Income-tax Officer, B Ward, Jabalpur vs B. M. Arora

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1978 Supreme(MP) 216

HIGH COURT OF MADHYA PRADESH
M.L. Malik, J.
Income-tax Officer, B Ward, Jabalpur
v.
B.M. Arora and another
Cr. Revn. No. 387 of 1975 against order passed by Shri A.G. Gandhe, Addl. Sessions Judge, Jabalpur confirming the order passed by Shri K.K. Saxena, Chief Judicial Magistrate, Jabalpur
Decided on : 7-12-1978

Advocates appeared:
M.V. Tamaskar for applicant
R.N. Rai and P. Rusia for non-applicant No.1

Headnote:(1) Income-tax Act, 1961 – S.277 - gravemen of the offence-there should be evasion of tax-only giving false return is not sufficient.
       The gravemen of the offence under section 277 of the Income-tax Act is not just submitting a false return. It is the evasion of tax by giving false return which is the grave men of the offence. The assessee must incur the liability of a penalty by concealing the particulars of his income as contemplated by section 271 of the Act. [Para 7
       (2) Income-tax Act, 1961-Ss. 271, 277 & 279 (I-A) - false statement in verification-prosecution when may be launched-issue of estoppel'-applicability of.
       The false statement in verification, or delivery of an account or statement which the assessee knows to be false, should necessarily conceal particulars of income or should furnish inaccurate particulars for which the penalty should either be imposed or become imposable, then alone the assessee would be liable to be prosecuted, provided that the Commissioner authorizing prosecution, does not agree to waive or reduce the penalty imposed or imposable, acting under section 271 (4-A) (now section 273-A). If the Income-tax Appellate Tribunal, were to find that it was not a case of concealment of particulars of income nor of inaccuracy in particulars and, therefore, not a case where penalty was imposable, obviously it would not be a case for prosecution at all. If the prosecution is launched, it must either be withdrawn or the magistrate must discharge the assessee on the principle of 'issue estoppel" finality attaching to the Tribunal's orders which the authorization of the Commissioner will not be able to get over. [Para 10
       (3) Income-tax Act, 1961 - S.279 - power of Commissioner to sanction prosecution-how to be exercised-full facts not placed before the Commissioner-sanction not legal.
       Where statute confers power, may that be administrative or quasi-judicial the person to whom power is conferred must exercise it in good faith, for furtherance of the object of the statute and he must take into account matters relevant to the exercise of those powers. It would be legitimate to presume that while according sanction to prosecute, the papers that were placed before him, were the papers that have been filed along with the challan. The Commissioner was not apprised of the final order passed by the Income-tax Appellate Tribunal, setting aside the assessment order made by the I.T.O. [Para 11
       (4) Income-tax Act, 1961 - S. 279(1-A) - prosecution cannot be launched under section 277 before the Commissioner could be approached under section 279 (1-A).
       Criminal prosecution is a serious matter. The right of an assessee-accused to approach the Commissioner for invoking his powers under section 271 (4-A) could not be stultified. The magistrate would be justified in staying trial and giving an opportunity to the assessee to approach the Commissioner under section 271 (4-A), if an approach was not made before. He could also request the Commissioner to withdraw prosecution. If sanction had been accorded on highly exaggerated data. [Para 15

ORDER

M.L. Malik, J. - 1. This revision is directed against the order of the Second Additional Judge to Sessions Judge, Jabalpur, passed on 18-4-1975 in Criminal Revision No. 93 of 1974.

2. The Income Tax Officer, B- Ward, Jabalpur filed a complaint against Dr. B. M. Arora in the Court of the Chief Judicial Magistrate, Jabalpur, on 28-3-1974 under section 420 read with section 511 of the Indian Penal Code and under section 277 of the Income Tax Act on the usual allegations that that Dr. Arora had filed a false return of income on 3-10-1968 for the Assessment Year 1968-69 and later a revised return on 10-7-1969 duly verified and that he knew or had reason to believe the account and the statement in verification to be false, thereby be tried to evade payment of correct tax and thus attempted to cheat the Department of its revenue.

3. The attached schedule 'A' gives the figures of income shown by the assessee in the two returns, the Income Tax Officer’s assessment, the assessment made by the Appellate Assistant Commissioner of Income Tax in appeal and the ultimate order of the Income Tax Appellate Tribunal setting aside the assessment and the levy of penalty. By order dated 29-6-1973, the assessment case was remanded to the I.T.O. for a reassessment with certain specific directions.

4. The complaint came to be filed on 28-3-1974 before the reassessment proceedings commenced after the remand. The assessee raised preliminary objections that after the Income Tax Appellate Tribunal had set aside the order of assessment and also the levy of penalty, the Commissioner could not have authorized prosecution nor could the complaint be proceeded with by reason of section 279 (1-A) of the Income Tax Act until the reassessment proceedings were completed.

5. The learned Additional Judge to the Sessions Judge held that the prosecution of the assessee was premature. This is what he said in paras 9, 10, 11 and 12 of his order :-

"9. Now the case is before the Income-Tax Officer for fresh assessment. The Income-tax Officer has full powers while doing this work, if he is satisfied that the case is covered under Clause (c) of sub-section (1) of section 271(l) (c) (1) to redirect the assessee to pay by way of penalty an amount upto twice the amount concealed. The assessee has the right to go in appeal against such imposing penalty, and the Commissioner may in his discretion under sub section (4-A) of section 271 reduce or waive the penalty.

In this set of circumstances the consideration that the proceeding with the complaint would mean shutting the doors to a would be likely prohibition of not being proceeded against, is apparently relevant and material consideration. The conclusion arrived at by the trial Court that the complaint should be taken as premature seems correct.

10. True that the basis of the complaint is not the assessment, it is the false statement in verification in the return. True that the verification is false is apparent. May be, that the explanation for such false statement without further proof may not be taken as reasonable and further evidence in rebuttal might be necessary.

But with all this, when the prosecution for the falsity is made conditional by the statue itself there can be no further proceeding against if the condition would not exist.

11. True that complaint is also under section 420 read with section 511, I.P.C. For these sections obviously the provision of subsection (1-A) of section 279 of the Income Tax Act does not apply.

But we may note that even the allegation for the commission of this offence under I.P.C. and in relation to the same false statement in verification of the return. The weight to be attached to such false statement is yet hanging in air. Proceeding against the non-applicant under these sections, therefore, would not be justified.

12. Discharge of an accused on the ground that the prosecution is premature cannot prejudice the complainant. Such a discharge is not a final say in the matter. If and when occasi

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