2004 (2) TMI 10 - HC - Income Tax

Trial court allowed the applications filed by accused u/s 245(2) of the Code of Criminal Procedure and discharged them mainly on the ground that the notice issued by the revision petitioner u/s 158BC is not a valid service since the mandatory notices were duly served by the revision petitioner on their chartered accountants (i.e. agents) and which has been admitted by the respondents therefore the provisions of Order 5 rule 12 of the Civil Procedure Code will not at all come to the aid of the respondents to hold that service of notice on chartered accountants is not a valid service. Held that trial court lost sight of the provisions of Order 5 rule 12 of the Civil Procedure Code and the letters of request made by the respondents in all these cases to grant time or extend the time to submit the return is perverse and incorrect which calls for interference under section 379 of the Criminal Procedure Code - Order under revision passed by the trial court is liable to be set aside.

Summary

Issues:
Validity of notice under section 158BC of the Income-tax Act, 1961 for service on respondents. Compliance with mandatory provisions of section 158BC by the revision petitioner. Discharge of accused by the trial court under section 245(2) of the Criminal Procedure Code. Legal implications of serving notice on chartered accountants. Interpretation of legal precedents regarding service of notice and jurisdictional provisions.

Validity of Notice under Section 158BC:
The criminal revision petitions involved challenges against the orders of the Special Court for Economic Offences, Bangalore, discharging the respondents-accused under section 245(2) of the Criminal Procedure Code. The prosecution conducted raids in February 1997, seized relevant documents, and issued notices under section 158BC of the Income-tax Act, 1961 to the respondents. The revision petitioner contended that the notices were served on the chartered accountants of the respondents, constituting valid service. The trial court's discharge of the accused based on alleged improper service of notice was challenged, emphasizing the respondents' acknowledgment of the notice and request for additional time to submit returns.

Compliance with Mandatory Provisions:
The revision petitioner argued that serving notices on the chartered accountants, who represented the respondents, fulfilled the requirements of section 158BC. The respondents' subsequent request for an extension to file returns indicated their awareness of the notice served through their agents. Citing legal precedent, the revision petitioner asserted that acknowledgment of notice by the party or its agent validated the service, preventing the accused from denying receipt. The revision petitioner contended that the trial court's discharge order was erroneous, urging interference based on established legal principles regarding notice service and compliance with statutory provisions.

Discharge of Accused under Section 245(2):
The respondents' counsel maintained that criminal proceedings initiated against the respondents were lawful, as section 158BC mandated direct notice service on the respondents themselves. Arguing that notice served on the chartered accountants did not meet statutory requirements, the respondents sought support from legal precedents emphasizing the necessity of proper notice service for penal consequences. The respondents' position was that the trial court's decision to discharge them under section 245(2) was legally sound, given the alleged failure to comply with notice service provisions.

Legal Implications of Serving Notice on Chartered Accountants:
The respondents' counsel highlighted the distinction between authorized agents and chartered accountants, emphasizing that notice service on the latter did not constitute valid service on the respondents. Legal precedents were cited to support the argument that notice acceptance by an accountant did not equate to notice receipt by the assessee. The respondents contended that the initiation of criminal proceedings based on allegedly improper notice service was unlawful and warranted discharge by the trial court.

Interpretation of Legal Precedents:
Both parties relied on legal precedents to support their respective positions on notice service requirements and jurisdictional provisions. The revision petitioner emphasized cases where acknowledgment of notice by the party or its agent validated service, while the respondents cited cases underscoring the importance of proper notice service to uphold legal proceedings. The arguments centered on whether notice service on chartered accountants sufficed as valid service on the respondents, with each side presenting contrasting interpretations of legal decisions to support their stance.

In conclusion, the High Court of Karnataka set aside the trial court's discharge orders and remitted the matter for fresh disposal, emphasizing the importance of complying with statutory provisions for notice service and acknowledging the legal implications of serving notices on authorized representatives.