TMI Blog1986 (8) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... o be referred to as " the company"), and also for quashing the proceedings in that criminal complaint. It is a settled proposition of law and also conceded by learned counsel for both the parties that if the complaint, on the face of it, did not show a prima facie case against the petitioners, the impugned order as also the proceedings in the complaint against the petitioners are liable to be quashed by this court. In order to appreciate the applicability or otherwise of this proposition of law, it would be necessary to set out in brief the allegations made in the complaint. A perusal of the complaint shows that petitioners Nos. 2 to 6 constituted the board of directors and were jointly in charge of and responsible to the company, petitioner No. 1, for the conduct of its day-to-day business. It is alleged that the company indulged in the malpractice of making fake donations in the sum of Rs. 25 lakhs in favour of two approved trusts institutions, viz. : (i) Hastimal Sancheti Memorial Trust, Poona (in short HSMT) Rs. 10 lakhs; and (ii) Poona Medical Foundation, Poona (in short PMF)-Rs. 15 lakhs and this was done with an intention of claiming a deduction under section 35(2A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F897240 dated June 29, 1983, was purchased from State Bank of Hyderabad, Kasturba Gandhi Marg, New Delhi, and consideration for the same was tendered by accused, petitioner No. 1 company, through a cheque bearing No. 236606 dated June 29, 1983. An application for the purchase of banker's cheque made to the bank was originally for the issue of banker's cheque in favour of one M/s. Astra Commercial P. Ltd. but was subsequently modified under the signatures of accused petitioner No. 3, N. R. Dongre, and accused Vinod Singhania, respondent No. 3, and the bank was requested to issue the cheque in favour of P.M.F. The proceeds of the banker's cheque were collected by the State Bank of Patiala, Shradha Nand Marg, Delhi, and were credited to the bogus account in the name of P.M.F. On the same day, proceeds of another banker's cheque for Rs. 3 lakhs purchased by M/s. Astra Commercial P. Ltd., a sister concern of the company petitioner No. 1, were also credited to the account of P.M.F. An account in the name of P.M.F. was opened on August 13, 1983, and the account opening form was not signed notwithstanding the usual practice and requirement in that regard but a rubber fascimile which appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HSMT and Rs. 15 lakhs for P.M.F were prepared for these donees, instead of sending the same immediately to the donees either through registered post or through some reliable person, appear to have been landed into the manoeuvering devices in a dubious manner involving certain fake steps on the part of the petitioners and their co-accused, respondents Nos. 2 to 5, and all those steps already referred to above in respect of the modus operandi of both the alleged donations and which find mention in the complaint, appear prima facie to be the circumstances caused to exist which could have the effect of enabling the petitioners and their co-accused to evade tax under the Act and such circumstances as are contemplated under Explanation (iv) to section 276C(1). The said Explanation explains the phrase " wilful attempt to evade any taxi penalty or interest chargeable or imposable under this Act " in its clauses (i) to (iv) and wilful attempt in any manner whatsoever on the part of a person to evade any tax, penalty or interest chargeable or imposable under the Act has been made an offence under section 276C(1) of the Act punishable with rigorous imprisonment for a term which shall not be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny offence, does not appear to be correct in the face of clause (iv) of the Explanation tagged to section 276C of the Act in view of the circumstances alleged to have been caused to exist by the petitioners and their co-accused in the matter of the above mentioned two donations which admittedly never reached the donees. The existence of a prima facie case also does not appear to suffer from any infirmity simply because the petitioners have shown the alleged donation, amount of Rs. 25 lakhs as "claims re-recoverable " in the balance-sheet. The complaint asserts that the petitioners could not claim any rebate in respect of these bogus donations in the return of income submitted on June 2, 1984, as the Income-tax Department had by then unearthed the indulging of the accused in the aforesaid nefarious activities. What has to be seen at this stage is whether, on the averments made in the complaint, a prima facie case is made out or not against the petitioners and not the truth of the allegations made therein. J. P. Sharma v. Vinod Kumar Jain [1986] 3 SCC 67 is instructive on this point and the relevant observations therefrom are set out below (headnote): " The High Court erred in qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held that though the Income-tax Officer was a court for the purposes of section 195(1)(b) of the Code of Criminal Procedure, he was not " a civil, revenue or criminal court " for the purposes of sections 476 and 479A of the Code and it was not, therefore, necessary for him to comply with those sections. This Division Bench authority was not, however, referred to by the learned single judge Al. L. Jain J. in S. Harnam Singh Suri's case [1984] 145 ITR 159 (Delhi). There is hardly any conflict between these two authorities as S. Harnam Singh Suri's case does not lay down that section 476, Code of Criminal Procedure, 1898, was applicable for launching prosecution by an Income-tax Officer. On the other hand, it simply talks of the applicability of the principles of natural justice in the matter of giving an opportunity to the man concerned of being heard in the shape of a preliminary inquiry analogous to the one provided in section 476 of the old Code, before the Income-tax Officer comes to the conclusion that the person concerned has deliberately made a false statement. The learned counsel for the petitioners asserted that no such opportunity had been given to the petitioners befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o personal hearing had been given and no notice had been sent to them by the Department. The adequacy/inadequacy of such a representation having been sent by the company and received by the Commissioner before the filing of the prosecution is a matter to be considered by the trial Magistrate as a preliminary objection or along with the other pleas which may be taken up by the petitioners or their co-accused, respondents Nos. 2 to 5. Mr. Jain has relied upon a judgment (copy annexure "A") of the Supreme Court in Criminal Appeal No. 202 of 1985 (.M. L. Batra v. S. Ghosh), wherein the following observations appear : " With respect, we are unable to see any valid reason for staying the criminal proceedings which the appellant has filed in the Delhi court. The learned Magistrate will have to decide the question of jurisdiction if that question is raised before him. Indeed, he will have to decide not only that question but such other preliminary questions as may be raised before him as, for example, the question as to whether the complaint discloses any offence." It has also been contended on behalf of the petitioners that for want of mens rea and also in view of the minimum imprison ..... X X X X Extracts X X X X X X X X Extracts X X X X
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