Madras H.C : Criminal Appeal No. 837 of 1996 Aggrieved against the order of acquittal, the IT Department has preferred this appeal.

High Court Of Madras

N. Srinivasan & Ors. vs. TMT. Uma Rani & Ors.

Sections 276C, 277

Asst. Year 1981-82

Mrs. R. Banumathi, J.

Crl. Appeal Nos. 837 & 838 of 1996

24th June, 2004

Counsel Appeared

Ramasamy K., for the Appellant : P. Angusamy, for the Respondent

JUDGMENT

Mrs. R. Banumathi, J. :

Criminal Appeal No. 837 of 1996 Aggrieved against the order of acquittal, the IT Department has preferred this appeal. By the impugned judgment (dt. 27th Feb., 1996) in C.C. No. 116 of 1990, the Judicial Magistrate No. 1, Poonamallee, has acquitted the accused, Uma Rani, the wife of Arumugam, under ss. 181, 193 of the IPC r/w s. 136 of IT Act, ss. 276C(1) and 277 of the IT Act in C.C. No. 116 of 1990. Criminal Appeal No. 838 of 1996 :

By the impugned judgment (dt. 27th Feb., 1996), in C.C. No. 117 of 1990, the Judicial Magistrate No. 1, Poonamallee, has acquitted the accused, Arumugam and Uma Rani, under ss. 181, 193 r/w s. 136 of the IT Act, ss. 276C(1) and 277 of IT Act in C.C. No. 117 of 1990.

The respondents/accused in both the appeals are husband and wife. Since common points for consideration are involved, both the appeals are taken up together and disposed of by this common judgment.

The facts which led to the present appeals could be stated thus : A search under s. 132 of the IT Act, 1961, was organised on 28th Jan., 1982, in the case of S. Arumugam, No. 35, 1st Main Road, Chromepet, Madras-44, on the strength of warrants issued by the CIT, Tamil Nadu-IV. On the day of search, cash of Rs. 32,000 was found at the residence of the assessee and the same was seized since Thiru Arumugam could not explain the possession of the cash.

On the day of search, two keys were found in the suit case of Arumugam and he was interrogated about the keys. When interrogated, accused-Arumugam had given a statement that the keys were handed over to him by one Vasudevan, for safe custody. The keys were later identified to be belonging to two bank lockers. One key was found to be that of a locker in the Bank of Baroda, Purasawalkam, and the other belonging to that of a locker at Madras Safe Deposit Co. Ltd., Madras-34. The locker at the Bank of Baroda, Purasawalkam, is in the name of Uma Rani, the wife of Arumugam. The locker in the Madras Safe Deposit Co. Ltd., Madras-34, stands in the name of Arumugam. On examination of the locker standing in the name of Arumugam, a few bank pass books and cash of Rs. 1,00,000 was found and the same was seized. A sworn statement was recorded after the seizure of Rs. 1 lakh from the locker from Arumugam, wherein he has admitted that the cash solely belongs to him. When the said Vasudevan was examined, he has disowned the keys stating that he is not connected with the keys. The first year of assessment of the said Arumugam is 1979-80. Thereafter, the Department/Seventh ITO has calculated the total assets of Arumugam as Rs. 7,26,416 as on 28th Jan., 1982. The total tax liability was arrived at Rs. 4,56,800.

5. Notwithstanding the Departmental proceedings, levying the assessment, the Department has initiated criminal prosecution against the respondents/accused alleging that the accused had given a false statement and that they have committed offences under ss. 181 and 193 of the IPC— Deliberately making a false statement regarding the income-tax, which statement, the accused believed to be false; That by making a false statement before the ITO, which the accused believed to be false and thereby, the accused wilfully attempted to evade the tax chargeable or imposable under the IT Act and thereby the accused have committed offence under ss. 277 and 276C(1) of the IT Act.

