TMI Blog1994 (10) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... itted the return of income declaring the net income of Rs. 1,45,386. The assessment also was completed on the total income of Rs. 1,56,580. In the statement of account, the first accused had declared a closing stock of Rs. 19,55,984. On February 18, 1982, there was a search in the premises of the first petitioner and the records were seized. According to the respondent-Income-tax Officer, it was found out from the records that the return filed by the first petitioner did not contain the full income as stocks to the value of about Rs. 5 lakhs had been suppressed, in the original return. Therefore, notice was issued to the petitioners under section 148 of the Act on July 19, 1983, and the first petitioner once again filed the return on December 6, 1983, declaring the net saving income as found in the original return. As the closing stock of the first petitioner was not correctly shown in the return and there was omission of the stocks to the aggregate value of Rs. 5 lakhs in the return, a complaint was filed before the Additional Chief Metropolitan Magistrate, Egmore, against the petitioners under sections 120B, 193, 196 and 420 of the Indian Penal Code,1860, and also under sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in S. M. No. 137 for the purpose of understating stock value and on a comparison of S. M. No. 84 stock book, with S. M. No. 137, which is the consolidated stock book for all the branches, there is short statement of Rs. 4,93,177. S. M. No. 137 is the consolidated stock book of the first accused company for all their business and according to the complainant, the first respondent herein, though the stock book S. M. No. 84 relating tot Kasi Chetty Street branch had been copied in S. M. No. 137, several pages have been omitted to be included in S. M. No. 137. According to the complainant, this has been deliberately done by the petitioners for the purpose of understatement of the account to escape the correct assessment and, therefore, the petitioners are liable to be punished under the Indian Penal Code and also under the Income-tax Act. In the petition filed by the petitioners, the maintenance of S. M. No. 84 stock book relating to Kasi Chetty Street branch and the seizure of this book is not disputed. But the contention taken in the petition is that rough stock statements were prepared periodically for the purpose of showing to the bank which advanced loans to them and this rough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to the correct stock. Even if S. M. No. 84 was a rough stock statement, it is a matter of evidence to be proved at the time of trial. Learned counsel for the petitioner contended that as the return was submitted for the year ended March 31, 1981, whereas the premises were searched on February 18, 1982, there is nothing to show that the details of the stock given in S. M. No. 84 seized in February, 1982, relate to the period ended March 31, 1981, and, therefore, the first respondent is not entitled to file a complaint relying upon S. M. No., 84 statement of account. He also refers to a decision in CIT v. Jewels Paradise [1975] 101 ITR 265 (Kar), in which case, cash was seized in the raid conducted on the assessee's shop and residences of the partners and on the basis of this cash, the authorities imposed a penalty under section 271(1)(c) of the Act. The Income-tax Appellate Tribunal set aside the order holding that the amount seized could not represent the income of the assessment year and, therefore, there was no concealment of income. That view was upheld by the Karnataka High Court. So, learned senior counsel for the petitioners argues that in this case also, in the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 764 (Bom), wherein, when minors were admitted to the benefits of the partnership and the minor died before the closing of the accounts, the question arose whether his share of profits up to the date of attaining majority of the minor will be his income. Another decision relied upon by the learned senior counsel is CIT v. Nathimal Gaya Lal [1973] 89 ITR 190 (All) [FB], in which case penalty was levied on the undivided family. In the assessment proceedings filed on behalf of the Hindu undivided family, penalty was levied for the undisclosed income. The Allahabad High Court set aside the assessment on the ground that as the undivided family ceased to exist on the date of the assessment, the imposition of penalty was not valid. One more decision relied upon by him is Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705 (SC). In that case, the return of income was filed and certain debits were found to be false claims and the assessee admitted a certain amount as taxable income. Therefore, penalty was levied. The Supreme Court has held that mere admission of the assessee as taxable income will not amount to concealment of income and, therefore, the penalty was not levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x the income and the burden lies upon the assessee to prove that the income from a source had already been taxed. Therefore, when the records seized discloses short statement of stock, certainly the Income-tax Officer is entitled to proceed against the petitioners-assessees according to law, for the fresh assessment and also for prosecution. Hence, the above decisions cited by learned senior counsel do not help the petitioners to avoid the criminal prosecution. The next line of argument of learned senior counsel for the petitioners is that as the assessment order of the Income-tax Officer has been set aside by