Madras H.C : Both these appeals are disposed of together since the parties are the same and the point is common. Criminal Appeal No. 817 of 1987 is directed against the order of acquittal dt. 31st March, 1987, passed by the learned Additional Chief Judicial Magistrate, Madurai, In C.C. No. 51 of 1985.

High Court Of Madras

S. Udayakumar, ITO vs. Abbas Ali & Co. & Ors.

Sections 276C, 277, 278B

Asst. Year 1980-81, 1982-83

S.M. Sidickk, J.

Criminal Appeals Nos. 817 & 818 of 1987

7th February, 1997

Counsel Appeared

K. Ramasamy, for the Appellant : R. Janakiraman, for the RespondentS Judgment

S.M. SIDICKK, J. :

Both these appeals are disposed of together since the parties are the same and the point is common. Criminal Appeal No. 817 of 1987 is directed against the order of acquittal dt. 31st March, 1987, passed by the learned Additional Chief Judicial Magistrate, Madurai, In C.C. No. 51 of 1985. Criminal Appeal No. 818 of 1987 is directed against the order of acquittal passed by the very same Magistrate in C.C. No. 52 of 1985 on the very same date.

2. The material averments in both the complaints arising out of these two cases in C.C. Nos. 51 of 1985 and 52 of 1985 are as follows : The first accused is a partnership firm which continued up to 3rd Oct., 1979, and after the death of one partner, viz., I. Abbas Ali, it was succeeded by I. Abbas Ali & Co., with the second accused to the seventh accused as partners. The business done by the first accused firm is the purchase and sale of iron and steel materials. The second accused to the seventh accused are partners in the first accused firm and they are proceeded against under s. 278B of the IT Act, 1961 (hereinafter called as the “Act”), as they are partners in the first accused firm. In the normal course of business transactions, the first accused firm purchased iron and steel materials from a business concern under the name and style of Iron and Steel Traders, situate at Door No. 77, Sembudoss Street, Madras-600 001. The first accused firm is situate at Door No. 78, South Perumal Maistry Street, South Gate, Madurai. Enquiry and investigations made by the complainant or the IT Department in the case of the firstaccused firm revealed that the undermentioned demand drafts were purchased by the fourth accused by name, Rajah Hussain, who was a partner in the first accused firm, in favour of one E. Muthu, an employee of Iron and Steel Traders situate at Door No. 77, Sembudoss Street, Madras 600 001. In the course of written statements given to the Asstt. Director or Inspector (Investigation), IT Department, the second accused by name Shahul Hameed and the fourth accused Rajah Hussain admitted the purchase of the undermentioned demand drafts towards the payment of on-money or premium over and above the invoice price for the purchase of iron and steel materials from Iron and Steel Traders, Madras1. DD. Date of Amount Purchased from Person buying In whose No. purchase Rs. favour bought 990 2-8-79 7,965 Central Bank of I. Raja Hussain E. Muthu, India, South Gate, (fourth accused) employee of Madurai Iron and Steel Traders, Madras-1.

