Madras H.C : The trial Court from the charges framed against them punishable under ss. 120B, 193 & 420 r/w s. 511 of the IPC and ss. 276C, 277 & 278 of the IT Act, 1961.

High Court Of Madras

Income Tax Officer vs. S. Ponnambalam & Anr.

Sections 276C, 277, 278

V. Kanakaraj, J.

Crl. Appeal No. 1188 of 1986

20th July, 1998

Counsel Appeared

Ramasamy, for the Appellant : M. Venkataraman, for the Respondents



The above criminal appeal is directed against the judgment dt. 8th Aug., 1986, made in E.O.C.C. No. 113 of 1986, by the Court of Additional Chief Metropolitan Magistrate (Economic Offences II). Egmore, Madras 8, acquitting the respondents herein and yet another, who were arrayed as accused Nos. 1 to 3 before the trial Court from the charges framed against them punishable under ss. 120B, 193 & 420 r/w s. 511 of the IPC and ss. 276C, 277 & 278 of the IT Act, 1961.

2. The charges as framed by the trial Court against these respondents and yet another is that : Firstly, the first accused during August, 1986, intentionally made a false verification in the application form (exhibit P-1) for getting s. 230A(1) of the IT Act, certificate, enclosing draft sale deed understating proposing the sale consideration as Rs. 75,000 and delivering the same before the ITO, Salaries Circle I(2). Madras, and thereby committing an offence punishable under s. 277 of the IT Act, 1961. Secondly, at the same time, place and in the course of the same transaction, the first accused attempted to evade capital gains tax chargeable under the IT Act to wit, the false consideration shown in the draft sale deed and application as Rs. 75,000 in respect of the asst. yr. 1985-86 and thereby committed an offence punishable under s. 276C(1) of the IT Act, 1961. Thirdly, the first accused, at the same time, place and in the course of the same transaction dishonestly attempted to cheat the ITO, Salaries Circle I(2), Madras, by including him to deliver s. 230A certificate which is a valuable security and thereby committed an offence punishable under s. 420 r/w s. 511 of the IPC. Fourthly, that the first accused, at the same time, place and in the course of the same transaction gave false evidence in the course of the s. 230A proceedings, which are judicial proceedings before the ITO, Salaries Circle I(2), Madras, and thereby committed an offence punishable under s. 193 of the IPC. Fifthly, the first and second accused at the same time, place and in the course of the same transaction caused the circumstances to prepare a false draft sale deed containing false statement by the first accused in exhibit P-6 and both of them committed on offence punishable under s. 193 of the Indian Penal Code.

The prosecution represented by the ITO, Salary Circle, Madras-6, in its endeavour to prove the above charges framed against the accused below, since the accused are presumed innocent and the prosecution being burdened with proof beyond reasonable doubts of the facts and circumstances of the case, would examine four witnesses for oral evidence as P.Ws. Nos. 1 to 4, and also would mark 26 documents for documentary evidence as exhibits P-1 to P-26 and on the part of the accused the evidence placed in all is nil. The Court below in assessing the above evidence placed in the context of the provisions of law under which the accused came to be charged and weighing the evidence to the required norms of law and appreciating the same in its own way would ultimately arrive at the decision to acquit all the three accused therein holding them not guilty, since the prosecution had failed to prove its case with proper evidence to the standard of proof beyond reasonable doubts.

