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Judgment
R. Banumathi, J.
C.A.NO.837 OF 1996:-
Aggrieved against the order of acquittal, the Income Tax Department has preferred this appeal. By the impugned Judgment (dated 27.02.1996)
in C.C.116 of 1990, the Judicial Magistrate No.1, Poonamallee, has acquitted the Accused Uma Rani, wife of Arumugam, under sections 181,
193 IPC r/w 136 Income Tax Act; 276C(1) and 277 Income Tax Act in C.C.No.116 of 1990.
C.A.NO.838 of 1996:-
2.By the impugned Judgment (dated 27.02.1996), in C.C.117 of 1990 the Judicial Magistrate No.1, Poonamallee, has acquitted Accused
Arumugam and Uma Rani, under sections 181, 193 r/w 136 IPC; 276C(1) and 277 Income Tax Act in C.C.No.117 of 1990.
3.The Respondents/Accused in both the appeals are husband and wife. Since common points for consideration are involved, both the appeals are
taken up together and disposed of by this common judgment.
4.Facts which led to the present appeal could be stated thus:-
A search u/s 132 of the I.T. Act, 1961 was organised on 28.1.1982, in the case of Thiru.S.Arumugam, No.35, 1st Main Road, Chrompet,
Madras-44 on the strength of warrants issued by the Commissioner of Income Tax, Tamil Nadu-IV. On the day of search, a cash of Rs.32000/-
was found in the residence of the assessee and the same was seized since, Thiru.Arumugam could not explain the possession of the cash.
5.On the day of search, two keys were found in the suit case of Thiru.Arumugam and he was interrogated about the keys. When interrogated,
Accused-Arumugam had given a statement that the keys were handed over to him by one Vasudevan, for safe custody. The keys were later
identified to be belonging to two bank lockers. One key was found to be that of a locker in Bank of Baroda, Purasawalkam and the other
belonging to that of a locker at Madras Safe Deposit Co. Ltd., Madras-34. The locker at the Bank of Baroda, Puraswalkam is in the name of
Tmt.Uma Rani, wife of Thiru.Arumugham. The locker in the Madras safe Deposit co., Ltd, Madras-34 stands in the name of Thiru.Arumugham.
On examination of the locker standing in the name of Thiru.Arumugham, a few Bank Pass Books and a cash of Rs.1,00,000/- was found and the
same was seized. A sworn statement was recorded after the seizure of Rs.1 lakh from the locker from Thiru. Arumugham, wherein he has admitted
that the cash solely belongs to him. When the said Vasudevan was examined, he has disowned the keys stating that he is not connected with the
keys. First year of assessment of the said Arumugam is 1979-1980. Thereafter, the Department/ 7th Income Tax Officer has calculated the total
assets of Arumugham as Rs.7,26,416/- as on 28.01.1982. The total tax liability was arrived at Rs.4,56,800/-.
6.Notwithstanding the departmental proceedings, levying the assessment, the Department has initiated criminal prosecution against the
Respondents/Accused alleging that the Accused had given a false statement and that they have committed offences under Sections 181 IPC and
193 IPC -
*** Deliberately making a false statement regarding the income tax, which statement, the accused believed to be false;
*** That by making false statement before the Income Tax Officer, which the accused believed to be false and thereby, the Accused wilfully
attempted to evade the tax chargeable or imposable under the Income Tax Act and thereby the Accused have committed offence under sections
277 and 276C(1) of the I.T. Act.
7.In the trial Court, to substantiate the charges against the Accused, the Department has examined PW-1 to PW-6. Ex.P-1 to Ex.P-22 are
marked. The main defence plea raised by the Respondents/Accused is that the departmental proceedings ended favourably and hence pleaded for
absolving of their criminal prosecution also. Upon consideration of the evidence adduced by the Department and the defence plea and relying upon
Uttam Chand and Others Vs. Income Tax Officer, Central Circle, Amritsar, , the trial Court has acquitted the Accused, finding that there was no
intention on the part of the Accused to defraud the Department. The learned trial Magistrate further held that there was no attempt by the Accused
to evade the tax and on this finding, both the Accused were acquitted.
