Madras H.C : the respondent had filed false returns of income

High Court Of Madras

Assistant Commissioner Of Income Tax vs. N.K. Mohamed Ali

Section 276C, 277, IPC 193, IPC 196, IPC 420, CRPC 245(2)

Asst. Year 1984-85, 1985-86, 1986-87

C.T. Selvam, J.

Criminal O.P. Nos. 32954 to 32956 of 2005 & Misc. Petn. Nos. 9303 to 9305 of 2005

30th April, 2010

Counsel appeared :

K. Ramasamy, for the Petitioner : A. Raghunathan for T.R. Ramanathan, for the Respondent Order

C.T. Selvam, J. :

As the petitioner and respondent are common in all these petitions and the same question is raised for consideration in all of them, they can be disposed of by a common order.

The petitioner herein, an Asstt. CIT in the IT Department has preferred three complaints alleging commission of offences by the respondent herein in respect of three different periods. These complaints were made on the assertion that the respondent had filed false returns of income. The facts leading to the filing of the complaints do not in any manner weigh upon the issue arising for consideration and hence, are not informed herein.

The complaints of the petitioner in EOCC Nos. 62, 63, 64 of 1992 are as follows : (a) wilful attempt to evade income-tax under s. 276C(1) of the IT Act, 1961; (b) filing of false return of income with false statement of accounts under s. 277 of the IT Act, 1961; (c) fabricating false evidence under s. 193 IPC; (d) using such false evidence in judicial proceedings before the ITO under s. 196 IPC; (e) cheating the ITO under s. 420 IPC. for the asst. yrs. 1984-85, 1985-86 and 1986-87. Penalties were levied upon the respondent under s. 271(1)(c) of the IT Act. Against the orders of penalty imposed by the Department, the respondent filed appeals before the Tribunal, Madras. The Economic Offences Court has taken cognizance of the complaints while these appeals were pending. The Tribunal allowed the appeals and the penalties levied against the respondent were cancelled. The respondent had moved petitions for discharge on 6th March, 1996 before the Economic Offences Court. The contention therein is that in view of the order of the Tribunal undoing the levy of penalty, the very basis of prosecution in the complaint case has been taken away and as such the complaints ought to be dismissed as groundless. The petitioner filed counter and the said petitions have not been disposed of till date.

The petitioner herein has filed a petition under s. 244(2) Cr.PC on 21st July, 2005, seeking a direction for issue of process to the list witnesses towards their examination. This was done on the basis of a direction passed by this Court in decision reported in K.M. Mohamed Ali vs. Asstt. CIT (1996) 217 ITR 839 (Mad).

The decision of this Court in (1996) 217 ITR 839 (Mad) (supra) came about in the following manner : A petition under s. 311 Cr.PC was moved before the Trial Court by the petitioner herein, which was allowed. The respondent challenged that order. This Court under order dt. 17th April, 1995 rejected the contention of the respondent observing as follows :

“The Magistrate shall proceed to hear the prosecution and take all such evidence as may be produced in support of the prosecution. Accepting the contention of the petitioner amounts to narrowing the scope of s. 244, Cr.PC, and would actually lead to grave injustice and hardship to the complainants.”

The petitioner informs that pursuant to the order of this Court, witnesses were produced before the lower Court, but the matter has been adjourned on a petition moved on behalf of the respondent under s. 309 Cr.PC. Thereafter, the respondent filed a petition under s. 245(2) Cr.PC seeking discharge.

The petitioner had filed a counter taking the stand that s. 245(2) Cr.PC petition was not maintainable without the evidence of the prosecution being recorded under s. 244(1) Cr.PC. The contention was that the petition under s. 245(2) Cr.PC will be considered only after taking evidence of the prosecution under s. 244(1) Cr.PC. The petition moved by the respondent under s. 245(2) Cr.PC had been kept endlessly pending and the reason therefor is not clear. As above stated, on 21st July, 2005, the petitioner moved a petition under s. 244(2) Cr.PC before the Trial Court seeking a direction for issue of process to the witnesses.

The Trial Court has required the prosecution to argue on the maintainability of the petition filed by the complainant under s. 244(2) Cr.PC. Written arguments were submitted by the prosecution on 1st Aug., 2005. Informing that the Trial Court is not following the procedure prescribed in Chapter XIX-B, ss. 244 to 247 Cr.PC and the unwillingness of the lower Court to follow the decision of the Hon’ble apex Court and disobedience of circular issued by this Court in S. Mohan Gandhi vs. Sri Visalam Chit Funds & Ors. (1998) 149 CTR (Mad) 106 : (1998) 231 ITR 69 (Mad), the petitioner seeks a direction to the Trial Court to record evidence under s. 244 Cr.PC.

