Crlatr/74/2018 Of M/S. Goman Agro Farms Pvt. Ltd v. Dy. Commissioner Of Income-Tax

IN THE HIGH COURT FOR THE STATE OF TELANGANAAT HYDERABAD FRIDAY, THE SEVENTEENTH DAY OF JUNETWO THOUSAND AND TWENTY TWO PRESENTTHE HON'BLE DR. JUSTICE D.NAGARJUN CRIMINAL APPEAL [(TR) ]NOS: 13 AND 74 OF 20'18 cRL.A. [(TR) ]NO.13 0F 2018: Criminal Appeal under Section 37 4(2) o'f Cr.P.C against the Judgment dated0910112014 in CC No.l19 of 201 1 on the file of the Court of the Special Judge forEconomic Offences, at Hyderabad. Between: 1. Smt B.Radha, W/o.B.Rama Raju, Director of M/s. Goman Agro Farms Pvt.Ltd., Plot No.392, HMT Hills, Opp: JNTU College, Kukatpally, Hyderabad-500072.Ltd., Plot No.392, HMT Hills, Opp: JNTU College, Kukatpally, Hyderabad-500072. 2. Sri Manthena Hriprasada Raju, S/o.late M.Ranga Raju, aged about 54 years,Director of M/s. Goman Agro Famrs Pvt. Ltd., Plot No.392, H[vlT Hills, Opp:JNTU College, Kukatpally, Hyderabad-500072.Director of M/s. Goman Agro Famrs Pvt. Ltd., Plot No.392, H[vlT Hills, Opp:JNTU College, Kukatpally, Hyderabad-500072. ....Appellants/ Accused 3 & 5 AND gt6DvFloor, Basheerbagh,Hyderabad-500004.[Commissioner of lncome Tax, Central Cirlce-8, Aayakar Bhavan, Room ][No.805,] ....RespondenU Complainant For the Appellants : SRI VINOD KUMAR DESHPANDE, Sr. COUNSEL FORSRI V.SURENDER RAO For the Respondent : SRI B.NARASIMHA SHARMA, SC FOR I.T.DEPARTMENT CRIMINAL APPEAL [(TR) ]NO.74 OF 2018: Criminal Appeal under Section 37 4(2) of Cr.P.C against the Judgment dated0910112014 in CC No.'t 19 of 2011 on the file of the Court of the Special Judge forEconomic Offences, at Hyderabad. Between: 1. M/s. Goman Agro Farms P!,t. Ltd., Plot No.392, HMT Hills, Opp: JNTUCollege, Kukatpally, Hyderabad-S0OO72, rep. by SriM.Suryanarayana Raju,S/o.M.V.Ramakrishnam Raju, aged about 36 yearsCollege, Kukatpally, Hyderabad-S0OO72, rep. by SriM.Suryanarayana Raju,S/o.M.V.Ramakrishnam Raju, aged about 36 years2. Sri tvl.V.Suryanarayana Raju, S/o.lt/.V.Ramakrishnam Raju, aged about 36years, Director of M/s. Goman Agro Farms P!t. Ltd., Plot No.392, HMT Hills,Opp: JNTU College, Kukatpally, Hyderabad-500072years, Director of M/s. Goman Agro Farms P!t. Ltd., Plot No.392, HMT Hills,Opp: JNTU College, Kukatpally, Hyderabad-500072 3. Shri Namburi F:rma Raju, S/o.Venkata Rajui, Aged about 49 years, Directorof lv'l/s Nagava li Greenlands Pvt. Ltd., Flat No.102, Dharunjayanest,Rajivnagar, Yo rsufguda, Hyderabad-500045.of lv'l/s Nagava li Greenlands Pvt. Ltd., Flat No.102, Dharunjayanest,Rajivnagar, Yo rsufguda, Hyderabad-500045. ....Appellants/ Accused 1, 2 & 4 AND DVCommissioner of | ['come ]Tax, Central Cirlce-8, Aayakar Bhaviin, Room No.805,gt6Floor, Basheerbag [-r,Hyderabad-500004.] ....Respc'ndenU Complainant For the Appellants r liRl VINOD KUMAR DESHPANDE, SEhllOR COUNSEL FORSRI G.ASHOK REDDY For the Respondenr : SRI B.NARASIMHA SARMA, SC FOFI r.li.DE:PARTMENT The Court delivered I ['e ]following Common Judgment :- THE HON'BLE DR. JUSTICE D.NAGARJUN CRIMINAL APPEAL [(TR) ]Nos.13 and 74 of 2018 COMMON JUDGMENT: ....Appellants/ Accused 1, 2 & 4 AND DVCommissioner of | ['come ]Tax, Central Cirlce-8, Aayakar Bhaviin, Room No.805,gt6Floor, Basheerbag [-r,Hyderabad-500004.] ....Respc'ndenU Complainant For the Appellants r liRl VINOD KUMAR DESHPANDE, SEhllOR COUNSEL FORSRI G.ASHOK REDDY For the Respondenr : SRI B.NARASIMHA SARMA, SC FOFI r.li.DE:PARTMENT The Court delivered I ['e ]following Common Judgment :- THE HON'BLE DR. JUSTICE D.NAGARJUN CRIMINAL APPEAL [(TR) ]Nos.13 and 74 of 2018 COMMON JUDGMENT: Cr1.A.(TR).No.74 of 2018 is filed by A1, A2 and ,{4 i.e.,Company and its two Directors respectively, whereasCr1.A.(TR).No.13 of 2018 is filed by A3 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.119 of 20 11 vide Judgmentdated 09.01.2014, wherein Accused Nos. 1 to 5 were found guiltyof the offences punishable under Section 276-Cl2l read withSection 278-8 of the Income Tax Act, 196 1 (for short, "the Act")consequently accused No. 1 was sentenced to pay fine ofRs.10,00O/- and in default of payment of fine to initiateappropriate proceedingsAS required under Section 421 ofCr.P.C., whereas Accused Nos.2, 4 and 5 were sentenced toundergo rigorous imprisonment for a period of one year each andA3 was sentenced to undergo rigorous imprisonment for a periodof six months and to pay fine of Rs.10,000 /- each. and in defaultof payment of line by accused Nos.2 to 5, to undergo simpleimprisonment for a period of one month each. Since thr issues involved in these appeals irre one and thesame, both th appeals are being disposed of by this commonjudgmentsame, both th appeals are being disposed of by this commonjudgment 2. For con," - nience, the parties herein are refr:rr:ed to as theyare arrayed refore the tria-l Court. i.e., Appel.lant No.1 asAccused No.1 ['Companv ]and Appellant Nos.2 to 5 :rs AccusedNos. 