Gujarat H.C : When the money and/or the value of the valuable articles, found during search operations during a year, has been accepted as the deemed income of the assessee for such financial year by the IT Department and also as wealth on the basis of the returns to be filed by the assessee-can there be a charge of a willful attempt to evade income-tax and also the wealth-tax for the said year ?

High Court Of Gujarat

Alkesh Subodhchandra Shah vs. State Of Gujarat & Anr.

Sections 44AA, 276C, WT 35A(1), CrPC 397

S.D. Dave, J.

Criminal Revision Appln. No. 130 of 1989

4th May, 1994

Counsel Appeared

K.H. Kaji for A.D. Shah, for the Petitioner : S.T. Mehta, for the Pespondent No. 1—State : B.B. Naik, for the Respondent No. 2

S.D. DAVE, J.:

These common orders shall govern the disposal of these three criminal revision applications presenting common questions of law and facts.

2. The questions of law in the background of facts, indisputed and accepted are :

“(1) When the money and/or the value of the valuable articles, found during search operations during a year, has been accepted as the deemed income of the assessee for such financial year by the IT Department and also as wealth on the basis of the returns to be filed by the assessee-can there be a charge of a willful attempt to evade income-tax and also the wealth-tax for the said year ?

(2) Whether the orders of the city Sessions Court in revisional jurisdiction, quashing the Magisterial orders discharging the accused, and directing the framing of the charges, can be said to be interlocutory orders, not amenable to revisional jurisdiction of this Court under s. 397(2) of the Cr.PC, 1973 ?

(3) Whether, in the facts and circumstances of the cases, the assessee accused persons should have been put on trial for willful attempt to evade income-tax and wealth-tax ?

3. To these questions, the answers in my view need to be in negative. Criminal Revision Application No. 130 of 1989

4. The IT Department had carried out the search operations at the residential premises of the accused, Alkesh Shah, on 24th Jan., 1984 exercising their powers under s. 132 of the IT Act, 1961. During the search operations a cash amount of Rs. 70,488 was recovered and/or found. Out of this, an amount of Rs. 65,000 was treated as an amount of which the nature and source of acquisition were not explained. It appears that the necessary return for the asst. yr. 1984-85 came to be submitted by the accused-assessee before the requisite date. It is not in dispute that the returned income, as shown by the assessee in the return, has been accepted and that the tax thereon has also been assessed. It is also not in dispute that no penalty proceedings against the assessee-accused were taken out either for the concealment of the income or for showing incorrect particulars in the return. It is indeed true that some penalty proceedings were initiated against the accused assessee on the ground that there was a delay for the payment of the instalment of the advance tax and that the correct particulars in respect of the advance tax were not given. But again, later on these proceedings have been dropped. The factual and legal position, therefore, identifiable from this set of facts, is that the amount so recovered during the search operations was shown by the assessee-accused as his income in his return and the same has been accepted by the IT authorities and the assessment orders have been made. Anyhow it appears that, later on Criminal case No. 185/88 nd 236/86 came to be instituted on the basis of two complaints to be filed by the competent officials. The said complaints related to the offence punishable under s. 276C of the IT Act, 1961 and for the offence punishable under s. 35A(1) of the WT Act, 1957. The evidence of the complainant was recorded and all the material on which the prosecution wanted to place reliance was made available to the learned Addl. Chief Metropolitan Magistrate. After that exercise was done, there was a prayer coming from the assessee-accused that looking to the said material, he requires to be discharged from the proceedings. This prayer appears to have been accepted by the learned Metropolitan Magistrate on the ground that he could see no reasonable ground to believe that the accused had committed the offences as alleged by the Department. The learned Metropolitan Magistrate was also of the opinion that there was no sufficient material which would justify the framing of the charges against the assessee- accused. This view was taken and expressed by the learned Addl. Metropolitan Magistrate by his orders dt. 16th June, 1986. Being aggrieved and dissatisfied with the above said orders, the Department had preferred the Crl. Revn. Appln. No. 200/85 before the City Sessions Court, Ahmedabad. The prayer of the Department was that the orders of discharge pronounced by the Court below were not in accordance with law and that, therefore, the framing of the charge was necessary, regard being had to the factual and legal position. This prayer was countenanced by the learned Addl. City Sessions Judge vide his orders dt. 13th Feb., 1989. After allowing the Crl. Revn. Appln. and after setting aside the orders of the Court below, the learned Addl. City Sessions Judge has ordered for framing of the charge. These orders dt. 13th Feb., 1989 are in challenge in the Crl. Revn. Appln. No.130 of 1989.

