Crl.rev.pet v. Asst.commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE N.ANIL KUMAR THURSDAY, THE 05TH DAY OF NOVEMBER 2020/14TH KARTHIKA, 1942 Crl.Rev.Pet.No.2126 OF 2005 AGAINST THE ORDER IN Crl.M.P.No.52/05 IN CC 95/92 DATED05-08-2005 OF ADDITIONAL CHIEF JUDICIAL MAGISTRATE(ECONOMIC OFFENCES), ERNAKULAM REVISION PETITIONERS/PETITIONERS/ACCUSED Nos.1 to 3: 1M/S.OUR COLLEGE, T.D.ROAD, ERNAKULAM, COCHIN-35, REPRESENTED BY ITS MANAGING PARTNER, K.BALAKRISHNAN NAIR. 2K.BALAKRISHNAN NAIR,MANAGING PARTNER, M/S.OUR COLLEGE, T.D.ROAD, ERNAKULAM, COCHIN-35. 3J.B.MOHAN, PARTNER, M/S.OUR COLLEGE, T.D.ROAD, ERNAKULAM, COCHIN-35. BY ADV.SRI.ARUN RAJ.S. RESPONDENT/RESPONDENT/COMPLAINANT: ASST.COMMISSIONER OF INCOME TAX, CIRCLE-3, DIVISION-II, C.R.BUILDINGS, I.S.PRESS ROAD, COCHIN-18. BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX BY ADV. SRI.P.K.R.MENON SR.COUNSEL GOI TAXES GOI TAXES BY ADV. SRI.GEORGE K.GEORGE, SC, FOR INCOME TAX BY SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT BY SRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENT THIS CRIMINAL REVISION PETITION HAVING BEEN FINALLYHEARD ON 05.11.2020, THE COURT ON THE SAME DAY PASSED THEFOLLOWING: Crl.R.P.No.2126 of 2005 ..2.. ## ORDER Dated this the 05[th] day of November, 2020 The revision petitioners are the accused 1 to 3 and the respondent is the complainant in C.C.No.95/1992 on the file of the Additional Chief Judicial Magistrate Court (EconomicOffences), Ernakulam. Parties are hereinafter referred to as'the complainant' and 'the accused' according to their status inthe trial court unless otherwise stated. 2.The case arises under the Income Tax Act, 1961(hereinafter referred to as 'the Act'). The assessment yearconcerned herein is 1987-88. The offences alleged against theaccused are punishable under Sections 276C(1) and 277 of theAct in respect of the assessment year 1987-88. Primarily, thecomplaint against the accused is arising from wilful attempt toevade tax, penalty or interest, false statement in verification,etc. Crl.R.P.No.2126 of 2005 ..3.. 3.The 1[st] accused is a firm, running parallel colleges atErnakulam and Nedumangad, and is an assessee to theincome tax. The accused 2 and 3 are the Managing Partnerand Partner respectively of the 1[st] accused firm. The case isinstituted otherwise than on a police report by the complainantfor the offences punishable under Sections 276C(1) and 277 ofthe Act. 4.The 1[st] accused firm filed its return on 29.9.1987along with Annexure-A statement of total income, Annexure-Bprofit and loss account, Annexure-C balance sheet and otherdocuments, as contemplated under Section 139(9) Explanation(a),(b),(bb),(c),(d), etc. of the Act disclosing a total income ofRs.3,16,000/-. This total income of Rs.3,16,000/- was arrivedat after openly claiming deduction from the net profit ofRs.8,04,236/- disclosed by the firm in the profit and lossaccount which was filed along with the return. It could be seenfrom Annexures-A, B and C that the petitioner firm haddisclosed a sum of Rs.8,04,236/- as the income and thereafterthe firm had openly claimed a deduction of Rs.4,88,233/- and Crl.R.P.No.2126 of 2005 ..4.. then arrived at the figure of Rs.3,16,003/- which was theultimate figure derived while filing the return of tax payable.The complainant, the Assessing Officer, on the basis of theconsideration of the materials on record, assessed the firm atRs.6,50,000/-. The difference between the returned figureand the assessed figure was treated as the concealed income. Crl.R.P.No.2126 of 2005 ..4.. then arrived at the figure of Rs.3,16,003/- which was theultimate figure derived while filing the return of tax payable.The complainant, the Assessing Officer, on the basis of theconsideration of the materials on record, assessed the firm atRs.6,50,000/-. The difference between the returned figureand the assessed figure was treated as the concealed income. 5.The learned Additional Chief Judicial Magistrateafter taking cognizance of the offence under Section 276C(1)and 277 of the Income Tax Act issued summons to the accused1 to 3. In a warrant-case instituted otherwise than on a policereport, when the accused appeared before the learnedMagistrate under Section 244(1) of the Cr.P.C., the learnedMagistrate is obliged to hear the prosecution and take allevidence as may be produced in support of the prosecution. Inthis case, the learned Magistrate examined PWs.1 and 2 on thepart of the prosecution. On going through the evidence ofPW1, it is seen that the trial court did not permit the accusedto cross-examine PW1, presumably for the reason that thedefence will get an opportunity to cross-examine PW1 later. Crl.R.P.No.2126 of 2005 ..5.. There is nothing on record to indicate that the accused optedto cross-examine PW1 at a later stage. However, the trial courtpermitted the accused to cross-examine PW2. Two morewitnesses are yet to be examined by the prosecution as perthe witness list submitted before the trial court. 