3. The abovementioned transactions in the shape of demand drafts did not find a place in the account books maintained by the first accused firm and this is admitted by the second accused by name, Sahul Hameed, and also by the fourth accused by name, Rajah Hussain, in their statements given to the IT authorities. The sworn statement of E. Muthu, an employee of Iron and Steel Traders at Door No. 77, Sembudoss Street, Madras-1, was also recorded on 15th Dec., 1984, by the IT authorities wherein the said Muthu admitted that the demand drafts mentioned above were encashed by him towards the sale consideration due to Iron and Steel Traders at No. 77, Sembudoss Street, Madras-1. The return of income of the first accused firm accompanied by the trading and P&L a/c and balance sheet declaring an income of Rs. 8,100 for the asst. yr. 1980-81 (previous year ending on 31st March, 1980) was filed on 11th Aug., 1980. Likewise the return of income of the first accused firm declaring an income of Rs. 24,900 for the asst. yr. 1982-83 (previous year ending on 31st March, 1982) was filed on 4th Oct., 1985. The income-tax assessment for the asst. yr. 1980-81 was completed on 31st March, 1981, under s. 143(1) r/w s. 189 of the Act and the income-tax assessment was made on the basis of the figures mentioned in the day book and ledger, which did not record the demand draft dt. 2nd Aug., 1979, for a sum of Rs. 7,965. Similarly, the income-tax assessment for the year 1982-83 was completed under s. 143 (1) of the Act on 21st Oct., 1983, and the income-tax assessment was made on the basis of the figures in the day book and the ledger of the first accused firm, which did not record the demand draft dt. 11th Aug., 1981, for a sum of Rs.25,112. Therefore, it is clear that with a view to evade income-tax and to defraud the exchequer of its legitimate revenue and to mislead and deceive the ITO the first accused to the seventh accused committed offences punishable under ss. 34, 120B, 193, 196 and 420 of the IPC and ss. 276C(1) and 277 r/w s. 278B of the Act in a series of acts which are detailed hereunder and which form the same transaction. All the accused have, in furtherance of the conspiracy and common intention of all, fabricated false evidence in the form of false account books for the aforesaid assessment years with a view to produce them as genuine evidence, and to deliver a false return of income of the first firm with a view to wilfully evade income-tax and fraudulently induced the ITO to deliver an assessment order based on the false return of income determining the tax payable by the first accused firm at a far lower amount than the legitimate amount of tax payable by the firm and thereby committed the offences punishable under ss. 34, 120B, 193, 196 and 420 of the IPC and ss. 276C(1) and 277 r/w s. 278B of the IT Act. In pursuance of the conspiracy and common intention of all and in the course of the same transaction, the first accused has intentionally fabricated false evidence in the shape of account books, which omitted entries about the demand drafts mentioned supra and thereby committed the offence punishable under s. 193 of the IPC, 1860, r/w s. 136 of the IT Act. In the course of the same transaction, the first accused firm used the fabricated account books as true and genuine evidence before the ITO during the assessment proceedings fully knowing them to be false or fabricated and thereby committed the offence punishable under s. 196 of the IPC, r/w s. 136 of the Act. In the course of the same transaction all the accused have intentionally fabricated false cash book or day book or false ledger or false purchase bills or false trading and P&L a/c and balance sheet and thereby dishonestly induced the ITO to deliver an assessment order on the basis of the false return of income determining the tax payable at a lower figure and thereby committed an offence punishable under s. 420 of the IPC. In pursuance of the conspiracy and common intention, all the accused delivered the first accused’s return of income declaring a false total income by omitting to include the demand drafts mentioned supra and thereby committed the offence punishable under s. 276C(1) of the IT Act, 1961. In the course of the same transaction, the second accused delivered before the ITO a false return of income making a false verification which omitted to record the purchase of the demand drafts mentioned supra knowing them to be false, having reason to believe that the statements and records are not true and thereby the second accused committed an offence punishable under s. 277 of the IT Act, 1961. The second accused to the seventh accused being the partners are responsible to the firm for the conduct of business and as such they are proceeded against under s. 278B of the Act.

On the basis of the abovesaid averments two separate complaints were filed under the respective provisions of law mentioned above in C.C. Nos. 51 of 1985 and 52 of 1985. P.W. 1, Udaya Kumaran, is the witness examined in C.C. No. 51 of 1985, who is the same first witness in the other case C.C. No. 52 of 1985. Likewise P.W. 2, Bose, P.W. 3, Sundaresan, P.W. 4, Gurunatha Krishnan, P.W. 5, Muthu, P.W. 6 Mohan, P.W. 7 Sankaranarayanan, P.W. 11 Venkataraman, were examined respectively as P.Ws. Nos. 2, 4, 5, 6, 7, 8 and 9 in the other case in C.C. No. 52 of 1985 and the evidence was recorded separately in each one of the cases. The complainant examined 11 witnesses in C.C. No. 51 of 1985 while he has examined nine witnesses in C.C. No. 52 of 1985 and marked 51 documents in C.C. No. 51 of 1985 and 21 documents in C.C. No. 52 of 1985 on the side of the prosecution. The defence has marked one document in C.C. No. 51 of 1985 while it has marked three documents in the other case in C.C. No. 52 of 1985. During the course of these appeals, the defence has produced the copy of the order of the Dy CIT(A), Madurai, B. Range, dt. 4th Dec., 1989, with reference to the asst. yrs. 1980-81 and 1982-83 relating to the first accused firm. The carbon copy of the order dt. 4th Dec., 1989, passed by the Dy. CIT(A), Madurai, is marked as exhibit D-2 on the side of the accused in C.C. No. 51 of 1985 while so the xerox copy of the same order is marked as exhibit D-4 on the side of the accused in C.C. No. 52 of 1985.On a consideration of the evidence and materials placed before the lower Court, the learned Additional Chief Judicial Magistrate, Madurai, came to the conclusion that the accused in both the cases are not guilty of the offences with which they are charged. Aggrieved against the order of acquittal, the ITO of Madurai as the complainant in these two cases has preferred both these appeals. After hearing the advocates for both the parties, the point that arises for determination in these two appeals is as to whether the complainant has proved his case beyond all reasonable doubt and whether the accused are guilty of the offences with which they are charged and if so, what is the sentence. Point.—The second accused to the seventh accused are partners of the first accused firm. They had dealings in iron and steel materials with Iron and Steel Traders at Madras. One Vinod Kumar Didwani is the proprietor of the said Iron and Steel Traders at Madras. One Muthu, who was examined as P.W. 5 in C.C. No. 51 of 1985, relating to the Criminal Appeal No. 817 of 1987 and examined as P.W. 6 in C.C. No. 52 of 1985, relating to the Criminal Appeal No. 818 of 1987, was the godown keeper or watchman of Iron and Steel Traders at Madras. The impugned two demand drafts—one for Rs. 7,965 and another for Rs. 25,112 were purchased in the name of the abovesaid Muthu, an employee of Vinod Kumar Didwani on 2nd Aug., 1979, and 11th Aug., 1981, respectively. They were purchased by the fourth accused Rajah Hussain, from Central Bank of India at Madurai. The respective applications for getting the demand drafts are marked as exhibit P-11 in C.C. No. 51 of 1985 and exhibit P-8 in C.C. No. 52 of 1985. According to the prosecution, a conspiracy was hatched by the partners of the first accused firm to do business transactions with Vinod Kumar Didwani, who was the proprietor of Iron and Steel Traders at Madras, outside the books of account of the first accused firm. The IT Department, who is the complainant herein, gathered the information that Vinod Kumar Didwani was in the habit of doing business transactions outside the books of account all over India including the first accused firm situate at Door No. 78, South Perumal Mestry Street, South Gate, Madurai. According to the prosecution, the difference between the invoice price and the actual purchase price was sent by way of demand drafts by the first accused firm in favour of Muthu, who is the employee of Iron and Steel Traders at Madras and for this purpose Vinod Kumar Didwani opened a savings bank account in the name of Muthu having S. B. Account No. 417 in Dena Bank at Madras. Vinod Kumar Didwani introduced his employee, Muthu to Dena Bank at Madras by signing in the form required for opening the savings bank account marked as exhibit P-15 in both the cases in C.C. Nos. 51 and 52 of 1985. Exhibit P-16 in both the cases is the signature of Vinod Kumar Didwani in the application for opening the savings bank account in Dena