Criminal Revision Application No. 131 of 1989

5. These proceedings are almost similar to the previous proceedings. In this case the residential premises of petitioner-accused, Kaushikkumar, came to be raided on the same date, i.e., 24th Jan., 1984 and search operations were carried out. It is the case of the Department that a cash amount of more than Rs. 4,00,000, jewellery of the value of Rs. 93,590, gold ornaments of the value of Rs. 1,69,355 and silver bars of the value of Rs. 59,685 were recovered. In this case also the assessee-accused had shown the said amount and the value of the jewellery, the gold ornaments and silver bars as his income from the other sources and that the necessary return was submitted by him on 30th June, 1984 under which the returned income was in sum of Rs. 7,37,460. The assessee-accused had also submitted the WT return in which this amount and/or the value of the articles was also included. The assessment proceedings under the IT Act, 1961 and under the WT Act, 1957 have been duly completed. As in the former case, in this case also no penalty proceedings were initiated either on the ground of concealment of the income-tax or on the ground of showing incorrect particulars in the return. The returned income as disclosed by the assessee-accused admittedly came to be accepted by the Department and that, the assessment orders have been made in this respect. Anyhow, later on, in this case also three criminal cases, namely criminal case No. 24/86, criminal case No. 472/86 and criminal case No. 476/86 came to be filed by the official of the IT and WT Departments, in the Court of the learned Addl. Chief Metropolitan Magistrate on the similar allegations. A similar prayer was mooted by the accusedassessee saying that he requires to be discharged from all the three cases, as the material brought before the Court would not go to show any case which could be tried against him. As in the previous case, in this case also, this prayer emanating from the assessee-accused came to be countenanced by the learned Addl. Chief Metropolitan Magistrate vide his orders dt. 20th June, 1988. The Department feeling aggrieved and dissatisfied with these orders had filed the Crl. Revn. Appln. No. 202/88 which came to be allowed under the orders of the learned Addl. City Session Judge dt. 13th Feb., 1989, and the orders of discharge as pronounced by the Court below came to be quashed and set aside. It was also ordered and directed that the charge should be framed against the assessee-accused in all the above noticed three cases. These orders are under challenge in the present Crl. Revn. Appln. C

riminal Revision Application No. 132 of 1989

6. The residential premises of the assessee-accused, Paresh Shah, came to be raided on 24th Jan., 1984 and the search operations were carried out as it had happened in two previous cases. An amount of Rs. 15,000, the jewellery of the value of Rs. 59,435 and some silver utensils were found during this search operations. The assessee accused had submitted the return of his income for the asst. yr. 1984-85 and had declared income of Rs. 1,33,220 as the income from other sources. The returned income was accepted by the Department and the assessment proceedings have been completed and the necessary assessment orders have been made on 29th Oct., 1984. The assessee-accused had submitted the necessary return under the WT Act and that, the assessment proceedings were also concluded. In this case also, no penalty proceedings were initiated by the Department either on the count of concealment of the income or of showing incorrect particulars in the returns. The penalty proceedings were indeed initiated in respect of the advance tax but they were ultimately dropped. Thus, in this case also, the income and the wealth as disclosed by the accused-assessee came to be accepted by the Department and the necessary assessment orders have been made. Anyhow two complaints were filed against the assessee- accused, they being Criminal Case No. 12/86 and Criminal Case No. 13/86. In these two cases also, after the examination of the complaint and after the necessary material was submitted before the Court below, there was a prayer on behalf of the accused-assessee urging that as no case is being made out for the alleged commission of the two offences, he requires to be discharged. This prayer came to be recognised by the learned Addl. Metropolitan Magistrate vide his orders dt. 30th Sept., 1986. As the assessee-accused came to be discharged under the said orders, the complainant Department filed Crl. Revn. Appln. which came to be allowed by the learned Addl. City Sessions Judge, Ahmedabad under his orders dt. 13th Feb., 1989. Under these orders, the orders granting discharge came to be set aside and the charges was directed to be framed against the assesseeaccused. These orders are in challenge in the present Crl. Revn. Applns. The learned Addl. Metropolitan Magistrate was of the view that, when no satisfactory explanation was emanating from the accused-assessee, the money and/or the value of the articles found shall be deemed to be the income of the accused-assessee from undisclosed sources in that particular financial year and that, when the respective accused had submitted the returns showing the concerned amount or the value of the articles as his income from undisclosed sources and when such a case put forth by the assessee has been accepted and the assessment orders have been made and the tax also has been paid, the assessee-accused were required to be discharged under s. 245(1) of the Cr.PC, 1973. A similar view has been taken in the cases punishable under s. 35A (1) of the WT Act, 1957.

