V.k. Sasikala v. The Asst. Commissioner Of Income Tax, Central Circle Ii(5), Madras

In the High Court of Judicature at Madras Dated : 02..12..2006 C O R A M The Honourable Mrs. Justice Prabha Sridevan Criminal R.C. Nos.781 to 786 of 2006andM.P.No.1, 2, 2 and 2 of 2006 J. Jayalalitha .. Petitioner in Crl. R.C.No.781 of 2006(Accused No.2) Sasi Enterprises,Rep. By its Partner V.K. Sasikala,14, Parsn Manere, 602, Anna Salai, Chennai-6.J. Jayalalitha .. Petitioner in Crl. R.C.No.782 of 2006(Accused No.1) .. Petitioner in Crl. R.C.No.783 of 2006(Accused No.2) Sasi Enterprises,Rep. By its Partner V.K. Sasikala,14, Parsn Manere, 602, Anna Salai, Chennai-6.Selvi J. Jayalalitha .. Petitioner in Crl. R.C.No.784 of 2006(Accused No.1).. Petitioner in Crl. R.C.No.785 of 2006(Accused No.1) V.K. Sasikala .. Petitioner in Crl. R.C.No.786 of 2006(Accused No.1) Versus The Asst. Commissioner of Income Tax,Central Circle II(5),Madras. .. Respondent Prayer : Criminal Revisions under Section 397 r/w. 401 ofCr.P.C. against the orders dated 14.6.2006 passed in M.P.No.1784 of 2004 in E.O.C.C. No.202 of 1997, M.P. No.1784of 2004 in E.O.C.C. No.202 of 1997, M.P. No.1785 of 2004in E.O.C.C. No.203 of 1997, M.P. No.1785 of 2004 inE.O.C.C. No.203 of 1997, M.P. No.1782 of 2004 in E.O.C.C.No.161 of 1996 and M.P. No.1783 of 2004 in E.O.C.C. No.194of 1997, on the file of the Additional Chief MetropolitanMagistrate (E.O.I), Chennai. https://hcservices.ecourts.gov.in/hcservices/ For Petitioners: Mr. Guru Krishnakumar and Mr. Subramanium Prasad for Mr. N. Jothi, Assisted by Mr. L.P. Shanmugha Sundaram, Mr. A. Kandasamy and Mr. V. Karthikeyan. For Respondents: Mr. Gopal Subramaniam, Additional Solicitor General of India, Assisted by Mr. K. Ramasamy, Senior Public Prosecutor for I.T. Cases, Mr. S. Rajappa and Mr.P.Wilson,Asst.Solicitor General of India - - - - - O R D E R The petitioners' applications for discharge filed under Section245 of the Code of Criminal Procedure were dismissed. They havefiled these revisions. 2. Briefly stated, the facts of the case are as follows : The petitioner in Crl. R.C. Nos.781, 783 and 785 of 2006(hereinafter referred to as 'the first petitioner') was required tofile return of income for the Assessment Year 1993-94 under Section139(1) of the Income Tax Act, 1961 (hereinafter referred to as 'theAct') by 31st August, 1993. The first petitioner failed to furnishthe return of income. A notice was sent to the first petitionerunder Section 142(1) on 18.1.1994, calling upon her to file thereturn of income within a period of 30 days from the date of serviceof the notice. This notice was served on the first petitioner on19.1.1994. The period of 30 days expired, but no return was filed incompliance to the notice. Reminders were sent on 22.8.1994,10.2.1995 and 23.8.1995, yet the return was not filed. Subsequently,a notice under Section 142(1)(ii) of the Act was issued on 31.7.1995,calling upon the first petitioner to produce the accounts since asper the Act, assessments need to be completed by March 31, 1996. Thefirst petitioner failed to furnish the return of income and alsofailed to comply with the statutory notice. A best judgmentassessment was completed under Section 144 of the Act on 9.2.1996 andpenalty proceedings for concealment of income were initiated underSection 271(1)(c) of the Act. Penalty proceedings were alsoinitiated for non-compliance of the notice under Section 271(1)(b) ofthe Act. A demand inclusive of interest was made. The firstpetitioner challenged the assessment order before the Commissioner of Income Tax (Appeals). This appeal was partly allowed by order dated28.2.1997. The department has challenged that order in AppealNo.1239 of 1997. The first petitioner has also challenged thatorder. Both the Appeals are pending. On 14.10.1996, complaintswere filed against the first petitioner and the other petitioners forthe offence under Section 276CC of the Act. Thereafter, there havebeen several proceedings initiated at the instance of the firstpetitioner before the Magistrate's Court and also before the HighCourt. It is not necessary for the purpose of deciding theserevisions to refer to all of them in detail or to refer to the factsin each case, since they are more or less similar. 3. On 12.5.2004, an application under Section 313 of the Code ofCriminal Procedure was filed by the respondents for examining thefirst petitioner. On the same day, the first petitioner filed anapplication under Section 245 of the Code for discharging her fromthe prosecution proceedings. Other petitions were also filed. Therespondents filed petitions before this Court for a direction to thetrial court to frame charges against the petitioners. Thepetitioners filed application under Section 482 of the Code to quashthe proceedings. The petitions filed by the respondents weredismissed by this Court. Against this, the department filed SpecialLeave Petitions, which were disposed of by the Supreme Court,directing the trial court to consider the matter regarding framing ofcharge, after hearing the parties on the petition for discharge,within a period of two months. Thereafter, the trial Magistratedismissed the discharge petitions and fixed the date for commencementof hearing as per the directions of the Supreme Court. The learnedMagistrate directed the accused to be present in Court on 25.8.2006.The first petitioner has filed the revision against the dismissal ofthe discharge petition. She has also filed a writ petitionchallenging the