It is only challenging the acquittal judgment registered by the trial Court, the complainant Department has come forward to prefer the above appeal on grounds as made out in the memorandum of appeal such as (i) that the lower Court has completely misdirected itself on the question of law relating to s. 230A and s. 277 of the IT Act; (ii) that the lower Court has failed to note under s. 277 of the IT Act that any person who makes a statement in any verification or under any rule made thereunder or delivers an account which proves to be false, shall be punished and the same has not been given effect to by the Court below; (iii) that s. 230A(2) of the IT Act states that the application should be in such form shall contain such particulars as may be prescribed (rules 44A and 44B and Form 34A) and the applicant should sign the verification and if any of the verification made in the said form is false, the person concerned is liable to be punished under s. 277 of the IT Act and the same has been lost sight of by the Court below; (iv) that the lower Court’s findings that the certificate under s. 230A of the IT Act is only to prevent the disposal of property, when there is a tax liability and if there is any liability to pay tax, there is no offence committed is erroneous and has resulted in miscarriage of justice : (v) that the Court below having found that the sale price was admittedly Rs. 1,70,000 and the application under s. 230A of the IT Act, verified as true by the first accused showed the price as Rs. 75,000 which is a false statement, ought to have convicted the first accused under s. 277 of the IT Act; (vi) that the lower Court erred in finding that there was no tax liability when under the law, the first respondent is bound to pay capital gains tax; (vii) that the findings of the Court below that no witness has spoken to the liability of the first accused to pay capital gains tax and hence there is no proof of liability of tax is contrary to law and is opposed to the canons of evidence; instead the Court has to take judicial notice under s. 57 of the Indian Evidence Act; (viii) that the Court below has also failed to note that the original sale deed had been written for Rs. 75,000 and the stamp purchased for the said amount and that only after the Department’s investigation that in the sale deed it was Rs. 1,75,000 the additional stamps were purchased and interpolated for a total value of Rs. 1,75,000 and the document registered; (ix) that the lower Court has erred in holding that there is no attempt to evade the capital gains tax on the same ground that there is no tax liability; (x) that the Court below has completely misdirected itself on the application of s. 276C of the IT Act, which contemplates the attempt to be complete, the moment a circumstances is made to exist which may eventually be used to evade tax, the lower Court has not adverted to this in its discussion; (xi) that the lower Court’s finding that there will not be any liability for tax, if the capital gains has been invested in certain investments and there cannot be any attempt to evade tax is untenable in law; (xii) that the lower Court ought to have held that s. 277(ii) of the IT Act will clearly apply to the facts of the case and the interpretation given in this regard by the lower Court in para. 14 of its judgment are not correct and warranted. With the above and such other grounds, the memorandum of appeal would seek for setting aside the acquittal judgement and to convict the accused according to the penal provisions of law for the offence committed. During the arguments, learned senior counsel Mr. Ramasamy (Central Government Standing Counsel) appearing for the IT Department, at the outset besides giving a picture on the structure of the income-tax laws their significance and the importance of the penal provisions of the IT Act, would also contend that the IT statutes are standing on a different footing and there should be neither fabrications nor additions; that the onus (in common) is fixed on the accused; that for instance if one states that he possessed rupees five lakhs, the onus is on him to prove the source. Learned counsel would further argue that the culpable mental state is presumed for the accused unless the contrary is provided. He would further generally contend that regarding the income tax, the Act is dearer and affectionate to those who disclose the income needless to point out that it is the dreaded enemy of those who try to evade or escape that lawful tax.

Learned senior counsel would further argue that in many cases, the tax is deducted at source and would support entering into the facts of the case stating that the first accused is the seller of the property located in Plot No. AP 1665, Door No. 143, “O” Block, Ganapathy Colony, Anna Nagar, Madras 40, with an extent of 88 sq. feet and a house built on it, and the second accused and third accused are the purchasers of the same which had been sold as per the registered sale deed dt. 30th Sept., 1985, under a document No. 3610 of 1985 on the file of the Sub- Registrar, Anna Nagar, Madras. Over and above Rs. 50,000, if the transaction is involved under s. 230A of the IT Act, the income-tax clearance certificate should be obtained for the transaction, that the first accused applied for s. 230A certificate on 30th Aug., 1985, and in the application the sale consideration was mentioned as “Rs. 75,000” but in fact, it should have been more that. On suspicion the IT authorities deputed one of the inspectors to make an enquiry and the enquiry revealed that there had been an agreement for sale between the same parties and regarding the same property wherein the actual sale price was Rs. 1,75,000 and not Rs. 75,000 as it had been falsely mentioned.

Learned senior counsel would further contend that the chartered accountant, who filed for the income-tax clearance certificate explained that Rs. 1,75,000 had been shown by way of protective steps but the enquiry revealed that on 6th Sept., 1985, the first accused gave a letter to the effect that the sale consideration in the s. 230A certificate to be Rs. 75,000 and the accused was caught red-handed since his own document the agreement for sale got detected, then the accused volunteered to admit to the effect that he was ready to correct the document stating that the sale consideration was Rs. 1,75,000. He had also given a statement on 7th Sept., 1985, admitting all the facts further stating that he had been misguided by a friend of his to give understatement to the Registrar. He further admitted that it was done with intent to save the stamp duty and other sundry charges. He also filed a fresh form quoting Rs. 1,75,000 and the certificate was also issued on the same day. Continuing his arguments, learned senior counsel for the IT Department would further contend that the clause in the agreement for sale says that accused Nos. 2 and 3 have purchased 27 stamp papers for a sum of Rs. 9,750 for the sale consideration of Rs. 75,000 an 23rd/24th Aug., 1985, and typed out the sale deed that after typing the first accused filed a second application for Rs. 1,75,000 which necessitated to purchase of the stamp papers for the remaining sum of Rs. 1 lakh and erasing the original sale deed and incorporating Rs. 1,75,000 as sale consideration the document had been registered.

Learned counsel would further point out that statements have also been recorded from accused Nos. 2 and 3 since they too committed an offence as contemplated under the charge. Giving a picture of the document marked as exhibit he would further say that exhibit P-1 is the application made originally with understatement valuing the property at Rs. 75,000 Exhibit P-6 is the draft sale deed in force along with exhibit P-1. Exhibit P-8 is the agreement entered into at Rs. 1,75,000. Exhibit P-9 is the letter by the first accused stating that it was a typographical error. Exhibit P-10 is the letter by the Asstt. CIT. Exhibit P-12 is the fresh application. Exhibit P-13 is the copy of the sale deed registered for Rs. 1,75,000 and exhibit P-14 is the understatement of the first accused.

