Madras H.C : the aforesaid decisions and discussion that simply because an order has been passed by the authority waiving the penalty, the proceedings pending against the petitioner cannot be closed.

High Court Of Madras

Sree Padmalaya Movies & Ors. vs. Assistant Commissioner Of Income Tax

Sections 276C, 277, 278B, 279(1A), IPC 120B, IPC 193, IPC 196, IPC 420, IPC 511

Asst. Year 1982-83

A. Ramamurthi, J.

Crl.R.P. No. 171 of 1999 & Crl.M.P. No. 1613 of 1999

23rd March, 2001

Counsel Appeared

P.N. Pavithran, for the Petitioners : K. Ramasamy, for the Respondent

JUDGMENT

A. RAMAMURTHI, J. :

The accused in C.C. No. 44 of 1992 on the file of the Additional Chief Metropolitan Megistrate (EOII), Chennai, have preferred the revision aggrieved against the orders passed in M.P. No. 166 of 1997, dt. 22nd Dec., 1998.

2. The case in brief is as follows : On 25th March, 1992, the respondent filed a complaint against the petitioners for the offence under ss. 276C(1) and 277 r/w s. 278B of the IT Act, 1961 (hereinafter referred to as “the Act”), for the asst. yr. 1982-83 and under ss. 120B, 193, 196, 420 and 511 of the IPC, 1860, alleging that subsequent to the search on 17th Dec., 1983, and pursuant to the notice under s. 148 of the Act for the said year on 21st July, 1986, and later a revised return on 28th Oct., 1987. In the course of the assessment proceedings, it was conceded the royalty of Rs. 60,000 received by the firm for exploitation of the rights of the two pictures was not disclosed and was assessable as its income and on 28th Oct., 1987, the assessment was completed levying the tax of Rs. 33,360 for the said year. On 30th March, 1989, a penalty of Rs. 60,000 was also imposed on the first petitioner. The CIT(A) also confirmed the order of penalty on 3rd Aug., 1990. The petitioner firm preferred an appeal to the CIT under s. 273A(4) of the Act and in the order dt. 23rd March, 1994, the CIT, waived the penalties imposed on the firm for all the four years, i.e., 1982-86, under the provisions of the said Act. Hence, the petitioners cannot be proceeded against for the offence under s. 276C and 277 of the Act in view of the mandatory provisions of s. 279(1A) of the Act. The respondent opposed the application and the learned Judge after hearing, dismissed the application and aggrieved against this, the present revision has been filed.

3. Heard learned counsel for the parties.

4. The point that arises for consideration is whether the order passed by the Court below is proper and correct.

5. Point : It is not in dispute that the respondent filed a complaint against the accused for the offence under ss. 120B, 193, 196, 420 and 511 of the IPC, 1860, and also for the offences under ss. 276C(1), 277 and 278B of the Act relating to the asst. yr. 1982-83. The prosecution admittedly examined six witnesses and marked 28 documents to make out a prima facie case against the accused for framing charges. The case was posted for examination of the accused under s. 313 of the Cr.P.C. and only at that point of time, the petitioners filed the application under s. 245 of the Cr.P.C. for discharge.

6. Learned counsel for the revision petitioner contended that the Court below totally misconceived the provisions of s. 273A(1)(b) of the Act. After the waiver of penalty, the criminal Court has absolutely no jurisdiction to go into the matter. Whether s. 273A applies to a case in which the assessees disclosed the income voluntarily or that the Department found out the escaped assessment are not relevant to consider application under s. 245 of the Cr.P.C. Once the order has been passed under s. 273A(4), the provisions of s. 279(1A) are attracted and all further proceedings have to be stopped. This Court had also occasion to consider a petition in Crl. O.P. No. 3172 of 1998 and the proceedings were quashed. The Court below has not considered the order. The application filed by the petitioners ought to have been allowed

7. The Court below had extracted the evidence of PWs. 1 to 6, who are officials working in the IT Department in order to establish that there is a prima facie case. It is admitted that during December, 1983, there was a search in the premises of the first accused firm, which resulted in seizure of several documents. After going through the documents, it was found out that the accused had escaped in assessment of a sum of Rs. 60,000 and therefore, notice under s. 148 of the Act was issued under Exh. P-4 and it was received under Exh. P-5. However, the accused did not file the return within 30 days from the notice and hence on 10th July, 1987, another notice was issued directing the accused to produce the books of account. The accused sought time till 21st July, 1986. The firm filed the return with a covering letter and the return is marked as Ext. P-7. The second accused had signed the return. It is not in dispute that the first accused firm also filed a revised return signed by the third accused along with a letter dt. 26th Oct., 1987. The revised return includes the amount received under two agreements, namely, Rs. 58,850. The revised assessment order has been passed and penalty proceedings were also initiated against the accused and summons was also issued to appear before PW-3. The statement given by her is marked Exh. P-21. An order of penalty has been passed imposing a penalty of Rs. 60,000 upon the first accused firm and the order is Ext. P-23; PW-4, who was the Assistant Director, Intelligence, Madras, accompanied by another Assistant Director conducted a search of the premises of the first accused firm on 17th Dec., 1983. This resulted in seizure of two agreements dt.

