Crlatr/78/2018 Of Shri Indukori Venkata Krishnam Raju v. Dy . Commissioner Of Income-Tax

tIN THE HIGH COURT FOR THE STATE OF TELANGANAAT HYDERABAD IFRIDAY, THE SEVENTEENTH DAY OF JUNETWO THOUSAND AND TWENTY TWO PRESENTTHE HONOURABLE DR. JUSTICE D.NAGARJUN CRIMINAL APPEAL [(TR) ]NOS: 26 AND 78 OF 2018 CRL.A.(TR) NO.26 OF 2018: _ Criminal Appeal under Section 37 4(2) of Cr.P.C against the Judgment dated0910112014 in CC No.1 ot 2011 on the file of the Court of the Special Judge forEconomic Offences at Hyderabad. Between: 't . M/s. Nagavalli Greenlands Pvt. Ltd., Flat No.1 02, Dhanunjayanest,Rajivnagar, Yousufguda, Hyderabad-500045, Rep. by Shri D.V.S. SubbaRaju, S/o. Late D.K. Raju, aged about 45 years.Rajivnagar, Yousufguda, Hyderabad-500045, Rep. by Shri D.V.S. SubbaRaju, S/o. Late D.K. Raju, aged about 45 years.2. Shri D.V.S. Subba Raju, S/o.late D.K.Raju, aged about 45 years, Director ofM/s. Nagavalli Greenlands Pvt. Ltd., Flat No. ['102, ]Dhanunjayanest, RajivNagar, Yousufguda, Hyderabad-500045.M/s. Nagavalli Greenlands Pvt. Ltd., Flat No. ['102, ]Dhanunjayanest, RajivNagar, Yousufguda, Hyderabad-500045.3. Shri Namburi Rama Raju, S/o.Venkata Raju, aged about 49 years, Director ofM/s. Nagavalli Greenlands P\.t. Ltd., Flat No. ['102, ]Dhanunjayanest, RajivNagar' Yousufguda' Hvderabao-uoooou...orpELLANTS/ AccusED 1, 2 & sM/s. Nagavalli Greenlands P\.t. Ltd., Flat No. ['102, ]Dhanunjayanest, RajivNagar' Yousufguda' Hvderabao-uoooou...orpELLANTS/ AccusED 1, 2 & s AND Dy. Commissioner of income-Tax, Central Circle-8, Aayakar Bhavan, Room No.B05,Bth floor, Basheerbagh, Hyderabad-500004. ...RESPONDENT/ COMPLAINANT For the Appellants : SRI VINOD KUMAR DESHPANDE, SENIOR COUNSEL FORSRI G.ASHOK REDDY For the Respondent : SRI B.NARASTMHA SHARMA, SC FOR I.T.DEPARTMENTCRL,A.(TR) NO.78 OF 2018: Criminal Appeal under Section 37 4(2) ot Cr.P.C against the Judgment dated0910112014 in CC No.1 ot 2O11 on the file of the Court of the Special Judge forEconomic Offences at Hyderabad.Between: 1. Shri lndukori Venkata Krishnam Raju, S/o.late l.Bangaru Raju, aged about 51years, Director of M/s. Nagavalli Greenlands Pvt. Ltd., Flat No.102,Dhanunjayanest, Rajivnagar, Yousufguda, Hyderabad-500045.years, Director of M/s. Nagavalli Greenlands Pvt. Ltd., Flat No.102,Dhanunjayanest, Rajivnagar, Yousufguda, Hyderabad-500045. l I Ii I i 2. Smt Jhansi Ra ri, W/o.Sri B.Suryanarayana Raju, aged about 45 years,Director of M/s Nagavalli Greenlands Pvt. Ltd., Flat No.'1 Ojl, Dhanunjayanest,Rajivnagar, Yc rsufguda, Hyderabad-500045.Director of M/s Nagavalli Greenlands Pvt. Ltd., Flat No.'1 Ojl, Dhanunjayanest,Rajivnagar, Yc rsufguda, Hyderabad-500045. ....Appellants/ Accused 3 & 4 And Dy. Commissioner of ncome-Tax, Central Circle-8, Aayakar Bhavan, Room No.B05,Bth floor, Basheerbal r, Hyderabad-500004. ...RESPONDENT/ COMPLAINANT For the Appellants : SRI VINOD KUMAR DESHPANDE, SENICIR COUNSEL FORSRI V.SURENDER F AO For the Responden : SRI B.NARASIMHA SHARMA, SC F()tt I.T.DEPARTMENT The Court delivered [' ]re following: COMMON JUDGMENT THE HON'BLE DR. JUSTICE D.NAGARJUN CRIMINAL APPEAL lTRl Nos.26 and 78 of 2O18COMMON JUDGMETN: ....Appellants/ Accused 3 & 4 And Dy. Commissioner of ncome-Tax, Central Circle-8, Aayakar Bhavan, Room No.B05,Bth floor, Basheerbal r, Hyderabad-500004. ...RESPONDENT/ COMPLAINANT For the Appellants : SRI VINOD KUMAR DESHPANDE, SENICIR COUNSEL FORSRI V.SURENDER F AO For the Responden : SRI B.NARASIMHA SHARMA, SC F()tt I.T.DEPARTMENT The Court delivered [' ]re following: COMMON JUDGMENT THE HON'BLE DR. JUSTICE D.NAGARJUN CRIMINAL APPEAL lTRl Nos.26 and 78 of 2O18COMMON JUDGMETN: Cri.A.(TR).No.26 of 2O1B is filed by AI, A2 and A5 i.e.,Company and its two Directors respectively, whereasCrl.A.