Learned senior counsel would further point out that in the attempt to evade capital gains tax, P.W. 1 had committed an offence under s. 136 of the IT Act that the proceedings before the ITO are deemed to be judicial proceedings within the meaning of s. 193 and s. 228 of the IPC and that every IT authority is deemed to be a civil Court under the authority of law. The object to be achieved is that before the IT authorities, one has to make the correct declaration, otherwise he would become punishable under s. 193 of the IPC for fabricating false evidence in a judicial proceeding intending to use the same in any such proceedings.

11. Sec. 196 of the IPC would deal with any one corruptly using or attempting to use as true or genuine any evidence knowing it to be false or fabricated. Learned counsel would also point out that both the accused were very much parties to the transactions, conspiracy and abetment, as given in the charge. Learned counsel would draw the attention of the Court to s. 276 wherein it has been contemplated that whoever fraudulently removes, conceals, transfer or delivers to any person, any property or any interest therein, intending thereby to prevent that property or interest therein from being taken in execution of a certificate under the provisions of the Second Schedule, shall be punishable with rigorous imprisonment for a term which may extend to two years and shall also be liable to fine. That Explanation to clause 1(iv) were to apply to constitute an offence under s. 276C(1) and this section would read that if any person wilfully attempts to evade tax imposable under this Act he is punished with imprisonment and fine and if any person wilfully attempts to evade payment of any tax also becomes punishable with rigorous imprisonment.

12. Learned senior counsel would further point out that P.W.1. the ITO speaks about filing of the application under s. 230A of the Act on lesser sale consideration of Rs. 75,000, i.e., exhibit P-1 application. Exhibit P-2 is the duplicate of exhibit P-1 application. The first accused also furnished an affidavit in exhibit P-3, Exhibit P-4 is the salary certificate; the power of attorney is exhibit P-5; exhibit P-6 is that draft sale deed for a sum of Rs. 75,000. Learned counsel would also would point out that P.W. 1 has made an endorsement on exhibit P-1 to the effect that he suspected and initiated the enquiry; exhibit P-7 is the report by the inspector on enquiry; exhibit P-8 is the agreement sent along with exhibit P-7, i.e., for Rs. 1,75,000; exhibit P-9 is the letter dt. 6th Sept., 1985, wherein the first accused has admitted the actual value, but attributing the fault for the typographical error; exhibit P-10 is the letter from the IAC; exhibit P-11 is the letter filed by the first accused with fresh application, with the letter of the auditor; Exhibit P-12 is the fresh application form; exhibit P-13 is the copy of the sale deed; exhibit P-14 is the statement of the first accused; exhibit P-15 is the statement of the second accused; exhibit P-16 is the second statement of the first accused; exhibit P-17 is the second statement of the second accused; exhibit P-18 is the impounding order of exhibit P-8 agreement and the original sale deed; exhibit P-19 is the sale deed for Rs. 1,75,000. Exhibit P-20 is the summons issued under s. 131 of the IT Act to the accused; exhibit P-21 is the summons for the appearance of the accused and giving statement on 7th Nov., 1985; exhibit P-22 is another summons to P.W. 4, the auditor; exhibit P-23 is the summons to P.W. 3, the auditor and P. Ws. 3 and 4 would appear on 26th Nov., 1985, and give sworn statements; exhibit P-24 is the statement of P.W. 4; exhibit P-25 is the statement of P.W. 3 and exhibit P-26 is the authorisation to file the complaint.

13. Learned counsel would then cite instances from the evidence of the witnesses and from the documents in consummation of his arguments to the establishment of the offence committed on the part of the accused. He would also comment on the questioning of the accused by the trial Court under s. 313 of the CrPC and the statement given by them to the said questions and would ultimately argue that from the above instances, the following conclusions should be arrived at. He would ultimately urge that the trial Court has based its conclusion on the following points so as to arrive at holding the accused not guilty and consequently to acquit them. They are : (i) Violation of filing Form No. 34A for obtaining tax clearance certificate under s. 230A of the IT Act will not constitute an offence by itself : (ii) Tax liability ought to have been determined and assessment has to be completed before a charge is made under s. 276C(1) of the IT Act. Hence, the complaint is premature and the complainant ought to have waited till the transaction was completed; and (iii) Punishment clause under s. 276C(1) in this case and under s. 277 in any other case of the income-tax only means the cases below Rs. 1 lakh of tax ought to be assessed. Answering the above three points, firstly he would cite a judgment reported in Pandurangam, In re (1973) Law Weekly (Crl.) 53, wherein it has been made clear that even filing of false affidavit constitutes an offence. While such being the case, it is still more clear that filing of a false affidavit by the accused would automatically constitute an offence under the IT Act. Learned counsel would further elaborate this point saying that the Income-tax Form No. 34A is an application and it is a valuable security, since by filing a form he gets a clearance certificate. In Ishwarlal Girdharilal Parekh vs. State of Maharashtra (1968) 70 ITR 95 (SC) : TC 48R.153 (head note), the Supreme Court has ruled that an income-tax assessment order is a valuable security. If he files a false return or conceals any fact in it or understates the income and thus invites an assessment order for a lesser income that constitutes an offence under s. 420 of the IPC. Citing yet another judgment report in Sudhir Kumar Mukherjee vs. State of W.B. (1975) Law Weekly (Crl.) 28 and yet another judgment reported in State of Maharashtra vs. Mohd. Yakub, AIR 1980 SC 1111, learned counsel would argue that based on these judgments the presumption of culpable mental state is what constitutes an offence and how it is applied to income-tax had all been established, besides allowing the appeal and sentencing the accused for six months. Hence, no legal error has been committed.

