J.K. Synthetics Ltd. And Another vs Income-Tax Officer, Central ...
1986 Latest Caselaw 450 Del

JUDGMENT

G.C. Jain, J.

1. M/s. J. K. Synthetics Ltd. (for short "the company") is a public limited company duly incorporated under the Indian Companies Act. It was engaged in the manufacture and sale of synthetic yarn, cement, etc. During the relevant period, i.e., accounting year ending December 31, 1974 (assessment year 1975-76), Sh. Sita Ram Singhania was its president. Sh. Rama Shankar Bajpai was its secretary and general manager (Taxation). For the said year, a notice under section 210 of the Income-tax Act, 1961 (hereinafter to be referred as "the Act"), requiring to pay a sum of Rs. 1,43,47,719 as advance tax was served on the company on May 30, 1974. This notice was issued on the basis of the previous assessments. Under section 212 of the Act, it was open to the company, instead of making the payment of advance tax demanded under section 210, likely to be less than the income on which advance tax had been demanded under section 210. The company, in exercise of this right, filed an estimate in the prescribed form signed by Sh. Rama Shankar Bajpai on June 13, 1974, estimating its total income as nil. The second estimate, estimating the total income at Rs. 311.31 lakhs on which income advance tax payable came to Rs. 179.78 lakhs, was filed under the signature of the said Sh. Bajpai on September 7, 1974. The third estimate, estimating the total income of the company at Rs. 176.92 lakhs, was filed under the signature of the said Sh. Bajpai on December 13, 1974, i.e., 17 days before the closing of the year.

2. The company filed a return of its income for the said assessment year declaring a total income of Rs. 3,88,63,416 on which the tax payable came to Rs. 2,24,43,623. After claiming credit for the tax already paid, the company paid a sum of Rs. 1,21,31,784 as tax. The assessment was completed and ultimately as a result of appeal, etc., the total income was finally computed at Rs. 4,17,87,323.

3. Penalty proceedings under section 273(1)(a) Of the Act were initiated against the company for filing false estimates and a penalty of Rs. 12,90,800 was imposed which was reduced to Rs. 7,74,470 in appeal.

4. On November 15, 1985, Sh. K Chaufla, Income-tax Officer, Central Circle xviii, New Delhi, filed a complaint for offences under sections 277 and 278 of the Act and sections 177 and 109, Indian Penal Code, against the company, Sh. Sita Ram Singhania and Sh. Rama Shankar Bajpai, before the Additional Chief Metropolitan Magistrate, Delhi. It was averred that the company willfully, deliberately and mala fide delivered the accounts or statements in the shape of estimates of advance tax in Form No. 29 as prescribed under the Income-tax Rules, 1962, which were false and which it either knew or believed to be false or did not believe to be true. The company had thus committed an offence punishable under section 277 of the Income-tax Act and section 177 of the Indian Penal Code. It was further averred that S/Sh. Sita Ram Singhania and Ram Shankar Bajpai had abetted the company in filing a false estimate of its total income and had thus committed offences punishable under section 278 of the Act and section 109 of the Indian Penal Code.

5. Learned Additional Chief Metropolitan Magistrate, by his order dated November 15, 1985, took cognizance of the offences, found sufficient grounds to proceed against the company for offences under section 277 of the Act and section 177 of the Indian Penal Code and against S/Sh. Sita Ram Singhania and Rama Shankar Bajpai under 278 of the Act and section 109 of the Indian Penal Code and summoned the three accused to appear on December 20, 1985.

6. Feeling aggrieved, the company and Sh. Rama Shankar Bajpai have filed this petition under section 482 of the Criminal Procedure Code for setting aside the order of the Additional Chief Metropolitan Magistrate and quashing the proceedings in the criminal complaint pending before him. Sh. Sita Ram Singhania filed a separate petition (No. 1464/1985) seeking the same relief.

7. This order shall dispose of both these petitions.

8. The petitioners have mainly raised the following contentions :

1. The estimated in question had been filed with the Income-tax Officer at Kanpur. The Additional Chief Metropolitan Magistrate, Delhi, therefore, had no jurisdiction to try the alleged offences.

2. The alleged false estimates were neither an account nor statement within the meaning of the expression "an account or statement" used in section 277 of the Income-tax Act.

3. The complaint had been filed under the directions of the Board to the Commissioner of Income-tax and not at the instance of the Commissioner as required under section 279 of the Act and was, therefore, not maintainable.

