S/S. Bhagat Motor Co. P. Ltd. vs S.K. Abrol Dcit
2011 Latest Caselaw 4882 Del

*              IN THE HIGH COURT OF DELHI AT NEW DELHI

+                       CRL.M.C. No.1545/2001

                                Date of Decision : 30.9.2011

S/S. BHAGAT MOTOR CO. P. LTD.            ...... Petitioner
                       Through: Mr. Raman Gandhi, Adv.

                                   Versus

S.K. ABROL DCIT                                      ....Respondent
                                 Through: Mr. Anshul Sharma, Adv.


CORAM :
HON'BLE MR. JUSTICE V.K. SHALI

1.     Whether Reporters of local papers may be
       allowed to see the judgment?             YES
2.     To be referred to the Reporter or not ?  YES
3.     Whether the judgment should be reported
       in the Digest ?                          YES

V.K. SHALI, J.

1. This is a petition filed by the petitioners under Section 482

Cr.P.C. for quashing of a complaint titled S.K. Abrol, Deputy

Commissioner of Income Tax Vs. M/s. Bhagat Motors Pvt. Ltd. &

Ors. for the assessment year 1983-84 and the order dated 20th

December, 2000 directing framing of the charges under Section

276 C(1) and Section 277 of the Income Tax Act, 1961.

2. Briefly stated, the facts of the case are that the

respondent/complainant who is the Deputy Commissioner of

Income Tax, in capacity of a public servant and in the discharge of

his official duties instituted a complaint against the petitioner for

violation of Section 276 C(1) and Section 277 of the Income Tax

Act, 1961. It was alleged that the petitioner No.1 had filed its

return of income tax for the assessment year 1983-84, for which

the accounting period ended on 31.03.1983, declaring a total

income of Rs.84,480/-. The return of income was in the prescribed

form and verification therein was made and signed by the petitioner

No.2 in his capacity as Managing Director. The return of income

was accompanied by the statement of assessable income, auditor's

report, balance sheet, manufacturing and trading account, profit

and loss account and other documents for the year ending upto 31 st

March, 1983. All these documents were signed by the petitioners.

3. On the basis of the return of income, assessment proceedings

for the relevant assessment year were initiated by issuing a notice

under Section 143(2) of the Act. On 23rd December, 1985 a

detailed questionnaire was issued to the Managing Director and

Principal Officer of the petitioner No.1 calling for information on

various points. The Assessing Officer asked for a note on

conversion charges indicating the process relating to purchase of

copper inward challan and their dispatch to the Bombay party from

where the petitioners were getting copper and zinc converted into

brass strips, indicating that the job was done and the goods were

dispatched from Bombay. The petitioners in response thereto gave

various details vide letter dated 4th January, 1986 which indicated

that against the total quantity of 8264.200 kg. of copper and zinc

sent to the said party, brass strips weighing 7621.5 kg. were

received back by the petitioners, thereby some material belonging

to the petitioner company was still lying with the Bombay party as

on 31st March, 1983 whereas, in the list of closing stock as on 31st

March, 1983 filed along with the letter dated 4th January, 1986

nothing was shown as closing stock of the raw material lying with

the Bombay party.

4. Summons were issued to the Bombay party on 24 th January,

1986 and they were requested to furnish the stock of raw material

and goods lying with them belonging to the petitioners as on 31 st

March, 1982, 1983 and 1984. The said Bombay party, vide their

letter dated 5th February, 1986, furnished a copy of the account of

the petitioner No.1 and requested for some more time to furnish

the remaining details. This resulted in investigation by the

Assessing Officer detecting that the petitioner company had

suppressed closing stock of copper and zinc valued at Rs.15,424/-.

The petitioners have not got the summons of the investigation

made by the Assessing Officer from the Bombay party and finding

themselves in a tight corner, they revised their income tax return

by sending a covering letter giving reasons for revising their return.

The above said facts were clearly taken to be reflecting the conduct

of the petitioners and it was assumed that for the assessment year

the total income on the basis of the stocks available with the

Bombay party was to the tune of Rs.3,47,252/- against the original

income of Rs.84,480/-. On the basis of these averments, penalty

proceedings under Section 271 (1) (c) of the Act against the

petitioner No. 1 for concealing the aforesaid income and furnishing

inaccurate particulars of its closing stock were initiated. On the

basis of the aforesaid averment, it was alleged that the petitioner

No.1 through petitioner No.2 had made a statement in verification

in the form of return of income filed on 27 th September, 1983 and

delivered accounts statement which were false which all the

accused persons knew or believed to be false or did not believe to

be true and thus they have committed an offence under Section

277 of the Act.

