income-tax Officer Vs. K.A. Siddique - Court Judgment

Excerpt:
- maximssections 2(xv) & 3(1) & (3): [v.v.s. rao, n.v. ramana & p.s. narayana, jj] ghee as a live stock product held, [per v.v.s. rao & n.v. ramana, jj - majority] since ages, milk is preserved by souring with aid of lactic cultures. the first of such resultant products developed is curd or yogurt (dahi) obtained by fermenting milk. dahi when subjected to churning yields butter (makkhan) and buttermilk as by product. the shelf life of dahi is two days whereas that of butter is a week. by simmering unsalted butter in a pot until all water is boiled, ghee is obtained which has shelf life of more than a year in controlled conditions. ghee at least as of now is most synthesized, ghee is a natural product derived ultimately from milk. so to say, milk is converted to dahi, then butter. scientifically or common sense point of view, even though ghee is not directly obtained from milk (which is certainly a product of cow/buffalo), it is certainly a product of a product of livestock i.e., cow or buffalo. it would be rather illogical or irrational to say that ghee is not a milk/dairy product or to say that it is not a product of livestock. section 2(x) and 2(iv) of the act used the plural products of livestock. the legislative intention is very clear that not only a product of livestock like milk (when notified by government), butter etc., are products of livestock but even derivative items (derived from a product of livestock) are intended to be product of livestock for the purpose of the act. thus the term ghee is to be interpreted on the basis of expression products of livestock as defined in section 2(xv) of the act. whatever products are declared as such by the government by notification, they become products of livestock for purpose of the act. consequently it was held that ghee is the product of livestock and by reason of power conferred under section 3(1) read with section 3(3) of the act on them it is competent for the government to declare ghee as product of livestock for the purpose of regulating its purchase and sale, in any notified market area. [per p.s. narayana, j,(dissenting)]if livestock or agricultural produce and the categories thereof had been specified in the statute itself by appending in the schedule or otherwise, that would stand on a different footing from the present provisions of the act which contemplate the issuance of notifications in accordance with the procedure ordained by the provisions specified supra. in view of the clear definition of the livestock and products of livestock, the ghee being derivative of butter or cream, if the language employed in definition to be taken as they stand, the only conclusion would be is that the ghee would not fall within ambit of the definitions aforesaid. sections 4 & 3: [v.v.s. rao, n.v. ramana & p.s. narayana, jj] declaration of notified area held, it is only under section 3 that government are required to publish draft notification inviting objections and section 3(3) mandates to consider objections and suggestions before issuing declaration order. it is very conspicuous that section 4 does not contemplate any draft notification inviting objections and suggestions before either constituting market committee, establishing notified market area or declaring notified market area for the purpose of levy of market fees. thus, except ordaining government to issue preliminary/draft notification inviting objections at the time of issuing declaration order under section 3(3) of the act nowhere much less under section 4 contemplates issuing a notification inviting objections. when the legislature has chosen to exclude principles of natural justice, the court cannot introduce rule of audi alteram partem and render statutory provisions unworkable. in such a case, maxim, expressum facit cessare tacitum (when there is express mention of certain things, then anything not mentioned is excluded) would apply. section 7: [v.v.s. rao, n.v. ramana & p.s. narayana, jj] levy of market fee element of quid pro quo - held, levying fees and tax are two forms of exercise of sttaes taxing power. there is no quid pro quo between tax payer and public authority as tax is a part of common burden. it is also well settled that fee is charge for special service or a benefit given to a class of individual fee payers and fee collected need not have correlation with actual service in exactitude but if it is shown that substantial portion of the fee is expended or the purpose for which it is levied, it would be justified. expressum facit cessare tacitum sections 4 & 3: [v.v.s. rao, n.v. ramana & p.s. narayana, jj] meaning when there is express mention of certain things, then anything not mentioned is excluded. - 4. on assessment of the evidence on record, the trial court found that the complainant has failed to prove that there was a wilful default of suppression of the income and, therefore, acquitted the respondent-accused of the charges levelled against him under the aforementioned sections. additional evidence must be necessary not because it would be impossible to pronounce judgment but because there would be failure of justice without it. the penalty imposed had been set aside by the commissioner of income-tax (appeals), holding that there was no wilful suppression of income and, therefore, the prosecution itself has become bad in law. ito [1989]175itr568(ap) ,the