JUDGMENT
1. This appeal is preferred by Revenue being aggrieved by the judgment and order dated 7-10-1973 passed by the Special Judge for Economic Offences. Hyderabad in C.C. No. 75 of 1989. By that order, the Special Judge for Economic Offences acquitted the respondent. It is under these circumstances, the Assistant Commissioner of Income-Tax has filed the present Appeal. The learned Standing Counsel strenuously contends that the impugned orders are illegal and the same are liable to be set aside. On the other hand, the learned counsel for the respondents strenuously supported the impugned orders. In order to appreciate the rival contentions of the parties, it is necessary to note brief facts of the case. Accused No. 1 is a registered firm and accused Nos. 2 and 3 are its Managing Partners and accused Nos. 4 to 8 are its active partners. The firm carried on business in cigarettes of I.T.C Limited at Vishakapatnam and also acted as whole sale Distributors for Voltes products and also carried on trade in cloth at Vizianagaram. For the Assessment Year 1980-81 corresponding to the Accounting Year 1-4-1979 to 31-3-1980, the Firm filed its return of the Income on 15-12-1981. The Firm also filed profit and loss account and other accounts as enclosures to the return of the Income. On verification of the return, the Revenue being of the opinion that the respondent Firm willfully and deliberately concealed the income of Rupees 1,77,310/- (i.e. Rs. 99,786/- being difference in accounts of I.T.C. Limited and Rs. 56,255/- being difference in accounts of Voltas Limited and Rs. 21,269/- being the excess deposits in the Bank of India) and accordingly A. 1 (respondent No. 1) Firm committed the offence punishable under sections 276-C and 277 of the Income-tax Act and A. 2 to A. 7 who are incharge of the Firm were responsible to the Firm for the conduct of the business of the Firm, filed a case before the Criminal Court for the offences under section 276-C and Section 277 read with Section 278-B(i) of the lncome-tax Act.
2. The prosecution examined P.W. 1 and P.W 2 and marked Exhibits P-1 to P-25. Accused were examined under Section 313 of Criminal Procedure Code. Exs. D-1 and D-2 were marked at the instance of the accused.
3. The trial Court after assessing the entire evidence acquitted the accused of the offence alleged against them on the ground that appeals on the departmental side were preferred by the accused and ultimately, the lncome-tax Appellate Tribunal allowed the appeal and deleted the penalty by holding that there was no concealment of the amounts in question on the part of the accused. This fact that an appeal was preferred by the accused before the Income-tax Appellate Tribunal, is admitted by P.W. 1. It is also admitted that the Appellate Tribunal passed an order allowing the appeal and set aside the penalty proceedings by giving a finding that there was no concealment on the part of the accused. It is also brought on record that the Income-tax Appellate Tribunal dismissed their reference application vide Ex. D-2. The learned Judge of the Economic Offences Court relied upon a judgment of High Court of Patna in Banwarilal Satyanarayan v. State of Bihar, and also a judgment of this Court passed in M/s. Vandana (P.) Ltd. v. Assistant Commissioner of Income-tax, Crl. Petitions Nos. 22/92 and 223/92 on the file of A.P. High Court. The said judgments were read over before me. The learned counsel for the respondents relied upon judgments of Supreme Court of India in Uttam Chand v. I.T.O., ; P. Jayappan V. K. Perumal v. First I.T.O., 149 ITR 696 : 1984 Tax LR 1197 and K.T.M. Mohammed v. Union of India, . In my opinion there is substance in the legal stand taken by the accused. Similar point did come up for consideration before this Court before other High Courts as well as before the Supreme Court.
4. The High Court of Kerala was considering, almost similar issue in Premier Breweries Ltd. v. Dy. I.T., Commissioner, (1995 Tax LR 996). In that case it was argued that notwithstanding the annulment of penalty proceedings the criminal proceedings shall go on and the Criminal Court may come to an independent conclusion of its own. Rejecting this kind of argument the Court held that in the light of the annulment of the penalty proceedings, there is no reasonable prospect of criminal case ending in conviction and consequently quashed the proceedings under section 482 of Cr.P.C. The relevant portion of the judgment reads as under :
“I agree with the stand of the petitioner that in the light of the annulment of the penalty proceedings there is no reasonable prospect of a criminal case ending in conviction as against the petitioners. As such, the continuation of the prosecution proceedings against the petitioners would only be as waste of time for the criminal Court.”
5. Dealing with a similar situation the High Court of Madras in Mohammed I. Unjawala v. Asst. I.T. Commr., Madras, 1995 Tax LR 919 held as under at page 926; of Tax. L.R.
“So the question arises in which matters the Criminal Court may disregard the findings of the authorities under the Income-tax Act and in which matters weight has to be given for such findings. In this connection, I have to refer to the view of the Supreme Court in Patnaik and Company Ltd. v. CIT, , which I referred to above. The Supreme Court has accepted that the findings of the Income-tax Appellate Tribunal on the fact are final and the Court has no jurisdiction to go behind the statement of fact made by the Tribunal. The Tribunal in its order has held that the assesses did not attempt to conceal the amount as they themselves produced the registers for verification and that the person who made the mistake viz., the accountant was dead and therefore the mistake in the return was unknown to the partners of the firm making it is a bonafide mistake. In the view of the Tribunal, the partners were not aware of the mistake in the return of assessment as the returns were prepared by the inexperienced accountant after the death of the previous accountant who wrote the accounts. In my considered view as the Tribunal has concluded that the mistake was not known to the partners, this finding of fact has to be accepted by the Court which with the criminal prosecution of the petitioners.
