The Deputy Commissioner Of Income Tax,Special Range – Ii,Coimbatore v. M/S.engineering Industrial Foundry Co (Firm), Rep By Managing

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 03.04.2007CORAM: THE HONOURABLE MR.JUSTICE A.C.ARUMUGAPERUMAL ADITYAN Crl.R.C.No.1497 of 2002 The Deputy Commissioner of Income Tax,Special Range – II,Coimbatore. ..Revision Petitioner/Complainant vs. 1.M/s.Engineering Industrial Foundry Co (Firm), Rep by Managing Partner S.Ramesh No.19, Senguptha Street, Coimbatore.2.Thiru.S.Ramesh3.Thiru.S.Sriram4.Thiru.R.Vasudevan5.Smt.R.Mythili6.Thiru.S.Rajagopalan7.Thiru.V.Ranganathan ..Respondent/accused Prayer: This Revision has been preferred under Section 397 and 401 ofCr.P.C., against the order dated 12.06.1998 in Crl.R.P.No.136 of 1993passed by the II Additional Sessions Judge, Coimbatore, reversing theorder dated 6.10.1993 in Crl.M.P.No.2597 of 1992 in C.C.No.127 of 1991 onthe file of the Chief Judicial Magistrate, Coimbatore. For Appellant : Mr.K.Ramasamy Special Public Prosecutor For Respondent : Mr.V.Gopinath, Senior Counsel for Mr.R.Johh Sathyan https://hcservices.ecourts.gov.in/hcservices/ ORDER This revision has been preferred against the order passed inCrl.R.C.No.136/1993 on the file of the II Additional Sessions Judge,Coimbatore, against the order in Crl.M.P.No.2597 of 1992 in C.C.No.127 of1991 on the file of the Chief Judicial Magistrate, Coimbatore. Theaccused in C.C.No.127 of 1991 on the file of the Chief JudicialMagistrate, Coimbatore, have filed Crl.M.P.No.2597 of 1992 under section245 of Cr.P.C., for discharge of them from the offence alleged againstthem in C.C.No.127 of 1991. The learned trial judge, after going throughthe affidavit to the petition and also the counter filed by therespondent, has dismissed the petition. Aggrieved by the findings of thelearned trial judge, the accused have preferred a criminal revisionpetition No.136/1993 before the II Additional Sessions Judge, Coimbatore.The learned Sessions judge, after giving due deliberations to thesubmissions made by the learned counsel on both sides and after goingthrough the oral and documentary evidence let in before the trial Court,has allowed the revision thereby setting aside the order passed inCrl.M.P.No.2597 of 1992 in C.C.No.127 of 1991, resulting discharge of theaccused from the criminal liability alleged against them, whichnecessitated the revision before this Court. 2. The only point to be decided in this revision is whether there isany prima facie case against the accused to proceed with the trial inC.C.No.127 of 1991? 3. The Point:- 2. The only point to be decided in this revision is whether there isany prima facie case against the accused to proceed with the trial inC.C.No.127 of 1991? 3. The Point:- 3(a) The complaint was preferred by Rang No.II, Income TaxCommissioner, Coimbatore Division, against the accused under Section 276 Cand 277 of the Income Tax Act and also under Section 193 and 196 of theIPC. The learned Sessions Judge has discharged the accused on twogrounds. The learned Sessions Judge would state that the Income TaxDepartment has levied penalty for an offence contemplated under Section276(C)(1) of the Income Tax Act for concealment of income by the accused.The learned Sessions Judge relied on the provision contemplated underSection 279(iA) of the Income Tax Act to the effect that if a penaltylevied by the department is waived or reduced then he cannot beprosecuted. The power of waivering or reducing the penalty has beengiven to Commissioner of Income Tax under Section 273A of the Income TaxAct. The learned Special Public Prosecutor for Income Tax CasesThiru.K.Ramsamy would focus the attention of this Court to Section 273A ofthe Income Tax Act and would contend that chapter XXI of the Income Taxdeals with penal section and chapter XXII of the Income Tax Act deals withprosecution and both can simultaneously be initiated against an income taxevader. The learned Special Public Prosecutor would contend that thereasoning of the learned Sessions judge that since penalty has beenimposed on the accused he cannot be prosecuted cannot be a sound reasoning. In support of this contention the learned Special PublicProsecutor would rely on 149 ITR 696 (P.Jayappan Vs. S.K.Perumal), whereinit has been held by the Honourable Apex Court that section 279(1A) doesnot provide that the mere fact that there is a possibility of theCommissioner passing an order waiving or reducing the penalty imposed orimposable on the accused under Section 271(1)(c), prosecution for anoffence under Section 276C or 277 shall not be instituted. For the sameproposition of law the