TMI Blog1988 (6) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 90,00,000. The society preferred an appeal before the Commissioner of Income-tax (Appeals) who, vide order dated February 27, 1985, had set aside the assessment order and remanded the case for a de novo assessment. The petitioner-society filed an appeal before the Income-tax Appellate Tribunal and, before the Tribunal could decide the appeal, the Inspecting Assistant Commissioner, on the basis of the remand order, made an assessment order on March 24, 1987, determining the income of the petitioner-society to the tune of Rs. 1,34,65,810. A criminal complaint was instituted in March, 1987, after obtaining the necessary authorisation under section 279(1) of the Income-tax Act. I would refer to the contents of the complaint a bit later. In order to complete the happenings, I may mention that the Appellate Tribunal, vide its order dated June 18, 1987, held that the Commissioner of Income-tax (Appeals) was not right in remanding the case and it directed the Commissioner of Income-tax (Appeals) to decide the appeal against the first assessment order afresh. A finding was given that the Commissioner of Income-tax (Appeals) had not cared to examine the reasons on the basis of which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence were found to be false and were stated to have been intentionally included in the return to inflate the figures in order to escape the taxation of income. The complaint was filed against the society and its president, vice-president, secretary and the two accountants. The petition has been moved for quashing of the criminal proceedings by the society and Anand Srivastava and Ajay Prakash, i.e., the vice-president and the secretary of petitioner No. 1. In the complaint, it has been mentioned that petitioner No. 1 and the other accused had themselves made or caused to be made false entries and the statements in its books of account, other documents filed along with the return of income in order to cause circumstances to exist which would have the effect of enabling petitioner No. 1 to evade income-tax, etc., and that all the accused have been in possession and control of the books of account and other documents containing the false entries and false statements relating to the aforesaid expenses and thus all the accused had committed an offence punishable under section 276C(1) of the Income-tax Act and moreover the accused No. 1, the society, through accused No. 2, the presid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment, on facts, is distinguishable because in the present case as yet, no finding has been given in the first appeal or in the second appeal that the allegations forming the basis of this criminal complaint are false. Hence, the observations made in the aforesaid judgment are not apposite to the facts of the present case. Counsel for the respondents, on the other hand, has referred to P. Jayappan v. S. K. Perumal, First ITO [1984] 149 ITR 696 (SC). In this case, the search was conducted in the premises of the petitioner and certain documents and account books were seized which revealed suppression of certain material income. There were several other wrong statements made in the assessment proceedings as also in the account books. A criminal complaint was filed for taking action for offences punishable under sections 276 and 277 of the Income-tax Act and sections 193 and 196 of the Indian Penal Code. A petition under section 482 of the Criminal Procedure Code was filed in the High Court to have the proceedings quashed contending that the launching of the prosecution was premature because the reassessment proceedings started against the accused had not been completed. The High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be passed therein. However, a note of caution was sounded by the Supreme Court that while exercising such discretion, the criminal court has to keep in view that the object of the criminal proceedings is not frustrated and there is no rigid rule which makes it necessary for a criminal court to adjourn or postpone the hearing of a case before it indefinitely or for an unduly long period, only because some proceeding which may have some bearing on it is pending elsewhere. This judgment is a complete answer to the contention raised on behalf of the petitioners in seeking the quashing of the criminal complaint pending against the petitioners. Counsel for the respondents also drew my attention-to Ashoka Biscuit Works v. ITO [1988] 169 ITR (St) 13, wherein also a complaint under sections 276C and 277 of the Income-tax Act had been launched and in the proceedings under the Income-tax Act in an appeal filed before the Tribunal, the penalty which was imposed on the same facts was quashed, but still it was held by the Hon'ble Supreme Court that a criminal complaint cannot be quashed only on the ground that in the income-tax appeal before the Tribunal, which was based on the same facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allegations made in the criminal complaint, the petitioners-would be well advised to apprise the court concerned regarding any such order and it would be for the court concerned to evaluate the worth of the said order keeping in view the evidence which may be led before the court in support of the complaint.. Mr. Venugopal, Senior Advocate, has raised a new point in his arguments which does not find mention in the petition. He has argued that the petitioner-society could not be guilty of any offences where the element of mens rea is a prerequisite. According to counsel for the petitioners, a legal person like a company or a society cannot have guilty mind. I am afraid that this particular contention is devoid of all force. In H. L. Bolton Engineering Co. Ltd. v. T. J. Graham Sons Ltd. [1957] 1 QB 159, the question which was posed was whether a company can have a guilty mind or not. It was clearly observed that the state of mind of the managers of the company is to be deemed to be the state of mind of the company. It was further observed that the intention of the company could properly be inferred from the intention of its officers and agents having regard to the nature of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ". So, it cannot be argued with any rationality that a company cannot have a guilty mind. The company's mind is the mind of the persons controlling the company. If the persons controlling the company have acted fraudulently on behalf of the company, it is the company which would be indicted for the said fraud committed by its controlling persons. Hence, it has to be held that even though mens rea is one of the elements of the offence which are the subject-matter of the criminal complaint, yet the company can be held guilty of the said offences, if the persons controlling the said company had acted on behalf of the company in committing the aforesaid offences. A perusal of the complaint, a copy of which was supplied to me by counsel for the petitioner and which is placed on the record, clearly shows that accused Nos. 2 to 6 had acted for and on behalf of the company in submitting false returns of income-tax with inflated expenditure in order to escape the liability of tax. Counsel for the petitioners, lastly, prayed that as the identity of petitioners Nos. 2 and 3 is not being disputed or challenged, it may be mentioned in the order that the Magistrate concerned shall grant exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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