constitutional validity of Section 278E of the Act. 4. The following grounds have been raised by the revisionpetitioners : (1) The trial court failed to consider that the ingredients forthe offence were not satisfied and the alleged offence is notcomplete. (2) The determination of the quantum of tax liability andfinality of assessment proceedings are important for invoking Section276CC. (3) Section 276CC(i) and (ii) refer to amount of tax andtherefore, without the quantum of tax liability being determined,there can be no proceedings. (4) The proviso to Section 276CC excludes the invocation of theSection against persons where tax payable on the total incomedetermined on regular assessment is less than Rs.3,000/-. Regularassessment is defined in Section 240 of the Act and it reads asfollows : "Regular Assessment" means the assessment made under sub-section (3) of Section 143 or Section 144." (5) Therefore, since the assessment proceedings have notattained finality, it is a very relevant point which the trialMagistrate ought to have borne in mind. (6) The documents filed would show the factual position as tothe filing of appeals against the assessment orders in the context ofthe quantum of tax liability and non-consideration thereof hasresulted in the unjustified order refusing discharge. (7) In particular, it is pointed out by the learned counsel forthe petitioners that as regards the firm, the tax liability has beenassessed to be 'Nil' and there is no taxable income for the firm tobe prosecuted. This has not been countered by the prosecution. (8) As regards the status of the proceedings against the firstpetitioner, as against the best judgment assessment, the firstpetitioner preferred an appeal and a substantial relief was grantedby the appellate authority by scaling down the tax liability byalmost one-third from the original assessment. This has also notbeen countered by the prosecution. (7) In particular, it is pointed out by the learned counsel forthe petitioners that as regards the firm, the tax liability has beenassessed to be 'Nil' and there is no taxable income for the firm tobe prosecuted. This has not been countered by the prosecution. (8) As regards the status of the proceedings against the firstpetitioner, as against the best judgment assessment, the firstpetitioner preferred an appeal and a substantial relief was grantedby the appellate authority by scaling down the tax liability byalmost one-third from the original assessment. This has also notbeen countered by the prosecution. (9) The prosecution acted in an unfair manner as can be seenfrom the evidence of P.W.3, who is the very complainant in all thefour prosecutions and who has said that he is not aware whether anyappeal has been filed, though he is the Officer under whose signaturethe appeal has been preferred. (10) It is not correct to state that the proviso is confined tocases of non-filing of return under Section 139(1)(a). The provisoalso gives exception to sub-clause (2) which provides for punishmentfor non-filing of returns in any other case. Therefore, it wouldcover all cases of non-filing of returns where the tax amount is lessthan rupees one lakh. (11) The finality of assessment proceedings would have to beconsidered while arriving at a decision whether prosecution should becontinued. (12) The Magistrate has acted as a post office or a mouth pieceof the prosecution, contrary to the Supreme Court's dictat in (2002)2 S.C.C. 135 [Dilawar vs. State]. (13) The Magistrate did not take note of the power availableunder Section 91 of the Code of Criminal Procedure for production ofdocuments which are necessary or desirable. (14) The Magistrate did not consider from the proper perspectivethe various submissions with regard to arraying the first petitioneras a co-accused, though she was only a dormant partner of the firm,as evidenced by several exhibits; the department was aware that iotwas the other partner who was running the affairs of the firm; thecomplaint did not set out any averments as to the negligence of thefirst petitioner in the affairs of the firm except to state that shewas in charge and responsible. (15) The department conducted a survey, but took no steps toidentify the person in charge, as would be evident from the evidenceof P.W.2. (16) The legal position as to the persons who could be heldresponsible in the context of the business of the company is wellsettled. Reference is made to (2005) 8 S.C.C. 89 [S.M.S.Pharmaceuticals vs. Neeta Bhalla], wherein it has been held thus : "Every person connected with the company shall not fall within the ambit of the provision. .....Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action." (17) The trial Magistrate has not considered the validity of thesanction granted under Section 279(1) of the Act. This sanction is apre-requisite for valid prosecution, as it lifts the bar to aprosecution. The requirements of a valid prosecution have been setout by the Supreme Court in (1997) 7 S.C.C. 622 [Mansukhlal vs. Stateof Gujarat) Wherein it has been held thus : "Since the validity of sanction depends on theapplicability of mind by the sanctioning authority to thefacts of the case as also the material and evidencecollected during investigation, it necessarily follows thatthe sanctioning authority has to apply its own independentmind for the generation of genuine satisfaction whetherprosecution has to be sanctioned or not. The mind of thesanctioning authority should not be under pressure from