6. In the trial Court, to substantiate the charges against the accused, the Department has examined PW1 to PW6. Exhibit P1 to Exhibit P22 are marked. The main defence plea raised by the respondents/accused is that the Departmental proceedings ended favourably and hence pleaded for absolving of their criminal prosecution also. Upon consideration of the evidence adduced by the Department and the defence plea and relying upon Uttam Chand vs. ITO (1982) 133 ITR 909 (SC), the trial Court has acquitted the accused, finding that there was no intention on the part of the accused to defraud the Department. The learned trial Magistrate further held that there was no attempt by the accused to evade the tax and on this finding, both the accused were acquitted.

7. Aggrieved over the order of acquittal, the Department has preferred these appeals. Placing reliance upon many decisions, the learned Special Public Prosecutor has submitted elaborate arguments, contending that the trial Court has not approached the evidence with proper perspective and that the trial Court has misdirected itself on every issue and the reasonings for acquittal are unsustainable. It is the further contention that only when the penalty is cancelled under s. 273A of the IT Act, criminal proceedings cannot be maintained and in all other instances, the criminal proceedings are well maintainable and the prosecution is to be dealt with independently. Submitting that there was no proper framing of charges on the wilful evasion of tax, the learned Special Public Prosecutor further submitted that notwithstanding the fact that the accused were not assessees, the factual situation in deliberately making a false statement is not effaced which was not taken note of by the trial Court. Relying upon in P. Jayappan vs. S. K. Perumal, ITO (1984) 42 CTR (SC) 180 : (1984) 149 ITR 696 (SC), the learned Special Public Prosecutor submitted that notwithstanding the termination of the Department proceedings, the criminal proceedings could be continued and that the order of acquittal suffers from perversity and prayed for reversal of the order of acquittal. Laying emphasis upon the order of the Department in the levy of income-tax and waiver of interest, etc.,….. “it is contended that the Department itself has levied the income-tax, and also waived interest, is not a fit case to interfere with the order of acquittal. It is further submitted that when a bunch of keys were noted during the search, on the casual statement made by the accused that the keys belong to Vasudevan of Trichy, no criminal intention could be attributed to the accused. It is the further contention that the ‘keys’ would not come under s. 132 of the IT Act.”

8. Upon a careful consideration of the submissions of both sides, the judgment of the trial Court and the evidence and materials on record, the following common points arise for determination in these appeals : (i) Whether the order of acquittal of the appellants/accused under ss. 276C(1) and 277 of the IT Act, suffers from infirmity and is within the parameters fixed for interference with an order of acquittal ? and (ii) Whether the order of acquittal under ss. 181 and 193 of the IPC suffers from perversity, warranting interference ?

9. In an appeal against the order of acquittal, the High Court would interfere only if the judgment of the trial Court suffers from illegality or is manifestly erroneous. On this point, it is relevant to refer to the following observations of the Supreme Court in Prem Dass vs. ITO (1999) 152 CTR (SC) 79 : (1999) 236 ITR 683 (SC), wherein the Supreme Court has observed as follows : “The plenitude of power available to the Court hearing an appeal against an acquittal is the same as that available to a Court hearing an appeal against an order of conviction. But the Court will not interfere with an order of acquittal solely because a different plausible view may arise on the evidence and the Court thinks that the view taken by the trial Court of the evidence is not correct. In other words, the Court must come to the conclusion that the view taken by the trial Judge while acquitting cannot be the view of a reasonable man on the materials on record. The Court of appeal must examine the reasons on which an order of acquittal is based and must reach the conclusion that the view taken by the acquitting Judge was clearly unreasonable. If the evaluation of the evidence made by the Courts below while recording an order of acquittal does not suffer from any illegality or manifest error and the grounds on which the said order of acquittal is based are not unreasonable, then the High Court should not disturb the order of acquittal.” Bearing in mind the above principles, we may proceed to consider whether the case in hand is within the above parameters fixed for interference with the order of acquittal.

