JUDGMENT
Radhakrishna Rao, J.
1. The 1st petitioner is a registered firm carrying on manufacture on manufacture of biscuits in the name and style of “M/S. Ashok Biscuit Works”. Petitioners Nos. 2 to 4 are partners. The petitioner firm filed returns for the years 1976-77, 1977-78 and 1978-79. On January 20, 1979, the Income-tax officer issued a letter to the 1st petitioner-firm pointing out that the sales aggregating to Rs. 2,29,249 properly accountable as sales for the previous year ending March 31, 1976, have not been accounted for under “sales”. The 1st petitioner-firm was requested to offer its objections, if any, for treating the sum of Rs. 2,29,249 as its concealed income for the assessment year 1976-77. The 1st petitioner-firm was requested to file its reply by January 27, 1979. On February 7, 1979, the 1st petitioner-firm filed a revised return of income disclosing a total income ofRs. 2,88,434.62 along with a letter stating that the reasons for filing the revised return and the reply to the letter dated January 20, 1979, would be filed on February 9, 1979. On February 15, 1979, the 1st petitioner-firm a reply. Two sworn statements were recorded from accused.No.3, one on September 24, 1983, and the other on November 2, 1983. The assessment was completed on March 30, 1979, determining the income at Rs. 3,40,347 by taking into considerations the revised return filed on March 7, 1979. The income-tax officer, by his order dated December 17, 1983 levied penalty for the three assessment years under section 271(1)(c) of the Income-tax Act for concealment of the income. The assessed succeed in the penalty proceedings finally before the Income-tax Appellate Tribunal and a revised reference was also asked for and the same was rejected.
2. Before the datermination by the Income-tax Appellate Tribunal, complaints have been filed in C.C. Nos. 126, 127 and 128 of 1986 for the concealment of income of Rs. 1,13,365, Rs. 2,85,921 and Rs. 4,70,849 for the assessment years 1976-77, 1977-78 and 1978-79, respectively, against the petitioner-firm under section 276C(1) of the Income-tax Act for evasion of tax, under section 277 for making false statement in verification and under sections 193 and 196 of the Indian Penal Code for giving false evidence. As the petitioner-firm succeeded in the penalty proceedings before the Income-tax Appellate Tribunal, three applications were filed before the Special Judge for Economic Offences under sections 482 and 245, Cr. P.C., to quash the proceedings. The Special Judge dismissed the three petitions by a common order dated August 22, 1986, with an observation that the finding of the Income-tax Appellate Tribunal that there is no case for imposing penalty cannot be a ground for quashing the proceedings, keeping in mind the view of the Allahabad High Court in Dr. D. N. Munshi v. Singh (N.B.) [1978] 112 ITR 173 and that of the Supreme Court in P. Jayappan v. S. K. Perumal, First ITO . Against those orders, the present petitions have been filed under section 482, Cr. P.C., to quash the proceedings in C.C. Nos. 126, 127 and 128 of 1986 pending on the file of the Special Judge for Economic Offences, Hyderabad.
3. Shri Malla Reddy, learned counsel for the petitioner-firm, contended that though the Department has got a right to initiate criminal proceedings at the inception, they cannot be pursued further in view of the finding of the Tribunal that there are bona fides in not disclosing the same at the earliest point of time. Its is also contended that when the statute has given a right to submit revised returns and when such returns have been filed in time and when they were accepted and the same was confirmed by the Tribunal and as the Tribunal also has upheld the plea of the petitioner that no penalties have to be levied, the proceedings before the Special Judge for Economic Offences should not be allowed to go on.
4. The point that arises for consideration is whether prosecution for offence under sections 276C and 277 of the Income-tax Act and sections 193 and 196, IPC, instituted by the Department when the assessment proceedings have become final are liable to be quashed on the ground that they are not maintainable. There is no provision in law which provides that prosecution for the offences in question cannot be launched or persuades that prosecution for the offences in question cannot be launched or pursued even though the revised statements filed by the assessee in time and accepted by the Department have become final. Section 279 of the Act provides that a person shall not be proceeded against for an offence under section 276C or section 277 of the Act, except at the instance of the Commissioner. It further provides that a person shall not be proceeded against for an offence punishable under those provisions in relation to the assessment for an assessment year in respect of which penalty imposed or imposable on him under clause (iii) of sub-section (1) of section 271 has been reduced or waived by an order under section 273A of the Act. The Commissioner has power either before or after the institution of proceedings to compound any such offence.
5. Learned counsel relied upon Uttam Chand v. ITO . In that case for the assessment year 1969-70, The Income-tax Officer cancelled the registration not the ground that the firm was not genuine on the basis of the statement the basis of statement of one of the parties that the Signatures in the records were not hers and that she was not a partner and The Tribunal on apparaisal of material on record and found that she was the partner and the partner was genuine and set aside the cancellation order of the income-tax officer. The Income-tax officer ignited the prosecution of the partners of the firm under section 277 of the Act for having filed false returns and the Punjab and Haryana High Court, in a revision petition for quashing the prosecution against the firm, held that the Tribunal’s finding was not binding on the criminal court, and cannot be a bar to the prosecution proceedings and that the same may be produced before the criminal court, if admissible as evidence. On appeal to the Supreme Court by special leave, it was found that in view of the finding recorded by the Appellate Tribunal that she was a partner of the and that the firm was genuine, the assessee could not be prosecuted for filing false returns.