8.Aggrieved over the order of acquittal, the Department has preferred these appeals. Placing reliance upon many decisions, the learned Special
Public Prosecutor has submitted elaborate arguments, contending that the trial Court has not approached the evidence with proper perspective and
that the trial Court has misdirected itself on every issue and the reasonings for acquittal are unsustainable. It is the further contention that only when
the penalty is cancelled u/s 273A of the I.T. Act, criminal proceedings cannot be maintained and in all other instances, the criminal proceedings is
well maintainable and the prosecution is to be dealt with independently. Submitting that there was no proper framing of charges on the wilful
evasion of tax, the learned Special Public Prosecutor further submitted that notwithstanding the fact that the Accused were not assessee, the factual
situation in deliberately making a false statement is not effaced which was not taken note of by the trial Court. Relying upon P. Jayappan Vs. S.K.
Perumal, First Income Tax Officer, Tuticorin, , the learned Special Public Prosecutor submitted that notwithstanding the termination of the
Department proceedings, the criminal proceedings could be continued and that the order of acquittal suffers from perversity and prayed for
reversal of the order of acquittal.
9.Laying emphasis upon the order of the Department in the levy of income tax and waiver of interest etc., ...""it is contended that the department
itself has levied the income tax, and also waived interest, is not a fit case to interfere with the order of acquittal. It is further submitted that when
bunch of keys were noted during the search, on the casual statement made by the Accused that the keys belong to Vasudevan of Trichy, no
criminal intention could be attributed to the Accused. It is the further contention that the ''keys'' would not come u/s 132 of the Income Tax Act.
10.Upon careful consideration of the submissions of both sides, Judgment of the trial Court and the evidence and materials on record, the following
common points arise for determination in these appeals.
(i)Whether the order of acquittal of the Appellants/Accused under Sections 276C(1) and 277 I.T. Act suffers from infirmity and is within the
parameters fixed for interference with an order of acquittal;
and
(ii)whether the order of acquittal under sections 181 and 193 IPC suffers from perversity, warranting interference ?
11.In an appeal against the order of acquittal, the High Court would interfere only if the Judgment of the trial Court suffers from illegality or
manifestly erroneous. On this point, it is relevant to refer to the following observations of the Supreme Court in Prem Dass Vs. Income Tax
Officer, , wherein the Supreme Court has observed as follows :-
The plenitude of power available to the court hearing an appeal against an acquittal is the same as that available to a court hearing an appeal
against an order of conviction. But the court will not interfere with an order of acquittal solely because a different plausible view may arise on the
evidence and the court thinks that the view taken by the trial court of the evidence is not correct. In other words, the court must come to the
conclusion that the view taken by the trial judge while acquitting cannot be the view of a reasonable man on the materials on record. The court of
appeal must examine the reasons on which an order of acquittal is based and must reach the conclusion that the view taken by the acquitting judge
was clearly unreasonable. If the evaluation of the evidence made by the courts below while recording an order of acquittal does not suffer from any
illegality or manifest error and the grounds on which the said order of acquittal is based are not unreasonable, then the High Court should not
disturb the order of acquittal.
12.Bearing in mind the above principles, we may proceed to consider whether the case in hand is within the above parameters fixed for
interference with the order of acquittal.
13.The Respondents/Accused are alleged to have made false statements during the search u/s 132 I.T. Act and that they have not disclosed the
owning of the locker. Thus the gravamen of the indictment against the accused is that (i)That they made false statement as to the bank locker;
(ii)That they have not disclosed the owner of the locker and that there was wilful evasion to pay the tax.
