M. Murali Mohan Vs. State (income-tax Officer, Nalgonda) - Court Judgment

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direct taxation - proceedings - sections 227 and 278 of income tax act, 1961 - petition to quash proceedings of special judge for economic offences - huge difference found between return filed and actual transaction - reassessment order passed and appellants were charged for economic offence - subsequently reassessment order was set aside by income-tax officer - appellant contended that prosecution proceedings are not maintainable as assessment order in respect of which prosecution was launched was not subsisting - arguments advanced by appellant accepted - high court under section 482 quashed original order itself - held, assessee was entitled to be set free. head note: income tax prosecution--offences under s. 277/278--setting aside of assessment order in appeal--question of maintaining prosecution on the basis thereof does not arise held: when the assessment itself is set aside by the appellate authority, it cannot be said that the assessment still continues in the eye of law and when the assessment order itself is not in existence, the question of maintaining the prosecution does not arise. in this view, the proceedings on the file of the special judge for economic offences are quashed. income tax act 1961 s.277 - motor vehicles act (59 of 1988)section 149 (2): [v. gopala gowda & jawad rahim, jj] insurers entitlement to defend the action joint appeal by insured and insurer - held, the language employed in enacting sub-section (2) of section 149 appears to be plain and simple and there is no ambiguity in it. it shows that when an insurer is impleaded and has been given notice of the case, it is entitled to defend the action only on grounds enumerated in sub-section (2) of section 149 of the act, and no other grounds are available to it. the insurer is not allowed to contest the claim of the injured or heirs of the deceased on other grounds, which are available to the insured. if insurer is permitted to contest the claim on other grounds it would mean adding more grounds of contest to the insurer and will be negation of the intention of the legislature and annihilate mandate of the provisions of sections 170 and 149 of the act. the insured can pursue appeal only after giving up the insurer as the appellant and not otherwise. in the instant case, the insurer has not withdrawn from party array but has remained prosecuting the appeal with the insured on the grounds which are available only to the insured. therefore, the joint appeal as filed by the insured and the insurer is not maintainable. section 166: [v. gopala gowda & jawad rahim, jj] claim for compensation accident due to mechanical defect in the vehicle held, it is not in dispute that the claimant suffered injuries in an accident, which occurred during the course of his employment, albeit due to his negligence but law does not render him remediless. statutory right is conferred on him, accruing by virtue of his employment under insured to claim compensation under workmens compensation act. the insurer is statutorily duty bound to discharge the liability of the owner of the vehicle, to pay such compensation to the employee, as mandated under the provisions of section 149 of the act. the right of an injured employee or his dependents as the case may be to be compensated, when injury is suffered or death occurs during his employment, is recognised not only under workmens compensation act, but also under benevolent provisions under section 166 and 167 of the m.v. act. the right of driver to seek compensation is not restricted only to the workmens compensation act, it has been enlarged to enable such person to seek just compensation (sections 166 and 168), conferring upon him the right of election engrafted under section 167 of the act to choose either of the two forum. the only defence which the insurer could take is limit of its liability as enumerated under section 147 of the act, leading to contest, inter alia, only between insured and insurer and does not impact claimants right to recover the compensation determined by the tribunal which crystallizes into enforceable right against both. in the instant case, the claimant/driver has exercised right of election under section 167 of the act to seek compensation under section 166 of the act resulting in award passed by the tribunal. therefore, the insured and the insurer have no escape but to discharge the said award as directed. undisputedly, in this case as deduced for proved facts, the vehicle in question was not properly maintained by the owner and despite faulty brake system, the claimant had undertaken the hazardous journey to his peril at the behest of and at the instruction of the owner. the owner is therefore, tortfeasor. section 168: [v. gopala gowda & jawad rahim, jj] insurers limit of liability - held, it is well settled that the liability of the insurance company for payment of compensation can be statutory or contractual. is for the insurance company to show that the insurance policy was a statutory policy and not a contractual policy to restrict its liability. that issue was neither raised before the tribunal nor is raised in this appeal requiring decision. thus, if at all the insurer has any valid ground to restrict its liability, it can proceed against the insured but firstly it has to discharge the award as required under section 149 (1) of the act. where the owner/insured has failed to maintain the vehicle as per prescribed safety standards and has caused the claimant to drive the vehicle with mechanical defects, the owner would be the tortfeasor and the claimant can maintain a petition seeking compensation under the provisions of the act, instead of seeking compensation under the workmens compensation act. on facts, held, the material evidence on record, particularly, with regard to the income of the claimant, his age, medical evidence and the evidence relating to pecuniary loss has not been considered by the tribunal in the correct perspective, which has resulted in passing of the impugned award, disproportionate to the pecuniary loss and the loss of future income of the victim. the settled principles governing determination of compensation has been given a go-bye. compensation of rs.4,15,150/- awarded by the tribunal was enhanced to rs.8,20,000/-. rama rao, j.1. this petition is to quash the proceedings of the special judge for economic offences, hyderabad, in crl. m.p. no. 1524 of 1984, in c.c. no. 94 of 1984, confirmed by the metropolitan sessions judge, hyderabad. the facts arising in this petition may be briefly stated : for the assessment year 1980-81, the petitioner field the return under the income-tax act admitting a total income of rs. 15,481. on scrutiny of the books of account, the income-tax officer, nalgonda, found that in collusion with the second accused, he had introduced fictitious purchases of yarn of rs. 75,000 for the manufacture of bandage cloth by him and on that basis a sum of rs. 75,000 was added to the income declared by the petitioner. on appeal against the said assessment, the appellate assistant commissioner, hyderabad, by his order dated january 27, 1984, set aside the orders passed by the income-tax officer and directed him to redo the assessment. after the assessment order was passed, the income-tax officer filed a complaint with the approval of the commissioner of income-tax against the petitioner and another person for offences under sections 277 and 278 of the income-tax act and sections 193 and 196, ipc. summonses were issued in c.c. no. 94 of 1984, and thereafter the petitioner filed crl. m.p. no. 1524 of 1984, stating that the prosecution does not subsist in view of the setting aside of the order of the income-tax officer. this order was dismissed by the special judge and on revision the metropolitan sessions judge confirmed the same. learned counsel for the petitioner, sri n. bhaskar rao, contends that the assessment order in respect of which the prosecution was launched is not subsisting as it was set aside and, therefore, the prosecution proceedings are not maintainable. it is not in dispute that the assessment order was set aside. but, however, the learned metropolitan sessions judge held that the criminal proceedings can icontinue irrespective of the fact whether the assessment is set aside. it may be stated that this approach of the learned judge is erroneous. when the assessment itself is set aside by the appellate authority, it cannot be said that the assessment still continues in the eye of law and when the assessment order itself is not in existence, the question of maintaining the prosecution does not arise. the metropolitan sessions judge also held that the revision is not maintainable. this technical objection need not be considered as the high court has ample power under section 482, crl. pc, to quash the original order itself. in this view, the proceedings in c.c. no. 94 of 1984, on the file of the special judge for economic offences are quashed. the criminal miscellaneous petition is allowed.