I have heard Mr. K. Ramasamy, learned Special Public Prosecutor (Income-tax) and Mr. A. Raghunathan, learned counsel for the respondent. While the contention of the learned Special Public Prosecutor (Income-tax) is that the stage for discharge under s. 245(2) Cr.PC would arise only after recording of evidence of prosecution in keeping with s. 244 Cr.PC, the learned senior counsel for the respondent would submit that s. 245 (2) Cr.PC specifically informs that an order of discharge of the accused could be passed at any previous stage of the case if, for reasons to be recorded, the Magistrate considers the charge to be groundless. Strong reliance was placed on the decision of the Hon’ble apex Court in Ajoy Kumar Ghose vs. State of Jharkhand & Anr. AIR 2009 SC 2282, wherein it had been specifically stated in para 20 as follows :

“We are convinced that under s. 245(2) Cr.PC, the Magistrate can discharge the accused at any previous stage, i.e., even before any evidence is recorded under s. 244(1) Cr.PC and if under s. 245(2) Cr.PC, there could be a discharge at any previous stage then there is a necessary sequel, an application could also be made at that stage.”

The learned senior counsel would submit that respondent had moved an application for discharge on the ground that the prosecution case is groundless. Such a petition specifically had been held to be maintainable by the Hon’ble apex Court in the decision referred to above. It is contended that the Trial Court ought to be permitted to dispose of the petition of the respondent under s. 245(2) before doing anything further.

On a perusal of the above judgments, it is clear that a petition for discharge under s. 245(2) Cr.PC would be maintainable before the stage of examination of witnesses contemplated under s. 244 Cr.PC has been passed. If the matter stood thus, there would be no difficulty in disposing of the petition. But, this Court finds that the petition for discharge moved under s. 245(2) Cr.PC rests solely on the contention that the order of the Tribunal, whereby the levy of penalty against the respondent stands undone would render the complaint cases groundless. Elaborate arguments have been advanced by either side on the binding nature of the order of the Tribunal upon a Criminal Court. While the learned senior counsel for the respondent would submit that the same would be binding on the trial Court, the learned Special Public Prosecutor would argue otherwise. Various decisions were relied upon by counsel on either side.

The submissions of the learned senior counsel for the respondent predominantly lie on the reasoning of the Hon’ble apex Court in K.C. Builders & Anr. vs. Asstt. CIT (2004) 186 CTR (SC) 721 : (2004) 2 SCC 731 and other decisions which reflect a similar line of thought and to the effect that levy of penalties and prosecution under s. 276C of the IT Act are simultaneous and hence, once the penalties are cancelled on the ground that there was (no) concealment, the quashing of prosecution under s. 276C of the IT Act was automatic.

16. In Standard Chartered Bank & Ors. vs. Directorate of Enforcement & Ors. (2005) 195 CTR (SC) 465 : (2006)130 Comp Cas 341 (SC) : (2006) 4 SCC 278, the Hon’ble apex Court has distinguished the decision in K.C. Builders vs. Asstt. CIT (supra), case in the following words : “The decision in K.C. Builders & Anr. vs. Asstt. CIT (2004) 186 CTR (SC) 721 : (2004) 2 SCC 731 is clearly distinguishable. The Court proceeded as if under the IT Act, the prosecution is dependent on the imposition of penalty. That was a case where the prosecution was based on a finding of concealment of income and the imposition of penalty. When the Tribunal held that there was no concealment, and the order levying penalty was cancelled, according to this Court, the very foundation for the prosecution itself disappeared. This Court held that it was settled law that levy of penalties and prosecution under s. 276C of the IT Act are simultaneous and hence, once the penalties are cancelled on the ground that there was (no) concealment, the quashing of the prosecution under s. 276C of the IT Act was automatic. We have held already that on the scheme of the FERA, the adjudication and the prosecution are distinct and separate. Hence, the ratio of the above decision is not applicable. That apart, there is merit in the submission of the learned Addl. Solicitor General that the correctness of the view taken in K.C. Builders & Anr. vs. Asstt. CIT (supra) may require reconsideration as the reasoning appears to run counter to the one adopted by the Constitution Bench in Asstt. Collector of Customs vs. L.R. Melwani (supra) and in other decisions not referred to therein.”

