Judgment:
Sant0sh Duggal, J.
(1) M/S. Rinkoo Steels, a partner. ship firm, petitioner No. I, in this petition under section 482 Cr. P.C.. is an income-tax assessed, with petitioners No. 2 and 3 as partners. After the assessment lor the year 1980-81 had been finalised, a search under section 132 of the Income-tax, Act. 1961 (for short 'the Act') was conducted on 31st May, 1984 of their business promises as well as of other associates of theirs, and during the said search operations, allegedly a number of incriminating documents, books of account etc. were seized. An examination of the documents so seized is alleged to have revealed a large scale under-statement of income by petitioner No. 1. Since the assessment for the previous years had already been completed, prior to the date of search, proceedings under sections 147(a) read with section 148 of the Act were initiated, and the assessed called upon to submit fresh returns for the earlier assessment years, namely, 1980-81 and 1981-82.
(2) The allegation further is that in the returns filed for the aforesaid years, pursuant to notice under section 148 of the Act, the total income declared in the prescribed proforma, as signed by Joginder Kaur. one of the partners of the firm was stated, and in that connection the income-tax officer concerned entered upon a detailed enquiry, and called upon the assessed to produce books of account, purchase and sale vouchers etc. but they were not produced on the plea that the accountant who had access to these books of account and other documents was not available, and his whereabouts were not known or that the said books of accounts had been burn.
(3) The contention is that the Income-tax officer was thus prevented from examining the books of account and other documents on the basis of which the assessed, had declared its income and had to fall back upon his post-search enquiries. It has been further alleged that one of the documents that had been recovered during the course of the search operation and seized, was certificate issued by the Chartered Accountant Shri Ashok Mehta, disclosing huge discrepancies in the total value of the raw material consumed by the assesses, as against the total sales declared by them in the trading account, and that the figures shown were of far less amounts as compared to the figures given by the Chartered Accountants certificate. Thereupon the in said documents, giving opportunity to the assessed to reconcile the discrepancies, and also required them to produce the Chartered Accountant but he was not produced on the plea that his present whereabouts were not known to the assessed.
(4) A complaint for prosecution of the assessed firm and its partners for the offences under section 276-C/277 of the Act as well as sections 193 and 196 of the Indian Penal Code was filed in the court of the Additional Chief Metropolitan Magistrate, Delhi, alleging that the above narrative clearly indicated that the assessed had understated its income in the returns filed pursuant to notice issued under section 147/48 of the Act. and had also failed to disclose income out of which it had funds to make additional purchases as reflected in the certificate of the Chartered Accountant and that it caused circumstances to exist which would have the effect of enabling it to evade income-tax, penalty or interest chargeable or imposable under the Act. and further that it was in possession of books of accounts and other documents containing false entries, and statements relating to the sales affected by them and that the statements of income and expenditure and other details contained in the returns were verified knowing or believing them to be false, and that the acceded dishonestly and deliberately fabricated false evidence in the shape of books of accounts and other documents for the purpose of being used in evidence in assessment proceedings.
(5) Since the allegations related to three different assessment year 1980-81 and 1981-82 and 1983-84 three separate complaints were filed. After the order of summoning was passed by the Addl Chief Metropolitan Magistrate, application were moved in each of the complaint cases for dropping of the proceedings on the plea that on appeal being filed by the assessed, against the order of the income-tax officer. on completion of the assessment returns for the aforesaid assessment years. the Commissioner of Income-tax (appeals) had quashed the order on the view that notice under section 148 of the Act was illegal and as such all the proceedings initiated pursuant thereto or the order passed by the income-tax officer in respect of the assessment returns filed by the assessed were liable to be set aside, the plea being that there was no basis left for prosecution of the accused on the allegation of under-statement of income or fabrication of accounts or false verification etc. because once the notice had been held to be not sustainable. then the income-tax returns, filed in response to said notice, have to be treated as non est and thus there was no material for prosecution of the accused and ends of justice required that the said proceedings be dropped and complaint dismissed.