2 to 5. 3. The ger: ,,sis of these cases, which lead the appellants-ger: ,,sis of these cases, which lead the appellants-,,sis of these cases, which lead the appellants-of these cases, which lead the appellants-these cases, which lead the appellants-cases, which lead the appellants-which lead the appellants-lead the appellants-the appellants-appellants-accused to prr t-er these appea-ls, are narrated in trrref i1s under: The ger: ,,sis of these cases, which lead the appellants-ger: ,,sis of these cases, which lead the appellants-,,sis of these cases, which lead the appellants-of these cases, which lead the appellants-these cases, which lead the appellants-cases, which lead the appellants-which lead the appellants-lead the appellants-the appellants-appellants- i) Ac:used No.l/Company - M/s. GorrLan Agro FarmsPrivate I mited, which was registered under the CompaliesAct wit; r the Registrar of Companies zrt HyderabadSPrivate .imited Company, was engaged in the business ofacquisit on and sale of lands. Appelleint N,rs. 2 to 5 hereinare the -rirectors of Accused No. 1/Company i0 Ac::used No.l/Company has acquired lands to anextent of Ac.7.00 in Sy.No.194 under tht: limits ofBachup :1ly Mandal, Ranga Reddy District during thefinancia I year 2002-2003 and developecl tl-rc said lands by incurring some amounts during the linancial years 2OO2-03 to 2007-08. Accused No.i/Company along with othercompanies, who have lands contiguous to the lands olAccused No.1/Company, have agreed to develop the landsjointly with M/s. Mytas Property Private Limited. As perthe said development agreement, the built up area agreedto be given to Accused No.1/company, was allowed to besold to various buyers by M/s. Mytas Property PrivateLimited and pass on the sale proceeds to AccusedNo.1/Company. i0 Ac::used No.l/Company has acquired lands to anextent of Ac.7.00 in Sy.No.194 under tht: limits ofBachup :1ly Mandal, Ranga Reddy District during thefinancia I year 2002-2003 and developecl tl-rc said lands by incurring some amounts during the linancial years 2OO2-03 to 2007-08. Accused No.i/Company along with othercompanies, who have lands contiguous to the lands olAccused No.1/Company, have agreed to develop the landsjointly with M/s. Mytas Property Private Limited. As perthe said development agreement, the built up area agreedto be given to Accused No.1/company, was allowed to besold to various buyers by M/s. Mytas Property PrivateLimited and pass on the sale proceeds to AccusedNo.1/Company. iii) For the assessment year 2008-09, accusedNo.1/company has filed income tax returns on 26.O8.2OO9under Ex.P1 by bifurcating the sale proceeds into long termcapital gains accrued from the sale proceeds ol the landsand short term capital gains accrued from the [.sale]proceeds of the constructed area by showing gross taxableincome as Rs.7,65,64,5721-, out of which an amount ofRs.4,86,86,431/- was shown as long term capital gain andRs.2,78,78,141/- was shown as short term capital gains. iu) Ac :used No.1/Company is expectt:i to pay thelllCO mei:-x either by way of advance tax asi reqllired underSection :208 of the Act or at least along with filing ofreturns n terms of Section 140-4 of the Ac:t. As perSection 143 (1) of the Act, the tax liabilitl o.: Ac:cused No. 1was irrrived at Rs.2,27,74,267 1 - by therespond:nt/complainant and raisecl a demand underSection 156 read with Section 143 of the r\,:t and issued anintimati rn to Accused No.1/Compary under Ex.P2Accusec No. 1/company\\i as required to p;ry the taxdemanci ,:d within 30 days of service of rr,rt.ice. but it hascommit r:d default r,) Rt spondent/ complainant has issued show-causenotice [( ]rrted 