any "Since the validity of sanction depends on theapplicability of mind by the sanctioning authority to thefacts of the case as also the material and evidencecollected during investigation, it necessarily follows thatthe sanctioning authority has to apply its own independentmind for the generation of genuine satisfaction whetherprosecution has to be sanctioned or not. The mind of thesanctioning authority should not be under pressure from any quarter nor should any external force be acting upon it totake a decision one way or the other. Since the discretionto grant or not to grant sanction vests absolutely inthe sanctioning authority, its discretion should be shownto have not been affected by any extraneous consideration.If it is shown that the sanctioning authority was unableto apply its independent mind for any reason whatsoeveror was under an obligation or compulsion or constraintto grant the sanction, the order will be bad for the reasonthat the discretion of the authority not to sanction wastaken away and it was compelled to act mechanically tosanction the prosecution." The sanction in the present case does not meet the requirements oflaw and has been influenced by the opinions of the Special PublicProsecutor. (18) The sanction is wholly vitiated as it does not take intoaccount the crucial aspects namely stage or status of the assessmentproceedings, the prima facie satisfaction of willfulness and otherimportant materials. (19) The impugned order is unsustainable in the light of thestatus of penalty proceedings, in view of the decision in (2004) 2S.C.C. 731 [K.C. Builders vs. Assistant Commissioner of Income Tax]. (20) The satisfaction as to the existence of a prima facie caseought and cannot be reached by merely accepting the prosecution caseas it is, but by sifting the evidence,albeit for a limited purpose offinding out a prima facie case. (1) Section 276CC of the Act seeks to punish the act of wilfulfailure to furnish in due time a return of income under sub-section(1) of Section 139 or abide by the notice given under Section 142(1)or Section 148 of the Act. The statutory 'due date' was August 31for the relevant assessment years in all the four cases. (2) The proviso to Section 2786CC postulates that the returnwould have been filed under Section 139(1), even though it may nothave been filed in due time. The said proviso has no relevance whereno return had been filed either with reference to Section 139 or withreference to a notice under Section 142(1) or Section 148. Theproviso is, therefore, inapplicable. (3) The learned trial Magistrate had formed a prima facieopinion, on examining the documents exhibited by the prosecution andthe deposition of the witnesses and found that there were grounds to https://hcservices.ecourts.gov.in/hcservices/ presume that the petitioners have committed the offence under Section276CC and had, therefore, rightly rejected their applications fordischarge, for which reliance is placed on (1986) 2 S.C.C. 587 [Stateof U.P. vs. Manmohan]. (4) The respondents refer to (2004) 9 S.C.C. 686 [Prakash NathKhanna v. C.I.T.], where the Supreme Court has held that the questionwhether there was wilful failure to file the return must beadjudicated factually by the Court which deals with the prosecutioncase. (5) The assessment of income of an assessee who has failed tofurnish an income tax return has no relevance to the initiation orcontinuation of prosecution, as has been held by the Supreme Court in(1984) Supp. S.C.C. 437 [P. Jayappan vs. S.K. Perumal, 1st I.T.O.],where it was held that mere expectation of success in some otherpending proceedings can never bar a criminal prosecution if theingredients of the offence charged are prima facie fulfilled. (4) The respondents refer to (2004) 9 S.C.C. 686 [Prakash NathKhanna v. C.I.T.], where the Supreme Court has held that the questionwhether there was wilful failure to file the return must beadjudicated factually by the Court which deals with the prosecutioncase. (5) The assessment of income of an assessee who has failed tofurnish an income tax return has no relevance to the initiation orcontinuation of prosecution, as has been held by the Supreme Court in(1984) Supp. S.C.C. 437 [P. Jayappan vs. S.K. Perumal, 1st I.T.O.],where it was held that mere expectation of success in some otherpending proceedings can never bar a criminal prosecution if theingredients of the offence charged are prima facie fulfilled. (6) In any event, in this case, since no return has been filedtill date, the offence still continues as the petitioners have notdisclosed their true and correct income in the prescribed form, asrequired under Section 139(1) of the Act. Reliance is placed onA.I.R. 1986 S.C. 293 [Maya Rani Punj vs. Commissioner of Income Tax],where it was held that the non-complaince with the obligation ofmaking a return is an infraction as long as the default continues andtherefore, the fact as to the pendency of the adjudicationproceedings will have no bearing on the prosecution proceedingspending against the petitioners herein for non-filing of return. Theproviso will only apply in those cases where the assessees have filedtheir returns voluntarily before detection or before issuance of thestatutory notices. (7) As regards the Court's power to discharge the accused,(1977) 4 S.C.C. 39 [State of Bihar vs. Ramesh Singh] is referred to,where it has been held as follows :"The presumption of the guilt of the accused whichis to be drawn at the initial stage is