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PETITIONER: ISHWARLAL GIRDHARLAL PAREKH

       Vs.

RESPONDENT: STATE OF MAHARASHTRA AND ORS.

DATE OF JUDGMENT: 01/05/1968

BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. RAMASWAMI, V.

CITATION:  1969 AIR   40            1969 SCR  (1) 193  CITATOR INFO :  F          1977 SC1174  (6)

ACT: Indian  Penal  Code,  s. 30 and  s.  420-Causing  income-tax Officer   to   make   under   assessment   of   income    by misrepresentation    whether-cheating’--Assessment     order whether  ‘Property’--Communication of such order  to  assess whether  ‘delivery’  of  property-Assessment  order  whether valuable security’ as defined in s. 30 I.P.C.

HEADNOTE: The  appellant along with certain others was tried  for  the offence  of entering into a conspiracy to cheat the  income- tax -authorities in respect of the income-tax assessment  of a firm.  The prosecution levelled against him a charge inter alia,  of  the  offence under s. 420  I.P.C.  The  appellant raised  before the Special Judge an objection to the  effect that the terms of s. 420 I.P.C. were not satisfied  inasmuch as  (i)  an assessment order was not  ’property’,  (ii)  its communication to him was not ’delivery’, (iii) an assessment order was also not a ’valuable security’.  The Special Judge and   the  High  Court  rejected  these  contentions.    The appellant came to this Court by special leave. HELD : (i) Even if an assessment order is not ’property’  in the hands of the Income-tax Officer, it is ’property’ in the hands  of the assessee because it contains a computation  of his  assessable  income  and  a  determination  of  his  tax liability.   The  word property occurring in s.  420  I.P.C. does  not  necessarily  mean that the.  thing,  of  which  a delivery  is dishonestly desired by the person  who  cheats, must  have a money value or a market value in the  hands  of the person cheated. [196 G-197 A] (ii)   Communication  or service of an assessment  order  is part  of  the  procedure  itself.   But  if  the   necessary allegations  are  established, the accused must be  held  to have dishonestly induced the Income-tax Officer to ’deliver’ the  particular  property viz. the  assessment  order.   Nor could  the contention be accepted that the deception, if  at all,   is  practised  not  when  the  assessment  order   is delivered,  hut  at the stage when the  computation  of  the total income is made by Income-tax Officer, for, the process of ’cheating’ employed by an assessee, if successful,  would

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have  the  result  of dishonestly  inducing  the  Income-tax Officer to make a wrong assessment order and communicate the same to an assessee. [197 C-D] (iii) An order of assessment is a ’valuable security’  under s. 420 [.P.C. because@ it creates a right in the assessee in the  sense that he has  right to pay tax only on  the  total amount assessed therein and his liability to pay tax is also restricted to that extent.  [197 F-G] On  the above reasoning, framing of a charge for an  offence under 420 I.P.C. is correct.

JUDGMENT: CRIMINAL  APPELLATE JURISDICTION: Criminal Appeal No. 09  of 1966. Appeal  by special leave from the judgment and  order  dated November 24, 1965 of the Bombay High Court in Criminal Revi- ion Application No. 232 of 1965. 194 A.S. R. Chari, N. C. Maniar, P. C. Bhartari and J. B.  Dada. chanji, for the appellant. G. L. Sanghi and S. P. Nayyar, for respondent No. 1. N. C. Maniar, K. L. Hathi and Atiqur Rehman, for  respondent No. 2. The Judgment of the Court was delivered by Vaidialingam, J. In this appeal, by special leave, on behalf of the appellant, the fifth accused in Special Case No. 9 of 1963. in the Court of the Special Judge for Greater  Bombay, Mr’ -A. S. R. Chari, learned counsel, challenges the  order, dated November 24, 1965, passed by the High Court of Bombay, in Criminal, Revision Application No. 232 of 1965. There are five accused, in Special Case No. 9 of 1963.   The appellant, and accused No. 4, are partners of an  industrial concern, known as ’Premier Industries’.  Accused No. 1 is an Income-tax Consultant, and accused Nos. 2 and 3, are clerks. in   the  Income-tax  Department.   The  substance  of   the prosecution  case. against these five accused, is that  they formed a conspiracy, to cheat the income-tax authorities, in respect  of  the  income-tax  assessments,  of  the  Premier Industries,  for  the  assessment  year  1960-61,  and,   in pursuance of the said conspiracy, committed ,offences, under s.  420  IPC.,  and s. 5(1)(d) read with  s.  5(2).  of  the Prevention  of  Corruption  Act,  1947  (Act  11  of  1947). (hereinafter  called the Act).  They have also been  charged with  an  offence, under s. 468 IPC., alleged to  have  been committed, by them, in furtherance of the said conspiracy. The allegations, relating to the commission of the offence,. under S. 420 IPC., is comprised in charge No. 2. That charge ends  up  by  saying that, by the  various  acts,  mentioned therein. the appellant, along with accused No. 1, who is the Income-tax  Practitioner, and accused No. 4, dishonestly  or fraudulently induced the income-tax authorities and obtained assessment  order  for less income-tax than due  by  accused Nos.  4  and  5,  and that. all  the  three  of  them,  have committed  an  offence,  under  s. 420.   IPC.   It  is  not necessary to refer to the other charges. The  appellant  raised  an objection, to the  framing  of  a charge.  under  s. 420 IPC.  According to  him,  the  charge should  really have been framed under s. 417, on the  ground that the assessment order, in this case, is not  ’property’. He  also raised an objection, that the assessment order,  is -not ’valuable security’. The Special Judge, by his order, dated February 3, 1965, re- jected the preliminary objections, raised by the  appellant.