It appears that the above said view expressed by the learned Metropolitan magistrate came to be set at naught by the City Sessions Court, Ahmedabad while accepting that, though the change of the previous year was not unlawful “it was obvious that the change would not have been made by the assessee-accused but for the fact of the search operations and the find of money and certain other valuable articles”. It was also the view expressed by the City Sessions Court that the enabling provisions contained in s. 69A of the IT Act, 1961 could not and should not be treated as nullifying the penal consequences following the assessee’s inability to explain about the nature and source of acquisition of money and the articles. It is also said and expressed that different provisions contained in IT Act, 1961 and the WT Act, 1957 are meant for or intended to advance, the purpose of the taxing statutes and not “to annihilate the real meaning and intent of each other”. It was also the view expressed by the City Sessions Court, that according of the scope or the meaning of the relevant statutory provision as urged by the accused- assessee would give a lever to the assessee to escape conveniently from the penal consequences by merely and simply showing the discovered amount or the value of the discovered articles as his income from other sources in the financial year. This reasoning adopted by the City Sessions Court, while allowing the revision applications and setting aside the orders of discharge pronounced by the Court below comes under a searching questionnaire and then under a serious challenge at the hands of the learned counsel Mr. Kaji, who appears on behalf of the petitioner accused-assessee.

7. The learned counsel Mr. Kaji would urge that reading the provisions of s. 14F and 56(1) of the IT Act, 1961, as they stood at the relevant time, the discovered amount or the value of the discovered articles, jewellery, etc., should be deemed to be the income of the assessee from other sources and that, under s. 69A of the Act of 1961, if the assessee was found to be the owner of any money, jewellery or valuable article not recorded in the books of accounts, if any, to be maintained by him and the assessee has no explanation about the nature and sources of acquisition of the same or if the explanation offered by him is not in the opinion of the ITO satisfactory, the money and or the value of the jewellery or valuable article shall be deemed to be the income of the assessee for such financial year. The learned counsel Mr. Kaji would also urge that under s. 3(1)(a), the previous year would mean any financial year preceding the assessment year and under s. 3(3) of the Act of 1961, an assessee may have different previous years in respect of separate source of his income and under s. 3(1)(f) of the Act, where an assessee is a partner in a partnership firm and the firm has been assessed as such, then, in respect of the assessee’s share in the income of the firm, the period determined as the previous year for the assessment of the firm shall be the previous year for the assessment of the share income of the partner. It is also the contention emanating from the learned counsel Mr. Kaji that, under s. 139 of the Act, the respective petitioner accused-assessee was required to file his return before 30th June, 1984 and that, the same has been done. Mr. Kaji would also further urge that the amount recovered or the value of the articles recovered, have been shown as the income of the assessee from other sources and that the same has been treated as the income from the undisclosed sources for that financial year and that the income so returned has been accepted by the Department and that the assessment orders have been made and the tax has been paid, and that no penalty proceedings either for concealment of the income or for furnishing incorrect particulars in the returns have been initiated. Mr. Kaji, therefore, on these facts and circumstances, would ultimately urge that all, what the assessee were, as duty bound, required to do under the relevant statutory obligations having been done by them, has been accepted by the Department. The learned counsel Mr. Kaji would also further urge that, looking to the provisions contained under s. 44AA and the provisions in Chapter 16 of the Act, it is clear that when the petitioner accusedassessee had the only income from the partnership business he was not required to maintain any account books and that the view taken by the Court below in this respect appears to be ex facie erroneous. Lastly, the learned counsel would urge that the material made available to the Court below would not show a prima facie case of any wilful attempt to evade Income-tax or Wealth-tax within the meaning of s. 276C of the IT Act, 1961 or under s. 35A of the WT Act, 1957 respectively and that, regard being had to all these, the learned Metropolitan Magistrate was perfectly justified in ordering the discharge and that, there was no reason for the learned City Sessions Judge to cause any interference in these orders which appear to be in complete consonance with the law on the question. Anyhow, the learned standing counsel Mr. B.B. Naik appearing on behalf of respondent No. 2 while taking a preliminary objection, would urge that the present criminal revision applications are not maintainable under s. 307(2) of the Cr.PC, 1973 as having been directed against the interlocutory orders pronounced by the learned Addl. City Sessions Judge. It is also the contention coming from the learned counsel Mr. Naik that the facts and circumstances of the case would go to show that it was not open to the learned Metropolitan Magistrate to discharge the petitioner-accused while acting under the provisions contained under s. 256 of the Cr.PC, 1973, because it could not have been said that no case against the accused was made out which if un-rebutted would warrant his conviction. Lastly, upon a re- reading of the relevant provisions of the IT Act, 1961 and the WT Act, 1957 the learned counsel would urge that the material adduced before the trial Court unerringly demonstrate the wilful attempt on the part of the assessees to evade tax and that, therefore, the learned Magistrate was not justified in ordering a discharge. On the very same ground and on the basis of the very same statutory provisions the learned counsel would urge that no interference with the orders under challenge would appear justifiable.