not in the senseof the law governing the trial of criminal cases in Francewhere the accused is presumed to be guilty unless thecontrary is proved. But it is only for the purpose ofdeciding prima facie whether the Court should proceed withthe trial or not. If the evidence which the Prosecutorproposes to adduce to prove the guilt of the accused, evenif fully accepted before it is challenged in cross-examination or rebutted by the defence evidence, if any,cannot show that the accused committed the offence, thenthere will be no sufficient ground for proceeding with thetrial." Reliance is also placed on (2000) 6 S.C.C. 338 [State of M.P. vs.Mohanlal Soni], where it has been held thus : "The crystallised judicial view is that at thestage of framing charge, the court has to prima facieconsider whether there is sufficient ground for proceedingagainst the accused. The court is not required toappreciate evidence to conclude whether the materialsproduced are sufficient or not for convicting the accused." (1989) 1 S.C.C. 715 [Stree Atyachari Virodhi Parishad vs. DilipNathumal Chordia] is also relied on, where it has been held thus : "The court, therefore, need not undertake anelaborate enquiry in sifting and weighing the material.Nor is it necessary to delve deep into various aspects.All that the court has to consider is whether theevidentiary material on record, if generally accepted,would reasonably connect the accused with the crime. Nomore need be enquired into. In the same judgment, it has been further held as follows : "If the Sessions Judge, after hearing the parties, frames a charge and also makes an order in support thereof, the law must be allowed to take its owncourse. Self-restraint on the part of the High Court shouldbe the rule unless there is a glaring injustice whichstares the court in the face. The opinion on any mattermay differ depending upon the person who views it. Theremay be as many opinions on a particular matter as thereare courts, but it is no ground for the High Court tointerdict the trial. It would be better for the HighCourt to allow the trial to proceed." In the same judgment, it has been further held as follows : "If the Sessions Judge, after hearing the parties, frames a charge and also makes an order in support thereof, the law must be allowed to take its owncourse. Self-restraint on the part of the High Court shouldbe the rule unless there is a glaring injustice whichstares the court in the face. The opinion on any mattermay differ depending upon the person who views it. Theremay be as many opinions on a particular matter as thereare courts, but it is no ground for the High Court tointerdict the trial. It would be better for the HighCourt to allow the trial to proceed." (8) In this case, the learned trial Magistrate was satisfiedthat there was a prima facie case that the petitioners had nointention to file their returns and therefore, he refused todischarge them from the proceedings. (9) The Magistrate also, after going through the deposition ofthe sanctioning authority, P.W.4 and the documents exhibited by theprosecution, came to the conclusion that the relevant documents hadin fact been placed before the sanctioning authority, who on anapplication made, granted sanction. (10) In 1997 (7) S.C.C. 622 [Mansukhlal Vithaldas Chauhan vs.State of Gujarat], while dealing with the issue of judicial review ofan order granting sanction, the following observations were made bythe Supreme Court : "This principle was reiterated in Tata Cellular v.Union of India (1994) 6 SCC 651 in which it was, interalia, laid down that the Court does not sit as a court ofappeal but merely reviews the manner in which the decisionwas made particularly as the Court does not have theexpertise to correct the administrative decision. If areview of the administrative decision is permitted, itwill be substituting its own decision which itself maybe fallible. The Court pointed out that the duty of theCourt is to confine itself to the question of legality.Its concern should be : 1. Whether a decision-making authority exceeded its powers?;2. committed an error of law;3. committed a breach of the rules of natural justice; 4. reached a decision which no reasonable tribunal would have reached; or Similarly, in 2005 A.I.R. S.C.W. 1684 [C.S. Krishnamurthy vs. Stateof Karnataka], the Supreme Court has upheld the sanction, since thesanctioning authority deposed about application of mind. In thepresent case, P.W.4, who is the sanctioning authority, has deposedabout the independent application of mind for determining that thecase warranted sanction for prosecution. (11) Reliance was also placed on 242 I.T.R. 39 [SonaromeChemicals Pvt. Ltd. vs. Union of India], where a learned single Judgeof the Karnataka High Court has held thus : "The constitutional validity of Section 276C waschallenged in the case of Dr. (Mrs.) M.S. Dhowani vs. J.Ranganathan, Second ITO, [1992] 194 ITR 690 (Mad), on theground of violation of Article 14 of the Constitution,contending that, Section 276C(1) provides for a minimumimprisonment of six months and under clause (2), theminimum sentence prescribed was only three months which iscontrary to the concept of equality. The court observed https://hcservices.ecourts.gov.in/hcservices/ that the sub-sections operate in different fields and thatthere is a rationale behind the classification, theequality contemplated under Article 14 of the Constitutioncannot be considered to have been violated. The contentionwhich