S. Vaidyanathan, Income Tax Officer vs B. Mathuram and Sons and Others

David Annoussamy, J.—The revision petition is by the complainant, namely, the Income Tax Officer, City Circle I(1), Tiruchirapalli, against

an order of discharge passed by the Chief Judicial Magistrate, Tiruchirapalli, on November 19, 1984.

A complaint under sections 120B, 193 and 196, Indian Penal Code, and sections 276C(1) and 277 of the Income Tax Act, 1961, was filed by

the Income Tax Officer, City Circle I(1), Tiruchirapalli, on January 19, 1984, under the following circumstances against the six respondents, the

first respondent being a partnership firm and the other respondents being the partners thereof. The firm came into existence on April, 1, 1973, and

has been carrying on the business of manufacture and sale of indigenous medicinal preparations. After the Income Tax assessments of the first

accused firm for the assessment years 1975-76, and 1976-77 were completed on September 29, 1976, and February 3, 1977, respectively, it

came to light that the first accused firm had a current account and a fixed deposit account for Rs. 90,000 with the State Bank of Mysore,

Abhiramapuram Branch, Madras. Neither the fixed deposit account of Rs. 90,000 nor the current account balance of Rs. 352.52 was disclosed

by the first accused firm in the balance sheet filed by the accused along with its return of income for the year ended March 31, 1975, nor was the

interest received from the abovesaid deposits disclosed in the return of income for the year ended March 31, 1976. The original current account

opening form obtained from the bank clearly shows that the application was for opening an account in the name of the first accused firm and that it

was signed by all the five partners, namely, respondents No. 2 to 6 and they were to operate the account jointly and severally. The current account

and the fixed deposits and the interest received in respect of the fixed deposits have been completely kept out of the books of account of the first

accused firm maintained for Income Tax purposes. When respondent No. 2 was examined on oath by the Income Tax Officer on February 15,

1983, about the aforesaid current account and fixed deposit account, he deposed that the money did not belong to the first accused firm. When he

was questioned further, he made admissions to the contrary regarding the current and fixed deposit accounts and the fact of those accounts having

not been recorded in the books of the firm. Accordingly, a complaint was filed against all the respondents under the sections aforementioned.

The Magistrate examined the complainant as well as the other members of the Department. Thereafter, the respondents raised a plea that, in the

circumstances of the case, they deserved to be discharged. Their plea was accepted by the Magistrate and it is that decision arrived at by the

Magistrate which is challenged in the present revision. Three main points are raised before me by counsel for the respondents and they will be

considered seriatim. Those points are :

There is no valid complaint filed before the Magistrate.

From the records, it is shown that only the second accused has submitted the return; and all statements alleged to be false have been made

solely by him and, therefore, no charge can lie against the other respondents.

When the reassessment order made by the Income Tax Officer on the basis that the return was false has itself been set aside by the

Commissioner of Income Tax (Appeals), the complaint is lacking legal basis.

Point No. 1 : The Magistrate has discharged the accused placing full reliance on the decision of this court in Associated Industries and Others

Vs. First Income Tax Officer, City Circle-IV, Madras, , in which it was held that as per section 195(3), Criminal Procedure Code, the Income

Tax Officer was not a court since he was not declared to be so in the Income Tax Act and that, therefore a complaint could not be filed for

offences under sections 193 to 196, Indian Penal Code, in the teeth of the provisions of section 195, Criminal Procedure Code. It is represented

by learned counsel appearing on behalf of the Income Tax Department that in a recent judgment of this court in Union of India Vs. Gopal

Engineering Works and Others, , this court has observed that, inasmuch as u/s 136 of the Income Tax Act, a proceeding before the Income Tax

authority was a judicial proceeding within the meaning of sections 193 and 228, Indian Penal Code, for the purpose of section 195, Criminal

Procedure Code, also, the Income Tax Officer should be deemed to be a court.

I shall now consider the provisions of section 195, Criminal Procedure Code. They have the purpose of making an exception to the general law.

The essence of the provision is that no court shall take cognizance of any offence alleged to have been committed in, or in relation to, any

proceeding in any court except on the complaint in writing of that court or of some other court to which that court is subordinate. The purpose of

the provision is that when any offence mentioned in this section has been committed in a court, a third party is not entitled to bring the matter before

any court by way of a complaint. The right and privilege of bringing those offences for trial belong exclusively to the court before which the

offences have been committed. It is clearly to be borne in mind that the definition of the term ""court"" in section 195(3), Criminal Procedure Code,

is to be applied to all the provisions of the section and not only to the portion of the section which reads as ""except from the complaint in writing

from the court"". In the bar embodied in the opening portion, i.e., that ""no court shall take cognizance"", the term ""court"" has also to be understood

as defined in section 195(3).