petitioner had failed to show the agricultural income in the return, but later filed a revised return showing the same before assessment. shivlal dhulichand agarwal [1990]184itr414(ap) ,it is held that :penalty proceedings are quasi-criminal in nature and the findings given in assessment proceedings is not conclusive proof, but it is only a good piece of evidence. thirumal agencies [1997]227itr671(ap) ,it is held that whenever a statutory authority like income-tax appellate authority has given a finding of fact, 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 to be accepted by the criminal court.1. krishna saran shrivastav, j. - this appeal is directed against the judgment passed by the special judge for economic offences, hyderabad, in c.c. no. 125 of 1988, dated april 13, 1995, whereby the respondent accused has been acquitted under sections 276c(1) and 277 of the income-tax act. 2. the appellant-complainant laid a complaint against the respondent-accused alleging that he carried on business under the name and style siddique associates and had not filed the income-tax return for the assessment year 1985-86 within the prescribed time, but had filed the same only when noticed under section 142(1) of the income-tax act (for short 'the act'), on march 31, 1986, declaring an income of rs. 7,606. in this return, professional receipts were shown to be rs. 4,13,530 including the receipt of an amount of rs. 50,000 from dillu cine enterprises (p.) ltd. of which company he himself was the managing director. it was found in the assessment proceedings of dillu cine enterprises (p.) ltd. that actually an amount of rs. 1,00,000 was paid to the respondent-accused under the head 'building account additions'. when explanation was sought, the respondent-accused replied that, on april 18, 1984, he had transferred his share of dillu cine enterprises (p.) ltd. to one mr. p.k. ramaiah and before that he did not charge his fees as an architect being its shareholder and the managing director but at the time of changing over of the management, he demanded his fees of rs. 1,00,000 out of which rs. 50,000 was paid to him in cash on april 3, 1984, and an amount of rs. 50,000 was credited in the account of his proprietorship concern styled as k.a. siddique and associates and only on receiving the advice, the remaining amount of rs. 50,000 was to become taxable and, therefore, it was not shown in the relevant return. he filed a revised statement of income showing the said amount of rs. 50,000. he was assessed accordingly but the explanation was not accepted by the complainant-income-tax officer and for suppressing the income of rs. 50,000 and for falsely verifying the return of income-tax he was prosecuted under sections 276c(1) as also 277 of the income-tax act. 3. charges under sections 276c(1) and 277 of the income-tax act were framed against the respondent-accused who denied the guilt and claimed to be tried. 4. on assessment of the evidence on record, the trial court found that the complainant has failed to prove that there was a wilful default of suppression of the income and, therefore, acquitted the respondent-accused of the charges levelled against him under the aforementioned sections. 5. feeling aggrieved by the judgment of acquittal, the complainant has preferred this appeal. 6. the respondent-accused filed a petition criminal m. p. no. 219 of 1997 for taking additional evidence on record. the appellant-complainant resisted the application through counter. 7. i have heard sri suresh tekmal, learned standing counsel appearing for the appellant as also mr. m. suryanarayana murthy, learned advocate for the respondent-accused. 8. in the case of rajeswar prasad misra v. state of west bengal, air 1965 sc 1887, it is held that : '... the code gives power to the appellate court to order one or the other, as the circumstances may require, leaving a wide discretion to it to deal appropriately with different cases. additional evidence must be necessary not because it would be impossible to pronounce judgment but because there would be failure of justice without it. the power has to be exercised sparingly and only in suitable cases. once such action is justified, there is no restriction on the kind of evidence which may be received. it may be formal or substantial.' 9. it is urged on behalf of the respondent-accused that the commissioner of income-tax (appeals) iv, hyderabad, has passed the order in appeals no. 532, 533 and 433/ac-3(ii) i & v/cit/4/94-95, on december 21, 1995, that is to say after the trial court has passed the judgment of acquittal and, therefore, this order could not be filed before the trial court. through this order the order passed by the assistant commissioner of income-tax for the assessment year 1985-86 has been set aside and, consequently, the penalty imposed under section 271(1) is not to be paid. this order is a material and relevant order and, therefore, a certified copy of this order should be admitted on record as additional evidence. the letters written by the respondent-accused and the income-tax officer as also the order of penalty and the modified assessment order dated november 2, 1992, are also relevant and material and, therefore, they should also be taken on record as additional evidence. 