Punjab & Haryana H.C : It has to be proved by the prosecution for bringing its case within the mischief of ss. 276(c) and 277

High Court Of Punjab & Haryana

ITO vs. Jagdish Ram Manak Chand Jain & Ors.

Sections 276C, 277

Asst. Year 1980-81

Virendra Singh, J.

Criminal Appeal No. 356 of 1991

5th September, 2003

Counsel Appeared

N.L. Sharda, for the Appellant : Vikas Behl, for the Respondent


Virendra Singh, J. :

The Income-tax Officer (in short ITO), Special Circle-III, Jalandhar has filed the present appeal against the judgment of the learned Chief Judicial Magistrate dt. 7th Jan., 1991, whereby the respondents have been acquitted of the charge under ss. 276(c) and 277 of the IT Act, 1961 (for short “the Act”). M/s Jagdish Ram Manak Chand Jain respondent No. 1 is the firm dealing in clothes at village and post office Rahon, Tehsil Nawanshahr, District Jalandhar. The other three respondents are its partners. At the very outset, it has been brought to my notice by Mr. Vikas Behl, learned counsel for the respondents that respondent No. 4, namely, Smt. Leela Wati, wife of Jagdish Ram, had died on 6th Sept., 1994. Mr. Sharda, learned counsel for the appellant does not controvert this factual position. The present appeal qua respondent No. 4 thus, abates.

In short, the allegations against the respondents are that for the asst. yr. 1980-81 (financial year 1979-80), the original return filed on 13th Aug., 1982, on behalf of the firm was not true as certain facts were intentionally concealed in the said return to evade tax. The said return was signed by Manak Chand Jain, respondent No. 2 for himself and on behalf of the firm and its partners in which the income shown was Rs. 39,368. Along with the said return, other documents viz., trading account, P&L a/c and balance sheets, etc. were also attached. The ITO being dissatisfied had called upon the firm on 6th Sept., 1982, by issuing a notice to explain the accounts for certain transactions which were shown by the firm in the Udhar Bahis and other books taken by the Income-tax Officials at the time of survey conducted at the shop of the respondents on 7th Sept., 1979. The case of the prosecution further is that thereafter a revised return was filed by the firm for the same period on 29th Oct., 1982, declaring the net income as Rs. 64,368 instead of Rs. 39,368. Thereafter the assessment was made by the IT Department on 11th Jan., 1983, and during the course of assessment, Manak Chand respondent had agreed to be assessed at net income of Rs. 70,000 including unexplained investments, etc. for the purposes of tax. A penalty of Rs. 12,000 was also imposed upon the firm. The tax and the penalty was consequently paid. Thereafter, a complaint under ss. 276(c) and 277 of the Act was filed before the concerned Court by the ITO against the respondents on the ground that with the common intention all of them and with a view to avoid tax liability, the firm and its partners had concealed the income of the firm in their original return by not submitting the true statement of accounts.

The respondents were consequently summoned to face trial. After recording the pre-charge evidence, the trial Court framed the charges against all the accused.

After appreciating the entire evidence, the learned trial Court has acquitted the respondents. Hence, this appeal.

I have heard Mr. N.L. Sharda, learned counsel for the IT Department-appellant and Mr. Vikas Behl, learned counsel for the respondents. With their assistance I have also gone through the entire record.

Learned counsel for the appellant has assailed the impugned judgment mainly on the ground that the respondent- firm and its partners had intentionally not filed the true return for the asst. yr. 1980-81 by not declaring in their return the purchases made from certain firms in spite of the fact that there were entries in this regard in their Udhar Bahis. Advancing his arguments further, Mr. Sharda has submitted that the firm was in the knowledge of the fact that a survey was conducted on 7th Sept., 1979, and that the Udhar Bahis were taken into possession by the IT Department insomuch so that an admission was also made in this regard at that time and in spite of that they had intentionally concealed all the transactions in their return submitted in August, 1982, and only after issuance of the notice under s. 143(2) of the Act, a revised return was filed with the enhanced amount of income for the purposes of assessment. According to learned counsel this fact by itself would not absolve the firm and its partners from their liability as the first return survives which is false and as such they are liable to be punished for the charges framed against them.

The learned counsel then contended that even if during the assessment, the assessee had agreed to pay the tax on enhanced assessment, this again would not be a ground to absolve the respondents of their criminal act which is separate in nature for all the purposes and it rather goes to show that the first return was not depicting the true accounts and in fact certain material facts were concealed in it in order to avoid paying of tax. Consequently, the impugned judgment of acquittal is not sustainable in the eyes of law, the learned counsel so submits. In support of his arguments he has relied upon P. Jayappan vs. S.K. Perumal, ITO (1984) 42 CTR (SC) 180 : (1984) 149 CTR 696 (SC) and C.G. Balakrishnan & Ors. vs. ITO (1988) 171 ITR 1 (Ker).