(TR).No.7B of 2OlB is filed by A3 and A4, who are otherDirectors of A1/company, being aggrieved by the conviction andsentence imposed by the learned Special Judge lor EconomicOffences at Hyderabad in C.C.No. 1 of 2O 1 1 vide Judgment datedO9.Ol.2Ol4, wherein Accused Nos. I to 5 were found guilty ofthe offences punishable under Section 276-C(21 read withSection 278-8 of the Income Tax Act, 1961 (for short, "the Act")consequently accused No.1 was sentenced to pay fine ofRs. I O,000/- and1n default of payment of line to initiateappropriate proceedingsAS required under Section 421 ofCr.P.C., whereas Accused Nos.2, 3 and 5 were sentenced toundergo rigorous imprisonment for a period of one year each andA4 was sentenced to undergo rigorous imprisonment for a periodof six months and to pay fine of Rs. 10,000 l- each and in defaultof payment of Iine by accused Nos.2 to 5, to undergo simpleimprisonment for a pei:iod of one month each. Since tl e issues involved in these appeals are one and thesame, both t re appea-ls are being disposed ol b-1, this commonjudgment. 2. For con,enience, the parties herein are reierred to as theyparties herein are reierred to as theyreierred to as theyas theytheyare arrayed before the trial Court. i.e., Appr:l1ant No.1 asAccused No.. /Company and Appellant Nos.2 to 5 as AccusedNos. 2 to 5. For con,enience, the parties herein are reierred to as theyparties herein are reierred to as theyreierred to as theyas theythey 3. The ger esis of these cases, which leacl the appellants-accused to pr 'fer these appeals, are narrated in brief as under: i) Ac :used No.1/Company - M/s. Nagawali Greenlands Private I imited, u,hich was registered under the CompaniesAct witl the Registrar of Companies at HyderabadSPrivate r [,imited ]Company, was engaged in tl:re business ofacquisit, rn and sale of lands. Appellant Nos. 2 to 5 hereinare the I [,irectors ]of Accused No.1/Compan1.. ii) Ac, used No.l/Company has acquired lands to an extent o1 Ac.6.60 guntas in Sy.Nos. 194(P) ar-rd 196(P) underthe limi s of Bachupally Mandal, Ranga tteddy Districtduring t re financial year 2002-2003 and rleveloped the said lands by incurring some amounts during the linancialyears 2002-03 to 2007-08. Accused No.1/Company alongwith other companies, who have lands contiguous to thelands of Accused No.l/Company, have agreed to developthe lands jointly with M/s. Mytas Property Private Limited.As per the said development agreement, the built up areaagreed to be given to Accused No.1/company, \.,as 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 2008-09, accusedNo. 1 /company has liled income tax returns on 13.09.2008under Ex.Pl 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.7,2I,B9,45O l-, out of which an amount ofRs.4,59,04,343/ was shown as long term capital gain andRs.2,62,85, 1 1 1/- was shou.n as short term capital gains. lt iii) For the assessment year 2008-09, accusedNo. 1 /company has liled income tax returns on 13.09.2008under Ex.Pl 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.7,2I,B9,45O l-, out of which an amount ofRs.4,59,04,343/ was shown as long term capital gain andRs.2,62,85, 1 1 1/- was shou.n as short term capital gains. lt i.') A :cused No. 1/Company1Sexpected to pay theincome tax either by [,.vay ]of advance tax e.s required underSectior 208 ol the Act or at leas'L nl,r-tg, u,ith liling ofreturns in terms of Scction i40-A of the Act. As perSectior 1.13 (1) of the Act, the tax liabilitv of Accused No.1\\'as arrived at Rs.2,14,72,881 l- by therespon lent/complainant and raised a rlemand under.l Sectior 156 read with Section 43 of the lict and issued arrintimal on to Accused No.1/Companl under Ex.P2.Accuse I No.l /company\\rasrequrred to pay the taxdeman led within 3O dar,s of servicr: of noticr:, but it hascommi ted default. v) R :spondent/ complainant has issr-rr,:d show-causenotice lated 17.11.2OO9 under Section 221 (ll of the Actunder lx.P6, wherein the appellants s,cre asked to.shou,cause as to why penalty should not be levied forcommi ting default in payment of tax. ,{s there was norespolr;e from the appellants, the compla.inant has issuedanothe shou,-cause notice dated 01.09.20 l0 under trx.P7under lection 221 (1) read u.ith Section 1.13-,{ of the Act F'inally, one more opportunity was also given by theDepartment by giving another