(6) This application was rejected by the Addl. Chief Metropolitan Magistrate on the view that the mere fact that the Commissioner of Income-tax (Appeals) had set aside the assessment and had directed re-assessment after fresh notice under section 148 of the Act, in conformity with the provisions of the Act, would not have any consequence for the criminal proceedings based on the complaint instituted by income-tax officer for the reason that the complaint is to be decided independently on the strength of the evidence adduced by the complaint before the court, and on its own appreciation, and thus quashing of assessment order order could be of no consequence for the accused so far as the proceedings in the criminal complaint were concerned. The application moved in the complaint case No. 226/1 in respect of assessment year 1980-81 was dismissed vide order dated 16th January, 1988. Similarly, applications moved in the other two complaint cases i.e. for the year 1981-82 (Criminal complaint case No. 225/1) and 1983-84 (Criminal complaint case No. 224/1) were dismissed by separate orders dated 18th January, 1988 and 22nd July, 1988 respectively.
(7) The accused have filed three separate petitions under section 482 Criminal Procedure Code . assailing correctness of the view, and the approach adopted by the Addl. Chief Metropolitan Magistrate while dismissing their applications. These are Criminal Misc. (M) 1189/88. 1190/88 and 1191/88. Since common questions arise in all the three petitions, these are being disposed of by a common order, being recorded in Criminal Misc. (M) 1189/88, covering thee assessment year 1980-81.
(8) Mr. D.C. Mathur, appearing for the petitioners, argued that the continuance of the proceedings against the petitioners would certainly result in defeating the ends of justice because inspire of the fact that the assessment finalised by the income-tax officer, who is complainant in the case pursuant to notice under section 148 of the Act, stands quashed by the Income-tax Commissioner (Appeals) on the view that the notice itself was illegal, even then they have been held liable to continue facing criminal proceedings based on the allegation that the income-tax returns filed by them pursuant to notice under section 148 of the Act contained understatement of income, based on false accounts/fabricated documents and that they had been filed under a false verification, and used in assessment proceedings making them liable for prosecution under section 276-C and 277 of the Act as well as under section 193 and 196 of the Indian Penal Code. He contended that when the notice has been quashed, all the assessment return in response thereto, have to be treated as non-existent and thus there was no material for prosecution of the petitioners, and that in view of the fact that re-assessment has been undertaken after fresh notice under section 148 of the Act for all the assessment years under reference, it was a fit case to drop the present proceedings and the complainant could take further steps depending upon the result of the reassessment proceedings.
(9) Reliance has been placed on a judgment of this Court, reported as 1985 (1) Chandigarh Law Reporter 313, (W. L. Kohli & another v. The Commissioner of Income-tax and an other (1) wherein the plea of the accused for dropping of the proceedings was held entitled to consideration on the ground that it was in the fitness of things that unless the re-assessment is completed, there could not be any deduction or inference of concealment of income or falsification of accounts.
(10) Mr. Mathur pleaded that the present case was also of identical nature and here also since the assessment itself has been quashed, and all the proceedings have been held to be invalid, there was no basis for prosecution of the petitioner, and the proceedings in these complaint cases were liable to be quashed.
(11) Mr. D.K. Jain, appearing for the respondent No. 1. in these proceedings, countered argument of Mr. Mathur firstly in respect to his plea that there was no material against the petitioners as accused persons in the wake of quashing of the assessment orders finalised by the income-tax officer on the basis of the returns filed pursuant to notice under section 148 of the Act. He drew attention to certain averments made in the Complaint, instituted in the court of the Addl. Chief Metropolitan Magistrate, copy whereof has been annexed with the present petition, and contended that the prosecution is not sougnt, solely on the basis of the assessment made by the income- tax officer or the assessment returns sued by the assessed pursuant to notice under section 148 of the Act but there were allegation of independent incriminating material against the accused discovered during the search operation etc. and further that understatement which has been detected as a result of scrutiny of the documents recovered and seized during the search operation, relates to the original assessment returns filed for the assessment years 1980-81, 1981-82 and 1983-84 and that these furnished material which the department was in a position to produce and prove during evidence in the complaint case, and a. such the presumption on which the present petition has been moved, was misconceived, namely, that since the proceedings taken up as a sequel to the notice under section 148 of the Act including the assessment made thereon have been set aside, it was a case where there was no material or proceeding against the accused.
(12) Mr. Jain made a pertinent reference to the Explanationn to section 276-C of the Act which defines willful attempt to evade any tax, penalty or interest chargeable or impossible under this Act, as including a case where any person-
'(F)has in his possession or control any books of account or other documents (being book. of account or other documents relevant to any proceeding under this Act) containing a false entry or statement..............'.
