RATAN CHAND LODHA vs INCOME TAX OFFICER and Another

BY THE COURT :

This is a petition under s. 482 r/w s. 397 Cr.PC against the order passed by learned Special Court of Judicial Magistrate (Economic Offences) Rajasthan, Jaipur, in Cr. Case No. 178/86, ITO vs. Ratan Chand Lodha, which was passed by him on 2nd December, 1995. By this order the learned Magistrate ordered that the charges under s. 276(c) and 277 of the IT Act, 1961, be framed against the accused petitioner. The accused had submitted an application under s. 245(2) CrPC which was dismissed by him.

Brief facts are that the petitioner is a jeweller and a regular Income Tax assessee. On or around 29th May, 1979, an inspection was carried out at his premises by the officials of the IT Department and his various books. Statement of accounts, files, loose papers, etc., were seized, for the year 1979-80 showing income of Rs. 16,950. Inquiries were made and a sum of Rs. 1,68,888 was added to the declared income for the period in question. An appeal was filed before the CIT who partly allowed it and ordered for deletion of a sum of Rs. 1,52,388. Aggrieved by this order, the petitioner filed another appeal before the Tribunal against the order of the CIT(A) on 30th March, 1983. A cross-appeal was also filed by the Department but the Tribunal did not feel inclined to interfere with the inclusion of a sum of Rs. 50,500 in the income of the petitioner. The ITO Special Investigation Circle IV, Jaipur, on 29th April, 1985, imposed a penalty of Rs. 30,000 on the petitioner under s. 271(1)(c) of the IT Act and also granted sanction for prosecution of the petitioner for offences under s. 276(c) and 277 of the IT Act. The complaint was filed and cognizance was taken by the learned Magistrate who summoned the petitioner. The petitioner appeared before the learned Magistrate on 27th September, 1986, and statements of two witnesses were recorded. In the meantime, the appeal filed by the petitioner against the order dt. 29th April, 1985, whereby a penalty was imposed upon the petitioner and on the basis of which impugned complaint was filed, came to be allowed by the Tribunal on 17th December, 1987, wherein it was held that imposition of penalty was not sustainable as there was no concealment on the part of the petitioner and that explanation of the petitioner in respect of the items/goods referred to in the slip of papers in question was not found to be false. So the order of penalty was quashed. Thereafter an application was filed by the petitioner before the learned Magistrate under s. 245(2) CrPC which was dismissed and an order to frame charge was passed.

Learned counsel for the Department objected that the revision does not lie. Therefore, the order cannot be challenged in this Court, learned counsel for the petitioner submitted that there is no bar under s. 397 and 482, CrPC to hear this matter. He submitted that s. 397, CrPC, provides that the High Court or any Sessions Judge may call for and examine the record of any proceeding before any inferior criminal Court situated within its or his local jurisdiction for the purpose of satisfying itself or himself as to the correctness, legality or propriety of any finding, sentence or order recorded or passed.

The apex Court in a recent judgment in Krishnan and another Vs. Krishnaveni and another, , has held that the High Court can invoke revisional jurisdiction to meet the ends of justice and ss. 401 and 482, CrPC provide for the same. In Jesa Ram & Ors. vs. State of Rajasthan, SB Cr. Misc. Petn. No. 356/95 and 34 other petitions decided on 23rd July, 1996 following Kana Ram vs. State of Rajasthan, full Bench decision, reported in 1993 Cr.L.R. (Raj) 103, it has been observed that when in a given case the conscience of the Court is shaken, powers given under s. 482 CrPC can be exercised. Learned counsel for the petitioner relied on Rajkapoor & Ors. vs. State (Delhi Administration) & Ors. AIR 1380 SC 258, wherein the apex Court held that the inherent powers of the High Court under s. 482, CrPC do not repeal when the revisional power under s. 397 overlaps. Thus, this petition is not barred.