Learned senior counsel would secondly focus his attention on the decision in Mahabir Prasad Saraogi vs. State of Bihar (1979) 9 CTR (Pat) 88 : (1979) 120 ITR 663 (Pat) : TC 48R.156 regarding the offence constituted under s. 193, i.e. fabrication of false evidence. Under s. 193 of the IPC dealing with fabricating Form No. 34A the intention of the accused is to cheat the income-tax officials. Hence, the offence under s. 193 is complete. He would then cite Form No. 34A, i.e., exhibit P-1 and the sale agreement exhibit P-6 as examples for the accused to have committed the offence under s. 193 and further say that the offence is complete as soon as it is fabricated with the intention to commit the offence and would end up saying that the trial Court had not applied its mind or having applied its mind did not find any untoward incident in the cases of the offence. So far as the evidence is concerned, the prosecution has established its case beyond reasonable doubt. The trial Court had started solely on legal aspects which are fully settled citing a ruling report in G.S.R. Krishnamurthi vs. M. Govindaswamy, ITO (1992) 104 CTR (Mad) 143 : (1992) 195 ITR 137 (Mad) : TC 48R.417. Learned counsel would argue that all the points that are necessary to decide the above questions have been considered and answered in this judgment. Citing yet another judgment reported in P. Jayappan vs. S.K. Perumal, First ITO (1984) 149 ITR 696 (SC), learned counsel would say that assessment need not have been completed for the offence to be made out, and both proceedings could be carried on simultaneously, thus more or less akin to point No. 1. Further, this judgment would also clarify how s. 277 of the IT Act constitutes the offence and about the offence of conspiracy. Citing yet another judgment reported in R. Vijayalakshmi vs. ITO (1995) 216 ITR 385 (Mad), learned senior counsel would cite the relevant portion of the judgment dealing with s. 276C of the IT Act, which ‘deals with the attempt of a person to evade tax and, therefore, it need not be an actual evasion of the tax, and further holding thereby that as the first petitioner had deliberately given a false statement in Form No. 37G which was to be forward to the IT Department, it would amount to an attempt to evade tax. The verification was in respect of a false statement with regard to the sale consideration. There was a prima facie case under ss. 276C and 277. There was evidence that the second petitioner asked the vendor to execute the sale deed in favour of his wife, the first petitioner, and that was prima facie evidence for the offence under s. 278. There was fabrication of false evidence and hence charges could be framed under ss. 193, 196 and 199 of the IPC as well as under ss. 276C, 277 and 278 of the IT Act, 1961. Regarding the charges framed and the other judgment reported in ITO vs. Dharmchand Surana (1995) 216 ITR 678 (Mad) : TC 48R.404, learned senior counsel would explain that in that case the accused was a jewellery mart, which did not file the returns wherein what constitutes an attempt to commit an offence has been explained. With these arguments, learned senior counsel for the appellant would ultimately pray for allowing the appeal setting aside the acquittal judgment rendered by the trial Court.

In reply, learned counsel, Mr. N. Venkataraman, appearing on behalf of the respondents, would contend that the exercise of the power by the Department from the beginning is arbitrary, that P. Ws. 3 and 4 both of whom are auditors have been involved in this case that the Department questioned and had recorded statements of the accused, the first one the statement of the first accused on 17th Sept., 1985, in exhibit P-14, and the second one the sworn statement of A-2 on 2nd Nov., 1985, exhibit P-21, P.W. 4’s statement had been recorded on 26th Nov., 1985, in exhibit p. 24. P.W. 3’s statement had been recorded on the same day on 26th Nov., 1985, in exhibit P-25. Reading out the questions put to P.Ws. 3 and 4 learned counsel would question as to what made the Department to give up P.W. Nos. 3 and 4 from being charge sheeted along with the other accused no one knows till date.

16. Learned counsel would further argue that in this case the first accused is the vendor and accused Nos. 2 and 3 are husband and wife, respectively, the joint purchasers of the property from the first accused, that A-3’s case is akin to the case of the second accused, but they suddenly gave up the third accused and registered an appeal against the second accused excepting for the fact that one more charge is against the second accused. At this juncture, learned counsel would also remark that such arbitrariness on the part of the Department has only led casualness when different kinds of treatments are meted out to parties.