14.By the assessment order u/s 132(5) of the I.T. Act, the Assessment Officer has levied tax, fixing the liability at Rs.4,56,800/-. As on the date of
order of the Income Tax Officer (dated 24.04.1982) there was no criminal prosecution. It was only thereafter u/s 279 of the I.T. Act, orders were
passed by the Commissioner of Income Tax to launch prosecution against the Accused. Ex.P-7, dated 23.11.1983 authorises Authorities to file
the complaint against the Accused - Arumugam and his wife Uma Rani under sections 276C(1) of the I.T. Act.
15.Admittedly, the Accused are previously non-assesses. Only in October 1981, Accused Arumugham has hired a Locker in Madras Safe
Deposits Company Ltd. He has opened the locker No.653 and Key no.659 was allotted to him in October - November 1981 in his name.
Likewise, Accused Uma Rani has hired a Locker in Bank of Baroda during October 1981. She has hired Locker no.B.39 with key no.42.
16.For the year 1981 - 1982, the Accused were yet to be assessed. Even the Income tax officer has found ""That it is not possible for him to
ascertain in which particular previous year or years such income thereto relates ..."" and thus calculated the tax, as if the income were total income
chargeable at the rates in force in the financial year in which the assets were traced. When the Income Tax Officer was unable to trace the sources
of income and the Lockers were hired in October - November 1981, no culpable mens rea could be attached to the Respondents/Accused. This
is all the more so, when the accused had the time to file the statement for the year 1981-1982.
17.While the accused are yet to be assessed and had time to file the return, they could not be faulted that there was wilful attempt to evade any
tax. In order to attract the provisions of section 276C of the Income Tax Act, 1961, the prosecution has to establish that the accused wilfully
attempted in any manner to evade any tax, penalty or interest chargeable or imposable under the Act. To attract the provisions of section 277, the
prosecution is required to establish that the accused made a statement in any verification under the Act which he either knows or believes to be
false, or does not believe to be true. Wilful attempt to evade any tax, penalty or interest chargeable or imposable under the Act u/s 276C is a
positive act on the part of the accused which is required to be proved to bring home the charge against the accused. Similarly, a statement made by
a person in any verification under the Act can be an offence u/s 277 if the person making the same either knew or believed the same to be false or
does not believe to be true. Necessary mens rea, therefore, is required to be established by the prosecution to attract the provisions of section 277
or section 276C.
18.Section 132 of the Income Tax Act deals with search and seizure and sub-section (4A) thereof stipulates that where any books of account,
other documents, money, bullion, jewellery or other valuable article or thing are or is found to be in the possession or control of any person in the
course of a search, then it may be presumed that such books of account or other documents belong to such person and that the contents of such
books of account are true and that the signature and every other part of such books of account and other documents which purport to be in the
handwriting of any particular person are in that person''s handwriting. There is nothing in section 132(4A) which would establish the ingredients of
the aforesaid two criminal offences contemplated u/s 276C and 277. By applying the presumption u/s 132(4-a) of the I.T. Act, the ingredients of
the offence u/s 276C and 277 cannot be said to have been established.
19.Yet another formidable circumstance could be pointed out for not interfering with the order of acquittal - finding of the Income Tax Officer and
other authorities that there was no wilful evasion. In fact finding ""... the assesses had fully cooperated with the Department in inquiries that followed
the search and also in the finalization of the assessment proceedings and that the assessee had filed returns of the income after arriving at the
amount of income to be assessed in accordance with the discussions that the assessee had with the Departmental authorities. ... ""the assessee were
given the benefit of waiver of interest charged u/s 139(8) of the I.T Act. Thus all the Departmental proceedings ended favourably to the accused.
The appeal preferred by the Department before the Income Tax Tribunal was also dismissed. While so, hardly there is any justifiable reason for the
criminal prosecution to be continued.