Consequently, either an authority is a court, when both the privilege and the restriction apply or, if it is not, then section 195 does not come into

play at all. If the Income Tax Officer is not a court within the meaning of section 195(3), none of the provisions of section 195 would apply and

there will be no restriction whatsoever as contemplated u/s 195. The Income Tax Officer can, therefore, freely bring offences under sections 193,

196, Indian Penal Code, for trial without section 195 coming into operation at all. He would have only to show that the offences are such as are to

be taken on file and are punishable under law. Therefore, the ratio in Associated Industries and Others Vs. First Income Tax Officer, City Circle-

IV, Madras, , to the effect that if the Income Tax Act has not declared any officer to be a court, he will not be a court u/s 195(3), will not stand in

the way of the Income Tax Officer filling a complaint, not as a court, but as an ordinary citizen.

The second part of the argument of learned counsel for the revision petitioner (sic) is that as per the Finance Act, 1985 the Income Tax officer,

among others. has been declared to be a court. Section 136 of the Income Tax Act, 1961, has been amended and every Income Tax authority has

been declared to be a civil court for the purpose of section 195 of the Criminal Procedure Code, 1973, with retrospective effect from April 1,

1974. No doubt, if the provision is only procedural in nature, it could have retrospective effect. If on the contrary, the provision is to brand as an

offence an act which was not an offence before, or to permit prosecution which was not permitted before, or to change the rule of evidence to the

detriment of the accused, such provision, having the effect of aggravating the situation of the accused, could not have retrospective effect. If, as per

the existing laws, the Income Tax Officer did not have the power to file a complaint, such power cannot be given after eleven years. but, as has

been seen earlier, the power of the Income Tax Officer has been always present to file a complaint for offences u/s 193 and 196, Indian Penal

code, but he could not act as a court in filling the complaint. The fact of the Income Tax Officer acting as a court u/s 195, Criminal Procedure

Code, does not, in any manner, aggravate the situation of the accused. Therefore, the amendment of section 136 of the Income Tax Act, 1961, by

the Finance Act, 1985, with retrospective effect is proper and valid. On the facts in this case, the reading of the complaint would show that the

Income Tax Officer did not act as a court, nor did he purport to act as a court. The complainant''s name reads as follows : ""Thiru S. Vaidyanathan,

Income Tax Officer City Circle I(1), Tiruchirapalli"". The concluding sentence reads as follows : ""The complainant, therefore, prays that this

honourable court may graciously be pleased to take this complaint on file, issue processes to the accused and deal with them according to law"".

Therefore, even without the amendment, the complaint is perfectly in order and after the amendment also, it will be in order since the amendment

was found to be legally susceptible of having retrospective effect. In conclusion, the plea of the revision-petitioner (sic) is rejected.

Point No. 2 : The accused who were arrayed, as stated earlier, are : the first accused no. 1, the managing partner (accused No. 2) and the other

partners (accused Nos. 3 to 6). It is clear from the evidence on record that the person who field the returns and made statements before the

Income Tax Officer is only accused No. 2 The other accused have not field or signed in the returns nor made any statements before the Income

Tax Officer. The only allegation is that they have signed in the opening form of the current account. The fact that they have signed in the opening

form of the current account would not in any manner render them liable for statements contained in the returns of income and for the oral and

personal statements made by accused No. 2 before the Income Tax Officer. It has not been shown at any place that each one of them knew the

contents of the returns of income filed by accused No. 2. It has not been the case of the Income Tax Officer that all the partners of the firm have

been responsible therefor. Therefore, the plea for the discharge of accused Nos. 3 to 6 is perfectly justified and the order of the Magistrate

concerning them does not warrant any interference on that point.

Point No. 3 : The third ground of attack is that the reassessment order based on the discovery of new facts which, according to the Income Tax

Officer, would constitute the ingredients of the offence having been itself set aside by the Commissioner of Income Tax (Appeals), the complaint

also should be held to be objectless and unjustified. It is factually correct that the reassessment order was set aside and the matter remanded to the

Income Tax authority and that the Department has taken up the matter before the Income Tax Appellate Tribunal which has confirmed the order.

Therefore, the matter is settled neither in favour of the Department nor in favour of the accused. It cannot be, therefore, said that the complaint has

become objectless and without any basis. However, since the matter is still at large before the Department itself to make up its mind in respect of

the acts alleged to have been committed by the accused, it will not the proper for the trial court to proceed with the trial at this juncture. It would

be open to the Department to withdrawn the complaint with permission to file it again, if circumstances so warrant. If such a course is not resorted

to the court shall stay the proceedings and start them again, once a fresh assessment order is passed and an applications is made before the court

to take up the trial.

The revision petition is allowed only in respect of accused Nos. 1 and accused No. 2 and dismissed in respect of others. The discharge of

accused No. 1 and accused No. 2 is set aside.