10. the letters dated march 5, 1992, and january 27, 1992, are private documents and they may require proof by oral evidence whereas the certified copies of the orders passed by the appellate court on december 21, 1995, on march 30, 1992, and on january 21, 1992, are public documents and they have been passed by the complainant and their superior officers. these orders appear to be material and important and the cause for not filing them before the trial court appears to be reasonable and sufficient. the interests of justice demands that these documents may be taken on record for doing substantial justice to the parties to the appeal. simply because the appellant has preferred further appeal against the appellate order dated december 21, 1995, and which appeal is pending, it is no ground to reject the application for additional evidence. what value is to be attached to these orders is altogether a different matter. under these circumstances, the certified copy of the order passed by the commissioner of income-tax on december 21, 1995, the order passed by the assistant commissioner of income-tax dated january 21, 1992, the order passed by the commissioner of income-tax dated march 30, 1992, are admitted on record as additional evidence, but the letters dated march 5, 1992, and january 27, 1992, being certified copies of private documents are not taken on record as additional evidence. the application for additional evidence bearing crl. m.p. no. 219 of 1997 is accordingly partly allowed. 11. relying on the case of p. jayappan v. s.k. perumal, first ito : [1984]149itr696(sc) and on the case of ashok biscuit works v. ito 0044/1987 : [1988]171itr300(ap) , it is contended on behalf of the appellant that the result of a proceeding under the income-tax act does not bind the criminal court which has to judge the case independently on the evidence placed before it. there is no provision in law which provides that the prosecution for the offences under section 276c or 277 of the income-tax act cannot be launched or pursued even though the revised statements filed by the assessee in time and accepted by the income-tax department have become final. the criminal court no doubt has to give due regard to the result of any proceeding under the income-tax act having a bearing on the question in issue but that does not mean that the judgment of the assessing authorities is binding on criminal courts. the trial court has committed an error in holding that the respondent-accused had filed a revised return for the assessment year 1985-86, but in fact he has filed a revised statement of income for the assessment year 1985-86 and, therefore, it cannot be said that before the time prescribed for filing the return for the assessment year 1985-86, the respondent-accused had submitted a revised return wherein he had shown the second amount of rs. 50,000 as his professional income received from dillu cine enterprises (p.) ltd. it is also submitted on behalf of the appellant that the order passed by the commissioner of income-tax setting aside the order imposing penalty has been taken to the income-tax tribunal, hyderabad, in appeal and, therefore, it cannot be said that the penalty imposed has been set aside by the commissioner of income-tax (appeals), because it has not attained finality. 12. on the other hand, it has been urged on behalf of the respondent-accused that, as no advice had been received by him from dillu cine enterprises (p.) ltd., that the remaining amount of rs. 50,000 of remuneration has been shown in its account books as paid by adjustment, he had not shown that amount of rs. 50,000 in his income-tax return, exhibit p-3, but immediately on receipt of the advice, a revised statement of income has been submitted before the assessing authority to take into consideration as income for the year 1985-86 and it was accordingly accepted. this amount had also been shown in the income-tax return for the subsequent year voluntarily and when this amount had been accepted as income for the previous year, the respondent-accused had furnished a revised assessment for the year 1986-87, deleting the amount of rs. 50,000 as income from profession and it was also accepted by the assessing authority. the penalty imposed had been set aside by the commissioner of income-tax (appeals), holding that there was no wilful suppression of income and, therefore, the prosecution itself has become bad in law. 13. in the case of b. ravindra kumar v. ito : [1989]175itr568(ap) , the petitioner had failed to show the agricultural income in the return, but later filed a revised return showing the same before assessment. it is held in this case that when the petitioner has shown the agricultural income in the previous year of assessment, it cannot be said that he has acted with mala fide intention in not disclosing the agricultural income in the return filed by him in the first instance and that there was no requisite mens rea so as to attract the penal consequences of the act of the petitioner. 