Learned counsel would further attract the attention of the Court towards the instructions given in Chapter 22, Part 2, wherein under the head infirmities in prosecution compounding proposal could be made citing the judgment reported in Madura Chit and Investments Pvt. Ltd. vs. ITO (1994) 121 CTR (Mad) 288 : (1994) 208 ITR 228 (Mad) : TC 48R.956, learned counsel would contend that the first accused as the vendor his taxable income was nil, and at this stage he sold the property in favour of the accused Nos. 2 and 3 and as per the statement for the year 1996-97 after everything in the case is over, his existing liability should not exceed Rs. 50,000 (now Rs. 2 lakhs) that he was not an assessee that day; that only the house sought to be sold was the sole property belonging to him. The judgment relied upon by the Department rendered by Justice V. Rengasamy, reported in R. Vijayalakshmi vs. ITO (1995) 216 ITR 385 (Mad) and ITO vs. Dharamchand Surana (1995) 216 ITR 678 (Mad) : TC 48R.404 which is also on a different footing applies to the facts of this case. Coming to the witnesses, learned counsel for the respondents would point out that from out of the four witnesses P.Ws. 1 to 4, exhibit P-11 is addressed to P.W. 1 and there is no suppression of facts found at all and the evidence of P.W. 1 is self-explanatory and would further point out from the answer given by the chartered accountant that they prepared the document only by way of protective steps. Learned counsel would further emphasise that s. 230A certificate cannot be issued to a person whose property is less than the guidelines value and in case, the guidelines value is less than Rs. 75,000 there is no question of s. 230A coming into play. Pointing out that the guidelines value itself is not based on any fixed principle and without positive evidence regarding the guidelines value, the s. 230A proceeding is premature since the value of the sale deed would not be registered at all on 5th Sept., 1985. Citing for exhibit P- 11, learned counsel would say that there is no question of any suppression at all and it was not correct to say since the same was against prosecution, the report had been suppressed, and the whole exercise has been done, taking into consideration, the unregistered document where the offence was not complete. Citing a judgment reported in

ITO vs. Gadamsetty Nagamaiah Chetty (1996) 133 CTR (AP) 347 : (1996) 219 ITR 263 (AP) : TC 48R.778, wherein the case is quote similar to the case in hand, enclosing a copy of the sale deed proposed to be registered, request had been made to issue a certificate under s. 230A(1) of the Act and during the course of the raid a stamped paper was seized wherein the sale consideration was Rs. 3 lakhs as against Rs. 1,20,000 disclosed in the application under s. 230A(1) in their statement. In their statement the assessee have further admitted that the sale consideration was only Rs. 3 lakhs but not Rs. 1,20,000 and they have filed the application as per the market value. The learned judge on a consideration of the evidence acquitted the accused on grounds that they are not liable to pay tax under any enactment mentioned in s. 230A. Citing another judgment reported in CIT vs. Ram Rup Kishan (1992) 103 CTR (P&H) 236 : (1992) 193 ITR 129 (P&H) : TC 48R.795, learned counsel would point out from the Division Bench judgment of the Punjab and Haryana High Court that false statement in verification the lower Court ordered acquittal of the accused and after a delay of ten years of the order of acquittal, the appeal had come up for consideration remarking that the termination of criminal proceedings ordered by the lower appellate Court was, therefore, the safest order in terms of the Supreme Court guidelines saying that we see no reason to disturb in the present appeal, and declined to interfere with.

The next judgment is reported in ITO vs. Mittal (B.B.) (1993) 113 CTR (P&H) 229 : (1993) 199 ITR 805 (P&H) : TC 48R.863 wherein the Division Bench of the Punjab and Haryana High Court (headnote) : “Held, that the trial Court had perused the orders of the Tribunal wherein a positive finding had been recorded that there was no concealment of any income. The explanation given by the assessee had been held to be bona fide and the ITO’s order imposing penalty had to be quashed.

The trial Court was justified in dismissing the complaint under ss. 276C and 277 of the IT Act, 1961, and ss. 193 and 196 of the IPC, 1860.” Citing the above judgment, learned counsel would remark that he had filed his statement and the prosecution was unnecessary.

The next judgment cited by learned counsel is that one reported in Ganga Solvent vs. State of Bihar (1997) 226 ITR 401 (Pat) : TC S48.3867 wherein it is mentioned that (headnote): “The Government of India has issued a notification stating that prosecution need not be initiated where the cumulative interest payable under s. 201(1A) of the IT Act, 1961, for all the years involved in respect of the tax deducted at source under ss. 192 to 195 is less than Rs. 10,000 and the tax was also paid to the credit of the Central Government : Held, that the allegation was of delay in payment of tax deducted at source and the interest on this was less than Rs. 200. The prosecutions were liable to be quashed”. Citing the above ruling, learned counsel for the respondents would comment that he had no liability at all.

