M. Ranga Reddy, J.
1. The Assistant Commissioner of Income-tax, Circle-I, Vijayawada, who was the complainant in C.C. No. 289 of 1989 on the file of the Special Judge for Economic Offences has filed this appeal against the judgment dated August 26, 1992, acquitting the respondents of offences under sections 276C and 277 of the Income-tax Act, 1961.
2. The case against the respondents was in brief as follows : The first respondent was a private limited company carrying on business in exhibition and distribution of films. Respondents Nos. 2 to 5 are its directors. The first respondent filed its return of income for the assessment year 1985-86 showing loss. In that return filed by R-1, a sum of Rs. 1,60,000 is shown as agricultural income and as having incurred some loss on account of purchase of leasehold rights of a film by name 'Monagadu Vastunnadu Jagratha' from Gandhi Theatres (P.) Ltd. The assessing authority disallowed the income shown as agricultural income and ordered the same to be treated as taxable income on the ground that R-1 company had not carried on any agricultural operations and that the lease and sub-lease are only in the nature of adventure in trade and in the absence of any cultivation, it cannot be characterised as agricultural operations. So, the claim for exemption that the income of Rs. 1,60,000 was by sale of agricultural produce was not accepted and it was further observed that R-1 company has wilfully attempted to avoid tax on Rs. 1,60,000.
3. Gandhi Theatres (P.) Ltd. is a sister concern of the first respondent. It had purchased the leasehold rights of the film for Rs. 1,00,000 from April 1, 1983, to September 1, 1989, R-1 took on sub-lease the rights from the Gandhi Theatres (P.) Ltd., Vijayawada, for Rs. 3,50,000 from December 1, 1984, to September 1, 1989, and on account of it R-1 is said to have sustained some loss and the same is shown in the returns filed by him. In respect of this, the assessing authority observed that it was only intended to avoid incidence of tax as otherwise R-1 being aware of the marketability and potentiality of the film in view of the realisations made by Gandhi Theatres for the earlier period would not have taken the same on lease for such higher amount. So, this was also added to the income. As against that assessment, R-1 filed an appeal before the Commissioner of Income-tax and that appeal was also dismissed. Then on the directions of the Commissioner of Income-tax, Visakhapatnam, the Assistant Commissioner of Income-tax, Circle-I, Vijayawada, filed a complaint against the respondent for offences under sections 276C and 277 of the Income-tax Act before the Special Judge for Economic Offences.
4. The assessee filed an appeal before the Income-tax Appellate Tribunal while this criminal case was pending before the special court. That appeal was allowed on May 8, 1990. Exhibit P-13 is the order of the Tribunal. The Tribunal deleted the penalty and stated that it cannot be construed as a device invented to reduce the tax. The Tribunal further found that there is no material to show that the accused had concealed the income. Subsequent to the disposal of the appeal by the Tribunal, this criminal case came up for trial. The learned Special Judge relying on a decision of the Supreme Court in K.T.M.S. Mohammed v. Union of India : 1992CriLJ2781 , found that the very basis of prosecution, namely, that the respondent has wilfully concealed the income is nullified and that, therefore, no offence under sections 276C and 277 of the Income-tax Act is made out and consequently, acquitted the accused. In the decision referred to above, the case had ended in conviction of the assessee and by the time the appeal was filed, the Tribunal had disposed of the appeal against levying penalty. So, the Supreme Court held that the prosecution is not maintainable and acquitted the accused.
5. In view of the above citation, the learned Special Judge acquitted the accused. On a perusal of the judgment of the trial court, I find that the Special Judge has given cogent and convincing reasons for coming to that conclusion and I do not find any reason to interfere with the same. Hence, the appeal is dismissed.