17. Though, in such case, the Hon’ble apex Court was seized of a matter arising under FERA, the observations therein and the reference to the decision of Constitution Bench in the Asstt. Collector of Customs & Anr. vs. L.R. Melwani & Anr. AIR 1970 SC 962 are most relevant. It would be useful to extract paras 4 to 9 thereof : “4. The prosecution case is that the accused persons and some other unknown persons had entered into a conspiracy at Bombay and other places in the beginning of October, 1959 or thereabout for the purpose of smuggling goods into India and in pursuance of that conspiracy they had smuggled several items of foreign goods in the years 1959 and 1960.

In that connection an enquiry was held by the customs authorities. In the course of the enquiry some of the goods said to have been smuggled were seized. After the close of the enquiry those goods were ordered to be confiscated. In addition penalty was imposed on some of the accused. Thereafter on 19th Feb., 1965, the Asstt. Collector of Customs, Bombay after obtaining the required sanction of the Government filed a complaint against five persons including the appellants in Criminal Appeal No. 35 of 1967 (accused Nos. 1 and 2 in the case) under s. 120B IPC r/w cls. (37), (75), (76) and (81) of s. 167 of the Sea Customs Act, 1878 (Act VIII of 1878) as well as under s. 5 of the Imports and Exports (Control) Act, 1947. Before the commencement of the enquiry in that complaint, the 1st accused filed on 3rd Aug., 1965, the application mentioned above. Now we shall proceed to examine the contentions set out earlier. 6A. Reliance on Art. 20(2) is placed under the following circumstances. In the enquiry held by the Collector of Customs, he gave the benefit of doubt to accused Nos. 1 and 2. This is what he stated therein : ‘As regards M/s Larmel Enterprises (of which accused No. 1 is the proprietor and accused No. 2 is the manager) although it is apparent that they have directly assisted the importers in their illegal activities and are morally guilty, since there is no conclusive evidence against them to hold them as persons concerned in the act of unauthorised importation, they escape on a benefit of doubt.’ Despite this finding the Asstt. Collector in his complaint referred to earlier seeks to prosecute these accused persons. Hence the question is whether that prosecution is barred under Art. 20(2) of the Constitution which says that no person shall be prosecuted and punished for the same offence more than once. This Article has no direct bearing on the question at issue. Evidently those accused persons want to spell out from this Article the rule of autre fois acquit embodied in s. 403, Cr.PC. Assuming we can do that, still it is not possible to hold that a proceeding before the Collector of Customs is a prosecution for an offence. In order to get the benefit of s. 403, Cr.PC or Art. 20(2), it is necessary for an accused person to establish that he had been tried by a ‘Court of competent jurisdiction’ for an offence and he is convicted or acquitted of that offence and the said conviction or acquittal is in force. If that much is established, it can be contended that he is not liable to be tried again for the same offence nor on the same facts for any other offence for which a different charge from the one made against him might have been made under s. 236 or for which he might have been convicted under s. 273. It has been repeatedly held by this Court that adjudication before a Collector of Customs is not a ‘prosecution’ nor the Collector of Customs a ‘Court’. In Maqbool Hussain vs. State of Bombay 1953 SCR 730 : AIR 1953 SC 325, this Court held that the wording of Art. 20 of the Constitution and the words used therein show that the proceedings therein contemplated are proceedings of the nature of criminal proceedings before a Court of law or a judicial Tribunal and ‘prosecution’ in this context would mean an initiation or starting of proceedings of a criminal nature before a Court of law or a judicial Tribunal in accordance with the procedure prescribed in the statute which creates the offence and regulates the procedure. This Court further held that where a person against whom proceedings had been taken by the sea customs authorities under s. 167 of the Sea Customs Act and an order for confiscation of goods had been passed, was subsequently prosecuted before a Criminal Court for an offence under s. 23 of the FERA in respect of the same act, the proceeding before the sea customs authorities was not a ‘prosecution’ and the order for confiscation was not a ‘punishment’ inflicted by a Court or judicial Tribunal within the meaning of Art. 20(2) of the Constitution and hence his subsequent prosecution was not barred. The said rule was reiterated in Thomas Dana vs. State of Punjab 1959 Supp 1 SCR 274 : AIR 1959 SC 375 and in several other cases.

We shall now take up the contention that the finding of the Collector of Customs referred to earlier operated as an issue estoppel in the present prosecution. The issue estoppel rule is but a facet of the doctrine of autre fois acquit. In Sambasivan vs. Public Prosecutor, Federation of Malaya 1950 AC 458 at p. 479, Lord Mac Dermott enunciated the said rule thus : ‘The effect of a verdict of acquittal pronounced by a competent Court on a lawful charge and after a lawful trial is not completely stated by saying that the person acquitted cannot be tried again for the same offence. To that it must be added that the verdict is binding and conclusive in all subsequent proceedings between the parties to the adjudication. The maxim ‘res judicata pro veritate accipitur’ is no less applicable to criminal than to civil proceedings. Here, the appellant having been acquitted at the first trial on the charge of having ammunition in his possession, the prosecution was bound to accept the correctness of that verdict and was precluded from taking any step to challenge it at the second trial. And the appellant was no less entitled to rely on his acquittal insofar as it might be relevant in his defence. That it was not conclusive of his innocence on the firearm charge is plain, but it undoubtedly reduced in some degree the weight of the case against him, for at the first trial the facts proved in support of one charge were clearly relevant to the other having regard to the circumstances in which the ammunition and revolver were found and the fact that they fitted each other.’