14. in the case of krishna medical stores v. ito : [1994]206itr76(ap) , it is held that in order to bring home the guilt under section 277, it is necessary to prove that the accused either knows or believes it to be false or does not believe it to be true that the statement he makes or the verification he makes under the act is false. in the absence of any evidence that there was a wilful attempt to evade tax or that the statement in the verification of the returns was with the knowledge that it is false, the convictions and sentences under sections 276c, 277 and 278b of the income-tax act are not sustainable. it is further held in this case that (page 80) : 'section 278b deals with offences by companies and throws the burden of proof on the person in charge of the company to prove that the offence committed by the company was not with his knowledge or that he had exercised all due diligence to prevent the commission of such offence. in order to sustain conviction of the person in charge of the affairs of the company it is necessary for the prosecution to first establish the guilt of the company and then the burden shifts to the person in charge of the company to prove that he did not have the knowledge of such offence and that he had exercised all due diligence to prevent the commission of such offence.' 15. in the case of ito v. shivlal dhulichand agarwal : [1990]184itr414(ap) , it is held that : 'penalty proceedings are quasi-criminal in nature and the findings given in assessment proceedings is not conclusive proof, but it is only a good piece of evidence. when there is only the explanation of the assessee and there is no other evidence and the said explanation is false, it does not follow that the receipt constitutes his taxable income. when the department has to prove their case even in penalty proceedings treating them as quasi-criminal in nature, by adducing cogent evidence, it is a much more onerous burden on the department to prove their case of concealment of income and other charges in the criminal proceedings.' 16. in the case of mohamed i. unjawala v. asst. cit : [1995]213itr190(mad) , it is held that the findings of the tribunal on the facts are final and the high court has no jurisdiction to go behind the statements of fact made by the tribunal. therefore, the criminal court is bound to accept the findings of the tribunal on questions of fact. when the tribunal in the penalty proceedings gives a finding against the assessee, who is facing 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 criminal procedure code, 1973, and, therefore, the high court cannot deviate from the code for the reason that a finding has been arrived at by the authorities under the income-tax act, 1961. but the facts found by the tribunal in favour of the assessee cannot be disturbed by the high court as the tribunal is the fact-finding authority. in this case, the tribunal had held in the penalty proceedings that the assessees did not intend to conceal the amount as they themselves produced the register for verification and that the person who made the mistake, that is, the accountant was dead and, therefore, the mistake in the return was unknown to the partners of the firm, making it a bona fide mistake. this finding of fact had to be accepted by the court. the learned single judge of the madras high court quashed the prosecution launched by the income-tax officer. 17. relying on the case of k. t. m. s. mohammed v. union of india : 1992crilj2781 , it is held in the case of asst. cit v. poorna cine theatre (p.) ltd. [ : [1996]220itr361(ap) , by a learned single judge of this court that, when in an appeal against the levy of penalty, the tribunal deleted the penalty during the pendency of the criminal case before the special court, on the ground that the assessee had not concealed the income, it cannot be said that the assessee had wilfully omitted the income and, therefore, no offence under sections 276c and 277 of the income-tax act could be made out. 18. following the case of cit v. rajasekaran nair [1994] 207 itr 33, in the case of asst. cit v. thirumal agencies : [1997]227itr671(ap) , it is held that whenever a statutory authority like income-tax appellate authority has given a finding of fact, 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 to be accepted by the criminal court. 19. in the case of g.l. didwania v ito : [1997]224itr687(sc) , the apex court has held that, when the appellate tribunal set aside the assessment holding that there was no material to hold that young india and transport company belonged to the assessee, the finding of the income-tax appellate tribunal is conclusive and, therefore, the criminal proceedings launched against the assessee are liable to be quashed. 20. the position of law as gathered and gleaned from a catena of decisions referred to in the preceding paragraphs is that a criminal court has to give due regard to the result of any proceedings under the income-tax act having a bearing on the question in issue and in suitable cases it may drop the proceedings in the light of an order passed under the income-tax act. although the criminal court has to judge the case independently on the evidence placed before it, the finding of fact recorded by the ultimate income-tax authority is conclusive and binding on the criminal court. but an assessee cannot be convicted merely on the basis of the finding recorded against him by the ultimate assessing authority. it is necessary for the prosecution to establish mens rea which is an essential ingredient for the offence under sections 276c and 277 of the act. 21. the question that looms large for consideration is whether the respondent-accused had wilfully attempted to evade payment of income-tax and had falsely verified the income-tax return for the assessment year 1985-86 22. p.w.