The learned Government counsel Mr. S.T. Mehta, appearing on behalf of the State Govt., would endorse in detail, all what has been said by the learned standing counsel Mr. Naik and would urge with added vehemence that there is no reason for me either in law or in facts to interfere with the orders of the learned Addl. City Sessions Judge. Taking up the first contention regarding the maintainability of the present criminal revision applications, a reference shall have to be made to the provisions contained under sub-cl. (2) of s. 397 of the Cr.PC, 1973. Placing reliance upon these provisions, both Mr. Naik and Mr. Mehta would urge that the orders under challenge being purely interlocutory in nature could not have been challenged by way of filing the present criminal revision applications and that, under the very same provisions the present proceedings are barred. The question which, therefore, would arise is as to whether the orders under challenge can be said to be interlocutory in nature, against which no revision could be maintainable before this Court. Mr. Naik and Mr. Mehta in this respect, would firstly place reliance upon the Supreme Court pronouncement in Amar Nath & Ors. vs. State of Haryana & Ors. AIR

1977 SC 2185. This pronouncement of the Supreme Court, while explaining the term “interlocutory order” occuring in s. 397(2) of the Code, has said that the said term has been used in a restricted sense and that any order which substantially affects the right of the accused or decides certain rights of the parties, cannot be said to be an interlocutory order so as to bar a revision to the High Court. It is also stated by way of instance that certain orders summoning witnesses, adjourning cases, passing orders for bail and calling for the reports, etc., cannot be said to be final orders and that they would be the steps in aid of the pending proceedings and may amount to interlocutory orders against which no revision would lie. Anyhow, it is pointed out that those orders, which are matters of moment and which affect or adjudicate upon the rights of the accused or a particular aspect of the trial, cannot be said to be interlocutory. It has been pointed out further that, the orders compelling the appellant to face a trial, without proper application of mind cannot be held to be an interlocutory matter but one which decides a serious question as to the rights of the appellant to be put on trial. A momentary reversion to the facts of the cases on hand to reckon and appreciate that there are serious disputes as to the rights of the petitioner-accused to be put on trial, though appearing to be side tracking, would be a step in right direction.

The second decision on which reliance has been placed in this respect, is the Supreme Court pronouncement in V.C. Shukla vs. State through C.B.I. AIR 1980 SC 962. In this pronouncement while examining the provisions contained under s. 11 of the Special Court Act, 1979 and under s. 397(2) of the Cr.PC, the expression “Interlocutory order” has been explained. No doubt, though in context of s. 11 of the Special Courts Act, 1979 but also in context of the provisions contained under s. 397(2) of the Code, it is said that the order of framing charge is purely an interlocutory order as it does not terminate the proceedings, but the trial goes on until it culminates in acquittal or conviction. Heavy reliance has been placed upon this say of the Supreme Court, by the learned counsels Mr. Naik and Mr. Mehta while urging that the present Revision Applications against the interlocutory orders telling the trial Court to frame charges would not be maintainable. As against this, the learned counsel Mr. Kaji appearing on behalf of the petitioner would invite my attention to what the Supreme Court has said in Madhu Limye vs. State of Maharashtra AIR 1978 SC 47. Firstly, it has been made clear that the bar under s. 397(2) will not operate to prevent the abuse of the process of the Court and/or to secure the ends of justice because the label of the petition filed by the aggrieved party is not material and the High Court can examine the matter in an appropriate case under its inherent powers. What is yet more important is the following say of the Supreme Court contained in para 15 of the decision :

“An order rejecting the plea of the accused on a point which, when accepted, will conclude the particular proceeding, will surely be not an interlocutory order within the meaning of s. 397(2).” The above said say of the Supreme Court would go to show conclusively that an order rejecting the plea of the accused on a point, which when accepted will conclude the proceedings, would surely be not an interlocutory order within the meaning of s. 397(2) of the Code. Great emphasis and rightly has been placed on these observations by the learned counsel Mr. Kaji while persuading me to take a view that in this case also the order rejecting the plea of the accused if would have been accepted, would have concluded the proceedings initiated by the Department, and, therefore, the orders cannot be said to be interlocutory. Looking to all what has been said by the Supreme Court in this pronouncement, it appears that, there is a considerable force in the contention being raised by the learned counsel Mr. Kaji in this respect. The plea of the accused, namely that the material does not disclose a case on which they could be tried before the trial Court, which was already accepted by the learned Metropolitan Magistrate, if were to be again accepted by the learned Addl. City Sessions Judge, then definitely there should have been a conclusion of the proceedings launched against the petitioner-accused. Viewing the matter from this angle it appears that the orders under challenge cannot be said to be interlocutory orders against which the revision application would not be maintainable before this Court.

