Punjab & Haryana H.C : Petitioners Nos. 1 to 3 are partners of a firm, Om Industries, Charkhi Dadri (petitioner No. 4), which is engaged in the business of commission agency and manufacture of gram dal, barley, ghat, etc.

High Court Of Punjab & Haryana

Devidayal & Ors. vs. Union Of India & Ors.

Sections 277, 278, 279

Asst. Year 1971-72

Sukhdev Singh Kang, J.

Civil Writ Petition No. 3922 of 1985

6th August, 1987

Counsel Appeared

G.S. Garg, for the Petitioners : Ashok Bhan with A.K. Mittal, for the Respondents

SUKHDEV SINGH KANG, J.:

Petitioners Nos. 1 to 3 are partners of a firm, Om Industries, Charkhi Dadri (petitioner No. 4), which is engaged in the business of commission agency and manufacture of gram dal, barley, ghat, etc. Petitioner No. 1, Devi Dayal, filed a return of income of the partnership firm for the asst. yr. 1971-72 on April 6, 1972, showing an income of Rs. 5,480 which was later on revised to Rs. 7,000. During the assessment proceedings, the ITO, Bhiwani (respondent No. 3), took into possession certain documents from the Station House Officer, Dadri, and alleged that the same belonged to the petitioners. He issued notices to the petitioners under s. 143(3) of the IT Act, 1961 (hereinafter referred to as ” the Act “), and sought clarification from them. According to the ITO, the petitioners had purchased 1,376 bags of gram dal which were not accounted for in the books of petitioner No.

4. The ITO ultimately completed the assessment under s. 143(3) on February 22, 1973, and assessed the income of respondent No. 4 at Rs. 55,022. On appeal, the said assessment order was set aside and the case was remanded for fresh decision after proper investigation. Respondent No. 3 sent the proposed assessment for approval to the IAC, Rohtak, and the said proposal was approved and, consequently, the income of respondent No. 4 was assessed at Rs. 1,44,190. The ITO (respondent No. 3) found that the petitioners had done business without showing it in the books of account to the tune of 1,376 bags and assessed the initial investment at Rs.1,37,600 and added Rs. 36,956 on account of profits thereon. Respondent No. 3 consequently found that the return which was signed and verified by Devi Dayal, petitioner No. 1, did not disclose the true income and petitioner No. 1 knew it to be false. The petitioner filed an appeal before the CIT (Appeals), Chandigarh, and the learned CIT modified the order of the ITO and came to the conclusion that an addition of Rs. 41,000 was justified in view of the unexplained investments and profits of Rs. 1,37,600 and Rs. 36,952, respectively, as found by the ITO. Thereafter, penalty proceedings under s. 271 (1)(c) of the Act were initiated against the petitioners and a penalty of Rs. 41,000 was imposed for concealment of income. The appeal against the imposition of this penalty was dismissed by the CIT (Appeals), Chandigarh. The petitioner took an appeal against the imposition of penalty to the Tribunal at Delhi and the same is pending.

2. A complaint dated January 23, 1980, has been filed by the ITO against the petitioners under s. 277 of the Act r/w ss. 191/193/34 of the IPC on the allegations that in the asst. yr. 1971-72, the petitioner had intentionally, dishonestly and fraudulently made false entries in the books of account with a deliberate and mala fide intention of concealing their income in order to cause wrongful loss to the Department and had signed and verified the return of income which they knew to be false and not true. Aggrieved, the petitioners have filed the present writ petition challenging the constitutional validity of ss. 277, 278 and 279 of the Act and the validity of the criminal proceedings pending against them in the Court of the Chief judicial Magistrate, Bhiwani.

It is apparent from the above narration of facts that even the CIT (Appeals) has given a finding that an income of Rs. 41,000 had accrued to the petitioner-firm (respondent No. 4) on account of unexplained investments and profits. Simply because the CIT (Appeals) has deleted the addition of Rs. 1,33,552 from the addition made by the ITO, it cannot be said that the criminal complaint against the petitioners cannot proceed in relation to the addition of Rs. 41,000 also. What is the effect of the deletion made by the CIT (Appeals) will be a matter to be gone into by the trial Court. Mr. G. C. Garg, learned counsel for the petitioners, submitted that as an appeal against the imposition of penalty is pending before the Tribunal, Delhi, the matter has not been decided finally.

3. On the basis of these contentions, it cannot be plausibly argued that criminal proceedings pending against the petitioners cannot continue. However, if the CIT (Appeals) had deleted all the additions made by the ITO, the position may have been different. Mere filing of an appeal by the petitioners against the imposition of penalty under s. 271(1)(c) of the Act will not be a bar to the continuance of the proceedings in a criminal Court. If and when any order favourable to the petitioners has been passed or may be passed by the Departmental authorities that surely can be produced by them before the learned trial Magistrate and there is no doubt that due weight and consideration shall be given to that order.

No argument has been raised to assail the constitutional validity of 4 s. 277 of the Act and rightly so, because the constitutional validity of s. 52, a similar provision in the Indian IT Act, 1922, has been upheld by the Supreme Court in T.S. Baliah vs. T.S. Rangachari, ITO (1969) 72 ITR 787 (SC). Those very reasons apply to uphold the constitutional validity of the provisions of ss. 278 and 279 of the Act.

In this view of the matter, there is no merit in this writ petition and the same is dismissed. However, anything said or observed in this judgment may not be taken to be an expression of any opinion on the merits of the case pending before the trial Court and that Court shall decide the matter on the basis of the evidence produced before it.

No costs.

[Citation : 170 ITR 667]

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