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He  held that the assessment order was ’property’, and  that it  was also ’valuable security’.  Therefore, he  held  that the charge, framed 195 under  s. 420 IPC., was correct.  There were  certain  other objections,  raised ’by the appellant, viz.,  that  sanction had  not been obtained, under s. 196A, Cr.P.C.,  that  where the  offence itself was alleged to have been  committed,  in pursuance  of the conspiracy, and was the subject matter  of charge,  no charge of conspiracy could still be  maintained, and  that  the period of conspiracy  had  been  artificially fixed,  in  the  charge.  These objections  have  also  been overruled, by the Special Judge. The  appellant carried the, matter, in revision, before  the High  Court  of Bombay.  The learned Judge,  by  his  order, dated  November  24,  1965,  which  is  under  attack,   has confirmed  the order of the Special Judge.  Here again,  the High  Court has taken the view that the assessment order  is ’property’ and it is also ’valuable security’, under S.  30, IPC.   The  High  Court  is further of  the  view  that  the allegations,  contained  in the material  charge,  do  prima facie disclose an offence, under s. 420 IPC.  Certain  other objections,   raised  before  the  High  Court,  were   also negatived. Mr.  A. S. R. Chari, learned counsel for the appellant,  has again  reiterated  the  same  objections.   Except  for  the question,  relating to the charge framed under s. 420  IPC., we  make  it clear that we are not expressing  any  opinion, regarding  the  other points, raised by Mr. Chari.   If  any other  objections  are available to the  appellant,  or  any other  accused,  he or they, will be perfectly  entitled  to raise the same, during the course of the trial. The argument, regarding the invalidity of the charge, framed under S. 420, runs as follows.  The essential ingredient  of an offence, under S. 420 IPC., is that the person  cheating, must  thereby, dishonestly induce, the person  deceived,  to deliver any property, or to make the whole or any part of  a valuable  security.   We  are not  referring  to  the  other matters, contained in s. 420 IPC.  The issue or delivery  of an  order of assessment, by an Income-tax Officer is not  in consequence of the cheating, committed by a party, though it may  be  that  the computation of income, as  found  in  the assessment  order, may be the result of cheating,  practised by the accused.  Therefore, the accused cannot be considered to  have,  by creating, dishonestly induced  the  Income-tax Officer,  to deliver the assessment order, because  that  is issued, to a party, as a matter of routine.  The  assessment order,  cannot also be considered to be  ’property’,  within the  meaning of S. 420 IPC.  It cannot also be stated,  that the  accused,  by  cheating  have  dishonestly  induced  the Income-tax  Officer to make a valuable security, because  an assessment  order, can, in no sense, be considered to  be  a valuable  security.   No  legal  right  is  created  by   an assessment order.  The liability to payment of income-tax is created by the charging section, s. 3, of the Indian 196 Income-tax Act, 1922, and the demand, for payment of tax  is made,  on  the basis of a notice of demand,  issued  by  the Income-tax  Officer,  concerned.  At the most,  the  accused will be guilty of ’ cheating’, as defined under s. 415, IPC, inasmuch as they may have intentionally induced the  Income- tax Officer, who is deceived, to do or omit to do,  anything which he would not do, or omit. if he were not so  deceived, and they will be liable for punishment, under S. 417, IPC. Mr.  G.  L.  Sanghi,  learned counsel  for  the  State,  has

