1. The present appeal is maintained by the Assistant Commissioner, Income Tax against the respondents assailing the judgment passed by learned Chief Judicial Magistrate, Shimla on 14.8.2007 in Case No. 33/3 of 1996, titled as ACIT Vs. Janeshwar Lal Rajeshwar Lal & others, whereby the learned Chief Judicial Magistrate, Shimla acquitted the respondents for the commission of offence under Sections 276 (CC) read with Section 278 (B) of the Income Tax Act. At the very outset, it is necessary to mention that respondent No. 2 Rajeshwar Lal had expired when the appeal was pending before this Court and vide order dated 30.11.2016, he has been deleted from the array of respondents. Now the appeal is surviving against respondent No. 1, 3, 4 and 5.
2. Briefly stated the facts giving rise to the present appeal are that the complaint under Section 276(CC) read with Section 278(B) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was maintained by the appellant against the respondent No. 1 firm, respondents No. 2 to 5 (hereinafter referred to as "the accused"). The accused No. 2 to 5 being partners of accused No. 1, shared the profit and loss, for the assessment year 1984-85 and they are liable for the acts of accused No. 1.
3. As per the appellant, on the notice of the complaint, the accused put in appearance. The complainant was then asked to lead pre-charge evidence. Accordingly, the complainant examined Hari Ram as PW-1 and B.S. Pathania as PW-2. Upon consideration, all the accused were charged for the commission of offences punishable under Section 276 (CC) read with Section 278 B of the Income Tax Act to which they pleaded not guilty and claimed trial. Upon the request of the accused, the witnesses of the prosecution, who had been examined at the pre-charge state, were summoned and crossexamined by the accused. Thereafter, the accused were examined under Section 313 Cr. P.C. Their defence is denial simplicitor, in as much as that accused No. 2 was In-charge of the firm and was responsible for the conduct of business thereof and filing the return but he was not keeping good health and had remained hospitalized during March, 1983, as such, return could not be filed in time. Thereafter, an application under Section 311 of Cr. P.C. was moved by the prosecution for examination of Shri Rajesh Katoch, Assistant Commissioner, Income Tax, which was allowed and said witness was examined as PW-3. The accused were then reexamined, under Section 313 Cr. P.C., on 14.9.2006. However, their defence remained similar that due to illness of accused No. 2, Rajeshwar Lal Jain, the return for the period aforesaid could not be filed in time.
4. Learned counsel for the appellant has argued that the learned Court below has committed illegality in acquitting the accused persons, as their act itself shows that they had committed the offence punishable under Section 276 (CC) read with Section 278 B of the Act and were liable to be convicted as per the provisions of the Act. Learned Court below, just on the basis of surmises and conjectures, acquitted the accused.
5. On the other hand, learned defence counsel has argued that the learned Court below has committed no illegality, as the prosecution has failed to prove the guilt of the accused, including the mens rea on their part of delay in filing the return. However, the Commissioner, as required under law, never issued any notice compounding the offence before giving the sanction to prosecute, that too after 10 years. He has argued that the present appeal deserves dismissal, as there is nothing to suggest that interference of this Court is required.
6. To appreciate the arguments of learned counsel for the parties, I have gone through the record carefully.
7. From the record, it is clear that the accused persons have not concealed their income and in an appeal qua the penalty, the penalty has been held not recoverable by the Income Tax Appellate Tribunal.
8. Now, the Court below while dealing with the appeal, in submitting the return, has taken into consideration the fact that accused No. 2, who was In-charge and responsible for the business of accused No. 1, has suffered heart attack and ill health and the other accused were the sleeping partners and due to this reason, the return could not be filed in time. The evidence, as led by the parties, is required to be discussed in short, in order to appreciate the fact whether the return was delayed intentionally or for the reasons beyond the control of the accused persons.