17.11.2009 under Section ?,:>.1. (11 of the Actunder I [,x. ]P5, wherein the appellants r.r.err: asked to [.show]cause 'Ls to why penalty should r-rot be levied lorcommrt ,ng default in payment of tax. l.s there was norespons :: from the appellants, the complananl has issuedanother show cause notice dated 01.09.2O I 0 under Ex.P6under I .cLion 221 ( 1) read u,ith Secrion I 4 3-A of the Act Finally, one more opportunity was also given by theDepartment by giving another show-cause notice dated16.09.2010 (Ex.P7) under Section 221 (11 read with Section143-A of the Act. An opportunity of being heard was alsogiven by the respondent/ complainant to AccusedNo.1/Company fixing the date of hearing as 21.09.2010,but there was no response, on which a penalty ofRs.40,00,000/-\1,4simposed by way of order dated22.O9.2O1O (Ex.P8) under Section 221 read with Section140-A(3) of the Act and the said proceedings were servedon accused No.1 on 23.09.2OIO.Department by giving another show-cause notice dated16.09.2010 (Ex.P7) under Section 221 (11 read with Section143-A of the Act. An opportunity of being heard was alsogiven by the respondent/ complainant to AccusedNo.1/Company fixing the date of hearing as 21.09.2010,but there was no response, on which a penalty ofRs.40,00,000/-\1,4simposed by way of order dated22.O9.2O1O (Ex.P8) under Section 221 read with Section140-A(3) of the Act and the said proceedings were servedon accused No.1 on 23.09.2OIO. 4. Considering the rn illful evasion of payment of tax, therespondent/complainant has decided to initiate prosecution andaccordingly a notice was issued to accused No. 1/company andother Directors under Section 276-C(2) of the Act, as to whyprosecution shall not be initiated against them for willlul evasionof the tax. All of them have given reply stating that there was nointention to evade payment of tax. Another notice was issued toaccused No.1/Company and its directors under Exs.P10 to P14dated 27 .O9.20 1 1 asking them as to why prosecution shall not 4. Considering the rn illful evasion of payment of tax, therespondent/complainant has decided to initiate prosecution andaccordingly a notice was issued to accused No. 1/company andother Directors under Section 276-C(2) of the Act, as to whyprosecution shall not be initiated against them for willlul evasionof the tax. All of them have given reply stating that there was nointention to evade payment of tax. Another notice was issued toaccused No.1/Company and its directors under Exs.P10 to P14dated 27 .O9.20 1 1 asking them as to why prosecution shall not be initiated rnder Section 276-C(2\ of the Act. Again replieswere filed bl accused No.1/company and its Directors/ accusedNos.2 to 5 rnder Exs.Pi5 to P18 stating tl.r;rt there was nointention of r illiul evasion of tax 5. As Acx used No. 1/Company and its D irectors/ accusedNos.2 to 5 I ave not paid the tax in responsr: to the demandnotice issuec under Section 143 (1) of the A<:t and also failed topay the per' :Llty, the respondent/ complainanl. after obtainingsanctron ord:r dated 25.O2.2O I I for laur-rching of prosecutionfiled a compl rint before the Special Court for Eoc,nomic Offencesagainst accr rsed No.1 and accused Nos.2 -o 5, the otherDirectors, al. :ging that they have committed offe,nce punishableunder Sectir:t 276-C(21 read with Section 278-P.ol the Act, asthey have u Lllfully evaded tax even thor,rgh they\\/e re havingsufficient res r,urces. 6. The Sp rcia-l Court for Economic Offences took cognizanceof the offenc, s against Accused No.1/Companv and its Directorsi.e., Accuse< Nos. 1 to 5, under Section '2711-C(21 read withSection 278-3 of the Act and charges were franred against themunder Sectic [^r ]276 - C(2) read with Section 278 B(1) of the Act and all the accused have pleaded not guilty of the charges andclaimed to be tried.claimed to be tried. 