In Haryana Land Reclamation and Development Corpn. Ltd. vs. State of Haryana & Anr. Cr.L.R. (SC) 412, the orders of discharge passed by the Chief Judicial Magistrate were held not to be falling within the definition of term `interlocutory’. It was also pointed out that inherent powers of the High Court were not limited.

On a conspectus of the view expressed by the above said pronouncements, it is clear that the orders passed by the learned Addl. City Sessions Court in a revision now cannot be termed as interlocutory orders. As pointed out, if the plea of the petitioner accused were to be accepted, as was done by the trial Court. then definitely the proceedings against all the petitioners could have been concluded and that also in their favour. One more aspect which requires consideration is the real intent and the purport of the provisions contained under s. 397(3) of the Cr.PC, 1973. This provision would, while eliminating the scope of two successive revision petitions by the same party would say that, if a revision application under this section has been made by any person either to the High Court or to the Sessions Court, no further application by the same person shall be entertained by either of them. But when once the revision application has been accepted by the Sessions Court and a finding adverse to the case of the petitioner-accused has been recorded, in all fairness and under the law also, it could not be urged that now the petitioner-accused cannot come before this Court under a revision. The orders granting of discharge were admittedly challenged before the Sessions Court. The revision applications have been allowed and the orders of discharge have been set aside and quashed and the framing of the charges, in all the cases have been ordered. Now saying that the revision applications filed by the accused persons against the above said orders would not be maintainable on the ground that they are the orders of interlocutory nature within the meaning of s. 397(2) of the code would go to the extent of saying that the orders of discharge granted by the trial Magistrate could have been challenged by the complainants and that too, successfully, but that, those revisional orders could not be challenged by the petitioner-accused on the ground that such orders would be interlocutory in nature. If the orders granting discharge were found not to be interlocutory, how the orders of not granting the discharge and directing the charges to be framed could be said to be interlocutory so as to bar the jurisdiction of this Court under s. 397(2) of the code ? Accepting the contention being advanced by Mr. Naik, and buttressed by Mr. Mehta, would amount to the acceptance of two different scales, one for the prosecutor and the other for the accused and that too in criminal jurisprudence, and again on the basis of the very same statutory provisions. Thus on a careful analysis of the views expressed by the Supreme Court and the provisions contained under s. 397 of the Cr.PC, 1973, it is apparently clear that the present criminal applications cannot be said to be not maintainable or barred under s. 397(2) of the Cr.PC, 1973 as having been filed against orders which are interlocutory in nature. The preliminary objection on this count raised by the learned counsels Mr. Naik and Mr. Mehta thus in my view fails.

12. So far as the merits of these revision petitions are concerned, the submissions of the learned counsel Mr. Kaji appear to have been based upon the conjoint reading of certain statutory provisions finding their place in IT Act, 1961 and WT Act, 1957. The thrust of the arguments to be advanced by the learned counsel Mr. Kaji is that the amount recovered or the value of the articles recovered during the search operations would be the income of the respective assessee from undisclosed sources and that, this amount or the value of the article was required to be taken as the income of the respective petitioner-assessee from undisclosed sources, for the said financial year in which the amount was recovered.

The learned counsel Mr. Kaji in this respect firstly would place reliance upon the provisions contained under s. 14 of the IT Act, 1961, finding its place in Chapter IV which pertains to the computation of total income and the heads of income. A reference to these provisions would go to show that, as being urged by Mr. Kaji, the amount found or the value of the articles found during, the search operations would fall under the statutory category `F’— “Income from other sources”. The very same proposition emanates from the provisions contained under s. 56(1) of the IT Act, 1961, which would say that income of every kind which is not to be excluded from the total income under the Act shall be chargeable to income-tax under the head “Income from other sources” if the same is not chargeable to income-tax under any of the heads specified in s. 14, items A to E. Thus, upon a conjoint reading of the provisions contained under s. 14 and s. 56 of the Act of 1961, it shall have to be accepted, as urged by the learned counsel Mr. Kaji, that the amount or the value of the articles should be taken as the income from the other sources.