learned Special Public Prosecutor would rely on 206ITR 222 (Universal Supply Corporation and others Vs. State of Rajasthanand another), wherein the extract of Honourable Supreme Court has beenreproduced by the Rajasthan High Court - Jaipur Bench as follows:- "We do not, however, agree with the view expressed by the HighCourt of Calcutta in Jyoti Prakash Miter Vs. Haramohan Chowdhury(1978) 112 ITR 384. In that case on a complaint made againstthe assessee for an offence punishable under Section 277 of theAct, the Chief Metropolitan Magistrate issued process.Thereupon the assessee questioned the validity of the initiationof the criminal proceedings before the High Court of Calcutta onthe ground that until the penalty proceedings initiated inrespect of the same period under Section 271(1)(c) of the Actwere finally disposed of, no complaint could be filed. Thecontention of the assesseee was that the prosecution was opposedto the principles of natural justice as he would be deprived ofthe benefit of a finding which was likely to be recorded in hisfavour in the penalty proceedings. It was urged on behalf ofthe Department that the penalty proceedings under Section 271(1)(c) had no direct bearing on the maintainability of aprosecution launched under Chapter XXII of the Act. This HighCourt took the view, which according to us in an erroneous one,that the provisions of section 279(1A) of the Act establishedthe necessity for the completion of the penalty proceedingsbefore the institution of the prosecution and, therefore, aslong as the penalty proceedings were pending, the criminalproceedings could not be instituted." So the first reasoning given by the learned Sessions Judge that sincepenalty has been levied under Ex.P.15, prosecution against the accusedcannot be proceeded with is erroneous. So the first reasoning given by the learned Sessions Judge that sincepenalty has been levied under Ex.P.15, prosecution against the accusedcannot be proceeded with is erroneous. 3(b) The next ground on which the learned Sessions Judge hasallowed the revision was that one Sampath, Managing Partner of A1-partnership firm had filed the income tax return for A1-partnership firmfor the assessment year 1980-1981 and according to the prosecution, theconcealment of income by A1-partnership firm was to the tune ofRs.2,20,000/- and that for this lapse a penalty has been levied underEx.P.15 and that there was no material to show that the other accused hadknowledge or connivance with the said Sampath to submit a false income taxreturn. The learned Senior Counsel Thiru.Gopinath relying on Ex.P.15, https://hcservices.ecourts.gov.in/hcservices/ would contend that for the concealment of income to the tune ofRs.2,20,000/- alone a penalty of Rs.63,360/- was levied as per Section 271(1)(C) of the Income Tax Act. The learned Senior Counsel would attractthe attention of this Court to the evidence of P.Ws. 1 to 3, the incometax officials, deposed before the trial Court before framing of charges bythe trial Court. In the chief examination P.Ws.1 and 3 would admit thatA2 to A9 are the partners in A1-partnership firm and that A4 and A6 arenow no more and that P.W.2 has not impleaded the accused in his evidencein respect of the concealment of Rs.2,20,000/- income. The learned seniorcounsel would rely on the deposition of P.W.3 in the cross-examination tothe effect that Thiru.Sampath is the managing partner of A1-partnershipfirm and that even during his investigation Sampath was not alive, but A2has given a statement to the effect that he is responsible for theconcealment of income for the Kalinga Industries also. In this regard thelearned Special Public Prosecutor would draw the attention of this Courtto the complaint filed in the case wherein it has been stated that in therevised return filed on behalf of A1-partnership firm for the assessmentyear 1980 -1981, the concealment of income of Rs.2,20,000/- has beenadmitted and besides that it has also been admitted that the income fromKalinga Iron Works to the tune of Rs.66,000/- was also not disclosed. Butas far as the concealment of Rs.66,000/- from out of the income fromKalinga Iron Works (twice) the evidence of P.Ws.1 to 3 are silent. ButP.W.3 in his evidence in chief-examination would state that the income ofRs.66,000/- was stated in the revised return submitted by A1-partnershipfirm. But under Ex.P.15, order of levy of penalty, it is silent withregard to the concealment of the income of Rs.66,000/-. In this contextthe learned Special Public Prosecutor would rely on Ex.D.1, letter writtenby A2 to inspecting Assistant Commissioner of Income Tax, Assessment