10. The respondents/accused are alleged to have made false statements during the search under s. 132 of the IT Act, and that they have not disclosed the owning of the locker. Thus, the gravamen of the indictment against the accused is that (i) they made false statement as to the bank locker; (ii) they have not disclosed the owner of the locker and that there was wilful evasion to pay the tax. By the assessment order under s. 132(5) of the IT Act, the AO has levied tax, fixing the liability at Rs. 4,56,800. As on the date of order of the ITO (dt. 24th April, 1982) there was no criminal prosecution. It was only thereafter under s. 279 of the IT Act, the orders were passed by the CIT to launch prosecution against the accused. Exhibit P7, dt. 23rd Nov., 1983, authorises the authorities to file the complaint against the accused–Arumugam arid his wife, Uma Rani, under s. 276C(1) of the IT Act.

Admittedly, the accused are previously non-assessees. Only in October, 1981, accused Arumugam has hired a locker in Madras Safe Deposits Co. Ltd. He has opened the locker No. 653 and key No. 659 was allotted to him in October-November, 1981, in his name. Likewise, accused Uma Rani has hired a locker in Bank of Baroda during October, 1981. She has hired locker No. B. 39 with key No. 42.

For the year 1981-82, the accused were yet to be assessed. Even the ITO has found “That it is not possible for him to ascertain in which particular previous year or years such income thereto relates . . .” and thus, calculated the tax, as if the income were total income chargeable at the rates in force in the financial year in which the assets were traced. When the ITO was unable to trace the sources of income and the lockers were hired in October, November, 1981, no culpable mens rea could be attached to the respondents/accused. This is all the moreso, when the accused had the time to file the statement for the year 1981-82. While the accused are yet to be assessed and had time to file the return, they could not be faulted that there was wilful attempt to evade any tax. In order to attract the provisions of s. 276C of the IT Act, 1961, the prosecution has to establish that the accused wilfully attempted in any manner to evade any tax, penalty or interest chargeable or imposable under the Act. To attract the provisions of s. 277, the prosecution is required to establish that the accused made a statement in any verification under the Act which he either knows or believes to be false, or does not believe to be true. Wilful attempt to evade any tax, penalty or interest chargeable or imposable under the Act under s. 276C is a positive act on the part of the accused which is required to be proved to bring home the charge against the accused. Similarly, a statement made by a person in any verification under the Act can be an offence under s. 277 if the person making the same either knew or believed the same to be false or did not believe it to be true. Necessary mens rea, therefore, is required to be established by the prosecution to attract the provisions of s. 277 or s. 276C. Sec. 132 of the IT Act deals with search and seizure and sub-s. (4A) thereof stipulates that where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found to be in the possession or control of any person in the course of a search, then it may be presumed that such books of account or other documents belong to such person and that the contents of such books of account are true and that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person are in that person’s handwriting. There is nothing in s. 132(4A) which would establish the ingredients of the aforesaid two criminal offences contemplated under ss. 276C and 277. By applying the presumption under s. 132(4A) of the IT Act, the ingredients of the offence under ss. 276C and 277 cannot be said to have been established.

16. Yet another formidable circumstance could be pointed out for not interfering with the order of acquittal— finding of the ITO and other authorities that there was no wilful evasion. In fact finding “. . . the assessee had fully co-operated with the Department in inquiries that followed the search and also in the finalization of the assessment proceedings and that the assessee had filed returns of the income after arriving at the amount of income to be assessed in accordance with the discussions that the assessee had with the Departmental authorities …..” the assessees were given the benefit of waiver of interest charged under s. 139(8) of the IT Act. Thus all the Departmental proceedings ended favourably to the accused. The appeal preferred by the Department before the Tribunal was also dismissed. While so, there is hardly any justifiable reason for the criminal prosecution to be continued.