has been raised is based mainly on the ground thatsince the respondents have already been compensated,Parliament could not have enacted the provision forprosecution for the same default. There is no illegalityor lack of jurisdiction with Parliament in making aprovision for prosecution even in a case where the interestis charged which stands on different footing than theoffence for which the punishment is provided. In thesecircumstances, this contention has no force." https://hcservices.ecourts.gov.in/hcservices/ that the sub-sections operate in different fields and thatthere is a rationale behind the classification, theequality contemplated under Article 14 of the Constitutioncannot be considered to have been violated. The contentionwhich has been raised is based mainly on the ground thatsince the respondents have already been compensated,Parliament could not have enacted the provision forprosecution for the same default. There is no illegalityor lack of jurisdiction with Parliament in making aprovision for prosecution even in a case where the interestis charged which stands on different footing than theoffence for which the punishment is provided. In thesecircumstances, this contention has no force." 6. Mr. Guru Krishnakumar, learned counsel appearing for thepetitioners and Mr. Gopal Subramaniam, learned Additional SolicitorGeneral of India appearing for the respondent made detailedsubmissions and also submitted their written arguments, followed bysupplementary arguments. Several decisions were cited by the learnedcounsel on either side in support their respective submissions andsince many of them reiterated the same points, only the importantones will be referred to. 7. The learned trial Magistrate had come to the conclusion thata prima facie case had been made out, largely based on the statutorypresumption under Section 278E of the Act, the constitutionalvalidity of which was challenged in Writ Petition Nos.23581 to 23584of 2006. Those writ petitions have been dismissed today by aseparate order. Therefore, the petitioners cannot question inrevision, the correctness of the learned Magistrate presuming theculpable mental state of the petitioners, and their challenge as tothe correctness of the order passed by the trial Magistrate on othergrounds alone has to be examined. 8. The relevant portions of the complaint preferred against thefirst petitioner read as under : "The accused ought to have filed her Return of Incomefor the Assessment Year 1993-94 on or before 31.8.1993 asrequired under Section 139(1) of Income-tax Act, 1961.However, the accused did not file her Return of Incomewithin the due date prescribed by the Statute. Thus, theaccused has wilfully and deliberately contravened theprovisions of Section 139(1) of Income-tax Act, 1961 by notfurnishing her return of income on or before the due dateprescribed by the Statute, i.e., 31.8.1993 without anyvalid reason and thereby committed an offence punishableunder Section 276CC of the Income tax Act, 1961." 8. The relevant portions of the complaint preferred against thefirst petitioner read as under : "The accused ought to have filed her Return of Incomefor the Assessment Year 1993-94 on or before 31.8.1993 asrequired under Section 139(1) of Income-tax Act, 1961.However, the accused did not file her Return of Incomewithin the due date prescribed by the Statute. Thus, theaccused has wilfully and deliberately contravened theprovisions of Section 139(1) of Income-tax Act, 1961 by notfurnishing her return of income on or before the due dateprescribed by the Statute, i.e., 31.8.1993 without anyvalid reason and thereby committed an offence punishableunder Section 276CC of the Income tax Act, 1961." "As there was no statutory compliance of filing thereturn of income within the due date, and as the failure infiling the said return of income still persisted, a noticeunder Section 142(1) of the Income tax Act, 1961 was issuedto the accused on 18.1.94 calling upon her to file theReturn of Income within 30 days from the date of receipt ofthe notice which was served by R.P.A.D. on 19.1.1994. Theaccused neither sent any reply in response to the saidstatutory notice issued to her nor filed her return ofincome. Therefore, a reminder letter dated 22.8.1994 wasissued to the accused requesting her to file the return ofincome at the earliest. Again, there was no response fromthe accused and not even a reply was sent giving reasonswhy she is persisting in delaying the filing of the saidreturn of income even after the statutory due date andinspite of receiving the statutory notice u/s.142(1). Byanother letter dated 10.2.95, the accused was againreminded of her statutory obligation of filing of herReturn of Income by requesting her to file the returnimmediately. Another letter dated 23.8.1995 was issued tothe accused informing her that the return was not filed indue time; that there was no compliance to notice u/s.142(1)dated 18.1.94; that reminders were issued on 2.8.1994 and10.2.1995 and that due to lack of response, a noticeu/s.142(1) was issued on 31.7.1995 calling for certaindetails relevant for assessment. The failure in furnishingthe return of income continued even after the receipt ofthe above mentioned letters. Thus, the accused completelydisregarded the statutory requirements by wilfully failingto furnish her return under section 139(1) and alsodeliberately did not file the return even after the receiptof notice issued to her under section 142(1), two reminderletters