TMI Blog1995 (8) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... her sister concern of the same family in the name of Santosh Steel Sales at Lohiya Bazar, Gwalior, is also carrying on business as a firm. In that firm, Shekar Jain, Smt. Sharda Devi Jain, Smt. Sushila Jain and Nirmal Jain are the partners. Copies of the partnership deeds of the two firms are annexures "P-1" and "P-2" on record. The above two firms for business convenience had maintained current accounts in the regular course of business for the year 1988-89. The assessment of Prakash Iron Stores was taken up by the respondents. All the records were produced. The proceedings were finally completed on June 22, 1989, and the assessment order was passed, annexure "P-3". The account books of the sister concern, Prakash Iron Stores, were also examined, vide notice dated January 2, 1989, annexure "P-4". The petitioners claimed that the assessing authority of the respondents was fully satisfied with the account books and the action proposed against the firm was finally dropped as evident from the office note. The queries in respect of the current accounts were dropped on June 22, 1989. Later on, respondent No. 4 issued a show-cause notice dated February 14, 1991, to the firm, Prak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... committed gross irregularity amounting to an offence punishable under sections 276DD and 276E of the Income-tax Act. The petitioners have not explained their deposit or loans, etc., in their books of account and the respondents had properly given notices to them for their prosecution. When the respondents were not satisfied from the explanation given by the petitioners, the case was instituted in the criminal court for their prosecution. The respondents further alleged that the court at Indore was fully competent to prosecute and punish the petitioners for the offences alleged and these petitions under section 482 of the Code of Criminal Procedure were not maintainable here at Gwalior. The preliminary objection regarding territorial jurisdiction of this court was raised in the two cases at the very outset. This question was taken up by this court as a preliminary point and was decided by order dated October 5, 1993, passed by brother Shacheendra Dwivedi J. holding therein that the jurisdiction of this Bench seat was intact to entertain such petitions and this court had powers to pass necessary orders. These petitions were held to be maintainable by order dated October 5, 1993, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er who is in charge of or responsible for the conduct of the business of the firm can only be prosecuted, other partners who are not in charge of or responsible for the conduct of the business could not be prosecuted and their prosecution has to be quashed. On this basis learned counsel for the petitioners argued that even if the prosecution was necessary it could be only of the managing partner. Petitioner No. 5, Ajay Jain, is the managing partner of the firm in this case and other persons like Patiram Jain, Om Prakash Jain, Santosh Jain and Vinod Jain are the sleeping partners and they are not liable to such prosecution. The main contention raised in this case on behalf of the petitioners was that the offences enumerated under sections 276DD and 276E of the Income-tax Act could not attract the facts of the present case. Transactions between the two sister concerns were fully explained to the authorities concerned. The two sections of the Income-tax Act as aforesaid, were already deleted with effect from April 1, 1989, without any saving clause. Since section 276E of the Income-tax Act was deleted without any saving clause no prosecution could be launched for the offences unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r concern to the other sister concern was simply accommodating adjustment of the accounts and it was not in the shape of loan. This contention of the petitioners was already accepted by the respondents and the proceedings were earlier dropped. Once proceedings were dropped and section 276DD of the Income-tax Act was already deleted, the same could not be reopened for prosecution of the petitioners. It has also been accepted by the respondents that the transactions made between the two sister concerns were under exceptional circumstances to accommodate the emergency needs of the sister concern for a very short and temporary period. As such, it did not amount to a loan or deposit as defined under section 269SS of the Income-tax Act. Therefore, the proceedings initiated under sections 276DD and 276E of the Income-tax Act were against the provisions of law. The assessment order dated June 22, 1989, annexure "P-3", clearly indicates in para. I that the amount to the extent of Rs. 10,000 deposited was a genuine transaction and the prosecution under section 276DD be not launched. The firms were already assessed by this assessment order and prosecution was not authorised since penalties ..... X X X X Extracts X X X X X X X X Extracts X X X X
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