5. After obtaining the requisite sanction under Section 279 of the

Act, a complaint was filed against the present petitioners under

Section 276 C(1) and Section 277 of the Act. The petitioners were

summoned, as the complaint was filed by the public servant in

discharge of his official duties and no pre-summoning evidence was

recorded. The charges were framed by the Trial Court after

recording pre-charge evidence vide impugned order dated 20th

December, 2000. The petitioner feeling aggrieved, against the

framing of charge filed a petition under Section 482 Cr.P.C. for

quashing of the complaint. The matter came up before the High

Court for the first time on 30th April, 2001 and it was adjourned to

16th May, 2001. Ultimately after couple of adjournments, on 20th

September, 2001 arguments were heard and since the case was

fixed for recording of the statement of the accused persons under

Section 313 Cr.P.C. before the ACMM, this Court was pleased to

pass and order that ACMM shall not pass any final order in the

complaint, which stay order has continued till date.

6. The main contention of the learned counsel for the petitioners

is that apart from the prosecution of the petitioners for the

aforesaid offences under Section 276 C(1) and Section 277 of the

Income Tax Act, the respondents had proceeded for adjudication

proceedings against the petitioners for the alleged concealment of

their income to the tune of Rs.3,47,252/- for the assessment year

1983-84. The petitioners had reflected in the return an income of

approximately Rs.84,000/- while the respondent/complainant has

prima facie held the assessed income for the said period to the tune

of Rs.3,47,252/-. It is contended by the learned counsel for the

petitioners that in the departmental proceedings this plea of the

Department that the petitioner had concealed the income of

Rs.3,47,252/- was not upheld and the Income Tax Appellate

Tribunal as it came to the conclusion that the total income which

was alleged to have been concealed by the petitioners was only to

the tune of Rs.15,424/- and not Rs.3,47,272/-. It is contended by

the learned counsel that the respondent itself has issued guidelines

for prosecution under the Direct Tax laws on 7th February, 1991

wherein it has been laid down that with regard to prosecution under

Section 276 C(1) of the Income Tax Act, 1961 and the

corresponding provisions of the Wealth Tax Act, 1967, the

proceedings need not be initiated

(a) where the income sought to be evaded is less than Rs.20,000/-;

and

(b) wealth sought to be evaded is less than Rs.50,000/-.

7. It is contended that the said parameter will equally apply to

an offence under Section 277 for making a false statement in

verification. It was contended by the learned counsel for the

petitioners that in the light of this departmental circular, as the

Income Tax Appellate Tribunal has come to a finding that the total

income in respect of which the assessment is alleged to have been

concealed and the penalty imposed is less than the aforesaid limit

of `25,000/- fixed by the circular, therefore it was not open to the

respondent to have initiated the proceedings against the present

petitioners for having committed the and offence under Section 276

C(1) and Section 277 of the Income Tax Act.

8. The learned counsel for the respondent was not able to

dislodge this submission of the learned counsel for the petitioners.

Since the learned counsel for the petitioners did not raise any other

issue with regard to the quashing of the complaint and the

consequent charge sheet, this Court does not find it necessary to

deal with any other issue which, though urged in the petition but

was not raised before this Court.

9. I have carefully considered the submissions of the respective

sides. I have also gone through the record. Section 276 C(1) of

the Income Tax Act reads as under:-

"276C. Wilful attempt to evade tax, etc. (1) If a person willfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable,--

(i) in a case where the amount sought to be evaded exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine;

(ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine.‖

10. Similarly, Section 277 of the Act reads as follows:-

"277. False statement in verification, etc. - If a person makes a statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable,--

(i) in a case where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds one hundred thousand rupees, with rigorous imprisonment for a term which

shall not be less than six months but which may extend to seven years and with fine;

(ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine.‖

11. Further the Ministry of Finance, Government of India

has issued guidelines for prosecution:-

―F.No. 285/160/90-IT (Inv) Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, the 7th February, 1991 To

All Chief Commissioners of Income-Tax.

All Directors General of Income-tax

Sir,

Sub:- Guidelines for prosecution under the Direct Tax Laws.

Under the Direct Tax, Laws prosecution against tax offences and tax frauds is a significant provision and requires to be effectively deployed to create an appropriate impact and to subserve as a deterrence against tax evasion. During the last few years the department has stepped up the number of cases

where proceedings for prosecution have been initiated. Considering the mounting pendency and the inability of the judicial administration to speed up the disposal, it has become necessary to re-examine the strategy in regard to initiating prosecution proceedings.