dated 22.8.1994 and 10.2.1995 and further letterdated 23.8.95." "..... In order to conduct inquiry to complete theassessment, a statutory notice under Section 142(1) with a covering letter was issued to the accused on31.7.1995 requiring the accused to furnish the followinginformation : ....." "The Complainant states that as the accused wilfullyfailed to furnish her return of income and deliberately didnot file the said return at all for the Assessment Year1993-94 inspite of receiving statutory notice and despitegiving of opportunities, show cause notice dated 14.6.1996 and 10.7.1996 were issued to the accused asking her toexplain why prosecution proceedings under Section 276CC ofIncome-tax Act, 1961 should not be initiated againsther. ....." "..... The reasons given by the accused for such aninordinate delay are not tenable and cannot be accepted.Pre-occupations in official as well as party meetingscannot take over-riding precedence over statutory duties.The pesons in public life should respect and obey the ruleof law and set an example for others. ....." ....." "The Complainant states that as the accused wilfullyfailed to furnish her return of income and deliberately didnot file the said return at all for the Assessment Year1993-94 inspite of receiving statutory notice and despitegiving of opportunities, show cause notice dated 14.6.1996 and 10.7.1996 were issued to the accused asking her toexplain why prosecution proceedings under Section 276CC ofIncome-tax Act, 1961 should not be initiated againsther. ....." "..... The reasons given by the accused for such aninordinate delay are not tenable and cannot be accepted.Pre-occupations in official as well as party meetingscannot take over-riding precedence over statutory duties.The pesons in public life should respect and obey the ruleof law and set an example for others. ....." "The above facts clearly establish that the accusedwas bent upon deliberately not to file her return of incomeat all and she was willingly welcomed the exparteassessment order for reasons best known to her. There isevery reason to believe that in the circumstances of thecase, the assessee might have really benefitted by invitingan experate assessment and that may be the reason why therelevant return was not filed at all. The accused was notco-operative in the inquiry. ....." 9. As regards the petitioner in Crl. R.C. No.786 of 2006(hereinafter referred to as 'the second petitioner'), the complaintrefers to the default in filing the return under Section 139(1) ofthe Act and that there was a wilful and deliberate contravention. Inparagraph 10 of the complaint, there is reference to utter disregardin complying with the statutory obligation and wilful and deliberatein filing of the return of income in response to notice under Section142(1) and that no valid return was filed at all for the AssessmentYear 1993-94. The second petitioner has also given reasons as to whyshe could not file her returns and the circumstances under which thedelay occurred. The relevant portions of the complaint preferredagainst the second petitioner read as under : "..... The reasons given by the accused for not filingthe return at all do not carry any conviction. Beinguntenable they cannot be accepted. The presumptionrelating to culpable mental state u/s.278E of the I.T. Act,1961 squarely applies to this case. ....." "..... The said offence committed by the accused is acontinuing offence." 10. As regards the petitioner in Crl. R.C. Nos.782 and 784 of2006, a Partnership Firm (hereinafter referred to as 'the firm') therelevant portion of the complaint preferred jointly against the firmas well as the first and second petitioners herein (arrayed in thecomplaint as Accused-1, Accused-2 and Accused-3 respectively), there https://hcservices.ecourts.gov.in/hcservices/ is specific allegation that the first petitioner, viz. Accused-2 andthe second petitioner, viz. Accused-3 were in charge of Accused-1/firm, and were responsible for the conduct of the day to daybusiness of the firm and also they are individually, jointly andseverally responsible and liable for all the activities and defaultsof the Accused-1 firm and as per the Deed of Partnership dated4.5.1990 of Accused-1, its partners, viz. Accused-2 and Accused-3 areequally responsible and empowered to : i) operate bank accounts; ii) have full and equal rights in the management of the firm for its business activities; iii) deploy funds for the business of the firm; iv) appoint staff, watchmen etc.; and v) represent the firm before Income-tax Sales-tax andother authorities, etc. Apart from the allegations regarding wilful and deliberate failure tofurnish the return under Section 139(1) of the Act and for failure torespond to the notice under Section 142(1) of the Act, it is alsostated in the complaint as follows : i) operate bank accounts; ii) have full and equal rights in the management of the firm for its business activities; iii) deploy funds for the business of the firm; iv) appoint staff, watchmen etc.; and v) represent the firm before Income-tax Sales-tax andother authorities, etc. Apart from the allegations regarding wilful and deliberate failure tofurnish the return under Section 139(1) of the Act and for failure torespond to the notice under Section 142(1) of the Act, it is alsostated in the complaint as follows : "In terms of the partnership deed and in accordancewith the Partnership Act, all the partners are jointly andseverally responsible and liable for all the activities ofomissions and commissions of the partnership firm. Thus,Accused-2 while enjoying the fruits of partnership has tobear the duties and responsibilities cast on her incarrying out and discharging the statutory obligations.The Accused-2 was aware of the fact of non-filing of thereturn of income of the Accused-1 firm as is evident fromthe notings from her own statement of total income. Thereis nothing like 'Dormant Partner' under the Law." 11. The relevant provisions of law can be referred to at thisstage. Section 276CC of the Income Tax Act, 1961 reads thus :"Failure to furnish returns of income. 