J.dinakaran v. The Deputy Director Of Income Tax (Investigation), Unit-3(1), Nungambakkam, Chennai – 600 034

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR. JUSTICE G.K.ILANTHIRAIYAN Crl.O.P.Nos.28469, 28482 to 28484, J.Dinakaran ... Petitioner in all Crl.O.P.'sVs. The Deputy Director of Income Tax (Investigation),Unit-3(1),Nungambakkam,Chennai – 600 034 ... Respondent in all Crl.O.P.'s COMMON PRAYER:Criminal Original Petitions filed underSection 482 Cr.P.C. praying to call for the records and quashthe charges framed as against the petitioner / accused on01.11.2018 in the complaint in E.O.CC.Nos.130, 134, 135, 131,132 & 133 of 2016 pending on the file of the Hon'ble AdditionalChief Metropolitan Magistrate, EO-II, Egmore, Chennai foroffence under Section 227 of Income Tax, 1961. For Petitioner : Mr.S.S.Rajeshin all Crl.O.P.'s For Respondent : Mrs.M.Sheela,in all Crl.O.P.'s Special Public Prosecutor for Income Tax These petitions have been filed to quash the proceedings inE.O.CC.Nos.130, 134, 135, 131, 132 & 133 of 2016 pending on thefile of the Hon'ble Additional Chief Metropolitan Magistrate,EO-II, Egmore, Chennai. 2. Mr.S.S.Rajesh, the learned counsel for the petitionersubmitted that the petitioner is an individual engaged inbusiness of arranging finance, dealing with bricks, conductingchit fund, trade old boxes, waster paper assessed to tax by therespondent herein under pan No. . The respondentdefacto complainant filed complaint in pursuance of the sanction https://hcservices.ecourts.gov.in/hcservices/ of the Principal Director of Income Tax(Investigation), TamilNadu & Pondicherry under Section 277 of the Income Tax Act,1961. The complaint is with respect to assessment years 2009-2010, 2010-2011, 2011-12, 2012-2013, 2013-2014 and 2014-2015.The petitioner did not disclose his actual income of businesstransactions and search was conducted and found that thepetitioner did not maintain documents as per the accountingpractice and entire transactions were done in cash. Onconfession of the petitioner, his statement was recorded anddisclosed his money lending and chit business. Furtherallegation is that the petitioner submitted that a sum of Rs.35crores was not disclosed as income income for the assessmentyear 2009-2010, 2010-2011, 2011-12, 2012-2013, 2013-2014 and2014-2015. Therefore, the petitioner wilfully made falsestatement of return of income tax filed in his individualcapacity and wilfully under reported the income earned. It ispunishable under Section 227 Income Tax Act and liable forprosecution as such show cause notice was issued on 14.03.2016and the petitioner issued reply and it was not plausible and nottenable according to the complainant. Therefore, the respondentcomplainant preferred a complaint for the offence under Section277 of Income Tax Act. 3. The learned counsel for the petitioner submitted thatthere is absolutely no prima facie to entertain the complaint asagainst the petitioner. There are certain proceduralirregularities which are carried out by the complainant ininitiating the present impugned proceedings and theinvestigation being there is no locus to initiate prosecutionagainst the petitioner. He further submitted that thepetitioner never had an intention to evade income tax as allegedby the complainant and as such the learned Magistrate ought notto have taken cognizance for the offence under Section 277 ofIncome Tax Act. Therefore, he prayed for quashment of theentire proceedings in E.O.CC.Nos.130, 134, 135, 131, 132 & 133of 2016 pending on the file of the Hon'ble Additional ChiefMetropolitan Magistrate, EO-II, Egmore, Chennai. 4. Per Contra, Mrs.M.Sheela, Special Public Prosecutor forIncome Tax appearing for the respondent contended that thepetitioner failed to disclose his entire income for theassessment year 2009-2010, 2010-2011, 2011-12, 2012-2013, 2013-2014 and 2014-2015 to the tune of Rs.35 crores. Therefore, itis punishable under Section 277 of Income Tax Act. She furthersubmitted that the petitioner did not disclose his money lendingand chit business in his income tax returns. Therefore, asearch was conducted on the office premises of the petitionergroup of companies along with his residence and found that thepetitioner did not maintain documents as per the accountingpractice and the entire transaction was done in cash. The petitioner has wilfully made false statement of return of incomefiled in the individual capacity and wilfully under reported theincome earned by the petitioner. Therefore, there is absolutelyno merit in the quash petition and sought for dismissal of thesame. 5. Heard Mr.S.S.Rajesh, the learned counsel for thepetitioner and Mrs.M.Sheela, Special Public Prosecutor forIncome Tax appearing for the respondent. 