-1 has assessed the income of the respondent-accused for the assessment year 1985-86. he has testified that in the income-tax return, exhibits p-3, the respondent-accused has put his signature. instead of showing correctly that dillu cine enterprises (p.) ltd., had paid him an amount of rs. 1,00,000 as his remuneration, he had shown an income of rs. 50,000 only. when this fact was detected, the respondent gave an unacceptable explanation that regarding the adjustment of the amount of rs. 50,000 he had no knowledge because no advice was sent to him by the managing director of dillu cine enterprises (p.) ltd., subsequent to the alleged payment by adjustment. as and when that was known to him, he gave a revised statement of income showing the second payment of rs. 50,000 which amount he had shown in the return for the subsequent year of 1986-87 and later submitted a revised return for the assessment year 1986-87 by deleting the amount of rs. 50,000. he was assessed accordingly by the income-tax officer and, therefore, he is not liable. he has further stated on oath that, on april 18, 1984, the respondent and his wife dillawar banu, had sold their share in dillu cine enterprises (p.) ltd., and on the same day, the management was changed and the respondent-accused and his wife had made the entry on january 18, 1984, in their own hand regarding the payment of rs. 50,000 by way of adjustment. they had knowledge about the transaction and, therefore, the respondent-accused should have shown this amount in the income-tax return for the assessment year 1985-86. in cross examination he has admitted that the amount of second rs. 50,000 had been shown by the respondent-accused in his return for the assessment year 1986-87. he has also admitted that in the revised statement of accounts for the year 1985-86, the second payment of rs. 50,000 had been shown and the respondent-accused was assessed accordingly. he had also admitted that for the assessment year 1986-87 he had submitted a revised income-tax return in which the amount of rs. 50,000 shown as income by profession has been deleted and accordingly he was assessed. 23. it is pertinent to note that the appellant had not examined p.n. ramaiah or his associates in an attempt to prove that on april 18, 1984, the accused-respondent in his own handwriting had made entries in the cash book, a copy of which is at exhibit p-7, p-8a, p-9a and p-10a. it can be safely inferred that pw-1 was not acquainted with the handwriting of the accused. he has not claimed that he is familiar with the writing of the respondent-accused. thus, the statement of p.w.-1 cannot be accepted that the entries in the cash book on april 18, 1984, are that of the accused respondent. had the appellant examined the person who has written the cash book, he would have explained as to why the adjustment on april 18, 1984, was made in two instalments and why and how the payment was made by adjustment. in the light of these facts, it cannot be said definitely that the accused-respondent had the knowledge about the payment by adjustment on april 18, 1984. there is no iota of evidence on record that subsequent to the payment by adjustment, vide the entries in the cash book, exhibit p9-a, the advice was sent to the accused-respondent before he had signed and submitted the return of income-tax for the assessment year 1985-86. under these circumstances, the defence of the respondent-accused cannot be brushed aside that he did not receive the advice before submitting the return of income-tax for the assessment year 1985-86. 24. from a perusal of the order passed by the commissioner of income-tax (appeals)-iv, hyderabad, dated december 21, 1985, it is clear that it has not only referred to a relevant portion of the judgment of acquittal passed by the trial court but has also mentioned in para 1.2 of its order that the assistant commissioner of income-tax had issued a letter to the respondent relating to levy of penalty that the accused-respondent should pay the amount of rs. 2,37,522 immediately and should intimate the withdrawal of appeal forthwith before his application for dropping the penalty proceedings could be considered. thereafter, the respondent-accused wrote a letter dated march 10, 1992, requesting for withdrawal of the appeal and consequently the appeal against the penalty was dismissed as withdrawn. the interest charged under section 139(8) of the income-tax act has been waived. the commissioner of income-tax (appeals), considering the fact that the respondent-accused has disclosed the additional amount of rs. 50,000 for the subsequent year 1986-87 as a measure of protection and that there was no concealment of the amount of rs. 50,000 but he has disclosed the income, he could not be made liable for penalty and set aside the order imposing penalty under sections 271(1)(a), 271(1)(b) and 271(1)(c). the impugned order might have been challenged in appeal before the income-tax tribunal, but it is not urged during the course of the arguments by learned standing counsel for the appellant that the income-tax tribunal had suspended the operation of the impugned order whereby the penalty has been set aside. 25. for the foregoing reasons, it cannot be said that the respondent-accused had wilfully tried to evade the payment of tax and for that purpose he had falsely verified the income-tax return for the year 1985-86. 26. in result, the judgment of acquittal passed by the trial court cannot be faulted and, therefore, the appeal against acquittal is dismissed.