276CC. If a person wilfully fails to furnish in duetime the return of fringe benefits which he is required tofurnish under sub-section (1) of section 115WD or by noticegiven under sub-section (2) of the said section or section115WH or the return of total income which he is required tofurnish under sub-section (1) of section 139 or by notice given under clause (i) of sub-section (1) of section 142 orsection 148 or section 153A, he shall be punishable,– (i) in a case where the amount of tax, which would havebeen evaded if the failure had not been discovered, exceedsone hundred thousand rupees, with rigorous imprisonment fora term which shall not be less than six months but which mayextend to seven years and with fine; (ii) in any other case, with imprisonment for a termwhich shall not be less than three months but which mayextend to three years and with fine. Provided that a person shall not be proceeded againstunder this section for failure to furnish in due time thereturn of fringe benefits under sub-section (1) of section115WD or return of income under sub-section (1) of section139 – (i) for any assessment year commencing prior to the 1stday of April, 1975; or (ii) for any assessment year commencing on or after the1st day of April, 1975, if – (a) the return is furnished by him before the expiryof the assessment year; or (b) the tax payable by him on the totalincome determined on regular assessment, as reduced by theadvance tax, if any, paid, and any tax deducted at source,does not exceed three thousand rupees." "Prosecution to be at instance of Chief Commissioner orCommissioner. 279. (1) A person shall not be proceeded against foran offence under section 276BB, section 276C, section 276CC,section 276D, section 277, section 277A or section 278except with the previous sanction of the Commissioner orCommissioner (Appeals) or the appropriate authority : Provided that the Chief Commissioner or, as the casemay be, Director General may issue such instructions ordirections to the aforesaid income-tax authorities as he maydeem fit for institution of proceedings under this sub-section." https://hcservices.ecourts.gov.in/hcservices/ Section 245 of the Code of Criminal Procedure reads thus : "245. When accused shall be discharged. - (1) If, upontaking all the evidence referred to in section 244, theMagistrate considers, for reasons to be recorded, that nocase against the accused has been made out which, ifunrebutted, would warrant his conviction, the Magistrateshall discharge him. Provided that the Chief Commissioner or, as the casemay be, Director General may issue such instructions ordirections to the aforesaid income-tax authorities as he maydeem fit for institution of proceedings under this sub-section." https://hcservices.ecourts.gov.in/hcservices/ Section 245 of the Code of Criminal Procedure reads thus : "245. When accused shall be discharged. - (1) If, upontaking all the evidence referred to in section 244, theMagistrate considers, for reasons to be recorded, that nocase against the accused has been made out which, ifunrebutted, would warrant his conviction, the Magistrateshall discharge him. (2) Nothing in this section shall be deemed to preventa Magistrate from discharging the accused at any previousstage of the case if, for reasons to be recorded by suchMagistrate, he considers the charge to be groundless." 12. The judgment in (2004) 9 S.C.C. 686 [Prakash Nath Khanna v.C.I.T.] answers almost every question raised by the petitionersherein. The words "in due time" occurring in Section 276CC of theIncome Tax Act were interpreted in this decision and it was held thateven if a return is filed in terms of sub-section (4) of Section 139,that will not dilute the infraction in not furnishing the return indue time. The following words are relevant : "..... There is no condonation of the said infraction,even if a return is filed in terms of sub-section (4). In the above case, the contention that Section 276CC is applicableonly when there is discovery of the failure regarding evasion of taxwas also rejected, as also the contention that the return underSection 139(4) was filed before the discovery of failure regardingevasion, stating that the provision has no application. It was heldby the Supreme Court as follows : "The provision consists of two parts. First relates tothe infractions warranting penal consequences and thesecond, measure of punishment. The second part in turnenvisages two situations. The first situation is wherethere is discovery of the failure involving the evasion oftax of a particular amount. For the said infractionstringent penal consequences have been provided. Secondsituation covers all cases except the first situationelaborated above." The question whether there is a wilful failure was also held to be amatter upon which there should be a factual adjudication by the Courtand while the Court has