20.As per the principles of interpretation of statutes, the provisions of the statue must be interpreted as per the language used therein. By reading of
the section 276C(1) it is clear that a person who wilfully attempts to evade any tax, penalty or interest chargeable or imposable, or punishable as
laid down in that section. Thus, there must be wilful attempt to evade. To decide this wilful attempt, there must be assessment on the return filed. In
the case on hand, there was still time for the Respondent/Accused to file the return. Therefore, at a stage when the return is not filed and there was
still time for filing it, it cannot be said that the respondent committed any offence u/s 276C(1) of the Act or that any such allegation would constitute
the offence. In the circumstances, it cannot be presumed beforehand that, after filing of the return and on its scrutiny, the authorities would find
concealment of income by holding that the assesee were not inclined to disclose about the Bank Lockers. Accordingly, it cannot be concluded that
there was an attempt to evade payment of tax etc.
21.The point is, whether the act of attempt is complete or not and this depends upon the facts and circumstances of the case of each case. In the
instant case, there was ample time to file the return and there was change to the respondent to explain about the amount seized by adducing cogent
and convincing evidence. Even before filing the return, it cannot be anticipated that he would not explain and, accordingly, it cannot be presumed
that the respondent attempted to evade tax, etc.
22.Thus, even before the act of attempt to evade is started, on a mere anticipation or contemplation that there was possibility of accruing liability
after finalization of regular assessment proceedings, it cannot be said that the respondents are liable for conviction u/s 276C(1) of the I.T. Act.
23.The search was only u/s 132 of the I.T. Act and the statements are alleged to have been made during the search. The accused were yet to be
assessed; they still had time to file the returns. While so, it would be incongruous to prosecute a person for wilful concealment. Absolutely, there is
no question of wilful concealment when the Accused were yet to be assessed. The order of acquittal does not suffer from any infirmity warranting
interference.
24.Placing reliance upon P. Jayappan Vs. S.K. Perumal, First Income Tax Officer, Tuticorin, , the learned Special Public Prosecutor submitted
that the independent nature department proceedings and criminal prosecution have been affirmed in various decisions. The learned Special Public
Prosecutor further submitted that while, the criminal Court can no doubt come to different view with regard to the result of any proceedings in the
I.T.Act, it does not however mean that by the result of the proceedings, the prosecution is to be terminated and further contended that the criminal
Court has to judge the case independently, on the evidence placed before it.
25.There is a lot of difference between P. Jayappan Vs. S.K. Perumal, First Income Tax Officer, Tuticorin, and the present case. In the
Jayappan''s case, return was already filed and the same was found to be false during the search and the reassessment proceedings were pending.
Therefore, the Supreme Court in that case held that merely because re-assessment proceedings are pending, it is no ground for quashing the
prosecution proceedings. Whereas, in the case on hand, return has not been filed. There is time for filing the same and the regular assessment is yet
to be made. The decision of the Supreme Court in Jayappan''s Case is not applicable to the case in hand.
26.The main contention urged by the Special Public Prosecutor is that the Accused had not only made a false statement that the keys belonged to
Vasudevan of Trichy, and the same turned out to be false, a criminal proceeding to independently proceed, it is his contention that notwithstanding
the departmental proceedings, the factual situation are not effaced and the trial Magistrate erred in not appreciating the evidence adduced by the
Department. In support of his various contentions, the learned Special Public Prosecutor also relied upon Prakash Nath Khanna and Another Vs.
Commissioner of Income Tax and Another, and T.S. Baliah Vs. T.S. Rengachari, . We have not proposed to go in detail on the above decisions,
when this court is dealing with an order of acquittal. By applying the above decisions, a different view may possibly be adopted. But that can not
be the reason for reversing the order of acquittal.
27.Appreciation of facts and evidence by the trial Court does not suffer from any infirmity. The view taken by the trial Court cannot be said to be
unreasonable or manifestly erroneous. Offences under Sections 276C(1) and 277 of the I.T. Act and 181 and 193 of the IPC are not established
by the prosecution and beyond reasonable doubt. Considering the fact that the Departmental proceeding favourably ended and that the
Department has found that the Accused have fully cooperated with the Department and that the Department itself has waived the interest etc.,
there is no justifiable reason warranting interference in the order of acquittal. These appeals have no merits and are liable to be dismissed.