7. Refuting the arguments of Mr. Sharda, Mr. Behl has vehemently contended that no offence is made out against the respondents at all as there is no concealment in this case. He further contended that there was no mens rea on the part of respondent No. 2 while filing the return on behalf of the firm because when the original return was filed on 13th Aug., 1982, the firm was not in the possession of all the account books including the Bahis as these were taken by the Income-tax officials at the time of conducting the survey of the firm on 7th Sept., 1979. The learned counsel then submitted that in fact after respondent No. 2 was given a notice in September, 1982 and was confronted with certain entries of the Bahis, he immediately without wasting any time filed another revised return with an enhanced amount and then during the assessment proceedings, the assessee had also agreed to assess his net income as Rs. 70,000 including the income from unexplained investments in the purchase of goods outside the books of account and consequently the ITO worked out the sales of the assessee including the sales which were not shown in the regular books of account at Rs. 5,45,604 instead of Rs. 4,53,462 and imposed the tax which was ultimately paid. Mr. Behl further contended that even the penalty of Rs. 12,000 was also paid by the assessee. This all was in fact done in order to buy peace as the assessee did not want to enter into any controversy with the IT Department. The learned counsel then submitted that legally also once the revised return was filed by the assessee, the earlier return becomes null and void and as such it cannot now be said that there was wilful concealment of the income by the assessee. The learned counsel, however, fairly concedes that before filing the return in August, 1982, the assessee has not moved any application for looking into the Udhar Bahis or other accounts taken by the IT Department in the survey conducted in September, 1979 and filed the return in routine on the basis of certain account books which he was maintaining after the survey. He in support of his arguments has relied upon Kuldip Rai Chopra, ITO vs. Sohan Singh Dhiman (1977) 110 ITR 521 (P&H), Jog Raj vs. The State of Punjab 1986 (1) CLR 388 and ITO vs. Mohd. Yousuf 1989 (2) CLR 178.

After hearing the rival contentions of both the sides, I am of the considered view that there is no merit in the appeal filed by the IT Department. I have minutely perused the impugned judgment passed by the learned Chief Judicial Magistrate, Jalandhar. With the assistance of both the sides I have also rescanned the entire evidence.

Shri D.S. Walia, ITO, Central Circle-III, Jalandhar (PW2) has categorically stated in his cross-examination that if the assessee files a revised return before the passing of the assessment order, the original return becomes null and void and the assessment order is to be passed on the basis of the revised return. Shri J.R. Malhotra, ITO (PW3) has also stated that for the purposes of income part, the original return becomes null and void once the revised return is filed by the assessee. Although he had thereafter volunteered in his cross-examination that for other actions including the concealment, the original return is taken into account and is valid for all the purposes. Admittedly, the position in this case is that when the original return was filed by the assessee in August, 1982, all Udhar Bahis and other account books were in the possession of the IT Department because the same were taken in custody at the time of survey conducted on 7th Sept., 1979. Mr. Sharda, learned counsel for the appellant also does not dispute this factual position. Admittedly the assessment year was covering the financial year 1979-80 i.e., ending 31st March, 1980. In my view, respondent No. 2 filed the return on the basis of some account books which he had been maintaining after September, 1979, upto March, 1980 because prior to September, 1979, all the account books were taken into custody by the IT Department. For this reason, he might have declared his income as Rs. 39,368. No doubt, some fault lies with the assessee for not moving an application before the Department for taking the Udhar Bahis and account books back for the purposes of filing the proper return but this by itself would not be a ground to say that the assessee had wilfully concealed the income. The moment a notice was issued in September, 1982, under s. 143(2) of the Act by the Department, a revised return with enhanced income was filed immediately in the month of October, 1982. The enhanced income was shown as almost double and thereafter during the assessment proceedings, the assessee had also agreed to pay the tax on enhanced assessment. Consequently, the tax was imposed and the same was paid in so much so the amount of Rs. 12,000 as penalty was also paid by the assessee. This talks volumes of the bona fide of the assessee-firm in this case.

11. “Wilful concealment” has got a special meaning according to the IT Act. It has to be proved by the prosecution for bringing its case within the mischief of ss. 276(c) and 277 of the Act. In the present case, the mens rea on the part of the assessee is missing. The learned trial Court has discussed the entire evidence in its judgment and then extended the benefit of doubt to the respondents. I am totally in agreement with the findings recorded by the learned trial Court.

12. Even otherwise, the order of acquittal can be reversed only if it suffers from illegality or manifest error. The order cannot be reversed merely because a different view can be taken. Once the trial Court after examining the entire evidence has come to a categoric finding that there was no wilful concealment in the present case, there would be no justification in setting aside the order of acquittal especially when I do not find any illegality in the impugned judgment which is a well reasoned one. My view is fortified by the judgment of the apex Court rendered in Prem Dass vs. ITO (1999) 152 CTR (SC) 79 : (1999) 236 ITR 683 (SC).

13. The rulings cited by Mr. Sharda—P. Jayappan’s case (supra) and C.G. Balakrishnan’s case (supra) are not applicable to the facts of the present case.

Consequently, the present appeal is dismissed being devoid of any merit.

[Citation : 266 ITR 220]

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