The rule laid down in that decision was adopted by this Court in Pritam Singh vs. State of Punjab AIR 1956 SC 415 and again in N.R. Ghose, Nikhil Ranjan Ghose vs. State of West Bengal (1960) 2 SCR 58 : AIR 1960 SC 239. But before an accused can call into aid the above rule, he must establish that in a previous lawful trial before a competent Court, he has secured a verdict of acquittal which verdict is binding on his prosecutor. In the instant case for the reasons already mentioned, we are unable to hold that the proceeding before the Collector of Customs is a criminal trial. From this it follows that the decision of the Collector does not amount to a verdict of acquittal in favour of accused Nos. 1 and 2.

9. This takes us to the contention whether the prosecution must be quashed because of the delay in instituting the same. It is urged on behalf of the accused that because of the delay in launching the same, the present prosecution amounts to an abuse of the process of the Court. The High Court has repelled that contention. It has come to the conclusion that the delay in filing the complaint is satisfactorily explained. That apart, it is not the case of the accused that any period of limitation is prescribed for filing the complaint. Hence the Court before which the complaint was filed could not have thrown out the same on the sole ground that there has been delay in filing it. The question of delay in filing a complaint may be a circumstance to be taken into consideration in arriving at the final verdict. But by itself it affords no ground for dismissing the complaint. Hence we see no substance in the contention that the prosecution should be quashed on the ground that there was delay in instituting the complaint.”

18. In P. Jayappan vs. S.K. Perumal, ITO (1984) 42 CTR (SC) 180 : (1984) 149 ITR 696 (SC) the Hon’ble apex Court has observed as follows : “The Criminal Court no doubt has to give due regard to the result of any proceeding 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. 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. Otherwise, there is a danger of a contention being advanced that whenever an assessee or any other person liable under the Act had failed to convince the authorities in the proceedings under the Act that he has not deliberately made any false statement or that he has not fabricated any material evidence, the conviction of such person should invariably follow in the Criminal Court.”

It further has observed that : “The power conferred on the CIT under s. 273A is an overriding power which he may exercise at his discretion. It is only where the CIT reduces or waives the penalty imposed or imposable under s. 271(1)(iii) of the Act in exercise of his discretion under s. 273A, s. 279(1A) comes into operation and acts as a statutory bar for proceeding with the prosecution under s. 276C or s. 277. It does not, however, provide that merely because there is a possibility of the CIT passing an order under s. 273A, the prosecution shall not be instituted.”

It is the rationale of the judgments of the Hon’ble apex Court that are to be followed by this Court. In so doing, this Court would have to accept the contention of the learned Special Public Prosecutor (Income-tax) that the finding of the Tribunal can have no binding effect on the proceedings of the Criminal Court. This Court also finds that the present complaints do not stop with offences under the IT Act. They also speak of commission of offences under ss. 193, 196 and 420 IPC towards commission of offence under the IT Act. Thus, it is clear that the finding of the Tribunal cannot render the proceedings before the Criminal Court groundless.

In conclusion, (i) A petition for discharge under s. 245(2) Cr.PC would be maintainable at a stage prior to recording of evidence under s. 244 Cr.PC. As I find, in the instant case that the order of the Tribunal will not be the last word on the matter, the lower Court shall take up the petition under s. 245(2) Cr.PC and dispose of the same in keeping with the observations hereinabove made. (ii) Thereafter, the lower Court shall take up the petition filed by the petitioner under s. 244(2) Cr.PC, issue summons to the witnesses and proceed further in the case.

This is an unfortunate case which has been pending on the file of the lower Court from the year 1992. Interests of justice would require for early disposal of the case. Accordingly, the lower Court is directed to complete the proceedings before it within a period of six months from the date of receipt of a copy of this order.

The observations herein above are merely towards disposal of present petitions pending before this Court and shall not in any manner influence the lower Court. These criminal original petitions are disposed of with the above direction. Consequently, the connected miscellaneous petitions are closed.

[Citation : 325 ITR 661]

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