6. In that case, originally the firm was assessed for several years as a registered firm prior to 1969-70. Prosecuttion was lainched only on the ground that it was not a genuine firm, but when once it was found that it was a genuine firm by the Appellate Tribunal, the natural consequence would be that the prosecution will not lie. It is from that angle that as the cancellation of the registration was not genuine and as the firm is entitled to file the same as a genuine one, the Supreme Court found to be a partner and that the firm was a genuine one and the assessee could not be prosecuted for filing false returns. This judgment was considered in Jayappan’s case and it was found that the decision in Uttam Chand’s case , is no authority for the proposition that no proceedings can be initiated at all under sections 276C and 277 of the Act as lond as some proceeding under the Act, in which there is a chance of success of the assessee, is pending.
7. Sri Malla Reddy contended that the facts in Jayappan’s case are different and the principle laid down in Uttam Chand’s case alone is applicable. In Jayappan’s case , the contention was that there is a chance of success of the assessee before the Tribunal and in view of that expectation of success, appeal or reference alone has been considered. If we go through the judgment in Jayappan’s case , it is clear that the pendency of the reassessment proceeding cannot act as a bar to the institution of criminal prosecution for offences punishable under section 276C or 277 of the Act. In criminal cases all the ingredients of the offence in question have to be established in order to secure the conviction of the accused. The criminal court, no doubt, has to give due regard to the results to the result of any proceedings under the act having bearing on the question in issue and in appropriate case it may rope the proceedings in the light of the order passed under an act It does not however mean that the results of a proceedings under the Act would be binding on the criminal court. The criminal court has to judge the case independently on the evidence placed before it.
8. In the case on hand the allegation is that the books of account contain false entries inasmuch as the value of finished goods were not shown in the closing stock figure shown in the goods account in the ledger. The mere fact that the revised returns were filed within the statutory period will not come in the way of the department initiating action for the offences under section 276C and 277 of the Act. Whether false state-ment and verification have been made out of not has to be judge with the reference to the date of filing of original returns. In Uttam chand’s case the main allegation was about the registration of the firm and that the firm was found to be a genuine one. In case on hand admitted, the finished stock of the goods with regard to four commission agents was not furnished. It is only when the when a notice has been issued about the concealment of income, that time was taken and revised statement have been filed. If the revised statement was filed before the notice of concealment, the position would be different. If the revised statement has been filed with the view to get over the allegation about concealment, we have to find out whether a false statement has been made in the verification in the original return that has been filed by the firm or not. Simply because a revised return has been filed after the insurance of the notice and the same was accepted and the penalty proceedings also were dropped at a later stage, we cannot say that the assessee has not committed any offence with regard to the statement that has been made by him in the original return. That the fact has to be determined by the criminal court. Similarly with regard to the wrong accounting that has been made by him, it has to be decided with reference to the statement made by the firm and with reference to the non-disclosures of the stock lying with four agents, while disclosing the stock with two agents in the return. Whether the wrong accounting that has been pleaded by the firm in bona fide or not and whether a false statement about the verification has been made in the original return or not, has to be considered by the criminal court.
9. In this connection, we have to see the view taken by the supreme court in Sharda Prasad Sinha v. State of Bihar, . In that case, it was observed as follows (p. 1755) :
“It is now settled law that where the allegations set out in the complaint or the charge-sheet do not constitute any offence. It is competent to the high court exercising its inherent jurisdiction under section 482 of the code of criminal procedure to quash the order passed by the Magistrate taking cognizance of the offence.”
10. The same view has been reiterated in Municipal Corporation of Delhi v. Ram Kishan Rohtagi, , which reads as follows (headnote) :
“Proceedings against an accused can be quashed only if on the face of the complaint or the papers accompanying the same, no offence is constituted. In other words the test is that taking the allegation and the complaint as they are without adding or subtracting anything If no offence is made out then the high court will be justified in quashing the proceedings in the Exercise of its power under section 482 of the Criminal Procedure Code.”
11. By applying the test, if we see the complaint as it is, it has been mentioned about non-disclosures of four items in one assessment year and the chart filed discloses the exact position as to when the original return was filed when the revised return was filed and when the complaint has been filed.