the Income-tax Appellate Tribunal and the Commissioner of Income-tax (Appeals) also has cancelled the penalty order of the Income-tax Officer, the prosecution against the petitioners is not sustainable and the same has to be quashed. In support of this argument, learned senior counsel refers to a series of decisions which I cite below. The first decision is Prakash Chand v. ITO [1982] 134 ITR 8 (P H). In that case, the Income-tax Appellate Tribunal gave a finding that there was no proof of concealment of income. On the basis of this finding, the Punjab and Haryana High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and remanded the matter for being given adequate opportunity to the assessee before the order of assessment was made. Therefore, the Appellate Tribunal has not given any finding with regard to the merits of the contention taken by the assessee. As it was contended that adequate, opportunity was not given to the assessee to explain the accounts, the assessment order of the Income-tax Officer was set aside and was remanded back to the Income-tax Officer for fresh consideration. Therefore, in the absence of a definite finding by the Income-tax Appellate Tribunal as to the correctness of the returns submitted by the assessee, it cannot be con tended that the criminal prosecution under sections 276C and 277 of the Act is not maintainable. Learned counsel appearing for the respondent, Mr. K. Ramaswamy, would argue that under section 276C of the Act, prosecution could be launched against a person if he attempted to evade any tax or penalty chargeable or imposable under this Act indicating that even if the assessment proceedings was not complete, if tax is chargeable or imposable upon that person, that itself is sufficient to prosecute him for his attempt to evade the tax. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complaint in the hope that there is a likelihood of penalty being waived by the Department. In G. S. R. Krishnamurthi v. M. Govindaswamy, ITO [1992] 195 ITR 137, this court has observed that though the assessment proceedings were not completed, it will not be a bar to the initiation of the criminal prosecution. In Raja Corporation v. ITO [1992] 194 ITR 487 (Mad) ; S. P. Murugappan v. ITO [1992] 194 ITR 531 (Mad) and P. N. v. P. C. Chadaga, Asst. CIT [1992] 195 ITR 910 (Mad), Justice Arunachalam has taken a consistent view that when a prima facie case is disclosed in the complaint, setting aside the order of assessment by the appellate authority will not be a bar for criminal process and when especially no finding by the appellate authority that the statement made by the assessee was true. In Geethanjali Mills Ltd. v. V. Thiruvengadathan [1989] 179 ITR 558 (Mad), Justice Janarthanam has held that the fact that the Tribunal had passed an order of remand in assessment proceedings would not be a bar to prosecution for offences under the Act and the mere expectancies should not stand in the way of the criminal proceedings in the matter. In S. R. Arulprakasam, v. Smt. Prema Malini Vasan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the petition to quash the criminal court proceedings, the Delhi High Court found that the lack of amenities in a house would not constitute proof of non-residence of the assessee in that building. Further, as the assessee also was allowed to file a declaration and return under the Voluntary Disclosure Scheme, the High Court of Delhi held that the assessee was not given opportunity to be heard and the action was violative of the principles of natural justice. Under those circumstances, the proceedings before the criminal court were quashed. In the next decision, a false statement was found in the return of income and penalty was imposed upon the assessee. Thereafter, the firm applied for waiver of penalty and the Commissioner of Income-tax gave an assurance that the waiver application would be considered favourably if taxes were paid. On that assurance, the assessee paid the tax but the waiver application was rejected by the Commissioner. Taking into consideration these circumstances, the High Court of Rajasthan has held that the principles of natural justice must be read into the unoccupied interstices of the statute unless there is a clear mandate to the contrary and every proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Income-tax Officer's presumption that the income relevant to the assessment year had escaped the assessment ". Therefore, it is specifically mentioned that the first petitioner-company explained their stand to the Income-tax Officer. Again in paragraph 6 also, it is alleged that the Income-tax Officer ignored the various statements and detailed evidence let in in support of the accounts maintained by it and made an arbitrary assessment determining the total income at Rs. 6,53,160. Therefore, it is repeatedly admitted in this petition itself that they tried to convince the Income-tax Officer with all materials placed before him to the effect that there was no concealment of income, however, the Income-tax Officer ignored the submissions and evidence of the assessees. Therefore, it cannot be contended that no opportunity was given to the petitioners to explain their stand. It is not necessary for the Income-tax Officer to inform that he was launching the criminal complaint against the petitioners, because the petitioners themselves were aware of the fact that the Income-tax Officer was not convinced of their explanation, and they were liable to be prosecuted for the suppressio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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