28th June, 1980, and 11th Feb., 1981. The assessee should have declared this amount in their annual return filed for the asst. yr. 1982-83. PW-6, Assistant Director of Income-tax submitted the file to the CIT for according sanction for prosecution. Through him the sanction accorded by the CIT was also marked as Ext. P28 andthereafter only the complaint was filed on the basis of the sanction order.

8. It is necessary to state that now the order relied upon by the accused was passed on 23rd March, 1994, under s. 273A(4) of the Act. Now, the present application has been filed by the petitioners under s. 245 of the Cr.P.C.,1860, only in April 1997. As adverted to, after the conclusion of the evidence of PWs 1 to 6 and after examination of the accused under s. 313 of the Cr.P.C., only, this application was filed. It is therefore prima facie clear that there is delay of three years from the date of the order relied on by them and also after the conclusion of the prosecution witnesses. When the prosecution case itself is coming to a close, it is pertinent to state that the present application is absolutely unnecessary and the Court below ought to have disposed of the application accordingly. It is not necessary to go into merits of the case. But, however, aggrieved against the order passed by the Court below, the petitioners have come forward with the present revision petition. It is just and necessary to find out whether the order passed on 23rd March, 1994, by the CIT would have bearing upon the continuance of the case or not ? It is seen from the order dt. 23rd March, 1994, that penalty levied against the accused under s. 271(1)(c) of the Act for the years 1982-86 has been waived under the provisions of s. 273A(4) of the Act. As adverted to, there was an escaped assessment of Rs. 60,000 which was found out on the search made during December, 1983. The revised return was made by the petitioners only after the search and after finding out the escaped assessment. It is therefore evidently clear that the accused did not disclose the income voluntarily relating to the escaped assessment of Rs. 60,000. The complaint against the accused is filed not only under the provisions of the IT Act, but also under the various provisions of the IPC. It is also pertinent to point out that after getting sanction from the competent authority only, charge-sheet was filed against these petitioners.

The main contention put forward by learned counsel for the revision petitioner is that in view of the orders passed under s. 273A(4) of the Act, which clearly attracts s. 279(1A)(a) of the Act and under the circumstances, there is a statutory bar for continuance of the prosecution and as such the proceedings have to be closed. Learned counsel for the revision petitioner upon an unreported judgment of this Court passed in Cr. O.P. No. 3172 of 1996, dt. 21st Aug., 1998, on the ground that in the identical case by invoking s. 279(1A) of the Act, the prosecution was closed. A perusal of the order only indicated that the accused concerned in the case was charged for the offence under the sections of the IT Act and not clubbed with any provisions of the IPC. There is also nothing to show that the escaped assessment was noticed and thereafter only the revised return was filed in that case. Under the circumstances, the fact in the present case and the case relied upon by the petitioners are completely different and as such the decision cannot be made applicable to the case on hand. Sec. 276C of the Act relates to wilful attempt to evade tax, etc. If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable. Sec. 277 of the Act relates to false statement in verification. If a person makes statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable. Sec. 278B of the Act relates to offence by companies. Where an offence under this Act has been committed by a company, every person who, at the time of the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punishable accordingly.

13. Sec. 273A of the Act relates to power to reduce or waive penalty, etc., in certain cases. Now the order relied upon by the petitioners has been passed under sub-s. (4) of s. 273A of the Act and it reads as follows : “Without prejudice to the powers conferred on him by any other provision of this Act, the CIT may, on an application made in this behalf by an assessee, and after recording his reasons for so doing, reduce or waive the amount of any penalty payable by the assessee under this Act or stay or compound any proceeding for the recovery of any such amount, if he is satisfied.” It is necessary to state that the perusal of the order dt. 23rd March, 1994, clearly indicates that there is no reference about the prosecution already launched against the petitioners after getting permission from the competent authority. It is also seen from the order that the first accused firm was dissolved w.e.f. 30th June, 1984. The assessee-firm has no assets at present and the erstwhile partners have also no sources of income. Apart from that the assessee-firm has paid the entire taxes on the income assessed. Based upon these facts only but without considering the sanction already granted by the authority and also the pending proceedings, the order has been passed. Learned counsel for the IT Department contended that simply because the order has been passed on 23rd March, 1994, the prosecution cannot be closed. Sec. 279 of the Act relates to prosecution to be at the instance of the Chief CIT or CIT. Sub-s. (1A) of s. 279 of the Act has been relied on by the petitioners and it reads as follows : “A person shall not be proceeded against for an offence under s. 276C or s. 277 in relation to the assessment for an assessment year in respect of which the penalty imposed or imposable on him under cl. (iii) of sub-s. (1) of s. 271 has been reduced or waived by an order under s. 273A.” Learned counsel for the respondent also relied upon the proviso to sub-s. (4) of s. 273A and contended that the order relied upon by the petitioners cannot have any bearing. The proviso reads as follows : “Where the amount of any penalty payable under this Act or, where such application relates to more than one penalty, the aggregate amount of such penalties exceeds one hundred thousand rupees, no order reducing or waiving the amount or compounding any proceeding for its recovery under this sub-section shall be made by the CIT except with the previous approval of the Chief CIT or Director-General, as the case may be.”