The next judgment cited by the respondent is one reported in Banwari vs. ITO (1992) 195 ITR 651 (SC) : TC 48R.804 wherein it has been held that (headnote) : “for more than a decade the proceedings were pending in the trial Court and no useful purpose would be served by proceeding with the complaint after a lapse of such a longer time. The matter had become stale.” The Supreme Court accordingly set aside the order of the High Court and restored the order of discharge passed by the Magistrate. Citing yet another judgment reported in State vs. Karunakaran (1993) Vol III 174, learned counsel would point out that there is no need to interfere with the acquittal registered by the trial Court on account of a delay of six years. Citing for more judgments reported in the Prevention of Food Adulteration Cases (i) (1992) (2) Prevention of Food Adulteration Cases 15; (ii) (1990) (2) Prevention of Food Adulteration Cases 405; (iii) (1989) (3) Prevention of Food Adulteration Cases 124; and (iv) (1982) (2) Prevention of Food Adulteration Cases 372, learned counsel would point out that in those cases even the minimum sentence was not awarded on account of lapse of time.

Learned counsel for the same proposition of law would also cite some more judgments reported in Fourth ITO vs. A.K. Srinivasan (1994) 117 CTR (Mad) 322 : (1994) 205 ITR 64 (Mad), (ii) State vs. Kumaresam (1992) Crl. LJ 3115 and (iii) S. Guin vs. Grindlays Bank Ltd. AIR 1986 SC 289, and out of the above judgments, it is worth citing State vs. Kumaresan (supra); wherein a learned single judge of this Court has held that “in an appeal against acquittal long time elapsing since acquittal held considering the mental agony suffered by respondent/accused right from the date of incident till disposal of the present appeal, it would not be proper to disturb verdict of acquittal though finding of trial Court on which verdict of acquittal was based, is set aside.” Central Government standing counsel sought to clarify certain ambiguities that arose from the argument of the other side and resuming

his argument would contend that the auditors were not parties to the document and that the third accused is also left out in the appeal since there would not have been sufficient materials to prosecute them and hence they would have been left with in the charge-sheet. He would further point out that the intention of the appellant to commit the offence has been established under s. 230A there was also understatement of the value; that when the assessment order is a tax deduction it might be on many reasons and there cannot be a finding; that even if one files his return and states that he has not executed documents he has to pay tax and if he conceals anything, he becomes liable to be prosecuted against and it is immaterial whether he pays the tax or not. It is an attempt to evade tax chargeable or imposable.

Learned counsel would further contend that most cases on question of delay cited by the other side are food adulteration cases and not tax matters, the amendment of the CrPC in 1975 introduced the statute by name Economic Offences (Inapplicability of Limitation) Act, was passed wherein among other Acts, the IT Act, Customs Act. Imports and Exports Act, fall under and these Acts would come under a special category whereas the Food Adulteration Act, is not one among them. Learned counsel would further cite a case reported in State of Gujarat vs. Shri Mohan Lal (1987) LW (Crl.) 435 (SC), and argue that in this case the Supreme Court held that “delay has become part and parcel of our life and that economic offences should be viewed more seriously and stringently than a murder case and the reason given is that the economic offence affects the very fibre of the society and the delay should not cause any inconvenience in rendering justice. In fixing the norms in view of long delay, the Supreme Court completely excluded the IT Act cases, that it is not that prosecution arising out of concealed activity which would come to surface only after some time.”

28. Learned counsel for the respondents would further point out that the document showed, no conclusion could be arrived at regarding the tax liability and for question of sentence learned counsel would cite a judgment reported in ITO (Fourth) vs. A.K. Srinivasan (supra), wherein it has been held that (headnote) “however, since the offence is said to have been committed in the year 1976-77 and the order of acquittal was passed in 1984, no useful purpose would be served by ordering retrial at this length of time especially when the respondent had already undergone imprisonment till the rising of the Court and paid the fine in respect of the offences, committed in connection with the same transactions.”

29. It is an appeal against acquittal by the trial Court and in dealing with such appeals arising out of the acquittal by the trial Court, sufficient guidelines have been provided by the apex Court in its judgment reported in Madhavan Nair vs. State of Kerala (1975) MLJ (Crl.) 239 wherein it has been held : “In an appeal under s. 417 of the CrPC, against an order of acquittal the High Court has full power to review at large the evidence on which the order of acquittal was founded and to reach the conclusion that upon the evidence the order of acquittal should be reversed. No limitation should be placed upon that power unless it be found expressly stated in the Code, but in exercising the power conferred by the Code and before reaching its conclusion upon facts, the High Court should give proper weight and consideration to such matters as, (1) the view of the trial judge as to the credibility of the witnesses; (2) the presumption of innocence in favour of the accused, a presumption certainly not weakened by the fact that he has been acquitted at his trial; (3) that right of the accused to the benefit of any real and reasonable doubt; and (4) the slowness of an appellate Court in disturbing a finding of fact arrived at by a judge who had the advantage of seeking the witnesses. The High Court should also take into account the reasons given by the Court below in support of its order of acquittal and must express its reasons in the judgment which lead it to hold that the acquittal is not justified. Further, if two conclusions can be based upon the evidence on record, the High Court should not disturb the finding of acquittal recorded by the trial Court. It would follow as a corollary from that, that if the view taken by the trial Court in acquitting the accused is not unreasonable, the occasion for the reversal of that view would not arise”.