7. In order to prove the charges leveled against theappellants, the respondent/complainant has examined PWs. I to3 and got marked Exs.Pl to P19. After closure of evidence of thecomplainant, the incriminating evidence elicited against theappellants was read over and explained to them under Section3 I 3 of the Cr. P.C., lor which all of them have denied andreported that they did not choose to examine any witness orrtheir behalf. However, they got marked Exs.Dl to D3 on theirbeha,lf. 8. The substance of the evidence of PWi is that after receivingof returns of income tax filed by accused No.1/company, therespondent/complainant has processed the same under SectionI a3( 1) of the Act and issued intimation determining the totaltaxable income as Rs.7,65,64,570/- and tax liabilityASRs.2,50,30,164 l-. The evidence of PW2/lncomeTax ofhcer is tothe extent that he has considered the annual report of accusedNo. I /company for the financial year 2007-O8 under Ex. P3 andbank account statements of accused No. I / Company with the-./ AXIS Bank I-imited under Ex. P4 and lou;-r I Lh at accusedNo. 1 / Compa: Ly did not pay the tax returns in spit e of havingsurplus and suflicient funds. PW3 is thc lncrtnte Tax Officer,who has suc reeded PW2. His evidence is that he has passedpenalty order under Ex.P8 imposing penalty ol Rs.4O lakhs andraised demar d under Ex.P9 and the same vre s served on theaccused. He also deposed that as there u,as no response fromthe accused, --ihow cause notices under Ser:tiol 276-C of the Actwere issued i gainst all the accused through rvhich accused rvereinformed tha the department is initiating crirnirral proceedingsand consequr ;rtly the department has hled the ccrnplaint 9, After fu l-fledged trial, on considering the entire material onrecord, the 1. ['ial ]Court has found Accused No. I ,/ Company andA2 to A5, tL:: Directors of A1 company, guiltl, of lhe offencespunishable t nder Sections 276-C(2\ and 278- Il of the Act andwere sentenc rd as stated supra. Aggrieved b-v tlte said judgmentand convict-i rn of Special Judge for Econornic,al Offences atHyderabad, [. ]lre present appeals are filed orig n all-v before theMetropoiitan Sessions Judge Court at Hyderabrtrl 9, After fu l-fledged trial, on considering the entire material onrecord, the 1. ['ial ]Court has found Accused No. I ,/ Company andA2 to A5, tL:: Directors of A1 company, guiltl, of lhe offencespunishable t nder Sections 276-C(2\ and 278- Il of the Act andwere sentenc rd as stated supra. Aggrieved b-v tlte said judgmentand convict-i rn of Special Judge for Econornic,al Offences atHyderabad, [. ]lre present appeals are filed orig n all-v before theMetropoiitan Sessions Judge Court at Hyderabrtrl 10. The erstwhile High Court for the States of Telangana andAndhra Pradesh has issued circular ROC.No.34, CriminalSection/20 17, dated 28.08.2017, r.r,,herein it is clarified thatagainst any 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 view of the said circular, these appeals filed by theappellants have been transferred lrom Metropolitan SessionsJudge Court, Hyderabad, to the High Court for the State ofTeiangana. 1 1. The summary of grounds of appeal as filed by theappellants in briel are as under: a) The trial Court has failed to see that accusedNo. l/company was not having lunds to pay the tax on the duedate as reflected in Ex. P4-bank statements and that accusedNo.1 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 / Co mpar Ly has received sale proceeds liom M / s. MytasProperty Priv, .te Limited. b) Thc trir . court has misconstrued the pre sumption underSection 278)) of the Act and erred in holding tl.at tl-re burden ofproof rs on tL:r accused to prove that there was n() r.r,illlul evasionof payment o tax. c) 'lhe trii I Court erred in holding that the ,r<:cused failed toprove non-er stence of culpable menta-1 state in non-payment oftaxes on the late of filing returns axd as on thc rlate of demandnotice ar-rd tl .r.t the trial Court failed to appreciate that in spite ofnot having z r1y cogent evidence to show that rill the accusedhave willfullr evaded the tax, the trial Court has concluded thataccused havr committed willful evasion in pavment of tax d) The tri 11 court fajled to see that all the assets belong toaccused No. /Company were attached under Sr,:ction 281-B ofthe Act and <lue to paralyzing of financial activities of accusedNo.1, ta-x cor. ld not be paid in time. e) The trir I court failed to consider the adrni:;s ion of PW3 thatthe amount received by Accused No. l/Comltanyis tou,ards \ share application money does not attract tax liability and thatthe trial Court could not consider that accused No.l has notreceived Rs.7 crores 65 lakhs from M/s. Mytas Property PrivateLimited. f) The Trial Court should not have concluded that accusedNos.2 to 5 are responsible for day to day affairs of accusedNo.1/company and should have taken into consideration thenotices issued under Sectioo 278-8 of the Act proposing theprosecution did not refer accused Nos. 2 to 5 as principal officersand thereby accused Nos.2 to 5 should have been acquitted. 