9. It has been admitted by PW-3 Rajesh Katoch, Assistant Commissioner of Income Tax that he was Income Tax Officer, Ward No. 1, Shimla, during the year 1994. He had issued notice, Ex. PW3/A, on 17.1.1994. The said notice was replied by accused No. 2 Rajeshwar Lal that there has been no willful failure on the part of the firm to furnish the return of Income Tax, within stipulated period, allowed under Section 139 of the Income Tax Act, 1961, as he being partner had been looking into the accounts for furnishing the return of Income Tax, but could not do so due to heard trouble. However, this explanation has not been considered at all by the authorities.
10. The accused, in their defence examined Sh. K.B. Sharma, Senior Assistant, H.P. High Court as DW-1, who has proved on record copy of reference, Ex. DW1/A, copy of orders, Ext. DW1/B to Ex. DW1/H, Ext. DW1/J to Ex. DW1/M and copy of letters, Ext. DW1/N to Ex. DW1/O claiming that the said documents are the art of reference, Ext. DW1/A.
11. Accused have also examined Shri Rajan Kumar of the Medical Cardiology Department, All India Institute of Medical Sciences, New Delhi, who has claimed that OPD Record pertaining to Shri Rajeshwar Lal Jain (accused No. 2) of OPD No. CV6577, dated 9.1.1984, has been destroyed, but has proved on record CV No. 23039 dated 6.12.1985 and that Shri Rajeshwar Lal Jain had checked in for coronary arteries disease and has proved on record OPD Card, Ex.,DW2/A. He has also proved on record, Ex. DW2/B, and that on 6.12.1985 said Shri Rajeshwar Lal Jain was again treated, vide CV No. 23039 and has produced on record the case receipt, Ex. DW2/C as also Ex., DW2/D. Nothing significant has been extracted from his cross-examination. Certainly, the record with All India Institute of Medical Sciences could not be manufactured by the accused. Hence, the explanation of the accused is plausible that they were prevented by a sufficient and reasonable cause for not filing the return in time.
12. The have also examined Shri Dev Datti Dass Gupta as DW-3, who too has stated that from 1973 to 1988, he was posted as HOD of the Medicine Department, IGMC, Shimla. According to him, he was known to Dr. A.N. Mahrotra, who too retired from IGMC, Shimla in the year 1984-85. He has proved on record the prescription slip, Ext. DW3/A to Ex. DW3/C and as per said prescription, Rajeshwar Lal Jain was suffering from diabetes and angina and that angina is a heart problem and as per Ex., DW2/B, Rajeshwar Lal Jain was suffering from hypertension disease. According to him, Ex. DW3/C, pertain to his unit, according to which, from 5.11.1990 to 9.11.1990, said Rajeshwar Lal Jain remained admitted in the hospital in the CCU ward for coronary artery heart disease. According to him, patients suffering from such a disease are unable to do hard work. He too has been crossexamined, but without any assistance. It is, therefore, apparent that accused No. 2 was suffering from aforesaid disease and was unable to undertake hard work and since he only was maintaining the accounts of the accused No. 1, firm qua filing the returns, certainly it was not possible for him or to other accused persons to file the return in time.
13. The appellant had remained unable to sustain the plea that any notice was issued to the accused persons, individually and in the absence of their proving the fact that the accused persons were given notices, individually for compounding the offences or otherwise their penalty liability cannot be affixed.