The learned counsel Mr. Ramaswamy contended that if the findings by the Tribunal in this case has to be accepted by the Criminal Court, the same principle has to be followed if the Tribunal confirms the penalty proceedings in which case the accused persons before the Criminal Court are found to plead guilty in view of the findings of the Tribunal, but such things will not happen because the Criminal Court has to independently try the case and therefore the finding of the Tribunal which is favourable to the assessee cannot be binding upon the Criminal Court. When the Tribunal in the penalty proceeding gives a finding against the assessee who is facing the criminal prosecution, he cannot be convicted on the basis of the findings of the Tribunal because the Criminal Court has to follow the procedural law for trying an offender according to the Code and therefore the Court cannot deviate from the Code for the reason that a finding has been arrived at by the authorities under the Income-tax Act. Only on account of such a situation the Criminal Court is expected to try the case independently according to the Code. But, the facts found by the Tribunal in favour of the assessee cannot be disturbed by the Court are the Appellate Tribunal is the fact finding authority under the Income-tax Act as held by the Supreme Court. Therefore, the contention of the learned counsel Mr. Ramaswamy will not prevail and the submissions of the learned caunsel for the petitioner have to be accepted.”
6. From the above two judgments of the High Court of Kerala and Madras it is clear that whenever a statutory authority like Income-tax Appellate Authority has given a finding of fact and the same has to be accepted as binding by the Criminal Court and if such authority holds that there was no concealment on the part of the assessee the same has got to be accepted by the Criminal Court. I am in respectful agreement with the judgments of Kerala and Madras High Courts referred to above. Moreover, I find almost a similar approach in the judgment of this Court in Criminal Petitions vide supra referred to above. This view is also supported by the judgment of the Supreme Court referred to at supra. In that case, the assessee filed a return as partner of the firm. The Income-tax Officer found that such a firm was not genuine and accordingly held that the assessee had made a false statement in order to avoid tax and accordingly penalty was levied. Simultaneously criminal prosecution was also launched against the said assessee. But, in the meanwhile the Appellate Tribunal in an appeal filed by the firm held that the firm was genuine and there was no question of any false statement being made by the Assessee. In these circumstances, the assessee preferred a Criminal Petition under section 482 of Cr.P.C. before the High Court of Punjab and Haryana. The High Court dismissed the Criminal Revision Petition on the ground that the proceedings before the Criminal Court and proceedings before the department under the provisions of the Income-tax Act are entirely two different proceedings and that the proceedings before the Criminal Court could go on. The Hon’ble Supreme Court of India reversed the said judgment of the High Court of Punjab and Haryana and held that in view of the findings of the Appellate Tribunal that the assessee was a partner of the firm and the firm was genuine, the assessee could not be prosecuted on the ground of filing a false return. The Supreme Court observed as under :
“Heard counsel, Special Leave granted. In view of the finding recorded by the Income-tax Appellate Tribunal that it was clear on the appraisal of the entire material on the record that Shrimati Janak Rani was a partner of the assessee firm and that the firm was a genuine firm, we do not see how the assessee can be prosecuted for filing false returns. We, accordingly, allow this appeal and quash the prosecution.”
7. There is another decision of the Supreme Court, the substance of which is noted in the short notes in (1994) 207 ITR (SA) Page 33 and which reads as under :
“Cancellation of penalty by Tribunal during pendency of criminal case – Effect : 18-4-1994 : Their Lordships J. S. Verma and S. P. Bharucha, JJ. dismissed a Special Leave petition by the Department to appeal against the order dated 29-3-1993 of the Kerala High Court in O.P. No. 5773 of 1989 by allowing the assessee’s writ petition against a criminal complaint filed by the Income tax Officer. In this case criminal proceedings were unasserted and penalty was also imposed. An application under section 273A of the Income-tax Act, 1961 for waiver of penalty was dismissed by the Commissioner. But, in the meantime the Tribunal allowed the assessee’s appeal in the penalty matter and cancelled the penalty. On the assessee’s writ petition against the criminal complaint, the High Court quashed the criminal proceedings with a proviso that fresh criminal proceedings may be taken if reference application under Section 256(2) of the Act succeeded, Commissioner of Income-tax v. V. Rajesekharan Nair : S.L.P. (Civil) No. 9155 of 1994.”
8. In view of the above law declared by the Supreme court, it is clear that the finding recorded by the statutory authority i.e. Income-tax Appellate Tribunal to the effect that there was no concealment of income on the part of the assessee the criminal proceedings cannot be allowed to stand on the same allegations. However, a judgment of another learned single Judge of this Court in a decision in “Ashok Biscuit Works v. Income tax Officer, Hyderabad, has been brought to my notice. In this case the assessee had filed an earlier return and on the basis of his subsequent return penalty proceedings were initiated on the ground that the earlier return was by way of concealment. The learned single Judge of this Court held in that case that the complaint already filed on the basis of an earlier return before the Criminal Court was not liable to be quashed even though the penalty proceedings were set aside on the basis of the return filed latter, prima facie, the facts of that case are distinguishable from the facts of this case. If the said decision is taken as the one laying down the law that notwithstanding penalty proceedings being set aside on the departmental side, the criminal proceedings shall go on, would be in conflict with the law declared by the Supreme Court referred to above. But, from the law as declared by the Supreme Court in the two decisions referred above it is clear that the findings recorded by the statutory authorities would be binding on the Criminal Courts. Following the same, this was also the view I have already taken in a decision in “M. A. Qudus v. Income-tax Officer, Hyderabad, Crl. Petitions Nos. 1665 and 1666 of 1995 of A.P. decided on 24-9-1996. Therefore, the impugned judgment of the Court below acquitting the accused in view of the judgment of the Income-tax Appellate Tribunal under Exts. D-1 and D-2 that there was no concealment, the order of the trial Court does not call for interference in this appeal. Thus, I find no merits in the appeal and accordingly it is dismissed.
9. Appeal dismissed.