show-cause notice dated16.09.2010 (Ex.P8) under Section 221 (11 read with SectionI43-A of the Act. An opportunity of being heard was a-lsogiven 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.35,00,000/-\\,asimposed by way of order dated22.O9.2010 (Ex.P9) under Section 221 read with Section140-A(3) ol the Act and the said proceedings were servedon accused No.1 on 23.O9.2O10.Department by giving another show-cause notice dated16.09.2010 (Ex.P8) under Section 221 (11 read with SectionI43-A of the Act. An opportunity of being heard was a-lsogiven 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.35,00,000/-\\,asimposed by way of order dated22.O9.2010 (Ex.P9) under Section 221 read with Section140-A(3) ol the Act and the said proceedings were servedon accused No.1 on 23.O9.2O10. 4. Considering the willful 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(21 of the Act, as to whyprosecution shall not be initiated against them lor willful evasionof the tax. All of them have given reply stating that there \\ras nointention to evade payment of tax. Another notice was issued toaccused No. 1/Company and its directors under Exs.P1 1 to P15dated 27 .O9.20 I 1 asking them as to why [prosecution ]shall not be initiated rnder Section 276-C{21 of the A(r1.. Again replieswere filed b.y accused No. 1/company and its I) irr:ctors/ accusedNos.2 to 5 r nder Exs.P16 to P2O stating that there was nointention of v illful evasior-r of tax. 5. As Acr used No.1/Company and its Directors/ accusedNos.2 to 5 l ave not paid the tax in response ro the demandnotice issuec under Section 1a3 ( i ) ol the Act and ; so failed topay the per rlty, the respondent/ complain:tnt aftt:r obtainingsanction ord :r dated 23.1I.2010 for launcl'ring of prosecutionfiled a compl rint before the Special Court ior [']ccnornic Offencesagainst acct sed No.1 and accused Nos.2 t-o 5, the otherDirectors, al :ging that the-v have committed oflence punishableunder Sectrc t 276-C(21 read witl.r Section 278-E\ of the Act, asthey have u illlully evaded tax even though they were havingsufficient res rurces. 5. As Acr used No.1/Company and its Directors/ accusedNos.2 to 5 l ave not paid the tax in response ro the demandnotice issuec under Section 1a3 ( i ) ol the Act and ; so failed topay the per rlty, the respondent/ complain:tnt aftt:r obtainingsanction ord :r dated 23.1I.2010 for launcl'ring of prosecutionfiled a compl rint before the Special Court ior [']ccnornic Offencesagainst acct sed No.1 and accused Nos.2 t-o 5, the otherDirectors, al :ging that the-v have committed oflence punishableunder Sectrc t 276-C(21 read witl.r Section 278-E\ of the Act, asthey have u illlully evaded tax even though they were havingsufficient res rurces. 6. The Sp:cial Court for Economic Offences rook cognizanceof the olfenc :s against Accused No.1/Company and its Directorsi.e., Accuser Nos. I to 5, under Section 27 6-C(21 read withSection 278-3 of the Act and charges were framed against thentunder Sectir o 276 - C(2) read with Section 278-B(ll of the Act and all the accused have pleaded not guilt]' of the charges andciaimed to be tried. 7. [n order to prove the charges Ieveled against theappellants, the respondent/complainant has examined PWs. 1 to3 and got marked Exs.P1 to P2 1. After closure of evidence of thecomplainant, the incriminating evidence elicited against theappellants was read over and explained to them under Section313 of the Cr.P.C., for which all of them have denied andreported that they did not choose to examine any witness ontheir behalf. Hou,ever, the),got marked Exs.D1 to D1O on theirbehall. 