6.Soon after the examination of PWs.1 and 2, theaccused filed Crl.M.P.No.52/05 before the trial court seekingfor a discharge under Section 245(2) of the Cr.P.C. The learnedMagistrate dismissed the application concluding that there isconcealment of income on the part of the accused andaccordingly dismissed the application filed under Section245(2) of the Cr.P.C. The petitioners, being aggrieved by theAnneuxre-E order, have filed this revision before this Court. 7.Heard Sri.Arun Raj.S., the learned counsel for therevision petitioners and Sri.Jose Joseph, learned StandingCounsel for the Income Tax. 8.When the revision petition has come up for hearing, the learned counsel for the revision petitioners Sri.Arun Raj.S.submits that the 2[nd] revision petitioner is no more and the case Crl.R.P.No.2126 of 2005 against him stands abated. The 2[nd] revision petitioner was theManaging Partner of the 1[st] revision petitioner herein. 9.The learned counsel for the revision petitionersfurther submitted that it was brought to the notice of thelearned Magistrate that Annexures-A and B statement andprofit and loss account respectively which form part of thereturn marked as Ext.P4 on the side of the complainant, wouldshow that Rs.8,04,236/- is the income figure which theaccused have disclosed whereas the income assessed by theAssessing Officer was only Rs.6,50,000/-. According to thelearned counsel, the claim of depreciation to the tune ofRs.4,88,233/- is an open claim which the Assessing Officercould allow or reject. Thus, it is contended that the AssessingOfficer could have rejected the claim for deduction andassessed the income at Rs.8,04,236/-. Instead of the above,the Assessing Officer, it has been submitted, assessed theincome at Rs.6,50,000/-. 10.The learned counsel for the respondent, on theother hand, would submit that taking into consideration the ..7.. evidence available on record, the learned Magistrate declinedthe prayer of the accused to discharge them under Section245(2) of the Cr.P.C. The learned counsel for the respondentfurther submitted that no other conclusion is reasonablypossible and where the order of the learned Magistrate isneither perverse nor suffers from any illegality, the orderwould not be interfered in revision. 10.The learned counsel for the respondent, on theother hand, would submit that taking into consideration the ..7.. evidence available on record, the learned Magistrate declinedthe prayer of the accused to discharge them under Section245(2) of the Cr.P.C. The learned counsel for the respondentfurther submitted that no other conclusion is reasonablypossible and where the order of the learned Magistrate isneither perverse nor suffers from any illegality, the orderwould not be interfered in revision. 11.When it comes to cross-examination, the trial courthas adopted two different yardsticks as stated earlier toexamine PWs.1 and 2. This is apparently incorrect. In thiscontext, the Apex Court in Ajoy Kumar Ghose v. State ofJharkhand & another [(2009) 14 SCC 115] held inparagraph 51 of the judgment thus:- “51. The right of cross-examination is a verysalutary right and the accused would have to begiven an opportunity to cross-examine thewitnesses, who have been offered at the stage ofSection 244(1) Cr.P.C. The accused can show, byway of the cross-examination, that there is nojustifiable ground against him for facing the trialand for that purpose, the prosecution would have ..8.. to offer some evidence. While interpreting thisSection, the prejudice likely to be caused to theaccused in his losing an opportunity to show tothe Court that he is not liable to face the trial onaccount of there being no evidence against him,cannot be ignored.” 12.Now coming to the facts of this case, it is clear thatthe opportunity to cross-examine PW1 is curtailed as the trialcourt has straight away proceeded to examine PW2. The trialcourt has taken into consideration the complaint, oral evidenceof PWs.1 and 2 and dismissed the application filed by theaccused under Section 245(2) of the Cr.P.C. In view of thedecision inAjoy Kumar Ghose'scase (supra), thejurisdictional Magistrate has the power to discharge theaccused under Section 245(2) of the Cr.P.C. if the chargelevelled against the accused is groundless, at any previousstage, that is, before the evidence is completed under Section244(1) of the Cr.P.C. or any stage prior to that. Consequent tothe application filed by the accused, the learned Magistrate notonly dismissed the application but also failed to state the future course of action under Section 244(1) of the Cr.P.C.Paragraphs 24, 25 and 26 in Ajoy Kumar Ghose's case(supra) are relevant in this context, which are extracted ashereinbelow:- “24. Now, there is a clear difference in