Bank at Madras marked as exhibit P-15. According to the prosecution, amounts were pouring in from all over India in this savings bank account No. 417 of the witness Muthu. A statement was recorded on 23rd Aug., 1982, by the IT Department from the witness Muthu under s. 131 of the Act and the same is marked as exhibit P-12 in both the cases in C.C. Nos. 51 and 52 of 1985. The impugned demand draft amounts find a place in the Savings Bank Account No. 417 of Muthu marked as exhibit P-14 in both the cases. There is an entry of credit of Rs. 7,965 on 6th Aug., 1979, and an entry of withdrawal of Rs.8,000 on 8th Aug., 1979, found in the savings bank pass book of the witness Muthu marked as exhibit P-14. Likewise there is an entry of credit of Rs. 25,112 in the savings bank account of Muthu marked as exhibit P-14 in these two cases. According to the prosecution, a sum of Rs. 8,000 was handed over by the witness Muthu to Vinod Kumar Didwani, who is his master, by withdrawing the same from Dena Bank at Madras on 8th Aug., 1979. The accused had not shown these two amounts covered by two demand drafts taken in the name of Muthu in the computation of their total income and they have not recorded the said amount in the books of account of the first accused firm and they have not included these two amounts in the return of income filed on behalf of the first accused firm. Thereby according to the prosecution, the real income and the real income-tax was brought down by these two amounts in the books of account of the first accused firm. It is the further case of the IT Department that by not including these two amounts covered by the two demand drafts taken in the name of Muthu in the account books of the first accused firm, the account books of the said firm were fabricated, and by producing such fabricated account books the accused have induced the ITO to levy a lesser income-tax, and so all the accused are guilty of the offences with which they are charged. According to the prosecution the purchase of the two demand drafts was admitted by the second accused, Shahul Hameed, and the fourth accused, Rajah Hussain, in their statements given to the ITOs marked as exhibits P-4 and P-8 in C.C. No. 51 of 1985 relating to Criminal Appeal No. 817 of 1987 and the respective statements of A-2 a A-4 were recorded on 4th April, 1985 and 10th Aug., 1984. It is also relevant to note that the second accused, Shahul Hameed, had given two statements one on 10th Aug., 1984, and another on 4th April, 1985, before the IT authorities, which are marked as exhibits P-9 and P-4 in C.C. No. 51 of 1985. Exhibit P-12 marked in C.C. No. 51 of 1985 is the statement of the witness Muthu given to the IT authorities on 23rd Aug., 1982, and exhibit P-21 in C.C. No. 51 of 1985, is the further statement of the witness Muthu before the IT authorities on 15th Dec., 1984. Exhibit P-25 is another statement of the witness Muthu given before the IT authorities on 22nd Dec., 1984. On the date of giving the statement on 22nd Dec., 1984, the witness Muthu handed over some of the documents to the IT authorities and the said documents are exhibit P-23 marked in C.C. No. 51 of 1985. Exhibit P-27 is one of the documents marked in C.C. No. 51 of 1985 handed over by the witness Muthu to the IT authorities and it is the secret account of his master, Vinod Kumar Didwani. Exhibit P-29 in C.C. No. 51 of 1985 is the English translation of the secret account of Vinod Kumar Didwani in Hindi.