6. In all the petitions, the petitioner is accused for nondisclosing the income to the tune of Rs.35 crores for theassessment years 2009-2010, 2010-2011, 2011-12, 2012-2013, 2013-2014 and 2014-2015. The present complaint has been lodged asagainst the petitioner for the offence punishable under Section277 of Income Tax Act. It is also seen that the petitioner didnot disclose his money lending and chit business in his returnsof income and declared false statement of returns of incomefiled in his individual capacity and wilfully under reported theincome earned by the petitioner. The learned counsel for therespondent relied upon the judgment in the case of Arun Arya Vs.Income Tax Officer in CRMC.No.205 of 2015 dated 28.09.2018,wherein Jammu & Kashmir High Court has held as follows: “10. Under the Income-Tax Act, 1961 there arevarious provisions for compliance with taxing provisionsand the collection of taxes. The Income-tax Act seeks toenforce tax compliance in a three fold manner; namely 1)Imposition of interests 2) Imposition of penalties and3) Prosecutions. In the fight against tax evasion,monetary penalties are not enough. When a calculatingtax dodger finds it a profitable proposition to carry onevading taxes over the years, if the only risk to whichhe is exposed is a monetary penalty in the year in whichhe happens to be caught. The public in general alsotends to lose faith and confidence in tax administrationwhen a tax evader is caught, but the administration letshim get away lightly after paying only a monetarypenalty- when money is no longer a major considerationwith him if it serves his business interest. Thesections dealing with offences and prosecutionproceedings are included in Chapter XXII of the Income-tax Act, 1961 i.e. S. 275A to S. 280D of the Act. Theprovisions of the said Code are to be followed relatingto all offences under the Income-tax Act, unless thecontrary is specially provided for by the Act. Theconcept of mens rea is integral to criminaljurisprudence. An offence cannot be committedunintentionally. Generally a guilty mind is a sine quanon for an offence to be committed. However, The Taxation Laws S. 278E has carved out an exception tothis rule. The said Section places the burden of provingthe absence of mens rea upon the accused and alsoprovides that such absence needs to be proved not onlyto the basic threshold of „preponderance of probability"but „beyond reasonable doubt". In every prosecutioncase, the Court shall always presume culpable mentalstate and it is for the accused to prove the contrarybeyond reasonable doubt. No doubt, this presumption is arebuttable one.” Taxation Laws S. 278E has carved out an exception tothis rule. The said Section places the burden of provingthe absence of mens rea upon the accused and alsoprovides that such absence needs to be proved not onlyto the basic threshold of „preponderance of probability"but „beyond reasonable doubt". In every prosecutioncase, the Court shall always presume culpable mentalstate and it is for the accused to prove the contrarybeyond reasonable doubt. No doubt, this presumption is arebuttable one.” 7. She also relied upon the judgment in the case ofP.Jayappan Vs. S.K.Perumal reported in 1984 AIR 1693, wherein itis held as follows: "It may be that in an appropriate case thecriminal Court may adjourn or postpone the hearing of acriminal case in exercise of its discretionary power undersection 309 of the Code of Criminal Procedure if thedisposal of any proceeding under the Act which hasa bearing on the proceedings before it is imminent sothat it may take also into consideration the order to bepassed therein. Even here the discretion should beexercised judicially and in such a way as not tofrustrate the object of the criminal proceedings.There is no rigid rule which makes it necessary for acriminal court to adjourn or postpone the 538 hearing of acase before it indefinitely or for an unduly long periodonly because some proceeding which may have some bearing onit is pending elsewhere. But this, however, has norelevance to the question of maintainability of theprosecution. The prosecution in those circumstancescannot be quashed on the ground that it is a prematureone." 8. The Hon'ble Supreme Court of India has held that theconcept of mens rea is integral to criminal jurisprudence andoffence cannot be committed intentionally. Section 278 (E) ofthe Taxation Laws places burden of proving the option of mensrea upon the accused and also provides that such absence need tobe proved not only to the basic threshold of “preponderance ofpossibility” but beyond reasonable doubt. In every prosecutioncase, the court shall always presume culpable mental state andit is for the accused to prove the contrary beyond reasonabledoubt. 9. In the present case, it is evident from the complaintthat the petitioner did not disclose his income to the tune ofRs.35 crores for the assessment years 2009-2010, 2010-2011,2011-12, 2012-2013, 2013-2014 and 2014-2015. The petitioner https://hcservices.ecourts.gov.in/hcservices/ wilfully made false statement of return of income and wilfullyunder reported the income earned. Therefore, the entireproceedings cannot be quashed on the grounds raised by thepetitioner as stated supra. The petitioner has to prove thecontrary beyond reasonable doubt before the trial court and thetrial court has to enquire the complaint independently on thebasis of the evidence as such these petitions are liable to bedismissed. 10. Accordingly, these Criminal Original petitions aredismissed. Consequently, connected miscellaneous petitions areclosed. Sd/- Assistant Registrar //True Copy// Sub Assistant RegistrarlokTo1. The Deputy Director of Income Tax (Investigation), Unit-3(1), Nungambakkam, Chennai – 600 0342. The Additional Chief Metropolitan Magistrate, EO-II, Egmore, Chennai 3. The Special Public Prosecutor for Income Tax, High Court of Madras.+2 ccs to M/s.R.C.Paul Kanagaraj, Advocate, S.R.No.20396 Order made in Crl.O.P.Nos.28469, 28482 to 28484, 28487 & 28492 of 2018and Crl.M.P.Nos.16565,16566, 16574 to 16580 & 16582 to 16584 of 2018NRL(CO)SSM(27/03/2019).