JUDGMENT
Jagdish Chandra, J.
1. The petitioners have brought this petition under section 482 of the Code of Criminal Procedure, 1973 (in short, Cr.P.C.) for the quashing and setting aside of the impugned order dated May 2, 1986, whereby the petitioner had been summoned in the criminal complaint dated May 2, 1986, pending in the court of Mrs. Manju Goel, Addl. Chief Metropolitan Magistrate, Delhi, which had been instituted by respondent No. 1, Shri Gopal Mukherjee, Income-tax Officer, Central Circle VII, Mayur Bhawan, New Delhi, under sections 276C(1) and 278 of the Income-tax Act, 1961 (in short, “the Act”) and under sections 193 and 196 read with section 120B, Indian Penal Code, in regard to the assessment year 1984-85 of the company, petitioner No. 1, M/s. General Sales Pvt. Ltd., 8, Malcha Marg Market, New Delhi (hereinafter to be referred to as “the company”), and also for quashing the proceedings in that criminal compliant.
2. 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.
3. 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 favor of two appeal 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 and intention of claiming a deduction under section 35(2A) of the Act in its return of income.
3. The modus operandi in regard to the alleged donation of Rs. 10 lakhs was by issuing a special crossed “payee’s A/c. only” cheque bearing number PWV 331524 dated April 28, 1983, drawn on Punjab National Bank, Kasturba Gandhi Marg, New Delhi, in favor of HSMT and the said cheque was signed by petitioner No. 3, N. R. Dongre, and petitioner No. 4, R. B. Sharma. The special crossing was, however, cancelled on this cheque under the signatures of petition Nos. 3 and 4 and the cheque was turned into a simple crossed one. This cheque was endorsed in favor of one India Investment Co. by one signing as Om Prakash in his alleged capacity as secretary of HSMT whereas there is no person by the name of Om Prakash connected with HSMT. The said endorsement in favor of M/s. India Investment Co. was confirmed by one Shri Vipin Kumar, proprietor of M/s. India Investment Co., and the proceeds of the said cheque were collected by New Bank of India, Chawri Bazar Branch, Delhi, and credited to the account of M/s. India Investment Co. on April 26, 1983. The said account in the name of M/s. India Investment Co. with New Bank of India, Chawri Bazar Branch, Delhi, was simultaneously opened on April 22, 1983, by the said Vipin Kumar in his capacity as the sole proprietor of the said concern. Vipin Kumar was an alias of co-accused Vipin Mehra (respondent No. 4) and he had been introduced to the bank by one Jaswant Rai, partner of M/s. Hari Kishan Jaswant Rai, 3751, Gali Lahey Wali, Chawri Bazar, Delhi, holder of account No. CA 49. There was another credit to the said account of M/s. India Investment Co. in respect of cheque for Rs. 5 lakhs drawn by one K. S. Karla, Chief functionary of M/s. Varun Enterprises and similarly endorsed in favor of the said M/s. India Investment Co. The said M/s. Varun Enterprises is a partnership in which major share is held by one Deepak Singh and Family (HUF) and Deepak Singh is the son-in-law of Charat Ram, accused-petitioner No. 2. The entire amount of Rs. 15 lakhs credited to the said account of M/s. India Investment Co. was withdrawn by bearer cheques between April 28, 1983, and May 2, 1983, by accused Vipin Mehra.
4. A different modus operandi was adopted in respect of the other alleged donation in the sum of Rs. 15 lakhs purportedly made in the name of P.M.F. and for this purpose, a banker’s cheque bearing number 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 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 favor 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 favor 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.G. 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 facsimile which appeared to be of the signatures of Dr. Grand, Managing Trustee of P. M. F., was affixed. Accused Desh Raj, respondent No. 5, was authorised to operate the said account even though never authorised by P.M.F. to open or operate any bank account on its behalf and he was a school teacher in New Delhi. The said account was opened at the behest of accused Prem Prakash, respondent No. 2, a close confidant and director of a number of companies belonging to the group indulging in such malpractice of fake donations. Prem Prakash and accused Vinod Singhania, respondent No. 3, used to issue instructions to the bank prior to any withdrawal from the bank and all the withdrawals were by bearer cheques and the cash was collected either by accused Dosh Raj or by accused Vipin Mehra.