12. Heard Sri Vinod Kumar Deshpande, learned Senior counselfor the appellants and Sri B. Narasimha Sharma, learnedStanding counsel for the income tax department, considered theentire material on record, relevant provisions of the Act and theauthorities cited. 13. Appellant No.1/company has filed an application underSection 391 Cr.P.C., along with the appeal for receiving of twodocuments i.e., (1) Common order passed by the AppellateTribunal in ITA.No.1024 of 20 14, dated 22.05.2015 and [(2)] 12. Heard Sri Vinod Kumar Deshpande, learned Senior counselfor the appellants and Sri B. Narasimha Sharma, learnedStanding counsel for the income tax department, considered theentire material on record, relevant provisions of the Act and theauthorities cited. 13. Appellant No.1/company has filed an application underSection 391 Cr.P.C., along with the appeal for receiving of twodocuments i.e., (1) Common order passed by the AppellateTribunal in ITA.No.1024 of 20 14, dated 22.05.2015 and [(2)] consequentie order, dated 21.O3.2016 passed bi' the AssessingOlficer, Assii t.ant Commissioner of Income ['l';u.:, ]Central Circie-3(2), Hydera rad, as additional evidence. As pr:r Lhe commonorder of the lribunal, dated 22.05.2015 (dot:r.tnrent No. 1), theassessment r :der dated 02.12.2OlO on which thr, prosecution isinitiated was tlirected to be modified. Basir-rg o n the orders ol theIncome Ta-x Appellate Tribunal, the assessrr<:nt olficer hasmodified the earlier orders dated 02.12.2O10 bJ, re-assessing thetax liability. ivhich the appellants were expectccL to pa1, lor theassessment 'ear 2OO7 -2008 (document No.2) [t.)on ]sidering theabove, and r::r hearing both sides, this Court is. ol the opinionthat these 1 "vo documents are very relevant t o <:onsider theappeals on h ;nd, thereby these documents are i e(rei\/ed 14. It is sr. bmitted vehemently by the learneri Senior Counsellor the appt llants that during the pendency ot- the complaintbefore the I rial Court, the accused har,'e paicl entire tax asdemanded, ncluding the penalty and intr:resl and that theappellants: avechallenged the assessmer t orders dated02.l2.2OIO rnder Ex.D2 before the learncd CI'l( A). On hearingboth sides, I :arned CIT(A) has found that ther t: arre no merits in the contentions raised by the appellants, and dismissed theappeal upholding the orders passed by the Assessing Officer forassessment year 2008-09. Aggrieved by the sarne, theappellants have preferred 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 iinding that theAssessing Olficer has committed error in calculating the turx tobe pard by the appellants and directed the Assessing Officer tore-assess the tax by computing the income of the appellantsfrom the transfer 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 ]dated09.O1.2014 in C.C.No.1i9 of 2011 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 2i.03.2016,wherein the tax liability was substantially reduced and foundthat the tax, which was already paid to the tune of Rs.2,27,74,2('7 l- was in excess of the revised raLx thereby, theexcess tax pa [,1 ]Rs. I ,44,17,2851- and interest o1' Ils..l I,19,131 l-the total of ruhich was Rs. 1,85,36,416 l-. was; ordered to berefunded anc the same was also adjusted ag:rinst t he demandlor the accc.rnting year 2009-10 vide RO.No 303513 dated28.O3.2016. On cor sidering the submissions ol' the learned Seniorcounsel rt is :[ear that the appellants have not onl.y paid the taxdemanded al rng with interest and penalty. but a Iso on accountof re-assessrl r:nt of tax, the tax already paid wal; in excess of taxliability, ancl that the same was adjusted for fu tr.rre tax liabilityand hence, sr ught for allowing of the appeals. Rs.2,27,74,2('7 l- was in excess of the revised raLx thereby, theexcess tax pa [,1 ]Rs. I ,44,17,2851- and interest o1' Ils..l I,19,131 l-the total of ruhich was Rs. 1,85,36,416 l-. was; ordered to berefunded anc the same was also adjusted ag:rinst t he demandlor the accc.rnting year 2009-10 vide RO.No 303513 dated28.O3.2016. On cor sidering the submissions ol' the learned Seniorcounsel rt is :[ear that the appellants have not onl.y paid the taxdemanded al rng with interest and penalty. but a Iso on accountof re-assessrl r:nt of tax, the tax already paid wal; in excess of taxliability, ancl that the same was adjusted for fu tr.rre tax liabilityand hence, sr ught for allowing of the appeals. 