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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE V. BAKTHAVATSALU
Assistant Commissioner of Income Tax - Appellant
Versus
Jawahar Mills Limited - Respondents
Crl. Appeal Nos. 647 to 653 of 1990
Decided On : 10 March 1998
INCOME TAX - Section 269SS - Acceptance of loans and deposits - Mode of acceptance - Cash deposits - Offence - Ingredients - Burden of proof - Section 276DD - Omission - Effect - General Clauses Act, 1897, Section 6.
Fact of the Case:
The accused, a private limited company, and its principal officers were charged with violating section 269SS of the Income-tax Act, 1961, by accepting cash deposits of Rs. 10,000 or more in contravention of the said section. The prosecution alleged that the accused had received the deposits without reasonable cause or excuse, thereby committing an offence punishable under section 276DD of the Act. However, section 276DD was subsequently omitted with effect from 1-4-1989, and a new section 271D was introduced, which imposed a penalty for contravening section 269SS but did not provide for imprisonment.
Finding of the Court:
The Trial Court acquitted the accused, holding that the prosecution had failed to produce the affidavits of the depositors from whom the accused had received cash, and that the burden was on the prosecution to prove that the accused had no reasonable cause or excuse for accepting the deposits in cash. The complainant appealed against the acquittal, contending that the Trial Court had erred in not considering the documentary evidence produced by the prosecution and in placing the burden of proof on the prosecution.
Issues: 1. Whether the accused were liable to be punished for alleged violation of section 269SS of the Income-tax Act, 1961. 2. Whether the prosecution had the burden of proving that the accused had no reasonable cause or excuse for accepting the cash deposits.
Ratio Decidendi: 1. The Court held that the accused were liable to be punished for violating section 269SS only if the prosecution proved that they had accepted the loans or deposits without reasonable cause or excuse. The Court relied on the plain language of section 276DD, which stated that a person who, without reasonable cause or excuse, accepts any loan or deposit in contravention of section 269SS shall be punishable with imprisonment and a fine. 2. The Court held that the burden of proving that the accused had no reasonable cause or excuse for accepting the cash deposits lay with the prosecution. The Court distinguished the present case from cases where a penalty is imposed for contravening a provision of the Act, in which case the burden of proof may lie on the assessee to show that there was reasonable cause for the contravention. However, in the present case, where the contravention of section 269SS carried the penalty of imprisonment, the prosecution had to prove the ingredients of the offence, including the absence of reasonable cause or excuse.
Final Decision: The Court dismissed the appeals filed by the complainant, upholding the order of acquittal passed by the Trial Court. The Court held that the complainant had failed to aver and prove that the accused had accepted the deposits in cash without reasonable cause or excuse, and that the Trial Court had rightly acquitted the accused.
CA. No. 647 of 1990
1. This appeal is preferred by the complainant, Assistant Commissioner, Salem, against the order of acquittal passed in F.O.C.C. No. 341 of 1989. The case of the complainant is that the first accused is a private limited company engaged in running a spinning mill, in the name and the style of "Jawahar Mills Limited."
The second, third and fourth accused are the principal officers of the first accused who are responsible for the conduct of the business. The provisions of section 269SS of the Income-tax Act, 1961 ('the Act') prescribed the mode of acceptance of any deposit or loan by the income-tax assessee. The above provision has come into force with effect from 1-7-1984. On scrutiny of the books of account of the first accused company for the year 31-3-1985, it was noticed that the first accused accepted deposit of Rs. 10, 000 or more violating the provisions of section 269SS. In the case of Vaiyapuri, an amount of Rs. 30, 000 was received in cash on 8-1-1985.
The complainant issued summons to the accused to produce books of account on 16-3-1988. In response to his summons, the second accused had appeared before the complainant with the relevant books of account. The second accused has admitted the default under section 276DD of the Act and pleaded his ignorance of the provision and represented the same as unintentional. A show-cause notice under section 278AA was also issued to the accused. The first accused company has violated section 269SS by acceptance of loans and deposits otherwise than by account payee'cheque or bank draft. The first accused has committed an offence punishable under section 276DD. The second, third and fourth accused being the executives of the first accused who were in charge and responsible for conduct of the business have committed an offence punishable under section 276DD, read with section 278B.
2. The complaint was examined as P.W. 1 who is an authorised representative of the Tribunal, Chennai. When P.W. 1 perused the account produced by the accused, it is revealed that a sum of Rs. 30, 000 was received by the accused. Ex. P. 1 is the Fixed Deposit Register, Ex. P. 2 is the corresponding entry in the cash register. Ex. P. 3 is the corresponding entry in the ledger. Ex. P. 4 is the order of sanction for launching prosecution against the accused. Ex. P. 5 to P. 7 are the statements given by the accused in the enquiry. After enquiry the ITO also issued showcause notice under Ex. P. 8 under section 2(35) of the Act. Ex. P. 9 is another notice issued to the accused. Ex. P. 10 is the reply given by the accused.
3. When the incriminating circumstances appearing against the accused were explained to them under section 313 of the Code of Criminal Procedure ('the Code'), the accused denied the evidence. On consideration of oral and documentary evidence, the trial Court acquitted the accused holding that the accused are not guilty under section 276DD.
CA. No. 648 of 1990
The appeal is preferred by the complainant, the Assistant Commissioner, against the order of acquittal passed in F.O.C.C. No. 342 of 1989. The above complaint is filed in respect of amount of Rs. 10, 000 received by the respondent in cash on 26-11-1984. Except the above fact, all other allegations in the complaint are similar to the complaint filed in the case relating to C.A. No. 647 of 1990. The complainant has also marked Ex. P. 1 to P. 10. The accused denied the evidence of P.W. 1 in 313 Explanation.
CA. No. 649 of 1990
This appeal is preferred by the complainant, the Assistant Commissioner, against the order of acquittal passed in F.O.C.C. No. 343 of 1989. The complaint is filed in respect of receipt of Rs. 14, 000 in cash by the accused on 15-10-1984. The other averments in the complaint are similar to the complaint filed in the other cases. P.W. 1, the complainant, has marked Ex. P. 1 to P. 10. The accused is examined under section 313 of the Code and he denied the evidence of P.W. 1CA. No. 650 of 1990.
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