17. As per the principles of interpretation of statutes, the provisions of the statute must be interpreted as per the language used therein. By a reading of s. 276C(1) it is clear that a person who wilfully attempts to evade any tax, penalty or interest chargeable or imposable, is punishable as laid down in that section. Thus, there must be wilful attempt to evade. To decide this wilful attempt, there must be assessment on the return filed. In the case on hand, there was still time for the respondent/accused to file the return. Therefore, at a stage when the return is not filed and there was still time for filing it, it cannot be said that the respondent committed any offence under s. 276C(1) of the Act or that any such allegation would constitute the offence. In the circumstances, it cannot be presumed beforehand that, after the filing of the return and on its scrutiny, the authorities would find concealment of income by holding that the assessees were not inclined to disclose about the bank lockers. Accordingly, it cannot be concluded that there was an attempt to evade payment of tax, etc. The point is, whether the act of attempt is complete or not and this depends upon the facts and circumstances of each case. In the instant case, there was ample time to file the return and there was chance for the respondent to explain about the amount seized by adducing cogent and convincing evidence. Even before filing the return, it cannot be anticipated that he would not explain and, accordingly, it cannot be presumed that the respondent attempted to evade tax, etc. Thus, even before the act of attempt to evade is started, on a mere anticipation or contemplation that there was possibility of accruing liability after finalization of regular assessment proceedings, it cannot be said that the respondents are liable for conviction under s. 276C(1) of the IT Act.

The search was only under s. 132 of the IT Act and the statements are alleged to have been made during the search. The accused were yet to be assessed; they still had time to file the returns. While so, it would be incongruous to prosecute a person for wilful concealment. Absolutely, there is no question of wilful concealment when the accused were yet to be assessed. The order of acquittal does not suffer from any infirmity warranting interference. Placing reliance upon P. Jayappan vs. S.K. Perumal, ITO (supra), the learned Special Public Prosecutor submitted that the independent nature of Department proceedings and criminal prosecution have been affirmed in various decisions. The learned Special Public Prosecutor further submitted that while the criminal Court can no doubt come to a different view with regard to the result of any proceedings in the IT Act, it does not however mean that by the result of the proceedings, the prosecution is to be terminated and further contended that the criminal Court has to judge the case independently, on the evidence placed before it. There is a lot of difference between P. Jayappan’s case (supra) and the present case. In P. Jayappan’s case (supra), return was already filed and the same was found to be false during the search and, the reassessment proceedings were pending. Therefore, the Supreme Court in that case held that merely because reassessment proceedings are pending, it is no ground for quashing the prosecution proceedings. Whereas, in the case on hand, the return has not been filed. There is time for filing the same and the regular assessment is yet to be made. The decision of the Supreme Court in P. Jayappan’s case (supra) is not applicable to the case in hand.

The main contention urged by the Special Public Prosecutor is that the accused had not only made a false statement that the keys belonged to Vasudevan of Trichy, and the same turned out to be false, a criminal proceeding to independently proceed, it is his contention that notwithstanding the Departmental proceedings, the factual situation is not effaced and the trial Magistrate erred in not appreciating the evidence adduced by the Department. In support of his various contentions, the learned Special Public Prosecutor also relied upon Prakash Nath Khanna vs. CIT (2004) 187 CTR (SC) 97 : (2004) 266 ITR 1 (SC) and T.S. Baliah vs. T.S. Rangachari, ITO (1969) 72 ITR 787 (SC). We have not proposed to go in detail on the above decisions, when this Court is dealing with an order of acquittal. By applying the above decisions, a different view may possibly be adopted. But that cannot be the reason for reversing the order of acquittal. Appreciation of facts and evidence by the trial Court does not suffer from any infirmity. The view taken by the trial Court cannot be said to be unreasonable or manifestly erroneous. Offences under ss. 276C(1) and 277 of the IT Act and ss. 181 and 193 of the IPC are not established by the prosecution beyond reasonable doubt. Considering the fact that the Departmental proceeding favourably ended and that the Department has found that the accused have fully co-operated with the Department and that the Department itself has waived the interest, etc., there is no justifiable reason warranting interference in the order of acquittal. These appeals have no merit and are liable to be dismissed.

In the result, the appeals are dismissed. Criminal Appeal Nos. 837 and 838 of 1996.

[Citation : 270 ITR 77]

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