to presume the existence of culpable mentalstate as per Section 278E, it was certainly "open to the appellants to plead the absence of culpable mental state when the matter istaken up for trial". The following paragraphs are relevant : The question whether there is a wilful failure was also held to be amatter upon which there should be a factual adjudication by the Courtand while the Court has to presume the existence of culpable mentalstate as per Section 278E, it was certainly "open to the appellants to plead the absence of culpable mental state when the matter istaken up for trial". The following paragraphs are relevant : "One of the significant terms used in Section 276-CCis 'in due time'. The time within which the return is to befurnished is indicated only in sub-section (1) of Section139 and not in sub-section (4) of Section 139. That beingso, even if a return is filed in terms of sub-section (4)of Section 139 that would not dilute the infraction in notfurnishing the return in due time as prescribed under sub-section (1) of Section 139. Otherwise, the use of theexpression 'in due time' would lose its relevance and itcannot be said that the said expression was used withoutany purpose. Before substitution of the expression 'clause(i) of sub-section (1) of Section 142' by the Direct TaxLaws (Amendment) Act, 1987 w.e.f. 1-4-1989, the expressionused was 'sub-section (2) of Section 139'. At the relevantpoint of time the assessing officer was empowered to issuea notice requiring furnishing of a return within the timeindicated therein. That means the infractions which arecovered by Section 276-CC relate to non-furnishing ofreturn within the time in terms of sub-section (1) orindicated in the notice given under sub-section (2) ofSection 139. There is no condonation of the saidinfraction, even if a return is filed in terms of sub-section (4). Accepting such a plea would mean that a personwho has not filed a return within the due time asprescribed under sub-section (1) or (2) of Section 139would get benefit by filing the return under Section 139(4)much later. This cannot certainly be the legislativeintent. Another plea which was urged with some amount ofvehemence was that the provisions of Section 276-CC areapplicable only when there is discovery of the failureregarding evasion of tax. It was submitted that since thereturn under sub-section (4) of Section 139 was filedbefore the discovery of any evasion, the provision has noapplication. The case at hand cannot be covered by theexpression 'in any other case'. This argument thoughattractive has no substance. The provision consists of two parts. First relates tothe infractions warranting penal consequences and thesecond, measure of punishment. The second part in turnenvisages two situations. The first situation is wherethere is discovery of the failure involving the evasion oftax of a particular amount. For the said infractionstringent penal consequences have been provided. Second situation covers all cases except the first situationelaborated above. The provision consists of two parts. First relates tothe infractions warranting penal consequences and thesecond, measure of punishment. The second part in turnenvisages two situations. The first situation is wherethere is discovery of the failure involving the evasion oftax of a particular amount. For the said infractionstringent penal consequences have been provided. Second situation covers all cases except the first situationelaborated above. The term of imprisonment is higher when the amount oftax which would have been evaded but for the discovery ofthe failure to furnish the return exceeds one hundredthousand rupees. If the plea of the appellants is accepted,it would mean that in a given case where there isinfraction and where a return has not been furnished interms of sub-section (1) of Section 139 or even in responseto a notice issued in terms of sub-section (2), theconsequences flowing from non-furnishing of return wouldget obliterated. At the relevant point of time Section 139(4)(a) permitted filing of return where return has not beenfiled within sub-section (1) and sub-section (2). The time-limit was provided in clause (b). Section 276-CC refers to'due time' in relation to sub-sections (1) and (2) ofSection 139 and not to sub-section (4). Had the legislatureintended to cover sub-section (4) also, use of theexpression 'Section 139' alone would have sufficed. Itcannot be said that the legislature without any purpose orintent specified only sub-sections (1) and (2) and theconspicuous omission of sub-section (4) has no meaning orpurpose behind it. Sub-section (4) of Section 139 cannot byany stretch of imagination control operation of sub-section(1) wherein a fixed period for furnishing the return isstipulated. The mere fact that for purposes of assessmentand carrying forward and to set off losses it is treated asone filed within sub-section (1) or (2) cannot be pressedinto service to claim it to be actually one such, though itis factually and really not by extending it beyond itslegitimate purpose. Whether there was wilful failure to furnish the returnis a matter which is to be adjudicated factually by thecourt which deals with the prosecution case. Section 278-Eis relevant for this purpose and the same reads as follows: '278-E. Presumption as to culpable mental state.—(1) In any prosecution for any offence under this Act whichrequires a culpable mental state on the part of theaccused, the court shall presume