12. The chart is as under :
————————————————————————
For the assessment year C.C.No. 126/86 C.C.No.127/86 C.C.No.128/86
1976-77 1977-78 1978-79
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1. Date of filing the
original return. 25-9-1976 14-10-1977 21-11-1978
2. Date of filing the
revised return. 07-2-1979 15-06-1979 21-07-1979
3. Date of assessment 30-3-1979 29-12-1979 13-03-1981
4. Date of order of
Appellate Tribunal ---- 07-01-1984 28-02-1986
5. Date of filing the
complaint 27-3-1986 27-03-1986 27-03-1986
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13. The Facts stated in the complaint disclose a prima facie case. The order of the Income-tax Appellate Tribunal is not binding on the criminal court but at the same time the court is entitled to look into that Jayappan’s case [1984] 149 ITR 696 and the results of the penalty proceedings by the Appellate Tribunal or the acceptance of the revised statements would not be binding on the criminal court. The criminal court has to judge the case independently on the evidence placed before it.
14. Shri Malla Reddy also relied upon judgment of the Karnataka High Court in Biology Oil Traders v. ITO . The Karnataka High Court relied on Uttam Chand’s case . The facts in that case are : Balaji Oil Traders, partnership firm together with four are was prosecuted for offences under section 276C and 277 of the Income-tax act in the court of the Chief Metropolitan Magistrate Bangalore. After the evidence of one witness for the prosecution was over, the accused filed an application praying that the court discharged them on the ground that they had preferred an appeal against the assessment order passed by the Income-tax Officer and the same was pending before the appellate authority and the prosecution was, therefore, premature and hence they should be discharged. It was observed in that case as follows (p. 133) :
“To pursue the prosecution in the criminal court during the dependency of such proceedings on the revenue side would amount to prosecution on certain facts which cannot even be countenanced under our system of administration of justice. Even to allow the complaint pending in the court bellow awaiting the decision in the appeals, revision etc., if any, filed and pending, would according to me amount to an abuse of the process of the court.”
15. While observing so, the proceedings were Quashed reserving the right of the Income-tax Department to take the appropriate action after the appeal before the income-tax authorities is decided.
16. In Prakash Chand v. ITO, The prosecution was launched against the assessee-firm and its partner for offences under section 277 of the Income-tax Act and section 193 and 471, IPC, on the basis of false returns, false accounts and inflated items of items of purchase. While the criminal case pending the Income-tax Appellate Tribunal cancelled the penalty holding that material before the Income-tax authorities did not disclose that the purchase were inflated. There was no proof that the assessee had concealed its income or furnished inaccurate particulars. A writ petition was filed by the assessee firm its partners for quashing the criminal case pending against them in court of the Chief Judicial Magistrate, Sonepat. It was observed that in the view of the finding of the Appellate Tribunal that there was no concealment and no accurate accounts by the assessee-firm and its partners the criminal proceedings against them could not continue and quashed the proceedings. The principle laid down in Uttam Chand’s case was also followed.
17. Learned standing counsel for the Department contented that the mere fact that the Income-tax Appellate Tribunal whose order is now final, had set aside the penalty, cannot by its be ground for quashing the proceedings against the petitioner. He also relied upon Dr. Munshi’s case [1978] 112 ITR 173 (ALL) Where in it was observed that under sub-section (1A) of section of 279 there is a bar to the institution or continuation of the prosecution against the assessee under section 277 of the act encase the commissioner had waived the penalty imposable upon the assessee, under sub-section (4A) of section 271 of the act When the Income-tax Appellate Tribunal allows the assessee’s appeal against imposition of penalty, it does not act under section 271(4A) of the act and the finding given by the tribunal cannot be by itself be sufficient to the direct the dismissal of the complaint or discharged of the accused The decision of the Allahabad High court in Munshi’s case [1978] 112 ITR 173 runs counter to the view taken by the Karnataka High court and the Punjab and Haryana High Court.
18. The contention of both the parties was set at naught by the ruling of the Supreme Court in Jayappan’s case . Simply because in that case they contended that only mere chance of success of the assessee was pending, It cannot be said that no persecution can be launched particularly when decision was rendered by the supreme court wherein particularly they have pointed out that the decision in Uttam Chand’s case is no authority for the proposition that no proceedings can be initiated at all under section 276C or 277 of the act as long as some proceedings under the act in which there is a chance of success of the assessee are pending. In Jayappan’s case the Supreme court approved the decision of the Punjab and Haryana High court in Telu Ram Raunqi Ram v. ITO and overruled decision of the Calcutta High Court in Jyoti Prakash Mitter v. Haramohan Chowdhury .
19. Taking the legal position and the allegation in the complaint per se, I am of the view that the institution of criminal proceedings cannot, in the circumstances amount to an abuse of the process of the court. I am also of the view that the finally of the penalty proceedings by the Income-tax Appellate Tribunal or the pendency of the reassessment proceedings cannot act as a bar to the institution or continuation of criminal prosecution for offences punishable under section 276C or section 277 of the Income-tax Act. The special Judge was therefore right in refusing to quash the prosecution proceedings in three cases instituted against the petitioners under sections 482 and 425 Criminal Procedure Code.
20. In the result, all the three petitions are dismissed.