13. The question is as to whether what would be the year to which such an income would relate. The provisions contained under s. 69A of the Act says very clearly that, where in any financial year, the assessee is found to be the owner of any money or valuable articles and if such money or valuable articles are not recorded in the books of account, if any, to be maintained by the assessee and the assessee offers no explanation about the nature and source of acquisition of the money or the article or the explanation is not satisfactory in the opinion of the ITO, the money and the value of the articles, may be deemed to be the income of the assessee for such financial year. These provisions, therefore, would go to show that the monies recovered, or the value of the valuable articles recovered, shall be deemed to be the income of the assessee for the financial year in which they were recovered. It is abundantly clear that these provisions would have a statutory deeming fiction, under which the above said income was required to be treated as the income of the assessee for the said financial year. Sec. 3 of the Act of 1961 which would define `previous year’ for the purpose of the Act would go to show that, previous year would mean the financial year immediately preceding the assessment year. The assessment year undoubtedly is 1984-85. The previous year would be 1983-84 and the financial year in which the money or the valuable articles were recovered was also the same. The earlier discussion would go to show that this income was required to be taken as the income from the undisclosed sources and that also it was to be taken as the income of that financial year.

14. It is not in dispute, on the contrary it is being substantiated by the evidence brought forth by the complainant/Department, that the amount recovered and/or the value of the valuable articles, have been shown by the respective assessee as the income from undisclosed sources in that financial year and that the said position has been duly accepted by the Department and that the assessment proceedings have completed. It is thus clear that once this position having been accepted by the Department and the income having been accepted as the income from undisclosed sources in that financial year under statutory provisions, it could not have been urged by the complainant/Department that there was a willful attempt on the part of the petitioner-assessee. Anyhow, before coming to this conclusion, a reference to certain case law on which the petitioners have placed heavy reliance would prove beneficial. In this respect, the reference firstly be made to the pronouncement of this Court in B.T.X. Chemicals (P) Ltd. & Ors. vs. Suraj Bhan & Anr. (1989) 76 CTR (Guj) 201 : (1989) 177 ITR 425 (Guj). This pronouncement of this Court would point out that an assessee can be prosecuted only if it is shown that he had a mala fide intention or mens rea for committing the particular crime. It is also pointed out that a bona fide mistake made by the assessee while filing in his IT return, would not necessarily amount to an intention to commit a crime punishable under s. 276C of the IT Act, 1961. In D.N. Bhasin & Anr. vs. Union of India & Ors. (1987) 66 CTR (P&H) 55 : (1988) 171 ITR 7 (P&H), as the facts would go to show, the assessees had filed their returns for certain assessment years but in April, 1992, the IT Department had searched the business and residential premises of the assessee and had seized certain papers. Later on the re-assessment proceedings were initiated against the assessee and the criminal complaints were also filed against them under ss. 276C and 277 of the IT Act, 1961. In the background of these facts, it was held that if the CIT(A) came to the conclusion that the additions, made to the income of the assessees were not justified and had ordered the same to be deleted, it could no longer be pleaded that the assessees tried to evade tax or had made false statements in the verifications of their returns. In Prakash Chand vs. ITO (1982) 134 ITR 8 (P&H), the prosecution was launched against the assessee for the offence under s. 277 of the IT Act on the basis of false returns, false accounts and inflated items of purchases. Pending the criminal proceedings, in penalty proceedings for concealment of income, the Tribunal had examined the material and had arrived at the findings that the IT authorities had not established clearly that particular items of purchases were inflated. It was held that, in view of the findings of the Tribunal that there was no concealment and no inaccurate accounts were filed by the petitioner, the criminal proceedings against the assessee could not continue and were liable to be quashed. In Kanshi Ram Wadhwa vs. ITO (1983) 36 CTR (P&H) 134 : (1984) 145 ITR 109 (P&H), where during the assessment proceedings, the ITO had passed an order imposing penalty on the assessee and that order was quashed by the AAC, and when, on the strength of the order of the ITO criminal prosecution was launched against the assessee under s. 277 of the IT Act, 1961, it was held that there was no case of sustenance of penalty, it equally would not be a case for criminal prosecution and, therefore, the criminal complaint filed against the assessee was liable to be quashed. The Supreme Court pronouncement in Uttam Chand & Ors. vs. ITO (1982) 133 ITR 909 (SC) would go to show that on the findings to be rendered by the ITO that the firm was not genuine and that one J was not the partner of the firm, there was the initiation of the prosecution against all the partners of the firm under s. 277 of the IT Act, 1961. But ultimately when the Tribunal had recorded a finding that J was a partner of the firm and that the firm was genuine, the assessee was said not liable to be prosecuted for filing the false return.

The Calcutta High Court pronouncement in Gopalji Shaw vs. ITO (1988) 73 CTR (Cal) 264 : (1988) 173 ITR 554 (Cal) would go to show a case, wherein the penalty proceedings were initiated under s. 271(1)(a) but no penalty was levied. The prosecution was launched and on a writ petition it was held that, though the penalty proceedings were initiated, no penalty was imposed, which showed that the Department did not consider it necessary to impose any penalty and that, in such case the ITO could not say that there was a wilful default on the part of the assessee and, therefore, the initiation of the criminal prosecution was without jurisdiction and was liable to be quashed.