2. The efforts of the department should be to concentrate on relatively important cases in filing prosecution complaints. For achieving this, it is essential that greater stress is laid on offences involving tax frauds, fabrication of evidence and major defaults relating to various other offences. While selecting cases for filing prosecution complaints, it is necessary to examine the facts of the case properly so that complaints are filed in really strong and sustainable cases.

3. Once a default has been properly examined and it falls within the parameters of prosecution guidelines, the assessing officer should send a notice to the defaulter intimating the nature of the offence committed and requiring the assessee to show cause why prosecution proceedings may not be initiated.

No such notice will be sent in any case where the offence committed is under sections 276C(1) and

277. All relevant enquiries regarding the default should be made by the assessing officer before the issue of the above mentioned notice.

4. Prosecution need not normally be initiated against persons who have attained the age of 70 years at the time of commission of the offence.

5. The guidelines for initiation of prosecution proceedings for specific offences are given below:-

iii) Section 276C (1) - Wilful attempt to evade tax etc.

Prosecution under Section 276C(1) of the Income tax Act, 1961 or the corresponding provision of the wealth tax Act 1957 need not be initiated if:

a) The income sought to be evaded is less than `25000/- or

b) the net wealth sought to be evaded is less than `50000/-

The same will apply to an offence under Section 277 for false statement in verification etc.―

12. A perusal of the circular purported to have been issued by the

respondent in the year 1991 with regard to setting down the

guidelines for prosecution of the persons, violating the provisions of

the Income Tax Act is not in dispute. Therefore, the only question

to be seen is whether the benefit of the circular can be extended

and claimed by the present petitioners and the proceedings under

Section 276 C(1) and Section 277 of the Act can be continued or

whether the proceedings are liable to be quashed along with the

impugned order dated 20th December, 2000 by virtue of which the

charges were directed to be framed against the petitioners.

13. In order to appreciate this contention, it may be pertinent to

mention that there is no dispute about the year of assessment

which is 1983-84. It is also not in dispute that the petitioners on

the basis of their return had reflected their income to be

Rs.84,480/- or so and the complaint was initiated against the

petitioners under aforesaid two provisions on the ground that the

petitioners had concealed correct income which was on the basis of

stock available with the party of the petitioners in Bombay to the

tune of Rs.3,47,252/-. This was the basis of the proceedings

against the petitioners for assessment and he was visited with the

penalty. This finding of the assessing officer that the petitioner had

concealed income to the tune of ` 3,47,252/- had been set aside by

the Income Tax appellate Tribunal in the adjudication proceedings

and it was held that the concealment was to the tune of `15000/-

or so. Further this fact has not been challenged by the Department

before any forum and thus it has attained finality. If it has attained

finality then the very substratum of the complaint regarding the

concealment of income to the tune of `3,47,252/- goes and in

terms of the departmental adjudication the proceedings have no

basis to continue. Since the alleged concealment is less than

`25000/- that the prosecution would not lie. I find force in this

contention of the learned counsel for the petitioners that it is not

open to the respondents to continue with the complaint which is

against their own circular. The circular of the respondent is very

clear that wherever the income sought to be evaded by the

petitioners happens to be less than Rs.25,000/-, the prosecution

ought not to have been initiated against such delinquent persons.

The reason for this is not far to seek. The reason for this is that

these small insignificant cases should not be taken for prosecution

as it results in considerable wastage of time, energy and resources

of the Government and they must actually go after big fish who are

indulging in large scale and rampant concealment of the income

and evasion of income tax. In order to attain this object, the

circular seems to have been passed. The entire basis of initiating

the complaint against the petitioners was that they had concealed

the income to the tune of Rs.3,47,252/-. But since the petitioners

had taken the said decision of the Department in appeal to the

various quasi-judicial bodies culminating in a finding by the Income

Tax Appellate Tribunal which upheld the plea of the petitioners and

held that the income which was concealed by the petitioners was

less than Rs.25,000/-, therefore, complaint against the petitioners

need not be continued.

14. Similar view has been taken by a number of judgments of the

Supreme Court and High Courts, which are K.C.Builders & Anr.

Vs. Asst. Commissioner of Income Tax 2004 (2) SCC 731, S.P.

Sales Corp. & Ors. Vs. S.R. Sikdar 1993 (113) Taxation 203

(SC), Madan Lal & Ors. Vs. IT Officer 1998 (144) CTR 57 and

Smt. Sheela Gupta Vs. Inspecting Asstt. Commissioner and

Ors. 2002 ITR Vol. (253) 552

15. In view of the aforesaid facts and circumstances of the case,

the complaint as well as the impugned order dated 20th December,

2000 stands quashed.

V.K. SHALI, J.

th 30 SEPTEMBER, 2011 s.pal