8. Learned counsel for the appellant, Mr. K. Ramaswamy, took me through several paragraphs of the complaint and the relevant material records and contended that the transactions of the two demand drafts taken in the name of the witness Muthu by the fourth accused, Rajah Hussain, on the instruction of his brother, the second accused, Shahul Hameed, who are the partners of the first accused firm, did not find a place in the account books maintained by the first accused firm, and the income-tax assessment was made on the basis of the figures mentioned in the ledger, which did not record the amounts of the two demand drafts mentioned earlier. According to learned counsel for the appellant thus there was deliberate concealment of income on the volume of transactions purposely to pay a lesser income-tax, and a wilful omission was made by the accused to evade higher amount of income-tax with fabricated books of account containing false or untrue statements by not mentioning the purchase of the demand drafts by the fourth accused, Raja Hussain, at the instruction of the second accused, Shahul Hameed. He further contended that the encashment of the two demand drafts in his S. B. account is by Muthu and the onus is on the accused, who are income-tax assessees, as to why these two amounts covered by the twodemand drafts were not reflected in their account books, and there is no contra evidence on the side of the accused to explain the omission of these two amounts in their account books resulting in the payment of lesser income-tax and the accused have not subjected these two amounts to income-tax deliberately and, therefore, the prosecution has proved the case beyond all reasonable doubt and the accused must be found guilty of all the charges.

Learned counsel for the appellant further argued that the purchase of the demand drafts and the payment of on- money is admitted by the accused, and the money of the impugned two demand drafts is reflected in the savings bank account of the witness Muthu and it is not disputed that P.W. 5 Muthu, was an employee of Vinod Kumar Didwani in his business concern, and P.W. 5, Muthu, assisted Vinod Kumar Didwani and these two amounts paid to Vinod Kumar Didwani through P.W. 5 Muthu, by the accused were not shown in the books of account of the first accused firm, and the second accused Shahul Hameed, admitted the same in his statement given to the IT authorities marked as exhibits P-4 and P-9 in C.C. No. 51 of 1985 which were recorded on 4th April, 1985, and 10th Aug., 1984, respectively and the books of account of the first accused firm marked as exhibits P-5 and P-6 in C.C. No. 51 of 1985 were impounded by the IT authorities as per the order dt. 10th Aug., 1984, marked as exhibit P-10. Per contra learned counsel appearing for the accused contended that the complaint of the IT Department is that the first accused firm purchased these two demand drafts—one for Rs. 7,965 on 2nd Aug., 1979, and another for a sum of Rs. 25,112 on 11th Aug., 1981, and these two demand drafts were not accounted for in the account books of the first accused firm and, therefore, the first accused and their partners, who are the second accused to seventh accused, committed an offence under s. 276C(1) of the Act on the ground that the accused concealed their income and paid a lesser tax. According to the defence counsel, Thiru R. Janakiraman, on the date of thecomplaint the assessment of income under s. 143 of the Act was made in which these two amounts covered by the two demand drafts were not shown in the income of the first accused firm and this criminal complaint was filed on the basis of search made by the IT authorities in the business premises of Vinod Kumar Didwani and on the basis of the statements obtained from his employee, P.W. 5, Muthu. The premises of the first accused firm were surveyed under s. 133A of the Act and the statements were obtained from the second accused, Shahul Hameed, the fourth accused Raja Hussain, and P.W. 5, Muthu and on the basis of these statements the complaints in the Criminal Cases Nos. 51 and 52 of 1985 were filed. However, according to the learned defence lawyer, Mr. R. Janakiraman, subsequent to the complaint in these two cases, the income-tax assessment of the first accused firm was reopened by the ITO, who is the complainant herein, and proceeded under s. 147 of the Act, and the revised assessment on the basis of the concealment of income of the first accused firm was completed on 31st March, 1986, and thereby the ITO included the amounts covered by these two demand drafts in the hands of the first accused firm and completed the revised assessment on the basis that these amounts covered under the two demand drafts escaped from assessment as they were not originally disclosed in the total income for the payment of income-tax by the first accused firm. Aggrieved by the order of the revised assessment, according to learned counsel for the defence, the first accused firm filed an appeal before the Appellate Authority, viz., the Dy CIT(A), Madurai, who by an order dt. 4th Feb., 1989, marked as exhibits D2 and D-4 respectively, in both these criminal appeals as additional evidence, deleted these two additions covered by these two demand drafts taken by the fourth accused, Raja Hussain, in the name of P. W. 5 Muthu, and so there is no evasion of income-tax or concealment of income or fabrication of account books or false fabrication of the income-tax return, and as a result the original income-tax returns filed by the first accused firm remained as correct and valid, because the IT Department did not go in further appeal as against the order of the Dy. CIT(A), Madurai, and so the first submission of learned counsel for the accused is that the very basis of the complaint in these two cases has gone and the complaints in both these criminal cases have become infructuous. In support of the above contentions, the learned defence counsel, Mr. R. Janakiraman, relied upon two decisions K.T.M.S. Mohammed vs. Union of India (1992) 108 CTR (SC) 84 : (1992) 197 ITR 196 (SC) and Mohammed I. Unjawala vs. Asstt. CIT (1995) 126 CTR (Mad) 371 : (1995) 213 ITR 190 (Mad) . In K.T.M.S. Mohammed vs. Union of India (supra), it was held by the Supreme Court that though the criminal Court had to judge the case before it independently on the materials placed before it, there was no legal bar to giving due regard to the proceedings under the IT Act. A similar view was taken by our Court in the case Mohammed I. Unjawala vs. Asstt. CIT (supra), wherein it was laid down as follows : “Even though the Supreme Court in P. Jayappan vs. S.K. Perumal, ITO (1984) 42 CTR (SC) 180 : (1984) 149 ITR 696 (SC) has made the observation that the result of the proceedings under the Act is not binding on the criminal Court and the criminal Court has to judge the case independently on the evidence placed before it, a rider also is provided expressing that the criminal Court no doubt has to give due regard to the result of any proceedings under the Act, having a bearing on the question in issue and in an appropriate case, it may drop the proceedings in the light of an order passed under the Act. Therefore, it cannot be treated that every finding of the authorities under the IT Act had to be disregarded and ignored for the criminal prosecution. On the other hand, due regard must be given and in appropriate cases, the criminal prosecution has to be dropped. Therefore, in deserving cases, the criminal Court has to give weight to the findings of the authorities under the IT Act and it is not in all cases to ignore the conclusions of the Tribunal.”