Now, the question is whether the order of learned Magistrate should be set aside ? Learned counsel for the petitioner submitted that when very basis of the prosecution was set aside by the Tribunal and the penalty has been set aside, the petitioner should have been discharged. He further submitted that due weightage should have been given to the judgment of the Tribunal by the trial Magistrate and by not discharging the petitioner, the learned Magistrate has committed an error which is apparent on record and the same should be set right in this Court. He cited the following authorities :

(i) V. Rajasekharan Nair Vs. Commissioner of Income Tax and Others, wherein the Kerala High Court held that in view of the agreed nature of the assessment and the failure to establish the falsity of the explanation offered by the assessee, the very basis of the prosecution was lost.

(2) Premier Breweries Ltd. and Others Vs. Deputy Commissioner of Income Tax and Another, wherein the Kerala High Court held that in the penalty proceedings Tribunal accepted the explanation of the assessee and quashed the order of imposition of penalty, therefore, the criminal proceedings were also liable to be quashed.

(3) Surinder and Company and Another Vs. A.K. Thatai, Income Tax Officer, wherein penalty proceedings with respect to concealment of income were quashed is well reasoned judgment of CIT and Tribunal. The prosecution was held to be quashed in a case under s. 482 CrPC.

(4) Harcharan Singh Bhatia Vs. Income Tax Officer, A-Ward and Another, wherein the ITO filed complaint under s. 277 of the IT Act against the petitioner for having filed a false return as he did not include in it the profit derived by his two minor sons who were admitted to the benefits of the partnership in another firm. At the time of framing of charge it was brought to the notice of the trial Court that the order of the ITO directing the inclusion of profits of the minors in the return of the petitioner had been set aside by the Tribunal on the ground that the reassessment made by the ITO was not valid. It was held that the complaint under s. 277 was not maintainable in view of the order of the Tribunal setting aside the order of reassessment passed by the ITO.

(5) D. N. Bhasin & Anr. vs. Union of India & Ors. (1988) ITR 7 wherein it was held that the finding of the IT authorities in assessment proceedings are relevant and the criminal Court is required to act upon them. In this case, the CIT(A) came to the conclusion that the additions made to the income of the assessees were not justified and ordered that the same to be deleted. It was observed that it could no longer be pleaded that the assessees tried to evade tax or had made false statements in the verifications of their returns. There was no case left for prosecuting the assessees in a criminal Court for filing false returns or attempting to evade tax. It was held that the criminal complaints were liable to be quashed.

In nutshell the argument of the learned counsel for the petitioner based on these citations, is that when the order levying the penalty was set aside by the highest Tribunal of the Income Tax, the very basis had gone away and that the return also cannot be said to have been falsely filled in. Therefore, the learned magistrate should have accepted the application under s. 245(2), CrPC, and should not have ordered to frame charge against the petitioner.

On the other hand, learned counsel for the Department has tried to support the order of learned magistrate based on evidence which was recorded in the proceedings before him. He has submitted that though the IT authorities might have arrived to different conclusion that the penalty was wrongly levied, yet according to him there is evidence to the effect that there was wilful attempt to evade tax and false statement in verification was made by the petitioner and they are punishable under ss. 276(c) and 277 of the IT Act.

After having gone through the citations relied by the learned counsel for the petitioner, I am of the view that the order levying penalty was quashed by the Tribunal because there was no concealment on the part of the petitioner and explanation offered by assessee was not false. The Tribunal is the highest Tribunal so far as proceedings under IT Act are concerned and when it came to the conclusion that the concealment was not proved and hence, the penalty was deleted, they very basis of the prosecution was lost. Similarly, it could not be said, in these circumstances, that the petitioner had submitted a false verification in his return, as such the proceedings before the Court below were liable to be quashed. Such a view was taken in Income Tax Officer, B-Ward Vs. T. Abdul Majeed, Harcharan Singh Bhatias case (supra) and D. N. Bhasins case (supra). No other view was submitted by the learned counsel for the Department.

In view of above discussion, the petition should be allowed.

In the result, the petition is allowed and the impugned order of the learned Magistrate is set aside.