8. The substance of the evidence of PW1 is that after receivingof returns of income tax filed 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.7,21,89,450/- and tax liability asRs.2,35,99,87O1-. The evidence of PW2/lncome Tax officer is tothe extent that he has considered the annual report of accusedNo.l/company for the financial year 2OO7-OB under Ex.P4 andbanlq.account statements of accused No.1/Company with the AXIS Bank l-imited under Ex.P5 and for-irrcl t hat accusedNo.1/Compz n.1, did rlot pay the ta,x returns in spite of havingsurplus and sufficient funds. PW3 is the lnc:ome Ta-x Officer,who has su :ceeded PW2. His evidence is tlrirt he has passedpenaltlt orde ['undcr ]E..:.P9 imposing penalty of l?s.ll5 lakhs andraised dema 1d under Ex. P 10 and the same as sen,ed on the',l accused. H : also deposed that as there ivas rrr, re'sponse fromthe accused show cause notices under Sc,ctio n 1176-C of the Actwere issued igainst alI the accused through whi<:h accuscd wereinformed th: t the department is initiatinli crinrinal proceedingsand consequ:ntly the department has filed the r:omplaint.9. After fr ll-fledged trial, on considering the r:ntirr: material onrecord, the rial Court has found Accused No. 1 / Company andA2 to A5, tl e Directors of A I company, gllilty of the offencespunishable rnder Sections 276-C(2) and 278-B ol the Act andwere senten( ed as stated supra. Aggrievecl by the szrid judgmentand convict rn of Special Judge lor Econonrir::al Offences atHyderabad, .he present appeals are filed orrginally 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/2O17, dated 28.O8.2017, wherein 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 from Metropolitan SessionsJudge Court, Hyderabad, to the High Court ior the State ofTelangana. 1 1. 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/2O17, dated 28.O8.2017, wherein 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 from Metropolitan SessionsJudge Court, Hyderabad, to the High Court ior the State ofTelangana. 1 1. The summary of grounds of appeal as filed by theappellants in brief are as under: accuseda) The trial Court has failed to see that No.1/company was not having funds to pay the tax on the duedate as reflected in Ex. P5-bank statements and that accusedNo.l has not received any sale proceeds lrom M/s. MytasProperty Private Limlted, thereby the respondent/ complainanthas not produced any evidence to show that accused No.1/Compzu y has received sale proceecls frotn M/s. MytasProperty Privr te Limited. b) The trir I court has misconstrued the 1;re sum ption underSection 278-\', of the Act ancl erred in holding that the burden ofproof is on tl- 3 accuscd to prove that there was nc, rvillful evasionof payment o tax c) The triz I Court erred in holding that tl.re ar:cused failed toprove non-ex stence of culpable mental st:rte in non pa-vment oftaxes on thc late ol filing returns and as on tho :late ol demandnotice ald th rt the trial Court failed to apprer:iaLe that in spite ofnot having . ny cogent evidence to show that rill the accusedhave u,illfull5 evaded the tax, the trial Court iras concluded thataccused harrr committed willful evasion in oavrnent of tax. d) The tri d court failed to see that all thr: assets belong toaccused No. were attached under St:ction 281-B of/Company the Act ancl due to paralyzing of financial activities of accusedNo.1, tax cor ld not be paid in time. The tri, l court lailed to consider the adrnission of PW3 that e) the amount received by Accused No. I / Com p:,rn1, i5 1s1i,a16" share application money does not attract tax liability and thatthe tria.l Court could not consider that accused No.1 has notreceived Rs.3 crores 75 lakhs from M/s. Mytas Property PrivateLimited. l) The Trial Court should not have concluded that accusedNos.2 to 5 are responsible for da1, to day affairs of accusedNo. 1/company and should have taken into consideration thenotices issued under Section 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 teix department, considered theentire material on record, relevant provisions of the Act and theauthorities cited. 13. Appellant No . 