HE thus contended that even the existence of books of account containing any false entry of statement or possession thereof by the assesee, now came within the inclusive definition of 'willful attempt to evade any tax, etc.' and that in view of the categorical allegations in the complaint that during search operations book of account and other documents were recovered which on examination were found to contain false entries or statements and further that one of the documents recovered was a certificate from their Chartered Accountant, which on the face of it revealed vast difference in the amounts of sales shown in the book. of account which the accused produced during the original assessment, as against those reflected by this certificate, the petitioners were on wrong footing when they asserted in these petitions in the application before the Addl. Chief Metropolitan Magistrate that after the order of Commissioner of Income-tax (appeals) dated 1st April, 1987, setting aside the assessment orders on the view that the notices under section 148 of the Act were illegal, there was no material against them, justifying the prosecution in these complaint cases. He reiterated that there were definite allegations in paragraph 5, 8 and 11 of the complaint as to discovery of incriminating documents and books of account during search operations, particularly the certificate of Chartered Accountant, and failure on the part of the assessed to produce the books of account and document on the basis of which they had declared their income earlier as also their failure to produce the Chartered Accountant and-that there was understatement of income by falsification of account books, as also false verification on the original returns filed and that these allegations still subsist inspire of the assessment order made pursuant to notice under section 148 of the Act had been set aside.
(13) Besides repelling the plea of the petitioners, as to nonexistence of any material for the purpose .of these complaint cases, by referring to facts and allegations as aforesaid, Mr. Jain further argued that there was no force in the contention that merely because re-assessment had been ordered, criminal complaint filed earlier was liable to be quashed. He placed reliance on a Supreme Court judgment in P. Javeppan v. S. K. Perumal, First Income-tax Officer, Tuticorin : [1984]149ITR696(SC) (2), wherein it was categorically held that there was no provision in law which provides that a .prosecution of the offence under section 276-C or section 277 of the Income-tax Act could not be launched until reassessment proceedings initiated against the assessed are completed.
(14) In this case the Supreme Court while observing that although the criminal court may have to give due .regard to the result of any proceeding under the Act, having a bearing on the question in issue, and that in an appropriate case. it may drop the proceedings in the light of the order passed under the Act, added that:
'IT does not, however, mean that the result of a proceeding 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.'
(15) This authority is thus sufficient to defeat contention of the petitioners that proceedings in the complaint case are liable to be dropped merely because assessment has been set aside or re-assessment ordered or undertaken. In the view of the Supreme Court, even if it were so then also, the criminal case can be initiated or continued, as the case may be, because the court, notwithstanding the said situation has to decide independently, on the basis of the evidence adduced before it, and that its findings were not dependent upon the result of reassessment proceedings.
(16) The present case is still better for the complainant at this stage because apart from the allegations of understatement of income or falsification of accounts, and other cognate allegations, conforming to ingredients of sections 276-C and 277 of the Act, as well as sections 193 and 196 of Indian Penal Code in relation to the assessment returns filed after notice under section 148 of the Act, there are allegations that the original returns for the assessment years which are subject matter of the criminal complaints also suffered from-the same vices, and further that there was independent evidence of existence of false books of accounts, and other documents, with the intention of evading income, recovered during search operations. Mr Jain conceded that all these allegations shall have to be proved by the complainant before the criminal court, but assented that the departmental authorities were in a position to do so, and that the proceeding- cannot be throttled at this stage simply because notice under section 148 of the Act was quashed on a technical view, necessitating fresh notice and re-assessment proceedings.
(17) Mr. Jain also placed Reliance on a judgment. of the Andhra Pradesh High Court, reported as Ashok Biscuit Works and others v. Income-tax Officer, E. Ward, Circle Ii, Hyderabad, 0044/1987 : [1988]171ITR300(AP) (3) enunciating the same proposition to the effect that the criminal court has to adjudge the case independently, on the evidence placed before it and that where the allegation was that the books of account contained false entries or there were discrepancies showing attempted falsification of accounts, resulting in concea;ment of income and evasion of income-tax, consequent upon false statement and verification of the income-tax returns, it was a case where the complaint discloses a prima facie case and that the question whether false statement and verification had been made, had to be judged with reference to the date of filing of the original returns. The learned counsel ii''oririca that this view of the Andhra Pradesh High Court has been endorsed by the Supreme Court inasmuch as a Special Leave Petition has been dismissed, as per report in 1969 Itr (Statute part) 13.
