing on the orders of theinitiated was directed to be modified. Basing on the orders of theIncome Tax Appellate Tribunal, the assessment officer hasmodified the earlier orders dated 02.12.20i0 by re-assessing thetax liability, which the appellants were expected to pay for theassessment year 2OO7 -20O8 (document No.2). Considering thetax liability, which the appellants were expected to pay for theassessment year 2OO7 -20O8 (document No.2). Considering theabove, and on hearing both sides, this Court is of the opinionthat these two documents are very relevant to consider thethat these two documents are very relevant to consider theappeals on hand, thereby these documents are received. 14. It is submitted vehemently by the learned Senior Counselfor the appellants that during the pendency of the complaintbefore the trial Court, the accused have paid entire tax asdemanded, including the penalty and interest and that theappellants have challenged the assessment orders dated02.12.2O7O under Ex.D2 before the learned CIT(A). On hearingboth sides, iearned CIT(A) has found that there are no merits in the contentions raised by the appellants, and dismissed theappeal upholding the orders passed by the Assessing Oflicer forassessment year 2O0B-09. Aggrieved by the sarne, theappellants have prelerred appeal before the Income Tax AppellateTribunal (in short, "the Tribunal"), and on hearing both sides,learned Tribunal has partly allowed the appeal vide orders dated22.O5.2015 in ITA.No.943lHydl2ola and others finding that theAssessing Officer has committed error in calculating the tax tobe paid by the appellants and directed the Assessing Officer tore-assess the tax by computing the income of the appeilantsfrom the transler of lands held by accused No. 1 / company ascapital assets by way of development agreement and subsequentto sale of flats and bungalows received as consideration for suchtransferred amounts to stock in trade on conversion. Theseorders are passed after passing conviction vide judgment datedO9.OI.2O|4 in C.C.No.l24 of 2Ol1 by the learned Special Judge.It is also submitted by the learned Senior counsel that theAssessing Officer has re-assessed the tax as per the directions ofthe Tribunal and passed consequential order, dated 2LO3.2016,wherein the tax liability was substantially reduced and foundthat the tax, u,hich [\ ]''as already paid to the tune of Rs.1,32,38,986/ - was in excess of the revised tax thereby, theexcess ta-x paid Rs.83,65,280 l- and interest of Rs.23,89,863/-the total of which was Rs.1,07,55,143 l-, was ordered to berefunded and the same was also adjusted against the demandfor the accounting year 2OO9-10 vide RO.No.3O3516 dated28.O3.2016.excess ta-x paid Rs.83,65,280 l- and interest of Rs.23,89,863/-the total of which was Rs.1,07,55,143 l-, was ordered to berefunded and the same was also adjusted against the demandfor the accounting year 2OO9-10 vide RO.No.3O3516 dated28.O3.2016. Rs.1,32,38,986/ - was in excess of the revised tax thereby, theexcess ta-x paid Rs.83,65,280 l- and interest of Rs.23,89,863/-the total of which was Rs.1,07,55,143 l-, was ordered to berefunded and the same was also adjusted against the demandfor the accounting year 2OO9-10 vide RO.No.3O3516 dated28.O3.2016.excess ta-x paid Rs.83,65,280 l- and interest of Rs.23,89,863/-the total of which was Rs.1,07,55,143 l-, was ordered to berefunded and the same was also adjusted against the demandfor the accounting year 2OO9-10 vide RO.No.3O3516 dated28.O3.2016. On considering the submissions of the learned Seniorcounsel it is clear that the appeliants have not only paid the taxdemanded along with interest and penalty, but also on accountof re-assessment of tax, the tax already paid was in excess of taxliability, and that the same was adjusted for future tax liabilityand hence, sought for allowing of the appeals. 15. Learned standing counsel representing the Income TaxDepartment stated that as on the due date, the accused have notpaid the tax having sufficient funds and committed willfulevasion of payment of tax. It is also submitted that AccusedNo.l/company has filed annual returns (Ex.P3), through itsChartered Accountant for the financial year 2OO7-OB relevant forthe assessment year 2OO8-09, according to which Accused No. 1made profit on sale of land to a tune of Rs.4,54,O4 ,4OO l- and the bank statements show that Accused No. 1/Company has receivedpart of sale consideration in respect of "Mytas Hill County" fromtime to time, but did not choose to pay the advance tax. It isfurther submitted that the balance sheet of Accu sedNo.1/Company also shows Rs.6,97,25,332 l- under the headreserves and surpius, so also Rs.8,16,31,269/- under the headcurrent assets by way of loans and advances. It is furthersubmitted that accused No.1/Company having enough liquidcash during the relevant accounting year, willfully evaded inpayment of tax, thereby the accused have committed the offencepunishable under Section 276-C(2) read with Section 278-8 ofthe Act and hence conviction recorded by the trial Court isproper. 