RangeNo.i, Coimbatore, wherein it has been stated that the revised return forthe assessment year 1980-1981 revealing the mistake of concealment ofRs.66,000/- of income from Kalinga Iron Works and he has further statedthat it was an accountancy error resulted in debit in the purchase accounttwice over of Rs.66,014/21 and that the said Sampath, managing partner ofA1-partnership firm also expired on 17.2.1983 and that he was the person,who was looking after the day-to-day affairs of A1-partnership firm. Ithas further been stated in Ex.D.1 itself that the deceased Sampath was themanaging partner who was the managing the business and other persons arenot in the know of things. The learned senior counsel relying on 1992 LW120 (Alfred Borg & Co., India (P) Ltd., and 13 others and M/s.Antox India(P) Ltd., 46/3, Hossargatta Road, Bangalore), wherein it has been held asfollows:- "In catena of cases, the Apex Court has held that initiatingprosecution against sleeping partners of women, when the companyis the main offender, cannot be sustained unless there was basismaterial to show that such partners or directors were also incharge of and responsible for the conduct of the business of thecompany. Merely, by alleging that directors are in charge ofthe company, as is found in paragraph 11 of the complaint, petitioners 2 to 6 cannot be prosecuted. The complainant shouldfurther show that petitioners 2 to 6 were also responsible forthe day-to-day conduct of the business of the company." The learned Special Public Prosecutor relied on 223 ITR 68 (Income taxofficer Vs. Dinesh K.Shah and others), wherein a bench of this court haveheld that in a case against a partnership firm notice need not be sent toeach and every partner. The dictum laid in the said ratio decidendi is asfollows:- "In this context, a person 'in charge' must mean a personin over all control of the day-to-day business of the companyor firm or other association. Therefore, any person who at thetime the offence was committed was in charge of and wasresponsible to the company, which includes a firm, for theconduct of the business, can be proceeded against under section278B of the Act notwithstanding the fact that the personproceeded against may not be either the "principal officer" orthe "person responsible for paying". In view of the provisionsof this section, non-issuance of individual notices to any ofthe partners is of no consequence. It is not necessary toissue any such notice. Section 2(35) defines the expression"principal officer" only with reference to a local authority ora company or any other public body or any association ofpersons or any body of individuals. The Act adopts thedefinition of the terms "firm", "partner" and "partnership" ascontained in the Indian partnership Act, 1932. Each partner isan agent of another." But the above said dictum will not be applicable to the present facts ofthe case because the issue raised in this case is not that the notice wasnot served to each and every partner of the firm. But the point fordetermination is whether there is any basic material to show that thesepersons were also incharge and responsible for the conduct of the businessof the company. Under such circumstances, there is absolutely no materialon record to show that A2 to A9 (A4 and A6 died) also are incharge andresponsible for the conduct of the business of the company at the relevantpoint of time, when Sampath alone, as a managing partner, was lookingafter the affairs of the company and had submitted the impugned income taxreturn for the assessment year 1980-1981 in which he had concealed theincome of Rs.2,20,000/-. So under such circumstances, I do not find anyreason to interfere with the orders of the learned first appellate judgein discharging A2 to A9 (A4 and A6 died). Admittedly A1-partnership firmis responsible for the concealment of the income of Rs.2,20,000/- forwhich A1 (represented by managing partner S.Ramesh) necessarily to beprosecuted. Point is answered accordingly. 4. In fine, the revision is partly allowed with the followingmodification in the order in Crl.R.P.No.136 of 1993 on the file of the IIAdditional Sessions Judge, Coimbatore :- The prosecution against A1represented by managing partner S.Ramesh is to be proceeded with, inaccordance with law. The trial court is directed to dispose of the matterwithin a period of three months from the date of receipt of copy of thisorder. Sd/ Asst.RegistrarDated : 10.04.2007 Amended as per the order of this Court dated 07.06.2007 and made in the applicationin Crl.RC.No.1497/02. Sd/-Asst. RegistrarDated : 08.06.2007. AKR (CO)km/12.4. Crl.R.C.No.1497 of 2002 RVL 09.06.2007