14. Their Lordships of Hon''ble Supreme Court in Gujarat Travancore Agency versus Commissioner of Income Tax, Kerala, ITR (1989) Vol. 177 SCC 455 have held as under:
"It is sufficient for us to refer to Section
271(1)(a), which provides that penalty may be imposed if
the Income tax Officer is satisfied that any person has,
without reasonable cause, failed to furnish the return of
total income, and to Section 276 C which provides that if a
person willfully fails to furnish in due time the return of
income required under Section 139(1), he shall be
punishable with rigorous imprisonment for a term which
may extend to one year with fine. It is clear that in the
former case what is intended is a civil obligation while in
the latter what is imposed is a criminal sentence. There
can be no dispute that having regard to the provisions of
Section 276 C, which speaks of willful failure on the part
of the defaulter and taking into consideration the nature of
the penalty, which is punitive, no sentence can be imposed
under that provision unless the element of mens rea is
estasblished. In most cases of criminal liability, the
intention of the Legislature is that the penalty should serve
as a deterrent. The creation of an offence by statute
proceeds on the assumption that society suffers injury by
the act of omission of the defaulter and that a deterrent
sentence must be imposed to discourage the repetition of
the offence. In the case of a proceeding under Section
271(1)(a), however, it seems that the intention of the
Legislature is to emphasise the fact of loss of revenue and
to provide a remedy for such loss, although no doubt an
element of coercion is present in the penalty. In this
connection, the terms in which the penalty falls to be
measured are significant. Unless there is something in the
language of the statute indicating the need to establish the
element of mens rea, it is generally sufficient to prove that
a default in complying with the statute has occurred. In
our opinion, there is nothing in Section 271(1)(a) which
requires that mens rea must be proved before penalty can
be levied under that provision. We are supported by the
statement in Corpus Juris Secundum, Volume 85, Page
580, paragraph 1023."
15. The Hon''ble High Court of Andhra Pradesh in
Income Tax Officer versus Autofil and others, ITR Vol. 184
(1990) 47 has held as under:
"Conviction under Section 276 CC is an
extreme and exceptional resort and gets warranted only
when willfulness in failure to submit the return in time is
established beyond all reasonable doubt and there should
be the presence of mens rea, a bad motive and a guilty
mind. In the absence of this, no conviction shall follow the
prosecution under Section 276 CC of the Income Tax Act.
There is a clear explanation given by A-3 that he was not
conversant with the preparation of the profit and loss
account and the balance-sheet. Equally so is his colleague,
Satyanarayana. Their clerk happened to fall ill. Even if, for
any reason, the explanation does not receive acceptance,
still the conduct of the respondents in paying the advance
tax, the penal interest and penalty and want of mens rea
absolve them from criminal liability. I, accordingly, find no
merit in these appeals. The appeals are, therefore,
dismissed."
16. The Hon''ble High Court of Calcutta in Dunlop India
Ltd and others versus Arun Chandra Sinha, Assistant
Commissioner of Income-Tax and others, ITR Vol. 211
(1995) 79 has held as under:
"The person accused would be deprived of the benefit
or right of compounding the offence before the initiation of
proceedings, if the prosecution were launched without any
prior notice. In addition, I respectfully adopt the reasoning
of the Karnataka High Court in P.V. Pai''s case (1993) 200
ITR 717, as well as that of the Rajasthan High Court in
Shree Singhvi Bros.'' case (1991) 187 ITR 219 to hold that
the person accused is entitled to notice before the initiation
of proceedings in respect of which a right of compounding
has been given under Section 279(2) of the Act."
17. As the accused persons have not willfully delayed the
filing of the return and the deposit of tax and also as the
accused were not given any notice before giving sanction, this
Court finds that prosecution has failed to prove the guilt of the
accused persons beyond the shadow of reasonable doubt.
18. It has been held in K. Prakashan vs. P.K. Surenderan (2008) 1 SCC 258, that when two views are possible, appellate Court should not reverse the judgment of acquittal merely because the other view was possible. When judgment of trial Court was neither perverse, nor suffered from any legal infirmity or non consideration/misappreciation of evidence on record, reversal thereof by High Court was not justified.
19. The Hon''ble Supreme Court in T. Subramanian vs. State of Tamil Nadu (2006) 1 SCC 401, has held that where two views are reasonably possible from the very same evidence, prosecution cannot be said to have proved its case beyond reasonable doubt.
20. In view of the above discussion, the prosecution has failed to prove the guilt of the accused conclusively and beyond the scope of reasonable doubt. The findings of the learned Court below are not required to be interfered with. Thus, I am of the view that the present appeal, being devoid of merits, deserves dismissal and is accordingly dismissed. Pending application(s), if any, are also disposed of accordingly.