As adverted to, after getting sanction from the competent authority to prosecute and the revised return was filed by the petitioners only after the search it cannot be said that the return was filed voluntarily and therefore by waiver of the penalty the prosecution has to be closed. Learned counsel for the revision petitioner also relied on M.R. Pratap vs. V. M. Muthukrishnan, ITO 1977 CTR (Mad) 338 : (1977) 110 ITR 655 (Mad) : TC 48R.757, wherein it is observed that the protection or immunity under s. 279(1A) of the IT Act, 1961, from prosecution under s. 277 of the Act in a case where the penalty imposable on the assessee under s. 271(1)(iii) has been reduced or waived under s. 271(4A) can be availed of by an assessee only in a case where the CIT is inclined to exercise his discretion under s. 271(4A). It cannot be contended that no criminal case can be instituted under s. 277 before the exercise of the discretionary power given under s. 271 (4A) of the Act. There is no dispute about this principle. Learned counsel for the Department also relied on Ajay Medical Agency vs. CIT (1999) 151 CTR (HP) 196 : (1998) 233 ITR 413 (HP) ; TC S49.3930, that furnishing of full and true disclosure of particulars should be made voluntarily and in good faith by the assessee. It was evident that in the instant case, disclosure of full and true particulars had been made only after the detection of the defective returns by the ITO. Consequently, the assessee was not entitled to the benefit of cl. (b) of s. 273A(1) of the Act. Reliance is also placed on Hakam Singh vs. CIT (1980) 17 CTR (All) 255 : (1980) 124 ITR 228 (All) : TC 49R.1022, that the action of an assessee in filing a return after the books of account had been seized at a raid would be impelled by the compelling circumstance that the assessee was likely to be dealt with under the penal provisions of the IT Act. The action of an assessee in filing a return under such a constraint cannot be said to be voluntary. They also relied on G.S.R. Krishnamurthi vs. M. Govindaswamy, ITO (1992) 104 CTR (Mad) 143 : (1992) 195 ITR 137 (Mad) : TC 3PS.9, 48R.417, S3.163, wherein it is observed 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 an appropriate case, it may drop the proceedings in the light of an order passed under the Act. It does not, however, mean that the result of a proceeding under the Act would be binding on the criminal Court. The criminal Court has to judge the case independently on the evidence placed before it. Mere expectancies should not stand in the way of the criminal Court from proceeding in the matter. The High Court cannot stop any proceedings against an assessee in a criminal Court on mere expectancy…. Sec. 273A prescribes certain conditions to be satisfied before the CIT can exercise his power to reduce or waive penalty. Sec. 279(1A) lays down that the person shall not be proceeded against for an offence under s. 277 in relation to the assessment year in respect of which penalty imposed or imposable on him under cl. (iii) of sub-s. (1) of s. 271 has been reduced or waived by an order under s. 273A. This section cannot come into play at all, unless and until, as a matter of fact, there is a reduction or waiver of penalty by an order emanating from the authority concerned under s. 273A… The expression ‘at the instance of the CIT’ as used in the section means ‘with his sanction or on his authority’. It does not require the complaint to be filed by the CIT himself. Sec. 26 of the General Clauses Act, 1897, lays down that, where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but shall not be liable to be punished twice for the same offence.”

21. It is therefore clear from the aforesaid decisions and discussion that simply because an order has been passed by the authority waiving the penalty, the proceedings pending against the petitioner cannot be closed. Apart from that already the prosecution examined six witnesses and the order was passed in 1994 and the petition to discharge has been filed only in 1997. Under the circumstances, I am of the view that when once the Court finds that there is prima facie material to frame charges and after the examination of substantial witnesses, I am of the view that it is not necessary and proper to interfere in the finding given by the Court below. Hence the point is answered accordingly. For the reasons stated above, the revision fails and is dismissed. Considering the fact that the charge- sheet was filed in 1992, the trial Court is directed to expedite the trial as early as possible. Consequently, the connected Crl. M.P. No. 1613 of 1999 is also dismissed.

[Citation : 251 ITR 632]

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