16. Now, the points for determination in these appeals are: 1) Whether the conviction recorded based onthe assessment order dated 02.12.2010 can besustained, since the said assessment order dated02.I2.20 IO was subsequently revised?the assessment order dated 02.12.2010 can besustained, since the said assessment order dated02.I2.20 IO was subsequently revised? 2) Whether the accused have committed willfulevasion of tax?evasion of tax? 'l'o rr hat relieP3) Point No. 1: 17. The cause of action for the respondentdepartment/ complainalt to file the complaint against theappellants is the assessment order dated 02. L2.2OlO, accordingto which the appellants were asked to pay tax ofRs.1,32,38,986/-for the ta-xable income of Rs.4,47,64,910/- andaccordingly an intimation was sent by the Assessing oflicer tothe appellants under Section 143 (1) of the Act. Admittedly ason the date of initiating the prosecution against the appellants,demanded tax of Rs. | ,19 ,21 ,651 l- was not paid by theappellants. It is also an admitted fact that after initiating theprosecution. the appellants have paid the entire tax demandedalong with penalty, interest etc. Therefore, as on the date ofpronouncement of the judgment by the trial Court, there was notax liability to be paid by the appellants. 18. It is to be noted that the Income Tax Appellant Tribunalhaving considered the appeals of the appellants found that theassessment order, dated 02.I2.2OlO directing the appellants topay Rs. I,32,38,986 l- w3,s incorrect and the Assessment Officer 18. It is to be noted that the Income Tax Appellant Tribunalhaving considered the appeals of the appellants found that theassessment order, dated 02.I2.2OlO directing the appellants topay Rs. I,32,38,986 l- w3,s incorrect and the Assessment Officer was directed to assess the income ta-x afresh in terms of thedirections given by the Tribunal. Accordingly, the Assessmentofficer has re-assessed the income tax and passed modifiedorders, dated 21.O3.2016 determining the tax liability, which isfar less tharr what was assessed at the first place. The basis forrespondent/complainant to initiate prosecution against theappellants is the assessment order, dated O2.72.2O1O, on theground that the appellants have committed default in payment ofthe tax as per the said assessment order. When assessmentorder dated 02.I2.2OlO itself is re-assessed as per the directionsof the Tribunal which heid that the assessment of tax datedO2.I2.2O|O is incorrect and the tax to be paid was substantiallyreduced, it cannot be alleged that the appellants have committeddefault in payment of tax and willfully evaded. When theassessment order dated 02.l2.2OIO itself was modified holdingthat the Assessment Officer has incorrectly assessed the tax,whatever the consequential proceedings that have been initiated,including the initiation of prosecution of the appellants by therespondent/complainant, conviction recorded by the tria-l Court,cannot sustain. Basing on the fresh assessment order, dated27 .03.2016, it is to be examined alresh -{hat whether the appellants lrave committed any u,illful evasion of tax, as definedunder Section 276-C of the Act.under Section 276-C of the Act. 19. Therefore, on considering the above discussion, it is clearthat the finding of the triai Court that the appellants were guiltyof the oflences under Section 276-C(21 read with Section 278 Bof the Act is erroneous as the same is based on incorrectassessment order, dated 02.72.2010 and hence. shall notsustain, arld required to be set aside. Considering the same, point No. 1 is decided in favour of the appellants / accused. POINT No.2:- 20. The appellants have also raised other issues i.e., they havenot committed any willful evasion in payment of tax since, as onthe due date there were no liquid funds in their accounts andthe appellants - Accused Nos. 2 to 6, who are the Directors, arenot responsible for the day to day activities of accusedNo.l/Company as on the date of the alleged default, the trialCourt has misconstrued the presumption under Section 27 8E ofthe Act, the trial Court failed to record admission of pW.3, that the amount received ton,ards share application does not attractthe tax etc. 2\. This Court has already came to the conclusion whilediscussing point No.1 that the conviction and sentence recordedin favour of the appellants required to be set aside, on account ofthe fact that the assessment order dated O2.12.2O1O on whichthe conviction was recorded was modified and a freshassessment order came into force, hence, the issues raised bythe appellants, need not be answered. 