(18) In so far as the judgment of the Delhi High Court in W.L. Kohli (supra) is concerned, Mr. Jahl citeu two subsequent judgments of this Court : one reported as Umesh Kumar Modi v. K. S. Sahni, Income-tax Officer, Central Circle X, New Delhi and another, : [1986]159ITR597(Delhi) (4) and the other : Dharma Pratishthan and others v. Miss B. Mandal, Inspecting Assistant Commissioner of Income-tax, and another : [1988]173ITR487(Delhi) , (5) both holding that where ingredients covered by the provisions of sections 276-C and 277 or section 278-B of the Act were prima facie made out and when the complaint was based on the material and evidence collected, and not merely on the basis of the assessment order, then the fact that the assessment order had become invalid or set aside or fresh assessment ordered by appellate authority or re-assessment undertaken, would be hardly relevant, and that the criminal complaint would proceed, to be decided, on its own merits, and on the basis of the facts proved and evidence adduced before the criminal court and thus petitions under section 482 Criminal Procedure Code . for quashing the criminal proceedings were dismissed.
(19) It is thus now the settled view that the Criminal proceedings are not to be interfered or dropped merely because some assessment or re-assessment proceedings were still pending before the departmental authorities particularly when allegations in the complaint were referable not solely to the finding arrived at in the assessment order with reference to the returns filed by the assessed, which assessment order came to be quashed later on but on independent evidence of attempted evasion of income-tax by preparing false books of account or on allegations in the complaint, of independent evidence having been unearthed during search operations giving rise to belief of attempted concealment of income with intent to evade income tax.
(20) The accused, in these cases, approached the trial court for dropping of the proceedings on the threshold only, when order of summoning of accused was passed. Apart from the fact that there is abundant authority for the view, as noticed above, that the plea of the accused for dropping of proceedings on the ground of re-assessment having been ordered or such proceedings being pending, was not tenable; otherwise, also, it would not be ordinarily desirable to interfere with the proceedings, before the criminal court. in exercise of power under section 482 of the Code of Criminal Procedure, at such an early stage when only proceedings been been initiated an order for summoning the accused having been passed, and the court has yet to appreciate evidence.
(21) It has been impressed upon by the Supreme Court in a very recent judgment reported as State of Bihar v. Murad Ali Khan and others, : 1989CriLJ1005 that when the High Court is called upon to exercise its inherent jurisdiction under section 482 Criminal Procedure Code . to quash a proceeding at the stage of the magistrate taking cognizance of an offence, such a power should be used very sparingly, and that unless it is manifest on record that the allegations in the complaint or the charge sheet do not in law constitute or spell out any offence, and that resort to criminal proceedings would amount to abuse of the process of the court, the High Court should refrain from interfering in the proceedings and that this power should be exercised with circumspection.
(22) Similar view had been earlier expressed by the Supreme Court in case J.P. Sharma v. Vinod Kumar Jain and others, : 1986CriLJ917 wherein it was stressed that the High Court while exercising jurisdiction under section : 1986CriLJ917 Criminal Procedure Code should not embark upon an enquiry as to whether the allegations were true or false, or as to whether any subsequent development has taken place, which may render the proceedings futile, but only to confine itself to the fact that as to whether on the basis of the allegations an offence as alleged can be said to have been committed or not.
(23) It thus follows that the continuance of the criminal complaint or proceedings is not to depend upon the subsequent events but on the fact as to whether the allegations as set out therein make out a prima facie case for proceedings against the accused or not. It has already been noticed that there are averments in the complaint particularly paragraphs 5, 8 and Ii which clearly show that the complaint alleges existence of material, independent of the income tax returns or assessment made pursuant to notice under section 148 of the Act. and as such this latter event is absolutely inconsequential, in so far as the criminal complaints pending before the Addl. Chief Metro- politan Magistrate were concerned. The applications of the accused persons for quashing of proceedings were thus wholly misconceived, and rightly dismissed.
(24) I accordingly do not find existence of any material or any case made out for interference in the course of the criminal proceedings. This petition as well as Criminal Misc.(M) 1190188 and Criminal Misc.(M) 1191188 are accordingly dismissed. As a result, stay of proceedings in the lower court, in all the three complaint cases, is hereby vacated.
(25) A copy of this order be sent to the court of the concerned Additional Chief Metropolitan Magistrate.