On the other hand, learned counsel for the appellant had drawn my attention to a number of decisions Maqbool Hussain vs. State of Bombay AIR 1953 SC 325, Thomas Dana vs. State of Punjab (1959) Suppl. 1 SCR 274 : AIR 1959 SC 375, Asstt. Collector of Customs vs. L.R. Melwani (1969) 2 SCR 438 : AIR 1970 SC 962, P. Jayappan vs. S.K. Perumal (1984) 42 CTR (SC) 180 : (1984) 149 ITR 696 (SC), Dharma Pratishthan vs. Miss B. Mandal (1988) 71 CTR (Del) 52 : (1988) 173 ITR 487 (Del) and S.P. Murugappan vs. ITO (1992) 104 CTR (Mad) 380 : (1992) 194 ITR 531 (Mad), in support of his contention that the finding of the Income-tax Appellate Authority is not binding on the criminal Court and it has to judge the cases independently. Most of the cases referred to by learned counsel for the appellant relate to the proceedings to quash the criminal complaint filed by the IT Department. That apart nowhere it is stated in the decisions cited supra that due regard should not be given to the finding of the Income-tax Appellate Authority in respect of the prosecution launched by the very same IT Department. Nobody is questioning the proposition that the finding of the Income-tax Appellate Authority is not binding on the criminal Court. However, in the decision of the Supreme Court reported in P. Jayappan vs. S.K. Perumal (supra), which was followed by our High Court in the decision Mohamed I. Unjawala vs. Asst. CIT (supra), it has been categorically held that the criminal Court has to give due regard to the result of any proceedings under the IT Act having a bearing on the question in issue and in appropriate cases, it may drop the proceedings in the light of an order passed under the IT Act. Therefore, the decisions cited by learned counsel for the appellant will not be of any help to contend that the order passed by the Dy. CIT(A), Madurai, in this case has to be brushed aside. Per contra it is my view that due regard should be given to the order passed by the Dy. CIT(A) Madurai, for the purpose of this case.

It was next argued on behalf of the appellant that the Dy. CIT(A), Madurai, did not consider all the materials placed before the criminal Court in these cases and in such circumstances due regard should not be given to the order passed by the Income-tax Appellate Authority in arriving at a conclusion in these criminal cases. One cannot expect the Income-tax Appellate Authority to sit in judgment over the materials placed before the criminal Court.

