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PETITIONER: PREM DASS

       Vs.

RESPONDENT: INCOME TAX OFFICER

DATE OF JUDGMENT:       09/02/1999

BENCH: G.B.Pattanaik, M.B.Shah

JUDGMENT:

PATTANAIK,J.

     The  appellant was convicted under Section 276C of the Income  Tax  Act,  on a complaint being filed  that  he  had incorrectly made a verification on the income tax return for the  Assessment Year 1980-81.  For his such conviction,  the learned  Chief Judicial Magistrate, Faridabad, sentenced him to  undergo imprisonment for six months and to pay a fine of Rs.1000/-, in default, to further undergo imprisonment for a period of three months.  He was also convicted under Section 277 of the Income Tax Act and sentenced to undergo R.I.  for six months but the sentences awarded had been ordered to run concurrently.   The  appellant  preferred an appeal  to  the Sessions  Judge, who by Judgment dated 7th of October, 1988, came  to  the  conclusion   that  the  accused-appellant  is entitled  to  benefit of doubt and accordingly he  acquitted him  of  the charges levelled against him.   The  department moved  the High Court against the aforesaid acquittal passed by  the  learned  Sessions Judge and the High Court  by  the impugned  Judgment,  allowed  the appeal and set  aside  the Judgment  of acquittal passed by the learned Sessions  Judge and  affirmed  the conviction and sentence of the  appellant passed  by  the learned Chief Judicial Magistrate.   Learned Sessions Judge, after analysing the charges and evidence led by  the prosecution in support of the said charges, came  to the  conclusion that the gravamen of indictment against  the accused  lay  in  the fact that he had  filed  an  incorrect returns  of  income  from his  transportation  business  and intentionally withheld books of account seized during search made  under  Section 132 of the Income Tax Act and had  made wrong verification of the statements filed in support of the return.   But, according to the learned Sessions Judge,  the charges  were  not  only  vague  but  also  the  prosecution evidence  was  totally  insufficient to infer  the  criminal intent  of  the accused- assessee and, there was nothing  on record  to  pinpoint  the identity, veracity or  falsity  of entries  in  the  books  of  account  on  which  the  entire prosecution case was sought to be founded upon.  The learned Sessions  Judge also came to the conclusion that no evidence whatsoever  had  been  examined by the prosecution  to  lend support  to the opinion formed by the Income Tax Officer  in the  assessment  proceedings.  The Sessions Judge also  took into  account the fact that the appeal filed by the accused- assessee  in  respect  of the relevant assessment  year  was

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partly  allowed  by the Commissioner of Income  Tax(Appeal), Chandigarh  by Order dated 12.3.1987 and the said  appellate authority  had  recorded  that the income estimated  by  the Income  Tax  Officer was not based on reasonable  data  and, therefore  a  direction  was issued to the said  Income  Tax Officer  to  work out the commission at 8 per cent  for  all assessment years instead of 10 per cent estimated by him and on account of such order of the appellate authority, the tax liability  of  the assessee stood substantially reduced  and this itself demonstrates that no criminal liability could be fastened  on the assessee.  With these findings the Sessions Judge came to the conclusion that the prosecution is held to have  failed  to bring the guilt home to the accused  beyond reasonable  manner of doubt.  The High Court however, in the impugned  judgment  re-appraised the evidence of Income  Tax Officer  PW3  and  in view of  presumption  available  under Section 132(4A) of the Income Tax Act, reversed the order of acquittal  on a finding that the learned Sessions Judge  was in  error  to  hold that the prosecution case has  not  been established beyond reasonable doubt.

     Mr.   Salve, learned Senior Counsel, appearing for the appellant contended that though the powers of the High Court while  hearing  an appeal against the acquittal are as  wide and  comprehensive as in an appeal against a conviction, but the  High  Court  is required under the law to  examine  the reasons  on which the order of acquittal was based and would be  justified  in  interfering with an order  of  acquittal, after  being satisfied that the view taken by the acquitting Judge was clearly unreasonable.  According to Mr.  Salve, if on  the evidence two views are possible, one, supporting  an order  of acquittal and the other indicating conviction, the High  Court  would not be justified in interfering  with  an order  of  acquittal merely because it feels that it  would, sitting as a Trial Court, have taken the other view.  In the case in hand, not only the High Court has not considered the reasons  given  by  the  Sessions Judge  in  acquitting  the accused-appellant  but also the order of acquittal has  been reversed  merely by reference to the presumption arising out of Section 132(4A) of the Income Tax Act and in this view of the matter the conclusion is inescapable that the High Court committed  serious  error  in interfering with an  order  of acquittal  passed by the Sessions Judge.  Mr.  Salve further contended  that  the penalty proceeding in  question  having ended in favour of the assessee-accused on a conclusion that the additions made in the assessment was purely on the basis of  a  difference of opinion as to the estimate made by  the assessee  and  the  estimate  made by  the  department  and, therefore,  there  has  not been a case  of  concealment  of income  or  furnishing of inaccurate particulars of  income, the  High Court committed serious error in interfering  with an order of acquittal.  It is in this connection, Mr.  Salve brought  to the notice of the Court the legislative  mandate engrafted in Section 279(1A) of the Income Tax Act.  He also pointed out to us the earlier order of this court dated 28th of  August, 1997, where-under this Court had called upon the Income  Tax Officer to tell whether the prosecution launched against  the  appellant and which has led to his  conviction can independently be sustained when penalty proceedings have culminated  in favour of the appellant but there has been no response from the said Income Tax Officer.