Sections245(1)and 245(2) of the Cr.P.C. Under Section245(1), the Magistrate has the advantage of theevidence led by the prosecution before himunder Section 244 and he has to considerwhether if the evidence remains unrebutted, theconviction of the accused would be warranted. Ifthere is no discernible incriminating material inthe evidence, then the Magistrate proceeds todischarge the accused under Section 245(1)Cr.P.C. 25.The situation under Section 245(2) Cr.P.C.is, however, different. There, under sub-Section(2), the Magistrate has the power of dischargingthe accused at any previous stage of the case,i.e., even before such evidence is led. However,for discharging an accused under Section 245(2)Cr.P.C., the Magistrate has to come to a findingthat the charge is groundless. There is no question of any consideration of evidence at thatstage, because there is none. The Magistrate cantake this decision before the accused appears oris brought before the Court or the evidence is ledunder Section 244 Cr.P.C. The words appearingin Section 245(2) Cr.P.C. "at any previous stageof the case", clearly bring out this position. 26.It will be better to see what is that"previous stage". The previous stage wouldobviously be before the evidence of theprosecution under Section 244(1) Cr.P.C. iscompleted or any stage prior to that.” question of any consideration of evidence at thatstage, because there is none. The Magistrate cantake this decision before the accused appears oris brought before the Court or the evidence is ledunder Section 244 Cr.P.C. The words appearingin Section 245(2) Cr.P.C. "at any previous stageof the case", clearly bring out this position. 26.It will be better to see what is that"previous stage". The previous stage wouldobviously be before the evidence of theprosecution under Section 244(1) Cr.P.C. iscompleted or any stage prior to that.” 13.In this case, the learned Magistrate dismissed theapplication filed by the accused under Section 245(2) of theCr.P.C. before the entire evidence is recorded under Section244(1) of the Cr.P.C. This seems to be the established law.However, the impugned order was passed by the learnedMagistrate after taking into consideration the evidenceadduced by PW1 without giving an opportunity to cross-examine PW1. The principles of natural justice mandate that it Crl.R.P.No.2126 of 2005 ..11.. is only after affording an opportunity to cross-examine PW1,the trial court would proceed to decide as to whether the caselevelled against the accused is groundless or not. If thelearned Magistrate comes to a conclusion that the charge isgroundless, the learned Magistrate may proceed to dischargethe accused under Section 245(2) of the Cr.P.C. If not, thelearned Magistrate is duty bound to proceed under Section244(1) of the Cr.P.C. and take all evidence as may be producedby the complainant in support of the prosecution. After takingsuch evidence, the learned Magistrate comes to a conclusionthat no case against the accused has been made out which, ifunrebutted, would warrant their conviction, the learnedMagistrate shall proceed to discharge the accused underSection 245(1) of the Cr.PC. If not, the learned Magistrate willproceed under Section 246(1) of the Cr.P.C. Thus, thecomplainant will get the second opportunity to lead evidence insupport of the prosecution. Thus, the case is liable to beremitted back to the trial court, where the complainant mayoffer remaining witnesses under Section 244(1) of Cr.P.C. and Crl.R.P.No.2126 of 2005 ..12.. the trial court shall give an opportunity to cross-examine thewitnesses for the prosecution by the accused. It is only afteraffording an opportunity to cross-examine PW1, the trial courtwould proceed to decide the petition filed by the accusedunder Section 245(2) of the Cr.P.C. and decide whether thecase levelled against the accused is groundless or not. In casethe application under Section 245(2) of the Cr.P.C. is notinsisted by the accused before the trial court, the trial courtshall proceed to examine the remaining witnesses underSection 244(1) of the Cr.P.C. offered by the prosecution anddecide the case in accordance with law. 14.Accordingly, the criminal revision petition is allowedin part and the impugned order stands set aside. It is furtherclarified that the case stands remitted for consideration afreshin accordance with law, if possible, within three months fromthe date of production of a certified copy of this order beforethe trial court. The trial court will decide the case on the basisof the materials and the evidence adduced by the prosecutionuninfluenced by the earlier order passed by the trial court. This Crl.R.P.No.2126 of 2005 ..13.. Court, however, makes it clear that this Court has notexpressed any opinion on the merits of the case while havingformed an opinion to remand the case to the trial court. Sd/- skj N.ANIL KUMAR, JUDGE