30. Judging the facts of the case in the light of the evidence and in the context of the provisions of law in the IPC and the IT Act as well, it is a case of attempt to evade tax by undervaluing the property for sale intentionally furnishing an understatement in order to cheat in IT Department. Four witnesses have been examined and 26 documents have been marked. From among the witnesses examined P. Ws. 1 and 2 are the Departmental officials and P.Ws. 3 and 4 are the chartered accountants, who dealt with the subject matter on behalf of the accused. So far as the evidence of P.W. 1 is concerned, he would depose that he was the ITO, Salary Circle-1(2), Madras6, and the first accused, who was his assessee, approached him for a s. 230A certificate giving exhibit P-1 application and stating that the property sought to be sold was for a sale consideration of Rs. 75,000 wherein accused Nos. 2 and 3 have been shown as purchasers. Along with exhibit P1 and a duplicate of it in exhibit P-2 exhibit P-3 sworn affidavit by the first accused the salary certificate in exhibit P-4 the power of attorney given in favour of his auditor P.Ws. 3 and 4 in exhibits P-5 and P-6. The draft sale deed signed by the first accused had also been filed. Suspecting undervaluation of the instrument he made an endorsement to his inspector. P.W. 2 to make an inspection on the subject-matter and the report had been filed in exhibit P-7 based on which and the copy of the agreement submitted along with exhibit P-7 he issued summons and got the original agreement in exhibit P-8 along with exhibit P-9 letter from the first accused on 6th Sept., 1985, stating thereby that the value was only Rs. 1,75,000 and due to typographical error the sale consideration had been mentioned as “Rs. 75,000”. This witness would also depose that based on the attempts made on the part of the first accused he issued instructions in exhibit P-10 to get fresh application for Rs. 1,75,000 from the first accused, and followed the other procedures in recording the statements of all the accused as per exhibits P-14 to P-17 and impounded exhibit P-8 the undervalued instrument. He also recorded the statement of P.Ws. 3 and 4 in exhibits P-24 and 25, who are the auditors of the first accused and by exhibit P-26 authorisation of the CIT, he lodged the complaint against the accused. P.W. 2 the income-tax inspector would depose that he conducted an enquiry on 1st Sept., 1985, when he enquired the auditors, who produced the copy of the agreement, who stated that it was only as the protective step he produced the xerox copy of the agreement besides identifying his signature in exhibit P-5 dt. 5th Sept., 1985. P.Ws. 3 and 4 are the auditors of the first accused among whom P. W.3 would depose that in the last week of August, 1985, the first accused came for obtaining a s. 230A(1) certificate of giving exhibit P-6 draft sale deed. Further giving exhibit P-5 the power of attorney in favour of the firm that he filled up the application taking the particulars from exhibit P-1 sale deed, that he was not aware of any other agreement when he filled up the application; that he appeared before P.W.2 and produced all necessary documents and then met the Asstt. CIT, Mr. Lekhra, who informed him that prior permission of the CIT must be obtained by him prior to issuing the certificate and that he met the CIT along with his senior advocate, K. Ramamani, and gave a requisition exhibit P-11 with other details requesting to issue the certificate for the value of Rs. 1,75,000, since there was no tax liability. P.W. 4 is none other than the partner attached to the same office of P.W. 3 and this witness would also depose that exhibit P-2 application was filled up by him on the basis of exhibit P-6 draft sale deed, which was supplied by the first accused. He would also identify the power of attorney as exhibit P-5 and getting the signature of the first accused he filed it with the ITO then the first accused brought another agreement of sale for Rs. 1,75,000 in exhibit P-3. He met P.W. 1 and handed over the papers and on his instruction he met the ITO, who wanted the reason for the difference of amount between the application and the draft sale deed for which he answered that according to the guidelines value, the assessee prepared it and this witness would also depose that in meeting the Assistant CIT, Mr. Lekhra, and on giving a letter in exhibit P-9 by the first accused stating thereby that typographical error had occurred in exhibits P-2 and P-12 was prepared on 17th Sept., 1985, showing the sale consideration of Rs. 1,75,000 in a fresh application and the draft sale deed in exhibit P-13 enclosing which they submitted; that he received summons in exhibit P-22 and gave the statement to the ITO in exhibit P-24.

From the above evidence of the prosecution P.W. 1 suspecting the value offered in exhibit P-2 draft sale deed prior to issuing certificate under s. 230A(1) of the IT Act had summoned the first accused and by mere asking the first accused he had plainly told P.W. 1 that it was only a typographical error and on the instructions of P.W. 1 he got a new form and prepared the sale agreement for Rs. 1,75,000 and submitted the same for the issuance of the income-tax clearance certificate. It is the further case of the prosecution that P.Ws. 3 and 4 being the auditors of the first accused they filled up the necessary forms that were to be submitted in the proper manner before the IT authorities concerned. With the above facts not only summoning accused Nos. 1 to 3, but also summoning their auditors P. Ws. 3 and 4 statements have been obtained from all of them and they have been marked as exhibits before the trial Court P. Ws. 2 and 3 would simply state that based on the draft sale deed supplied by the first accused they entered the necessary columns in the application and submitted before the authorities.