22. Learned Senior Counsel for the appellants has placedreliance on the authority passed by the Honble Supreme Courtin the case of V.Srinivas Reddy Vs. State of Andhra Pradeshl,wherein it was held as follovvs: the amount received ton,ards share application does not attractthe tax etc. 2\. This Court has already came to the conclusion whilediscussing point No.1 that the conviction and sentence recordedin favour of the appellants required to be set aside, on account ofthe fact that the assessment order dated O2.12.2O1O on whichthe conviction was recorded was modified and a freshassessment order came into force, hence, the issues raised bythe appellants, need not be answered. 22. Learned Senior Counsel for the appellants has placedreliance on the authority passed by the Honble Supreme Courtin the case of V.Srinivas Reddy Vs. State of Andhra Pradeshl,wherein it was held as follovvs: "13. It was then urged by Mr. Arunachalam that ifthe Hiqh Court .felt that further eui.dence u)as necessary.for [di.sposal ][of ][the ][case ][then ][it ][could haue exercised its]power under Section 391 Cr. P.C. ond ought not to haueset aside the order of acquittal and remanded tlrc matterfor fresh [disposal. This arqument also ]did not impress usthe Hiqh Court .felt that further eui.dence u)as necessary.for [di.sposal ][of ][the ][case ][then ][it ][could haue exercised its]power under Section 391 Cr. P.C. ond ought not to haueset aside the order of acquittal and remanded tlrc matterfor fresh [disposal. This arqument also ]did not impress usbecause the Hiqh Court instead of recordinq the additionaleuidence in terms of Section 391 Cr. P.C.; preferred toremand the matter back to the tial court .for disposal inaccordance with lotu. It also appears from the record thatsome of the documents includinq FDRs, loan applicationsremand the matter back to the tial court .for disposal inaccordance with lotu. It also appears from the record thatsome of the documents includinq FDRs, loan applicationsetc., should also haue been brought on record for effectiue disposal of the controuersu raised in the cose and to dojustice betuteen the parties. It is needless ,o sau that thetial court toill stictlu adhere to the obseruations anddirections giuen by the High Court in its judgment." The rationale in the above authority of the Apex Courtsquarely applicable to the facts of the case on hand.squarely applicable to the facts of the case on hand. 23. Considering the facts and circumstances, this Court is ofthe considererl opinion that as the assessment orders datedO2.l2.2OlO on which the prosecution was initiated itself doesnot exist and that the same was modified and lresh assessmentorder datecl 21.03.2016 came into force. the conviction andsentence recorded agajnst the appellants basing on the incorrectassessment orders dated 02. 12.2OlO shal1 be set aside. 24 . Accorrlingly, both these criminal appeals are disposed ofsetting asi<le the conviction arrd sentence dated 09 .01.2014recorded by Special Court for Economical Offences at Hyderabadand C.C.No. 124 of 2011 is remanded back to the trial Court witha direction to consider the documents i.e., (1) Common orderpassed by the Appellate Tribunal in ITA.No.1OO4 of 20i4, dated22.05.2015 and (2) consequential order, dated 21.03.2016passed by the Assessing Officer, Assistant Commissioner of Income Tax, Central Circle_3(2), Hyderabad, liled by theappellants and decide the complaint afresh in accordance withlaw, after giving al opportunity to both sides to adduce anyfurther evidence, if any. However, the trial Court shall not beinfluenced by the comments and observations, if any, made bythis Court touching merits of the case while passing orders.As a sequel, pending miscellaneous applications, if any,shali stand closed. HIGH COURTDATED:1710612022 , ,,. , ,. [..\].'\mTl [;-' ][j]15 [tt1].. ii,.;))COMMON JUDGMENTCRLA(TR).Nos.9 and 40 of 2018 Disposing of the both Crl.Appeals n(k\r