However, the Dy. CIT(A), Madurai, has referred to the statement given by some of the partners of the first accused firm in these cases. The order dt. 4th Dec., 1989, of the Dy. CIT(A) Madurai, marked as additional evidence on the side of the defence reads as follows : “For the asst. yr. 1980-81 in the revised order, the ITO has added an amount of Rs. 7,965 and for the asst. yr. 1982-83 he has added an amount of Rs. 25,112 to the income returned. It is against these additions that the petitioner has filed these appeals . . . . The demand draft of Rs. 7,965 taken by Mr. Raja Hussain for the asst. yr. 1980-81 relating to the asst. yr. 1980-81 and another demand draft of Rs. 25,112 taken by him for asst. yr. 1982-83 have nothing to do with the appellant-firm. These drafts were taken by Sri Raja Hussain in his individual capacity and he could be charged to tax if at all his explanation regarding the source of money employed was not satisfactory. In this connection, he has further pointed out that the confession statement given by Mr. Shahul Hameed, partner of the firm, on 4th April, 1985, that the transaction has not been recorded in the books of account will not amount to concealment of income as the assessee-firm had not involved itself in these transactions. . . . unless nexus between the appellant-firm and the amount invested in the drafts is proved, additions cannot be made . . . nexus should have been proved that the money invested by Sri Raja Hussain was actually advanced by the firm, I. Abbas Ali and Brothers, the appellant. In view of this, I do not think that the additions have been made on proper and strong analysis of substantial evidence. Hence, additions are deleted and the appeals are allowed.”

14. A perusal of the order passed by the Dy CIT(A), Madurai, would go to show that he has considered the materials made available to him and he came to the conclusion that there was no nexus between the first accused firm and the amounts sent by way of the two demand drafts by the fourth accused, Rajah Hussain.

15. It is not the case of the appellant herein that this order of the Dy. CIT(A), Madurai, was obtained by misrepresentation of facts or for some extraneous consideration. This order of the Dy. CIT(A), Madurai, has been marked in these two appeals as additional evidence on the side of the defence with the consent of the appellant’s counsel. The findings of the Income-tax Appellate Authority are that the two demand draft amounts did not belong to the first accused firm and so the two amounts for the tax liability were deleted from assessment. These findings of the Income-tax Appellate Authority have become final as the Income-tax Department did not go in any further appeal. The result is that there is no basis for the charge that the first accused firm concealed their income in respect of the amounts covered by the two demand drafts which is the subject-matter of these criminal appeals, and so the entire basis of the charge in these criminal cases has gone. The liability to pay higher income-tax is interconnected with the concealment of income by the first accused firm. When the liability to pay higher amount of income-tax has been erased by virtue of the order passed by the Dy. CIT(A), Madurai, then the question of concealment of income by the first accused firm or the fabrication of account books does not arise at all. In such circumstances, I am of the view that having due regard to the order passed by the Dy. CIT(A) the charge against the accused in these criminal cases must fall to the ground. Even assuming and without admitting that the order of the Dy. CIT(A), Madurai, has to be ignored for some reason or other and the criminal cases have to be decided independently as urged by learned counsel for the appellant, let us consider the same on the available materials on record.

16. So far as the second accused, Shahul Hameed, is concerned, he has given two statements before the IT authorities and they are exhibits P-4 and P-9 marked in C.C. No. 51 of 1985. Exhibit P-9 is earlier in point of time and it is dt. 10th Aug., 1984, and exhibit P-4 is later in point of time and it is dt. 4th April, 1985. In exhibit P-9, the second accused, Shahul Hameed, has given the statement in the following words: (The portion of the judgment in vernacular is not printed here—Ed.) So it is the version of the second accused, Shahul Hameed, in his statement dt. 10th Aug., 1984, marked as exhibit P-9 that the demand drafts were taken by him through his brother fourth accused, Rajah Hussain, and they were sent to the witness Muthu as informed by Vinod Kumar Didwani, the owner of Iron and Steel Traders at Madras, towards the premium money for the purchase of goods at the instructions of Vinod Kumar Didwani and these two demand drafts were sent in the name of Muthu after the purchase of goods was completed. Nowhere in this statement dt. 10th Aug., 1984, marked exhibit P-9, it has been stated by the second accused, Shahul Hameed, that these two demand drafts were taken on behalf of the first accused firm and sent to the witness Muthu on behalf of the first accused firm. A plain reading of his statement dt. 10th Aug., 1984, would reveal that the amount covered by these two demand drafts were sent by the second accused, Shahul Hameed, alone and not from the funds of the first accused firm The second statement of the second accused, Shahul Hameed, dt. 4th April, 1985, is marked as exhibit P-4 in C.C. No. 51 of 1985. His statement dt. 4th April, 1985, recorded in Tamil reads as follows : (The portion of the judgment in vernacular is not printed here.—Ed.)