1 / company has filed an application underSection 39 1 Cr.P.C., along with the appeal for receiving of twodocuments i.e., (1) Common order passed by the AppellateTribunai in ITA.No.IO22 ol 20 14, dated 22.05.2015 and (2) consequentii I order, dated 21.03.20 16 passecl b'"' the AssessingOfficer, Assi.tant Commissioner of Income ['la-x, ]Central Circle-3(2), H-t'dera rad, as additionai evidence. As per the commonorder of the Tribunal, dated 22.C5.2015 (dor:ur;rent lJo. I ), theassessment ,rder dated 02.l2.2OlO on whicl-r th,:r pr-osecution isinitiated rvas directed to be modified. Basing on the orders o[ theIncome Tax Appellate Tribunal, the assessrnl:nt olficer hasmodilied the enrlier orders dated 02.12.2O1O by r-e-assessing theta-x liability, which the appellants were expect(:cl to pay for theassessment [,ear ]2OO7 -2008 (document No.2) [t]onsidering ]thcabove, :rnd r n hearing both sides, this Courl isr of the opinionthat thcse t wo documents are verv relevant Lo <:onsicler theappeals on h rnd, thereby these documents are received. 14. It is sL bmitted vehemently by the learn,:d Senior Counsellor the appr flants that during the pendency o." the complaintbefore the 1 [-ial ]Court, the accused have paid entire ta-x asdemanded, ncluding the penalty and interesl. and that theappellantslavechailenged the assessment orders dated02.12.2O 1O [r ]rnder Ex.D9 before the learned CI'[(.A). On hearingboth sidcs, l arned CIT(A) has found that thr:re rrre no merits ii-, the contentions raised by the appellants, and dismissed theappeal upholding the orders passed by the Assessing Officer lorassessment year 2008-09. Aggrieved by the same, theappellants have preferred appeal before the lncome Tax AppellateTribunal (in short, "the Tribunal"), and on hearing both sides,learned Tribunal has partiy a,llowed the appeal vide orders dated22.O5.2O15 in ITA.No.943/Hydl2Ola 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 appellantsfrom the transfer of lands held by accused No. i /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 ]dated09.01.2014 in C.C.No. t of 201 1 by the learned Special Judge. Itis 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 21.03.2016,wherein the tax liability was substantially reduced and foundthat the tax, which was already paid to the tune of Rs.2,l4 .7 2 ,8 i0 / - was in excess of the revised tax thereby, theexcess tax p; .id Rs.1 ,36,04,O91 /- and interest c,f Rs.40,4O,379/the total of i.r,hich was Rs.1,76,44,47O l-, \,ras ordered to berefunded an' I the same was also adjusted against the demandfor tire acc ,unting year 2009- 1O vide RO Nc,.303517 dated2a.o3.2016 On co rsidering the submissions of the learned Seniorcounsel it is clear that the aopellants have not o nly parcl the taxdemanded a cng with interest and penaltl', but also on accountof re'assessr rent of tax, the tax already paid was in excess ol taxliability, arrd that the same was adjusted for fut ure tax liabilityarrcl hence, s )Lrght for allowing of the appeals 15. Learne I standing counsel representing tre lncome l'a-xDepartment ;tated that as on the due date, the accused have notpaid the ta I having sufficient funds and committed willfulevasion of p ryment of tax. It is also submitted that AccusedNo.l /comprr ry has filed annua-l returns (Ex.Pa), through itsChartered A( countant for the fiirancial year 2C)O1'-OB relevant lorthe assessm nt year 2008-09, according to ',vhrch Accused No.1made prolit r n sale of land to a tune of Rs.7,21,8,1,450/ and the bank statements show that Accused No. i /Company has receivedpart of sa-le 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 ol AccusedNo.l/Company also shows Rs.8,77,71,656 l- under the headreserves and surplus, so also Rs. 11,04,07,166/- under the headcurrent assets of ioans and advances. It 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 oflencepunishable under Section 276-C(21 read with Section 278-8 olthe 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 .2OlO can besustained, since the said assessment order dated02.12.2O 1O was subsequentiy revised?1) Whether the conviction recorded based onthe assessment order dated 02. 12 .2OlO can besustained, since the said assessment order dated02.12.2O 1O was subsequentiy revised? 16. Now, the points for determination in these appeals are:1) Whether the conviction recorded based onthe assessment order dated 02. 