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TMI Blog2006 (11) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... f M/s. Dayagen. At the time of filing of the complaint, M/s. Dayagen was no longer a partnership firm but became sole proprietorship concern of Mr. V. P. Punj (accused No. 8) and, therefore, he is also made an accused. Qua him it is further alleged that he is associated with the firm since March, 1988, and was actively participating in the functioning of the firm since then. It is alleged that for the year 1988-89 the firm was required to file the return on or before June 30, 1988, as required under section 139(1) of the Act. It was not filed and instead Form No. 6 was filed on December 30, 1988, seeking extension of time up to March 31, 1989. This request was rejected and the same was conveyed to the accused persons, vide order dated January 14, 1989. A notice under section 139(2) of the Act was issued on March 10, 1989, by registered post, however, no return of income-tax was filed despite this notice. For the purpose of completing the assessment, notice under section 142(1) of the Act was issued on December 11, 1990, which was served on the accused persons on December 12, 1990, asking them to produce the books of account, etc. However, in spite of service of this notice, books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with effect from August 7, 1987. All the accused persons are related to each other and are family members. It appears that there were some disputes regarding family properties and business and, for deciding these disputes, the matter was referred to arbitration. The family members were divided into groups. The petitioners belonged to group No. 1, which consisted of 14 members, whereas Mr. V. P. Punj (accused No. 8) and his family members were in group No. 2, which had 12 members and in group No. 3 was Mrs. Dayawanti Punj, the mother of accused Nos. 4 and 8. Award dated August 6, 1987, was rendered by the learned arbitrator dividing all the assets, residential and commercial,. including business, among the three groups. In so far as the business of M/s. Dayagen is concerned, it fell in the share of group No. 2 headed by Mr. V. P. Punj. The result of this award, therefore, was that the said firm was dissolved as a partnership firm with effect from August 7, 1987, and, thereafter, became the sole proprietorship concern of accused No; 8. on the basis of the aforesaid award and these facts, it was pleaded by the petitioners that they had no concern with M/s. Dayagen with effect from Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olice report and documents referred to in section 173, (ii) examining the accused, if necessary, and (iii) hearing the arguments of both sides he thinks that there is a ground for presuming that the accused has committed an offence triable by him as a warrant case which he is competent to try and adequately punish. The basis for such a presumption would be a consideration of the police report and documents and the circumstances of the case supplemented by the examination of the accused, should it be necessary. The magis trate has to apply his judicial mind and mindfully adverting to the material on record for considering whether or not there is a ground for presuming the commission of the offence by the accused. He must not automatically frame the charge merely because the prosecution by relying on the documents referred to in section 173 consider it proper to institute the case. The magistrate has jurisdiction to commit or discharge on the basis of the documents referred to in section 173. Section 240 gives ample power to frame charges on a perusal of the papers and without examining witnesses. Only the documents in section 173 can be considered while framing charge and not the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income as well as asking them to furnish the copies of profit and loss accounts, balance-sheets, auditor's report as well as their books of account to enable him to comply the assessment. He further stated that despite service of the notices and letters, the return or income was not filed. He further stated that a show-cause notice was also sent as to why the prosecution should not be launched for non-filing of return of income. The accused furnished the names of the partners as well as details of the company account vide their letter dated February 11,1991. He further deposed that accused Nos. 2 to 7 were actively involved into the day-to-day affairs of the firm. In the cross examination nothing material has come out which could thwart the prosecution against the present revisionists. Keeping in view the entire material placed on record, a prima facie case under sections 276CC, 276D read with section 278B of the Income-tax Act has been made out against the revisionists." 6. Learned counsel for the petitioners submitted that when there was no dispute about the factum of arbitration award, which was also made rule of the court by orders of this court dated March 17, 1988, it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners to exercise any such right as per the guidelines for compounding issued by the Government. Learned counsel also submitted that for the assessment year 1988-89, the Revenue has charged the interest under section 139(8) of the Act for late filing of return by M/s. Dayagen in the complaint filed by the respondent. When the Revenue levies interest under section 139(8), it must be presumed that the Revenue has extended the time for filing the return beyond the prescribed period after satisfying that it is a case for extension of time. Therefore, no criminal prosecution can be launched or continued after charging the interest under section 139(8) as it is an implied extension of time to file the return of income. Therefore, no question of wilful default in filing the return of income arises in the present case. The prosecution of the petitioners is liable to be quashed on this alone. Reference in this regard is made to a decision of the Supreme Court in CIT v. M. Chandra Sekhar [1985] 151 ITR 433 (SC) ; [1985] 1 SCC 283. It is submitted that following the aforesaid decision of the Supreme Court, the Calcutta High Court in Gopalji Shaw v. ITO [1988] 173 ITR 554, had held that ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as the plea based on the award dated August 7, 1987, is concerned, the Division Bench categorically stated that it was not going into that aspect as it relates to the defence of the petitioner, meaning thereby that such a defence based on facts could be gone into only at the stage of trial. However, the petition was allowed on the ground that nothing was stated in the complaint which would indicate as to how the said directors (petitioners thereon belonging to group No. 1, as in the instant case) were in-charge of the affairs of the company. The order passed is brief and it would be apposite to reproduce the same in entirety: "Rule D.B. The petitioners herein are being prosecuted under section 276CC/276D read with section 278B of the Income-tax Act. In paragraph 2 of the complaint, it is stated as under 'That accused No. 1 is a company and during the period relevant to the assessment year 1988-89, accused Nos. 2 to 8 were the directors of accused No. 1 and they were in charge of and responsible to the company for conduct of its business. Accused No. 9 is presently the chairman of accused No. 1. Accused No. 9 has been signing relevant papers on behalf of accused No. 1 and ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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