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supported the views, expressed by the High Court. We are not inclined to accept the contentions of Mr.  Chari, that there is any error, or illegality, in framing a charge, under S. 420 IPC.  As to whether the prosecution is able  to make  out  its case, or not, is a different point.   We  are only  concerned, at this stage, to consider as  to  whether, under the circumstances, a charge, under s. 420, could  have been framed. It  is  well-known, that, under the Indian  Income-tax  Act, liability  to  pay income-tax arises on the accrual  of  the income,  and  not from the computation, made by  the  taxing authorities,  in the course of assessment  proceedings,  and that it arises, at a point of time, not later than the close of the year of account.  It has also been laid down, by this Court, that assessments particularise the total income of an assessee  and the amount of tax, payable.  But it is not  as if  that the assessment order is valueless, as is sought  to be  made out.  The question, that arises for  consideration, in  this  case,  is  whether  there  is  any  ’delivery   of property’,  or, at any rate, whether the Income-tax  Officer has been induced ’to make a valuable security’. ’Movable property’ is defined, in S. 22, IPC; ’Document’ and ’valuable  security’  are  defined in ss. 29  and  30,  IPC, respectively.  Under the scheme of the Income-tax Act, it is clear that the assessment order determines the total  income of  the assessee, and the tax payable, on the basis of  such assessment.   The assessment order has to be served, on  the assessee.   The tax is demanded, by the issue of  a  notice, under  S. 29; but the tax demanded, is on the basis  of  the assessment   order,  communicated  to  an   assessee.    The communicated  order of assessment, received by an  assessee, is  in  our  opinion,  ’property’,  since  it  is  of  great importance, to an assessee, as containing a computation,  of his total assessable income and, as a determination, of  his tax liability.  In our view, the word ’property’,  occurring in S. 420, IPC, does not necessarily mean that the thing, of which  a delivery is dishonestly desired by the -person  who cheats,  must have a money value or a market value,  in  the hand of the person cheated.  Even if the thing has no  money value, in the hand of the person cheated, but becomes 197 a  thing  of value, in the hand of the person, who  may  get possession  of it, as a result of the cheating practised  by him, it would still fall within the connotation of the  term ’property’, in s. 420, IPC. Once  the  assessment order is held to  be  ’property’,  the question arises as to whether there is a ’delivery’, of the, same,  to the assessee, ’by the Income-tax Officer.   It  is argued that the order is communicated, in the usual  course, and  that  irrespective of any ,cheating’,  the  officer  is bound to serve the assessment order.  This argument,  though attractive,  has no merit.  Communication, or service of  an assessment order, is part of the procedure of the assessment itself.   But it can be held that, if the necessary  allega- tions are established, the accused have dishonestly  induced the Income-tax Officer, to deliver the particular  property, viz.,  the  assessment order, as passed by him,  in  and  by which a considerably low amount has been determined, as  the total  income  of the assessee, on the basis  of  which  the amount  of tax, has been fixed.  Nor are we  impressed  with the contention, that the deception, if at all, is practised, not  when  the  assessment order is delivered,  but  at  the stage,  when the computation, of the total income, is  made, by  the  Income-,tax Officer.  The  process  of  ’cheating’, employed  by  an  assessee, if successful,  would  have  the

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result  of  dishonestly inducing the Income-tax  Officer  to make a wrong assessment order and communicate the same to an assessee. An  offence under s. 420, IPC, will also be made out, if  it is  established that the accused have cheated and,  thereby, dishonestly  induced  the  Income-tax  Officer  to  make   a ’valuable  security’.  This takes us to the question  :  "Is the  assessment  order.   ’valuable  security’  ?"  We  have already   referred  to  s.  30,  IPC,   defining,   valuable security’.  The assessment order is certainly a  ’document’, under  s.  29, IPC.  The order of assessment does  create  a right, in the assessee, in the sense that he has a right  to pay  tax only on the total amount assessed therein  and  his liability  to  pay tax is also restricted  to  that  extent. Therefore an ’order of assessment’ is a ’valuable security’, under s. 420, IPC.  Therefore, if the cheating, employed  by the accused, resulted in inducing the Income-tax Officer  to make  a wrong assessment order, it would amount to  inducing the Income-tax Officer, to make a ’valuable security’. Considering  the  question, from either point  of  view,  as indicated  above, it follows that the framing of  a  charge, for an offence, tinder s. 420 IPC., is correct.  The appeal, accordingly, fails, and is dismissed. G.C.               Appeal dismissed. 198