The Patna High Court decision in Banwarilal Satyanarain & Ors. vs. State of Bihar & Anr. (1989) 80 CTR (Pat) 31 : (1989) 179 ITR 387 (Pat) goes to establish that the prosecution of an accused under the provisions of the IT Act is liable to be discontinued if the statutory authority under the Act has passed any order on the merits in favour of the assessee who is the accused in a criminal trial. This pronouncement would definitely go to show that even in some case when the prosecution was launched and thereafter there was the correction of the orders of the Department, under which the assessee could not have been held liable, the prosecution launched against the assessee, ultimately came to be quashed. This pronouncement definitely would render a great assistance to the learned counsel Mr. Kaji while he urges before me that in this case also the orders of discharge passed by the learned trial Magistrate could not have been interfered with by the learned Addl. City Sessions Judge, because in fact, all whatever was said by the assessee in the returns came to be accepted by the Department and ultimately on the recognition of their say, there have been various assessment orders which have become final and conclusive. The rest of the four pronouncements on which the learned counsel Mr. Kaji would place reliance make the position yet clearer. The Supreme Court pronouncement in P. Jayappan vs. S.K. Perumal, First ITO (1984) 42 CTR (SC) 180 : (1984) 149 ITR 696 (SC) would go to show that, if the Departmental proceedings are not terminated, the initiation of the criminal proceedings against the assessee would be premature. It is true that in this pronouncement the Supreme Court has not quashed the criminal proceedings but that was done on a material distinguishing feature namely that the Departmental proceedings were not over. Even in such circumstances the say of the Supreme Court is that the launching of the criminal prosecution was premature. The reliance is being placed upon this pronouncement by Mr. Kaji, with a purpose to emphasise that in all the cases on hand the assessment proceedings are over and that, they have been in favour of the respective assessee, and that, when no penalty proceedings have been initiated for the concealment of income or for showing incorrect particulars in the statement, there could have been no prosecution of the assessee-accused. It appears that in view of what has been said by the Supreme Court, the contention of the learned counsel Mr. Kaji is fortified and requires to be accepted. The Delhi High Court pronouncement in Asstt. CIT vs. Belco Engineers (P) Ltd. & Ors. (1990) 87 CTR (Del) 1 demonstrates a case in which addition to the income was made on the ground that the assessee had shown excess amounts having been spent on raw material and had undervalued the scrap. But this addition having been deleted by the Tribunal, it was held that the assessee could not be proceeded against for the alleged offence under s. 276C. The Punjab and Haryana High Court decision in ITO vs. Mohinder Pal Ajay Kumar (1993) 111 CTR (P&H) 207 was a case in which the prosecution was launched against the assessee under s. 226C on the ground that the stock was found undervalued at the time of survey. Accused had thereafter surrendered the difference in the return by way of supplementary profit. The accused himself had corrected valuation for survey before filing the IT return. It was held that there was no attempt to attract the penal provision under s. 276C because the initial preparation did not mature into attempt to evade, which is made punishable. Punjab & Haryana High Court decision in ITO vs. B.B. Mittal & Ors. (1993) 113 CTR (P&H) 229 would go to show that when the Tribunal had quashed the penalty observing that there was no concealment and when the legality of the order of the Tribunal was not disputed, it was held that the prosecution was rightly dropped by the trial Court.

The later four decisions would go to show that the case of the Department against the assessee was in respect of some concealment somewhere which would entitle him to some benefit. Later on, it was found by the higher authorities that such was not a case. Accepting this position, these pronouncements would say that when the case of the assessee came to be accepted as a genuine one even later on, there could not have been the prosecution. Without repeating the facts of the case once more it shall have to be accepted that, as the case of the assessee has been accepted in full and as no penalty proceedings for the concealment of the income or for showing incorrect particulars in the return were initiated, the prosecution could not have been launched on the basis of some view which, right from the initiation, was even according to the Department was in favour of the assessee-accused.

The Court below, as noticed above, had taken the view that the accused-assessee had changed the previous year with a view to see that he comes out of the penal consequences which may ensue from the recovery of the amounts or of the valuable articles. The say of the Court below does not appear to be in consonance with law, because as noticed earlier, under the very same provision this income was required to be treated as the income of that financial year. Moreover, as rightly pointed out by the learned counsel Mr. Kaji, a person having more than one business can have more than one financial year. It is, therefore, abundantly clear that, it could not have been urged that the petitioners-assessees were guilty of offence for having more than one financial year. The important aspect to be noticed is that the assessee had the income of the share of partnership business only and that even if the assessees had some other income in previous years it could not have been said that they had changed the previous year. Similarly whatever may be the previous year, then also in respect of such income the petitioners- assessees could have filed their returns before 30th June, 1984, which in fact has been done by all the respective assessee.