5. It is further alleged that the return of income of the company for the assessment year 1984-85 for which the accounting period ended on June 30, 1983, was filed on June 2, 1984, and the same was in the prescribed form and verification thereto was signed by accused R. B. Sharma, petitioner No. 4, in his capacity as one of the directors of the company. The return was accompanied by profit and loss account, balance sheet, etc., and the said documents were signed by accused persons, namely, Charat Ram, petitioner No. 2, N. R. Dongre, petitioner No. 3, R. B. Sharma, petitioner No. 4 and Subodh Verma, petitioner No. 6. The said profit and loss account of the company showed profit before taxation at Rs. 44,10,392 and that profit was computed without taking into account the aforesaid amount of the fake donations of Rs. 25 lakhs during the relevant previous year and the said amount of Rs. 25 lakhs was shown in the balance-sheet as “claims recoverable”. The rebate in respect of the said bogus donations was not claimed in the return of income submitted on June 2, 1984, as the Department had by that time unearthed the indulging of the accused in the aforesaid nefarious activities by conducting raids, searches and seizure of various documents. It is further alleged that if nothing more, petitioners Nos. 2 to 6 were negligent in the discharge of their duties and obligations and the offences committed were directly attributable to the neglect on their part.
6. Admittedly, the aforesaid amounts of the alleged donations did not reach the donees. Even though the alleged donation cheques to the tune of Rs. 10 lakhs for HSMT and Rs. 15 lakhs for PMF 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 maneuvering 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 a 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 “willful attempt to evade any tax, penalty or interest chargeable or imposable under this Act” in its clauses (i) to (iv) and willful 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 less than six months but which may extend to seven years an with fine, in a case where the amount sought to be evaded exceeds one hundred thousand rupees, and in any other case with rigorous imprisonment for a terms which shall not be less than three months but which may extent to three years and with fine. The present case, if proved, would fall under the first category. The provision of law contained in section 35(2A) of the Act has been sought to be pressed into service by the learned counsel for the Income-tax Officer, respondent No. 1, who has filed the complaint before the Magistrate against the petitioners and the co-accused, respondents Nos. 2 to 5, and according to the same, if the assessed pays any sum to a scientific research association or university or college or other institution referred to in clause (ii) of sub-section (1) or to a public sector company to be used for scientific research undertaken under a programme approved in this behalf by the prescribed authority having regard to the social, economic and industrial needs of India, there shall be allowed a deduction of a sum equal to one and one-third times the sum so paid, and in this manner, the offenders, on account of the fake donations to the tune of Rs. 25 lakhs, appear to have made a willful attempt to claim benefit or reducing their income to the extent of over Rs. 33 lakhs which naturally would be tantamount to a willful attempt for evading income-tax under section 276C(1) of the Act already referred to above. It is alleged in the complaint that the company had not appointed any managing director and petitioners Nos. 2 to 6 constituted the board of directors of the company and were jointly in charge of and responsible to the company for the conduct of its day-to-day business. Some part or the other has been ascribed to every one of the petitioners and the other co-accused, which constituted the circumstances and which fell within clause (iv) of the Explanation to section 276C of the Act as already referred to above and which circumstances were intended to have the effect of enabling the petitioners to evade tax chargeable or imposable under the Act or the payment thereof. The contentions of the learned counsel for the petitioners that the petitioners did not actually claim any benefit of the donations before the assessing authority in any manner whatsoever and thus could not be guilty for any offence, does not appear to be correct in the fact 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.
7. 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 is instructive on this point and the relevant observations there from are set out below (headnote) :
“The High Court erred in quashing the criminal proceedings under section 482, Cr. P. C., on an erroneous basis when on prima facie being satisfied, the Metropolitan Magistrate had taken cognizance of the alleged offences. The question at this stage, is not whether there was any truth in the allegations made but it is whether on the basis of the allegations, a cognizable offence or offences had been alleged to have been committed. The facts subsequently found out to prove the truth or otherwise of the allegation is not a ground on the basis of which the complaint can be quashed. Taking all the allegations in the complaint to be true, without adding or subtracting anything at this stage, it can be said that a prima facie case for trial had been made out. That is the limit of the power to be exercised by the High Court under section 482, Cr. P. C. The High Court in the instant case exceeded that jurisdiction.”