17. A perusal of the latter statement of the second accused, Shahul Hameed, did not disclose that the funds of the first accused firm were utilised for the purchase of the two demand drafts cited supra. At the best his latter statement would make it clear that he alone provided the funds for the second demand draft and the same was sent at his instructions to the witness Muthu. It is relevant to note that the second statement of the second accused, Shahul Hameed, was obtained after the filing of the complaint in these two cases on 26th March, 1985, and so it is only an afterthought and the complainant has developed his case that the accounts were not properly maintained. So the two statements given by the second accused, Shahul Hameed, will not make out a case that the funds of the first accused firm were utilised for the purchase of these two demand drafts and in such circumstances all the accused being partners cannot be made liable for the falsification of accounts and for the concealment of income.

18. Now turning to the statement of the fourth accused, Rajah Hussain, given to the IT authorities on 10th Aug., 1984, marked as exhibit P-8 in C.C. No. 51 of 1985 it runs as follows : (The portion of the judgment in vernacular is not printed here.—Ed.) A perusal of the statement of the fourth accused, Rajah Hussain, would also make it clear that the funds of the first accused firm were not made use of for the purchase of the two demand drafts. On the other hand, his statement would establish that at the instructions of his brother second accused, Shahul Hameed and third accused, Abdul Wahab, he purchased the demand drafts and he did not know any other thing or matter. In such circumstances, the statement of the fourth accused, Rajah Hussain, will not lend support to the prosecution case that the funds of the first accused firm were provided for the purchase of the impugned two demand drafts and thereby the first accused firm has concealed its income.

19. Adverting to the oral testimony adduced in these two cases it must be borne in mind that except the witness Muthu, who was examined as P.W. 5 in C.C. No. 51 of 1985 and P.W. 6 in C.C. No. 52 of 1985 all the other witnesses examined in these two criminal cases are only income-tax officials and other officials. The only evidence that is sought to be adduced to prove the guilt of these accused is that of the witness Muthu. His evidence as P.W. 5 in C.C. No. 51 of 1985 reads as follows : (The portion of the judgment in vernacular is not printed here.—Ed.)

20. A careful scrutiny of the oral testimony P.W. 5, Muthu makes it clear that he did not say anything about the transactions of the first accused firm, Abbas Ali Brothers, in any of his statements given to the IT authorities, and he did not know for which of the invoices these two demand drafts were sent, and he did not know anything about the secret account of Vinod Kumar Didwani in Hindi, and there are invoices available in the business concern Iron and Steel Traders, Sembudoss Street, Madras, and he came to know at the time of the inspection of his house and at the time of sealing his godown that something has gone wrong and he was assisting the transactions of Vinod Kumar Didwani. The evidence of P.W. 5 Muthu is not convincing and satisfactory to establish the prosecution in these cases that the funds had flown from the first accused firm and the funds of the first accused firm wereutilised for the purchase of the two demand drafts taken by the fourth accused, Rajah Hussain. Further, these two demand drafts could not be correlated to any particular transaction of the first accused firm, even though invoices are available. Therefore, the evidence of P.W. 5 will not prove the case of the prosecution beyond reasonable doubt that the first accused firm advanced the amounts for the purchase of these two demand drafts and all the accused, who are partners of the same firm, had knowledge of the same and thereby all the accused have concealed their income to induce the ITO to levy a lesser amount of income-tax on the basis of the alleged fabricated account books by omitting to mention these two demand draft amounts.

Taking up the question of conspiracy, there is no allegation in the complaint that any of the partners has conspired with the other partners to conceal the income of the firm. It is merely stated in para. 9 of the complaint that all the accused have in furtherance of the conspiracy fabricated false accounts and filed false returns and dishonestly induced the ITO to deliver an assessment order based on the false return of income, determining the tax payable by the first accused firm at a far lower amount than the legitimate amount of income-tax. There is no satisfactory evidence available on record to show that all the accused have conspired together to fabricate false evidence to induce the ITO to pass an assessment order for a lesser amount of income than the amount that was originally due.

A careful scrutiny of the materials on record would go to show that all the accused except the second and fourth accused had no knowledge about these two demand drafts. Therefore, the charge of conspiracy as set out in para. 9 of the complaint is not entitled to any acceptance in these cases. If at all there could have been a conspiracy in these cases, it would have been a conspiracy between the second accused, Shahul Hameed, and fourth accused, Rajah Hussain, on the one hand and Vinod Kumar Didwani and the witness Muthu, on the other hand. Yet the prosecution had not chosen to implead Vinod Kumar Didwani and the witness Muthu as co-conspirators. There is no plausible explanation forthcoming on the side of the prosecution as to why no action has been taken against Vinod Kumar Didwani in these two cases by not impleading him as one of the accused even though he may be absconding. It cannot be said that he is not a party to all these shady transactions more so in respect of these two demand drafts which are the subject-matter of these two criminal appeals. In such circumstances, I am of the view that the benefit of doubt must go to all the accused.

