IMPORTANT POINT
Admission can be implied by conduct also.

Judgment

1. The Income Tax Officer, aggrieved by the acquittal of the respondents has preferred this appeal with leave of the Court.

2. According to the prosecution, respondent no.1 M/s. Mangat Ram Norata Ram is a partnership firm carrying on the business of sale and purchase of machinery, iron pipes and spare parts. Respondent No. 2 accused Hem Raj happened to be one of its partner. M/s. Mangat Ram Norata Ram (hereinafter referred to as "the Firm") filed its income tax return for the assessment year 1988-89 on 14th July, 1988 through its counsel, which was signed and verified by Hem Raj, its partner. The income-tax return showed the income of the firm Rs.1,02,800/-. Return was accompanied by statement of income, trading accounts, profit & loss account, partnership account and balance sheet for the assessment year 1988-89. The assessment was completed by the then Income Tax Officer under Section 143(3) of the Income Tax Act for Rs.1,47,370/-.

3. Further case of the prosecution is that the books of the accounts of the firm were taken into possession by the Sales Tax Department, which were obtained by the Income Tax Department and on its perusal discrepancies relating to entries of income, sale and purchase, bank account etc. were noticed and accordingly a notice under Section 148 of the Income Tax Act (hereinafter referred to as 'the Act') was issued requiring the respondents to furnish a revised return within 30 days. The respondents did not comply with the notice and thereafter notice under Section 142(1) of the Act was issued and the assessee firm ultimately filed its income tax return declaring its income of Rs.1,47,870/-. The prosecution has alleged that this return was duly signed and furnished by accused Hem Raj, which was accompanied by revised statement of income, trading account and profit and loss account. All these documents, according to the prosecution were also signed by accused Hem Raj. On consideration of the same, the Assistant Commissioner of Income Tax made addition of Rs.1,28,000/-with trading account, Rs.1,10,000/- in bank account and Rs.19,710/-as additional income and assessed the total income to Rs.3,68,200/- and directed for initiating penalty proceedings.

4. Ultimately, the minimum penalty of Rs.1,24,950/-was imposed under Section 271(1)(c) of the Act and further a sum of Rs.7890/- and Rs.12,680/-under Section 271(1)(a) of the Act. The respondent firm filed appeal against the imposition of penalty which was dismissed by the Commissioner of Income Tax (Appeals). The respondents had paid the penalty inflicted on the firm.

5. A complaint was also lodged for prosecution of respondents under Section 276C (i), 277 and 278 of the Act. The trial court on appraisal of the evidence held both the respondents guilty and awarded a fine of Rs.1000/-each under Section 276C(1), 277 and 278 of the Act to respondent no.1, the firm, whereas, respondent no.2 was sentenced to undergo rigorous imprisonment for one year and to pay a fine of Rs.1,000/- on each count and in default to suffer simple imprisonment for three months.

6. Respondents aggrieved by their conviction and sentence preferred appeal and the Appellate Court set aside the conviction and sentence on the ground that sanction for prosecution was not valid. The Appellate Court further held that the prosecution has not been able to prove the signature of respondent no.2 in the return filed, and hence, the conviction is bad on that ground also. The Income Tax Officer aggrieved by the acquittal of the respondents preferred appeal and the High Court by its impugned judgment upheld the order of the acquittal and while doing so observed that the sanction is valid but maintained the order of acquittal on the ground that the prosecution has not been able to prove that the return was signed/verified by respondent no.2. The observation of the High Court in that regard reads as follows:

"Irrespective of the above decision as regards grant of sanction and the requirement