8. It was contended on behalf of the petitioners that the petitioners were not given any opportunity much less a reasonable one of being herd before the launching of the prosecution against them, and the omission of such an opportunity rendered the prosecution bad in law. Reliance was placed upon S. Harnam Singh Suri v. Central Board of Direct Taxes [1984] 145 ITR 159 (Delhi) (at pp. 168 and 169) wherein it was held by M. L. Jain J. of this court that the Income-tax Officer should not, like an ordinary complainant, proceed to prosecute the assessed without giving him a hearing and that it was one even if the false affidavit attracted section 193 and 196, IPC. On the other hand, the learned counsel for the Income-tax Officer relied upon a Division Bench ruling of this court reported as Gulab Chand Sharma v. H. P. Sharma, Commissioner of Income Tax [1974] 95 ITR 117, wherein it 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 proposes of section 476 and 479 of the code and it was not, therefore, necessary contemplated in section 476, Criminal Procedure Code, 1898, had been made as a result of which the person concerned was deprived of the opportunity of being heard, it was held that the action of the Revenue was essential that the person concerned should be given an opportunity in the shape of a preliminary inquiry like the one provided in section 476, Criminal Procedure Code, 1898 (now section 340, Criminal Procedure Code, 1973) before the prosecution is launched by the Income-tax Officer. As no such preliminary inquiry analogous to the s violative of principles of natural justice and the complaint was bad in law, y for him to comply with those sections. This Division Bench authority was not, however, referred to by the learned single Judge M. 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 before the launching of the prosecution against them and as the principles of natural justice as contemplated in S. Harnam Singh Suri’s case [1984] 145 ITR 159 (Delhi), had been violated, the complaint was liable to be quashed by this court. Section 279(1) of the Act provides that such a prosecution is not to be launched except at the instance of the Commissioner. It is conceded that this prosecution has been authorised by the Commissioner. Mr. D. K. Jain, advocate, standing prosecution counsel, has filed a letter dated August 22, 1986, addressed to him by Mr. J. C. Pande, Commissioner of income-tax, Delhi (central-II), New Delhi, in which it is mentioned that the complaint in this case was field by the Income-tax officer only on May 2, 1986, and the assessed had not only been given a due opportunity before filing the complaint but all the “salient features” as mentioned by the assessed were duly considered before filing the said complaint. It was conceded by Mr. Jain that no show-cause notice had been sent to the petitioners and the co-accused before the launching of the prosecution against them, but asserted that as they had become aware of the intentions of the income-tax department on account of the raids conducted by the department officials on them and their premises which resulted in the seizure of a number of incriminating documents, they had sent a representation to Shri S. K. Roy, Member, Central Board of Direct Taxes, Ministry of Finance (Department of Revenue), North Block, New Delhi, with a copy to the Commissioner, Shri J. C. Pande, and all their contentions had been mentioned therein and thus they could not now turn round and say that they were not afforded an opportunity of being heard before the start of the prosecution against them. The learned counsel for the petitioners conceded that they had sent that representation to the quarters concerned including the Commissioner of Income-tax before the filing of the complaint and had also made it clear that the petitioner may be called upon to furnish any other clarification or information that might be directed and would be grateful if a personal hearing was granted to the company to explain its case. It was contended that the sending of the said representation was not tantamount to a hearing much less a fair hearing and was thus a non-compliance with the principles of natural justice especially when no 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.”
9. It has also been contended on behalf of the petitioners that for want of means read and also in view of the minimum imprisonment prescribed under section 276C(1), the company cannot be held guilty under section 278B of the Act. In Municipal Corporation of Delhi v. J. B. Bottling Co. Pvt. Ltd. [1975] Crl. LJ 1148 [FB], which was a case under the Prevention of Food Adulteration Act, 1954, whereunder a sentence of not less then Rs. 1,000 was imposable, it was held by the Full Bench of this court that a company did not enjoy immunity from prosecution when under that Act it was alleged to have committed an offence and in case such a company was found guilty of such an offence, it could be punished with fine only. In a later judgment of this court in P. N. B. Finance & Industries Ltd. v. Gita Kriplani H. L. Anand J. thought that the view taken by the Full Bench seemed to be inconsistent with the decision of the Supreme Court in State. of Maharashtra v. Jugmander Lal, and the line of cases in England that a company cannot be prosecuted. Anand J. further observed that the decision of the Full Bench required reconsideration and also pointed out that the Allahabad High Court in Modi Industries Ltd. v. B. C. Goel [1983] 144 ITR 496, expressly stated that the view of the Full Bench of Delhi High Court was counter to the view of the Supreme Court. It was also submitted on behalf of the petitioners that the Full Bench had considered the liability of the company of the offence only from the point of view of the minimum imprisonment prescribed for the offence but not from the point of view of means rea. All the matters can be considered by the High Court in appropriate proceedings after the case has been decided by the trial Magistrate.
10. No other point was urged and in view of the above discussion, the petition is dismissed.
11. Petition dismissed.