15. Learne< standing counsel representing lhe lncome TaxDepartment r t-ated that as on the due date, the accused have notpaid thc ta; having sufficient funds and c,rrnmitted vvillfulevasion of p Lyment of tax. It is also submitterl tl-rat AccusedNo.l/compar y has filed annual returns (Ex. P:3), through itsChartered A( :rountalrt for the financial year 2007 -OB relevant lorthe assessmclt year 2008-09, according to u,hich Accused No.1made profit t tr sale of land to a tune of Rs.7,65,ti,1 ,5'/O I- a:rd the bank statements show that Accused No. 1/Company has receivedpart of sale consideration in respect of "Mytas Hili County" lromtime to time, but did not choose to pay the advance tax. It isfurther submitted that the balance sheet of AccusedNo. 1/Company also shows Rs.9,33,45,911/- under the headreserves and surplus, so also Rs. 12,03,34,737 l- under the headcurrent assets of loans and advances. lt is furtherby way submitted 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(21 read with Section 278-B olthe Act and hence conviction recorded by the trial Court isproper. i6. Now, the points for determination in these appeals are:i ) Whether the conviction recorded based onthe assessment order dated 02.12.2OIO can besustained, since the said assessment order dated02.l2.2OlO was subsequently revised? 2l Whether the accused have committed wilifulevasion of tax? 3) Tr; r'hat relieP Point No. 1: 77. The rause of action for the respondentdepartment/< omplainant to file the complaint :rgainst theappellants is the assessment order dated C)2.1'.2 20lO, accordingto which he appeilants were asked to pay tax ofRs.2,27,74,2r 7l- for the taxable income of Rs.i',65,64,5721- andaccordingly i, r-r intimation was sent by the Ass;essing officer tothe appellanl ., under Section 143 (1) of the Act Admittedly ason the date r i rnitiating the prosecution agarnst the appellants,demarrded I rx of Rs. 2,27,74,267 l- was [.r ]11. paid b-v theappellants. L is also an admitted fact that:fter ir-ritiating theprosecution, lhe appellants have paid the entire tax demandedalong with 1 ::nalty, interest etc. Therefore, a J on the date ofpronouncem nt of the judgment by the trial Crtrrrt, there was notax liability t [r ]be paid by the appellants. 18. It is to be noted that the Income Tax A1>pellant Tribunalhaving consr lered the appeals of the appellant s found that theassessment rrder, dated O2.l2.2OlO directing the appellants topay Rs.2,27, i.4,267 l- was incorrect and the As;sessment Officer 18. It is to be noted that the Income Tax A1>pellant Tribunalhaving consr lered the appeals of the appellant s found that theassessment rrder, dated O2.l2.2OlO directing the appellants topay Rs.2,27, i.4,267 l- was incorrect and the As;sessment Officer was directed to assess the income tax afresh in terms of thedirections given by the Tribunal. Accordingly, the Assessmentofflcer has re-assessed the income tax and passed modifiedorders, dated 21.03.20 16 determining the tax liability, which islar less than what was assessed at the first p1ace. The basrs lorrespondent/ complainant to initiate prosecution against theappellants is the assessment order, dated 02.12.2O1O, on theground that the appellants have committed delault in payment ofthe tax as per the said assessment order. When assessmentorder dated 02.l2.2OIO itself is re-assessed as per the directionsof the Tribunal which held that the assessment of tax dated02.l2.2OlO is incorrect and the tax to be paid rvas substantiallvreduced, it cannot be alleged that the appellants have committeddefault in payment of tax and willfully evaded. When theassessment order dated 02.l2.2OlO 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 trial