12 .2OlO can besustained, since the said assessment order dated02.12.2O 1O was subsequentiy revised?1) Whether the conviction recorded based onthe assessment order dated 02. 12 .2OlO can besustained, since the said assessment order dated02.12.2O 1O was subsequentiy revised? 2l Whether the accused have committed willfulevasion of tax?evasion of tax? Point No. 1: 17. The cause ol action for thc respondentdepartment/ complainant to file the complairrt against theappellants i, the assessment order dated 02. l'2.201.0, accordingto w,hich the appellants were asked tc, pay tax olRs.2,35,99.t 7Ol- for the taxable income olRs T',1,1 1,89,450/- andaccordingl,r alr intimation was sent by the Ass,lssing officer tothe appellar ts under Section 143 (1) of the Act. Admittedly ason the date of initiating the prosecution agains,. the appellants,demanded la-x of Rs.2,35,99,87O l-was nol- paid by theappellants. It is also an admitted fact that after initiating theprosccution the appellants have paid the entir(l trix demandedalong with ;enalty, interest etc. Therefore, as on the date ofpronouncen cnt of the judgment by the trial Cor-rrt, there was nota-x liabilitl o be paid by the appeilants. I B. It is t , be noted that the Income Tax Appellant Tribunalhaving cons idered the appeals of the appeilants found that theassessment order, dated 02.l2.2OlO directinq tne appellants topa.r, Rs.2,35 .99,87O1- was incorrect and the As:;essment Olficer was directed to assess the income tax afresh in terms ol thedirections given by the Tribunal. Accordingly, the Assessmentoflicer has re-assessed the income tax and passed modifiedorders, dated 21.03.2016 determining the tax liability, which isfar less than what was assessed at the first place. The basis forrespondent/complainant to initiate prosecution against theappellants is the assessment order, dated 02.12.2010, on theground that the appellants have committed delault in payment ofthe tax as per the said assessment order. When assessmentcrrder dated 02.12.2O1O itself is re-assessed as per the directionsof the Tribunal which held that the assessment of tax dated02.12.2O1O 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.I2.2OlO itself was modifiecl holdingthat the Assessment Olficer has incorrectly assessed the tax,directions given by the Tribunal. Accordingly, the Assessmentoflicer has re-assessed the income tax and passed modifiedorders, dated 21.03.2016 determining the tax liability, which isfar less than what was assessed at the first place. The basis forrespondent/complainant to initiate prosecution against theappellants is the assessment order, dated 02.12.2010, on theground that the appellants have committed delault in payment ofthe tax as per the said assessment order. When assessmentcrrder dated 02.12.2O1O itself is re-assessed as per the directionsof the Tribunal which held that the assessment of tax dated02.12.2O1O 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.I2.2OlO itself was modifiecl holdingthat the Assessment Olficer 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,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, dated2I.O3.2016, it is to be examined afresh that rvhether the2I.O3.2016, it is to be examined afresh that rvhether the appellants hi ve committed any wiliful evasion of tax, as delinedunder Scctiot 276-C ol the Act. appellants hi ve committed any wiliful evasion of tax, as delinedunder Scctiot 276-C ol the Act. 19. Therefo'e, on considering the above discusr;ion, it is clearthat the lind ng of the tria-l Court that the appellzrnts u,ere guiltvof the offenc s under Section 276-C(21 read wit.h Se ction 278-Bof the Act is erroneous as the same is base,l on incorrectassessment order, dated 02.12.2O1O and hence, shall notsustain, and required to be set aside. Corrsi<l ring the same, point No. 1 is de,:id,:d in favour ofthe appellant s/accused. POINT No.2: 20. The ap rellants have also raised other issue:; i.e., they havenot committr d any willful evasion in payment of t.ax since, as onthe due datt there were no liquid funds in their accounts andthe appellar-r s - Accused Nos.2 to 5, who are t.he Directors, arenot respon s ible for the day to day acl-iviti,ls of accusedNo. 