It is not made clear on the side of the prosecution that the two amounts covered by the two demand drafts have been credited to the account of Vinod Kumar Didwani. Further, no lorry receipts or invoices or railway bills have been produced to show that the transactions between these two companies or business concerns had taken place in respect of these two demand drafts. In other words there is no evidence to show that the impugned draft amounts related to any particular transaction of the first accused firm. P. W. 5 Muthu has not stated for which transaction of the first accused firm, the impugned draft amounts were sent to him. The prosecution was not able to point out or specify the transactions in the books of account of the first accused firm correlating the same to these two demand drafts. P.W. 5, Muthu, has not stated in his evidence that the impugned two demand drafts were sent to him by the first accused firm. There is no mention of the name of the first accused firm in the order passed by the Assistant Director of Inspection (Investigation), IT Department to authorise P.W. 7, Sankaranarayanan, to enter thepremises of the first accused firm and inspect the same. Per contra the warrant of authorisation issued by the Asstt. Director of Inspection (Investigation), at Madras marked as exhibit P-7 states that the witness Sankaranarayanan is authorised to enter and inspect the premises of the fourth accused, Rajah Hussain. No doubt the two amounts covered by the impugned two demand drafts are reflected in the savings bank account of P.W. 5 Muthu, and it is not disputed that P.W. 5 Muthu is an employee of Vinod Kumar Didwani, and P.W. 5 assisted him, and a sum of Rs. 8,000 was withdrawn from the savings bank account of Muthu marked as exhibit P-14 and the very same sum of Rs. 8,000 finds a place in the secret account of Vinod Kumar Didwani marked as exhibit P-33 (English translation) in this case. Merely because these amounts are reflected in the savings bank account of P.W. 5 and in the secret account of Vinod Kumar Didwani, it cannot be presumed that these two demand draft transactions had taken place with reference to the first accused firm. But these documents may establish that those transactions were brought about by the second accused, Shahul Hameed, with the assistance of the fourth accused, Rajah Hussain, on the one side and by Vinod Kumar Didwani and the witness Muthu, on the other side. Such is not the prosecution case put forth in the complaints in these two cases. On the other hand the specific case of the prosecution in the complaint is that all the accused have conspired and fabricated their books of account and filed false returns and thereby induced the ITO to levy a lesser amount of income-tax. For the above reasons, I am of the view that the prosecution has not proved the case beyond all reasonable doubt.

To sum up, in the earlier statement of the second accused, Shahul Hameed, marked as exhibit P-9 he has not stated that he has sent the two demand draft amounts on behalf of the first accused firm, but he generally stated that these two amounts were sent by him at the instructions of Vinod Kumar Didwani in favour of his employee P.W. 5 Muthu, and there is nothing in the first statement of the second accused, Shahul Hameed, dt. 10th Aug., 1984, marked as exhibit P-9 to show that the first accused firm has committed the offence of sending these two demand drafts amounts by suppressing their real income. Probably realising this difficulty, the IT Department got the second statement of the second accused, Shahul Hameed, on 4th April, 1985, under exhibit P-4 after filing the complaint in these two cases on 26th March, 1985, and it is only an afterthought. The evidence adduced in this case and the materials placed on record would go to show that the amounts covered by the two demand drafts did not belong to the first accused firm, who proved before the Dy. CIT(A), Madurai, that these amounts did not belong to the first accused firm but these two amounts belonged to the concerned individuals. The complaintcould not correlate these two demand draft amounts to any of the specific goods purchased by the first accused firmfrom Vinod Kumar Didwani and the complainant could not specifically point out the invoices of the first accused firm relating to these two demand draft amounts, and P.W. 5 Muthu could not say anything about the invoices correlating to these two demand drafts. In such circumstances I am to hold that the prosecution has not prov their case beyond all reasonable doubt and the order of acquittal passed by the lower Court in C.C. Nos. 51 and 52 of 1985 is not erroneous and it is confirmed, and so both the Criminal Appeals Nos. 817 of 1987 and 818 of 1987 are dismissed, and consequently I answer this point against the appellant and in favour of the accused. In the result the Criminal Appeals Nos. 817 of 1987 and 818 of 1987 are dismissed. The orders of acquittal passed by the Additional Chief Judicial Magistrate, Madurai, in C.C. Nos. 51 of 1985 and 52 of 1985 dt. 31st March, 1987, are confirmed.

[Citation : 235 ITR 751]

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