So far as the case of the prosecution is concerned excepting for P.W. 1 who is said to have suspected undervaluation of the document and asked the reasons from the first accused, who readily stated that it was a typographical error and only thereafter the enquiry has been held as a formality nothing new turns out against the accused. In the said enquiry held with the accused and P.Ws. 3 and 4 and recording their statements seem to be an idle formality that had been adopted in this case by the Departmental officials. It is quite evident that if at all any irregularity had taken place knowingly and wilfully regarding the preparation of the documents it should have been known to P.Ws. 3 and 4 through whom the papers got submitted, since being their auditors, and the Department seems to have simply accepted what they told that based on draft sale deed they prepared the form and submitted. Hence, instead of treating them as accused clamping them also under s. 120B of the IPC, the prosecution has not only left them, but also have made them as prosecution witnesses to speak to their innocence not to reveal anything about his examining of P.Ws. 3 and 4 and nothing constructive turns out from out of his evidence. Ultimately, it has to be concluded that the entire case of the prosecution rests only on the evidence of P.W. 1 and the facts spoken about by this witness which has also not been corroborated by any other witness bringing out the guilt of the accused in a pinpointed manner. Mere production of documents cannot prove the case of the prosecution by themselves without brining in evidence the circumstances under which they came into existence, etc. Though it is true as per the arguments of learned counsel for the appellant that economic offences should be dealt with severely and that even admittedly is punishable under s. 193 of the IPC, and further more than in such cases of falsification of documents to cheat the Department should be treated stringently, everything could be done only based on evidence brought on record and such evidence in reliable and adduced to the standard and extend required by law. Though culpable mental state of the accused could be presumed in which event, the burden to cast off the said presumption lies on the shoulders of the accused as argued on the part of learned counsel for the Department, it should not be forgotten that to attain this state, prima facie case should be made out against the accused, lest, the presumption cannot at all be formed by the Court. Here is a case in which from out of four witnesses, two are claimed that is P.Ws. 3 and 4, to have been made co-accused, as per the defence, if at all the offence is said to have been committed by the accused. But the Department would not only leave them scot free, but also make them the prosecution witnesses for speaking nothing relevant in consummating the allegations to the requirements of the sections. But their evidence only serves exculpating them from the charge, which is not the purpose of the prosecution. On the contrary, positive evidence should have been let in proof of this guilt of the accused. No least attempt has been taken in this regard by the prosecution. The document writers who really wrote the draft sale deeds have not been examined to bring forth, the circumstances under which those documents came into existence nor those who really witnessed these documents being reduced into writing got examined. Even the part said to have been played by the Asstt. CIT on Lakhara and the CIT have not been proved in evidence much less regarding the permission granted for prosecution resulting in P.W. 1 lodging the complaint. It is further pathetic to note that simply the names of the second and third accused were found to be figuring in the draft deeds that is the purchasers without any supporting evidence or authenticity, they have been made the accused. The statements said to have been obtained by the prosecuting officials not only from the second and third accused but also from the first accused being every weak piece of evidence without corroborative evidence adduced in a reliable manner, they cannot be taken as the conclusive proof in deciding the case. From the very act of leaving the third accused in the appeal would further go to show that the prosecution was not definite as to who were to be made the accused at the time of filing the case. In short, the above case could well be called a case of no evidence in law. Like every other criminal case, a case under the IT Act would also be subject to the rule that the accused is presumed innocent and that the burden to discharge the said innocence is paramountly on the prosecution. However, strong the suspicion against the accused be, if every reasonable possibility of innocence has not been excluded he is entitled to acquittal. Whenever circumstances arise they must be proved and not by them-selves presumed. No single item of evidence can be singled out and given prominence nor the accused’s theory of the case be withdrawn from consideration. What constitutes an offence is a question of law, whether on the evidence the crime has been committed is a question of fact. If therefore, the evidence regarding the proof of the case leaves room for any doubt and does not displace the presence of innocence wholly, the charge cannot be said to have been established.

36. In the light of the above discussion, the only conclusion that could be arrived at so far as the case of the prosecution as projected before the trial Court is concerned is that the prosecution has miserably failed to prove that case put up by it to the required standards of proof beyond reasonable doubt, thus failing to bring home the guilt of the accused and hence any form of interference by this Court into the acquittal judgment registered for the reasons assigned by the trial Court will not be in the interest of justice and this Court is left with no option but to confirm the acquittal judgment of the trial Court.

In the result, the appeal fails and the same is dismissed confirming the acquittal judgment rendered by the Court of Addl. Chief Metropolitan Magistrate (Economic Offence II), Egmore, Madras-8, in E.O. C.C. No. 113 of 1986, dt. 8th Aug., 1986.

[Citation : 240 ITR 171]

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