1 / Compa [-rv ]as on the date of the alleged dr:fault, the trialCourt has m sconstrued the presumption under liection 27 BE ofthe Act, the -ria1 Court lailed to record admission of PW.3, that the amount received towards share application does not attractthe tax etc 21. 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 02.12.201O on whichthc conviction was recorded was modified and a freshassessment order came into force, hence, the issues raised b1'the 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 Pradeshr,wherein it was held as follows: "13. lt was then urqed bu Mr. Arunachalam that ifthe Hiqh Court felt that further euidence was necessary.for [disposal ][of ][the ][case then ][it ][could ][haue ][exercised its]pou.ter under Section 391 Cr. P.C. and ouqht not to haueset astde the order of acquittal and remanded the matterfor fresh [disposol. ][This ][argument ][also ][did ][not impress ][us]because the Hiqh Court instead of recordinq the additionaleuidence in terms of Section 391 Cr. P.C.; preferred toremand the motter back to the trial court for disposal inoccordance with lau. It also appears from the record thatsome of the documents including FDRs, loan applicationsetc., should also haue been brought on record for effectiue I (t 998) 9 SCC 331 disposa of the controuersu raised in the case and to dojustice i etueen the parTies. It is needless to sai! that thetial cot rt tuill strictlu adhere to the obserL,ar ions andd[rectiot s giuen bg the High Court in its [judgmen.t."] The ra ionale in the above authority of t.he Apex Courtsquarelr. app icable to the facts of the case on har: d. 23. Consid:ring the facts and circumstances, r-his Court is ofthe considr:r ed opinion that as the assessment orders datedO2.l2.2OlO rn which the prosecution wzrs initirrted itself doesnot exist anr that the same was modified and fr,:sh assessmentorder dated 2). .O3.2016 came into force, the cor-rviction andsentence rec rrded against the appellants basing ,rn the incorrectassessment rrders dated 02.12.2OlO shall be set aside. 24. Accord ngly, both these criminal appeals1rc disposed ofsetting asid r the conviction ald sentence dated O9.OI.2O14recorded b1. ipecial Court for Economical Offenc,::s at Hyderabadand C.C.No. of 201 1 is remanded back to tht: trial Court with adirection to consider the documents i.r:., (1) Common orderpassed by tl e Appellate Tribunal in ITA.No.lO2ll of 2014, dated22.O5.2015 and (2) consequentia.l order, dated 21.O3.2016passed by he Assessing Officer, Assisrant Commissioner of i \ 24. Accord ngly, both these criminal appeals1rc disposed ofsetting asid r the conviction ald sentence dated O9.OI.2O14recorded b1. ipecial Court for Economical Offenc,::s at Hyderabadand C.C.No. of 201 1 is remanded back to tht: trial Court with adirection to consider the documents i.r:., (1) Common orderpassed by tl e Appellate Tribunal in ITA.No.lO2ll of 2014, dated22.O5.2015 and (2) consequentia.l order, dated 21.O3.2016passed by he Assessing Officer, Assisrant Commissioner of i \ lncome Tax, Central Circle-3(2), Hyderabad, filed by theappellants and decide the complaint afresh in accordance withIaw, after giving an 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,shall stand closed, Sd/-K.SRINIVASA JOINT REGISTRAR//TRUE COPY//a\rwSEC oNoICER To 1 . The Special [Judge ][for ][Economic Offences' at Hyderabad']; iil 6'.;il com'mlsslon""i [oiin"o'" ][Tax' Cential circle -8' ][Aayakar Bhavan']' R;;;"N6;os, afr Fioor, Basheerbash, Hv9SEP993. b;;"iCi;aii' [v. ][surend"r. Rao' ][Advocate ][l9L99l];. 5;; 6d i; [s;i ][G.Ashok ][Reddv, ][Advocate ][[oPUC] ]^.;. il; 66 i; [5;i e.Ni'asimha ][s'tiarma' ] [fbr ][l'r''-toPUCJ]6. Two [CD CoPies]7. One [SPare ][CoPY] Kj \ *-- HIGH COURTDATED:1710612022. COMMON JUDGMI NTCRLA(TR).Nos.26 i nd 78 ol 2018 DISPOSING OF TF: BOTH CRL.A.(TR) (D*(,, tt\Tl t