4. The complaint had been filed without holding any preliminary inquiry and without giving any opportunity to the petitioners of being heard and was violative of the principles of natural justice.

5. The company was an artificial juridical person. It could not be attributed with any means read which was required to be proved for an offence under section 277 of the Act and, therefore, the complaint against the company was not competent.

6. The maximum sentence for the offences under section 277 at the relevant time was rigorous imprisonment for two years. This sentence could not be imposed on the company which was a juridical person and the complaint against the company was, therefore, liable to be quashed.

9. Section 177 of the Criminal Procedure Code reds as under : "177. Every offence shall ordinarily be inquired into and tried by a court within whose local jurisdiction it was committed."

10. The provisions contained in this section govern all trials held under the provisions of the Code, including trials of offences punishable under local or special laws. The word "ordinarily" used in the section means except where provided otherwise in the Code itself or in any other law. (See Naurmal v. State of Bombay, ). The Act does not provide for trial of offences under that Act otherwise than as provided in section 177 of the Criminal Procedure Code. It is thus clear that the offences which are the subject-matter of the complaint could be tried only by the court within whose jurisdiction those were committed.

11. The company is alleged to have delivered the estimates which were false and which it either knew or believed to be false or did not believe to be true, and thus committed offences under section 277 of the Act and section 177 of the Indian Penal Code. The offences, obviously, were committed when the alleged false estimates were delivered. The estimates in question were admittedly delivered to the Income-tax Officer at Kanpur. The said offences were thus committed by the company at Kanpur and the court at Kanpur alone was competent to try the said offences.

12. S/Sh. Sita Ram Singhania and Rama Shankar Bajpai are alleged to have abetted the company in delivering the false statement of its total income and thus had committed offences under section 278 of the Act and section 109 of the Indian Penal Code. This abetment admittedly took place at Kanpur and, therefore, the offences committed by them also were friable by a competent court at Kanpur. The Delhi Court, in these circumstances, had no jurisdiction to try the offences, the subject-matter of the complaint.

13. Mr. D. K. Jain, learned counsel for the complainant, contended that section 277 of the Act has to be read along with sections 273 and 275 of the Act. It was pointed out that the assessments were completed at Delhi where it was found that estimates delivered by the company were false. The penalty proceedings were taken at Delhi and, therefore, the Delhi courts had jurisdiction to try the case. It was also contended that no prejudice was likely to be caused to the petitioners if the complaint was tried at Delhi as all the records were at Delhi and, therefore, it would be convenient try the case at Delhi.

14. On a careful examination, I find no merit in these submissions. The Act which constitutes an offence under section 277 is the act of delivering accounts or statements which are false and which the person delivering either knew or believed to be false or did not believe to be true. The offence is committed at the place where the false statement is delivered. The offences under section 277 of the Act and section 177 of the Indian Penal Code are complete the moment the false statement is delivered. Similarly, offences under section 278 of the Act and section 109 of the Indian Penal Code are complete when the abetment was made. These acts were committed at Kanpur. These offences were not at all dependent on assessment proceedings or penalty proceedings. The question of prejudice is not relevant because the objection regarding want of jurisdiction has been raised at the earliest stage. The question of convenience also is of no relevance. Convenience cannot override the provisions contained in section 177, Criminal Procedure Code.

15. Mr. Jain, learned counsel for the complainant, sought assistance from the provisions contained in section 179, Criminal Procedure Code. These provisions have no application. The act of delivering false statement is an offence by itself. It is not an offence by reason of assessment proceedings or penalty proceedings.

16. I, consequently, hold that the Delhi courts had no jurisdiction to try the offences, the subject-matter of the complaint. The impugned order was illegal and liable to be quashed.

17. Learned counsel for the complainant contended that in case the Delhi courts had no jurisdiction, the complaint was liable to be transferred to the Kanpur courts. Learned counsel for the petitioners conceded this contention and had no objection if the complaint was transferred to Kanpur.

18. In the view taken above, it is neither desirable nor proper for me to record findings on the other submissions made on behalf of the petitioners.

19. I, consequently, accept these petitions, set aside the impugned order and instead transfer the complaint to the Court of the Chief Judicial Magistrate, Kanpur, for deciding the same in accordance with law. The complainant is directed to appear there on January 20, 1987.