So far as the violation of the provisions of WT Act, 1957 are concerned, the reference shall have to be made to the provisions contained under s. 2(q) of the Act which speaks of valuation date. The return of wealth under s. 14 of the Act, 1957 was required to be filed before 30th June of the corresponding assessment year. Looking to the provisions contained under s. 35A of the Act of 1967, it could not have been held that the petitioner accused- persons had wilfully attempted in any manner to evade any tax under the Act because, as it is abundantly clear, along with the IT returns, necessary returns for the wealth-tax were also duly submitted by the assessee before the requisite date and that, the say of the respective assessee/petitioner has been accepted and the assessment in this respect have been finalised.

It has been sought to be urged that as the assessees have not shown this undisclosed income in their account books or no account book in this respect have been maintained, they would be held liable and, therefore, must be put on trial. This contention also cannot be accepted, regard being had to the provisions contained under s. 44AA and the provisions contained under Chapter XVI of the Act of 1961. These provisions would go to show that the income of the respective petitioner-assessee, being the income from the partnership business, the maintenance of the account books by them under s. 44AA could not have been successfully insisted upon.

The City Sessions Court has said that if the contentions of the petitioner-assessee are to be accepted, it would amount to annihilation of the real object and purpose of the two taxing statutes. Unfortunately this view of the Court below cannot be accepted in light of all what has been stated by the pronouncements referred to earlier. It was required to show prima facie that there has been a wilful attempt to evade tax and that this position clearly is not obtainable from the factual data and the statutory requirements. It is, therefore, clear that the learned Metropolitan Magistrate, on the correct appreciation of the factual and legal position, was perfectly justified in ordering the discharge of the assessees, while the learned City Sessions Judge was not so, while upsetting the said orders.

21. The last would be the question as to whether this Court should interfere at the stage of the framing of the charge. Learned standing counsel, Mr. Naik and Mr. Mehta, would place reliance upon a pronouncement of this Court in K.C. Saksena, Asstt. Collector, Customs vs. Birbhadrasinhji K. Gohel & Anr. 26(1) G.L.R. 517. This pronouncement while examining the provisions contained under ss. 245 and 246 of the Code of 1973 says that at the stage of framing of the charge, the Magistrate is not required to appreciate the evidence meticulously but he has to form an opinion on the prima facie case. It is also pointed out that, if the evidence is prima facie sufficient and shows that the ground exists for framing the charge, then he cannot pass an order of discharge and he is required to frame the charge. This decision, in fact, reiterates the well settled legal position in respect of the framing of the charge. It is made abundantly clear that if the evidence is prima facie sufficient, the charge can be framed. The Supreme Court pronouncement in R.S. Naik vs. A.R. Antulay & Anr. AIR 1986 SC 2045 deals with the very same provisions with which I am concerned, namely the provisions contained under s. 245(1) of the code. This pronouncement emphasises that the power to discharge is exercisable under s. 245(1) of the case when the Magistrate considers, for reasons to be recorded, that no case against the accused have been made out which, if unrebutted, would warrant has conviction. In fact, on the analysis of the material made available to him in the instant cases the learned Metropolitan Magistrate has come to the conclusion that no such case is made out. It appears that, he was perfectly justified in his conclusion, regard being had to the legal and the factual position.

Lastly it was urged by the learned counsels, Mr. Naik and Mr. Mehta, that at the stage of the framing of the charge, the valuation of the material and documents, is to be done orally to find out whether facts emerging therefrom disclose the ingredients of alleged offence. The Supreme Court pronouncement pressed in purview in Niranjan Singh Karan Singh Punjabi vs. Jitendra Bhimraj Bijja & Ors. AIR 1990 SC 1962 of course, with a view to show that, at this stage when the question is of framing the charge or not, the scope and the ambit of the inquiry of the Court would be a limited one. There cannot be any quarrel on this settled position of law. But it appears that, without taking a deep dip in the material made available to the Court, it is prima facie shown that no case against the accused persons have been made out which, if unrebutted, would warrant their conviction. Thus, from all what has been stated above, it is clear that the present three criminal revision applications succeed and they require to be allowed. They are hereby accordingly allowed. The revisional orders under challenge are hereby set aside and the orders of the learned trial Magistrate, ordering the discharge of the respective petitioner accused- assessee are hereby restored. Rule is made absolute accordingly.

[Citation : 212 ITR 255]

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