Court,cannot sustain. Basing on the fresh assessment order, dated21.03.2O 16, it is to be examined afresh that u,hether thedirections given by the Tribunal. Accordingly, the Assessmentofflcer has re-assessed the income tax and passed modifiedorders, dated 21.03.20 16 determining the tax liability, which islar less than what was assessed at the first p1ace. The basrs lorrespondent/ complainant to initiate prosecution against theappellants is the assessment order, dated 02.12.2O1O, on theground that the appellants have committed delault in payment ofthe tax as per the said assessment order. When assessmentorder dated 02.l2.2OIO itself is re-assessed as per the directionsof the Tribunal which held that the assessment of tax dated02.l2.2OlO is incorrect and the tax to be paid rvas substantiallvreduced, it cannot be alleged that the appellants have committeddefault in payment of tax and willfully evaded. When theassessment order dated 02.l2.2OlO 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 trial Court,cannot sustain. Basing on the fresh assessment order, dated21.03.2O 16, it is to be examined afresh that u,hether the appellants ha [,: ]committed any willful evasron of t.ax, as definedunder Sectiott'.276-C of the Act. I 9. Therefor :, on considering the above cliscur;sion, it is clearthat the lindir g of the trial Court that the appellants rvere guiltyof the olfencr: ; under Section 276-C(21 read u,ith Section 278-Bof the Act ir erroneous as the same is bas,:cl on incorrectassessmcnt rrder, dated 02. 12.2OlO and hr:nce, shall notsustarn, and rlquipsd to be set aside. Considt ring the same, point No.1 is deci,led rn favour ofthe appellant ;/accused. POINT No.2: 20. ['lhe ]ap1 ,:llants have also raised other issues i.e., they havenot committ(:l any willful evasion in payment or'tax since, as onthe due datr: there were no liquid funds rn tl-rr:ir accounts andthe appellal s; - Accused Nos. 2 to 5, who are the Directors, arenot respon.. ible for the day to day act.ivities of accusedNo. 1/ Compa ['rJ/ ]as on the date of the alleged default, the trialCourt has m sconstrued the presumption unde: Section 278D ofthe Act, the trial Court failed to record aclmissicn of PW.3, that the amount received towards share application does not attractthe tax etc. Considt ring the same, point No.1 is deci,led rn favour ofthe appellant ;/accused. POINT No.2: 20. ['lhe ]ap1 ,:llants have also raised other issues i.e., they havenot committ(:l any willful evasion in payment or'tax since, as onthe due datr: there were no liquid funds rn tl-rr:ir accounts andthe appellal s; - Accused Nos. 2 to 5, who are the Directors, arenot respon.. ible for the day to day act.ivities of accusedNo. 1/ Compa ['rJ/ ]as on the date of the alleged default, the trialCourt has m sconstrued the presumption unde: Section 278D ofthe Act, the trial Court failed to record aclmissicn of PW.3, that the amount received towards share application does not attractthe tax etc. 2l . This Court has already came to the conclusion whilediscussing point No.1 that the conviction and sentence recordedin favour of the appeilants 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 bvthe appellants, need not be answered. 22. Learned Senior Counsel for the appellants has [placed]reliance on the authority passed by the Hon'ble Supreme Courtin the case of V.Srinivas Reddy Vs. State of Andhra Pradeshl,wherein it was held as follows: *13. It was then urged by Mr. Arunachalam that ifthe Hiqh Court felt ttnt further euidence u)as necessanlfor [disposal ][of ][the ][case then ][it ][could ][haue ][exercised ][its]pouer under Section 391 Cr. P,C. and ouqht not to houeset aside the order of acquittal and remanded the matterfor fresh [disposal. ][This arqument also ][did ][not ][impress ][us]because the Hiqh Court instead of recordina the additionaleuidence in terms o.f Section 391 Cr. P.C.; [preferred ]toremand tLLe matter back to the trial court for disposal inthe Hiqh Court felt ttnt further euidence u)as necessanlfor [disposal ][of ][the ][case then ][it ][could ][haue ][exercised ][its]pouer under Section 391 Cr. P,C. and ouqht not to houeset aside the order of acquittal and remanded the matterfor fresh [disposal. ][This arqument also ][did ][not ][impress ][us]because the Hiqh Court instead of recordina the additionaleuidence in terms o.f Section 391 Cr. P.C.; [preferred ]toremand tLLe matter back to the trial court for disposal inaccordance uith law. It also appears from the record thatsome of the documents includinq FDRs, loan appltcationsetc., should also haue been brought on record for effectiuesome of the documents includinq FDRs, loan appltcationsetc., should also haue been brought on record for effectiue riisposal )f the controuersq raised in the cos<: attd to dofrrstice [br tuteen ][the ][parties. ][It is ][needless to ][salt that ][the]tial coru t t.uill strictlu adhere to the obsert'ations anddirectiotu giuen bg the High Court in its judgm<znt. " The rati ,nale in the above authoritv of :he Apex Courtsquarel)r appl .)ab1e to the facts of the case on h;i.-I(l.squarel)r appl .)ab1e to the facts of the case on h;i.-I(l. 23. Conside ['ing ]the facts and circumstances, t:ris Court is ofthe considerr rl opinion that as the assessme rl. orders datedO2.12.2O l0 c e r,"'hich the prosecution was initia.ted itself doesnot exist and [hat the same was modihed and f:ersh assessmentorder dated 21.03.2016 came into force, the r;onviction andsentence rec( r'ded against the appellants basing on the incorrectassessment r rders dated 02. 12.2O1O shall be se : .Lside. 24. Accorclr rgl.y, both these criminal appeals ;,Lre disposed ofsetting asidr the conviction and sentence dat.ed 09.01.20 14recorded by ipecial Court for Economical Offer-r:es at Hyderabadand C.C.No. 19 of 2011 is remanded back to the trial Court witha direction o consider the documents i.e., l1) Common orderpassed by t] e Appellate Tribunal in ITA.No.lOil4 of 20 14, dated22.O5.2O15 and (2) consequential order, dated 21.O3.2016passed by he Assessing Officer, Assistant Commissioner of \ 24. Accorclr rgl.y, both these criminal appeals ;,Lre disposed ofsetting asidr the conviction and sentence dat.ed 09.01.20 14recorded by ipecial Court for Economical Offer-r:es at Hyderabadand C.C.No. 19 of 2011 is remanded back to the trial Court witha direction o consider the documents i.e., l1) Common orderpassed by t] e Appellate Tribunal in ITA.No.lOil4 of 20 14, dated22.O5.2O15 and (2) consequential order, dated 21.O3.2016passed by he Assessing Officer, Assistant Commissioner of \ Income Tax, Central Circle-3(2), Hyderabad, filed by theappellants and decide the complaint afresh in accordance withlaw, after giving an opportunity to both sides to adduce anyfurther evidence, if any. However, the trial Court shal1 not beinfluenced by the comments and observations, if any, made bythis Court touching merits of the case while passing orders.appellants and decide the complaint afresh in accordance withlaw, after giving an opportunity to both sides to adduce anyfurther evidence, if any. However, the trial Court shal1 not beinfluenced by the comments and observations, if any, made bythis Court touching merits of the case while passing orders. As a sequei, pending miscellaneous applications, il any,shall stand closed. Sd/.B.S.CHIRANJEEVIJOINTRYvSECTIoFFER //TRUE COPY// To1.TheSpecialJudgeforEconomicoffencesatHyderabad.(withrecords'ifany)2. The Deputv commissioner [of ][lncome Tax, Central ][circle ][-8, ][Aayakar ][Bhavan,]Room No.AOS,8'h [Floor, ][Basheerbagh, Hyderabad-500004']1.TheSpecialJudgeforEconomicoffencesatHyderabad.(withrecords'ifany)2. The Deputv commissioner [of ][lncome Tax, Central ][circle ][-8, ][Aayakar ][Bhavan,]Room No.AOS,8'h [Floor, ][Basheerbagh, Hyderabad-500004'] No.AOS,8'h . One CC to One CC to CC to to [Sri ][G.Ashok ][Reddy, ][Advocate ][O^e-p.C-.I-. One CC to One CC to CC to to [Sri ][G.Ashok ][Reddy, ][Advocate ][O^e-p.C-.I- 3. One CC to One CC to CC to to 3. One CC to One CC to CC to to [O^e-p.C-.I-4. on; ca io [Sri ][v.surenoer ][Rab, ][Advo-cate ][[o!u-c]]5. 6;; cc 6 [5;i ][B.N;t;a-ha ][Sarma, ][sc ][foi ][l'T'Department [oPUC]]6. Two CD Copies7. One Spare [CoPY]4. on; ca io [Sri ][v.surenoer ][Rab, ][Advo-cate ][[o!u-c]]5. 6;; cc 6 [5;i ][B.N;t;a-ha ][Sarma, ][sc ][foi ][l'T'Department [oPUC]]6. Two CD Copies7. One Spare [CoPY] Kj\}- HIGH COURT DAf ED:1710612022 COMMON JUDGMI I\ITCRLA(TR).Nos.13 i nd 74 of 2o18 DISPOSTNG OF I .tE BOTH CRL.A.(TR) ,..a:-'- [-" ][---],,I [l{'Ji] ][zdlL]E{r