     Mr.  Shukla, the learned Senior Counsel, appearing for the respondent on the other hand submitted that the criminal proceeding  is wholly independent of the penalty proceedings

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under  the Income Tax Act and, therefore, a conviction in  a criminal  proceeding cannot be interfered with on the  basis of  findings of the appellate authority or the tribunal in a penalty  proceeding.   With reference to Section 279(1A)  of the   Income  Tax  Act  and   its  effect  on  the   pending prosecution,  Mr.  Shukla submitted that the said  provision has  no  application  as  the   Commissioner  or  the  Chief Commissioner  has  not reduced or waived penalty and  it  is only  the Income Tax Appellate Tribunal which has  cancelled the  penalty in question and by way of written  information, Mr.   Shukla has intimated the court that against the  order of  the  appellate  tribunal   cancelling  the  penalty,  an application under Section 256(1) of the I.T.Act for making a reference  has  been filed and is still pending  before  the tribunal.

     In view of the rival submissions at the bar, the first question that requires consideration is whether the impugned order of the High Court can be held to be in accordance with the  parameters  fixed  for interference with  an  order  of acquittal.  There cannot be any dispute with the proposition that  the plentitude of power available to the court hearing an  appeal  against  the  acquittal  is  the  same  as  that available  to a court hearing an appeal against an order  of conviction.   But  at the same time it is well settled by  a catena  of  decisions of this court that the court will  not interfere   with  an  order  of  acquittal  solely   because different  plausible view may arise on the evidence and  the court  thinks that the view taken by the trial court of  the evidence  is  not correct.  In other words, the  court  must come  to  the  conclusion that the view taken by  the  trial Judge  while  acquitting cannot be the view of a  reasonable man  on  the materials on record.  It is also  well  settled that  the court of appeal must examine the reasons on  which an order of acquittal is based and must reach the conclusion that  the  view  taken by the acquitting Judge  was  clearly unreasonable.   It has also been held by this court that  if the  evaluation  of  the evidence made by the  courts  below while  recording an order of acquittal does not suffer  from any  illegality  or manifest error and the grounds on  which the  said order of acquittal is based unreasonable, then the High  Court should not disturb the said order of  acquittal. Bearing  in  mind the aforesaid principles and on  examining the  Judgment of the learned Sessions Judge and the  grounds on  which the said learned Sessions Judge recorded an  order of acquittal, as reflected in paragraphs 9, 10 and 11 of the appellate  judgment,  and the impugned Judgment of the  High Court  interfering  with the said judgment of  the  Sessions Judge,  we have no hesitation to come to the conclusion that the  High  Court has not considered the reasons and  grounds advanced  by  the learned Sessions Judge while recording  an order   of  acquittal  and  by   merely  relying  upon   the presumption  arising  out of Section 132(4A) of  Income  Tax Act,  reversed the order of acquittal without reversing  the findings arrived at by the Sessions Judge on the evidence on record.   The conclusion of the learned Sessions Judge after appreciating  the evidence led by the prosecution and  after perusing  the appellate order of the Commissioner of  Income Tax  (Appeals)  dated  12.3.87,  have  not  been  given  due consideration  by  the  High Court and the  High  Court  has merely  gone  by  the statutory presumption arising  out  of Section  132(4A)  of the Act.  To attract the provisions  of Section  276C  of the Income Tax Act the prosecution has  to establish that the accused willfully attempted in any manner to  evade  any  tax,  penalty   or  interest  chargeable  or

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imposable  under  the  Act.  To attract  the  provisions  of Section  277  the prosecution is required to establish  that the  accused made a statement in any verification under  the Act  which he either knows or believes to be false, or  does not  believe to be true.  The relevant part of Sections 276C and  277 are extracted hereunder for better appreciation  of the point in issue:

     "276  C.   (1) If a person willfully attempts  in  any manner  whatsoever  to  evade any tax, penalty  or  interest chargeable  or  imposable under this Act, he shall,  without prejudice  to any penalty that may be imposable on him under any other provision of this Act, be punishable,- .

     "277.    If  a  person  makes   a  statement  in   any verification  under  this  Act  or   under  any  rule   made thereunder,  or  delivers an account or statement  which  is false, and which he either knows or believes to be false, or does  not  believe  to be true, he shall be  punishable,  --

     Section  132  of the Income Tax Act deals with  Search and  Seizure and Sub-section (4)(A) thereof stipulates  that where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found to  be  in  the possession or control of any person  in  the course  of a search, then it may be presumed that such books of  account  or other documents belongs to such  person  and that the contents of such books of account are true and that the  signature and every other part of such books of account and  other documents which purport to be in the  handwriting of  any particular person are in that person’  handwriting. The aforesaid provision is extracted hereunder in extenso:-

     "132(4)(A)   Where  any  books   of   account,   other documents,  money,  bullion,  jewellery  or  other  valuable article  or  thing  are  or is found in  the  possession  or control  of any person in the course of a search, it may  be presumed -

     (i)  that  such  books of  account,  other  documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

     (ii)  that  the contents of such books of account  and other documents are true;  and

     (iii)  that the signature and every other part of such books  of account and other documents which purport to be in the  handwriting  of  any  particular person  or  which  may reasonably  be  assumed to have been signed by, or to be  in the  handwriting  of,  any particular person,  are  in  that person’s handwriting, and in the case of a document stamped, executed  or attested, that it was duly stamped and executed or  attested by the person by whom it purports to have  been so executed or attested."

     We  fail  to appreciate how applying  the  presumption under Section 132(4)(A) the ingredients of the offence under Sections  276C and 277 can be held to have been  established as has been held by the High Court.

     Willful  attempt to evade any tax, penalty or interest chargeable  or imposable under the Act under Section 276C is a  positive act on the part of the accused which is required

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to  be proved to bring home the charge against the  accused. Similarly  a statement made by a person in any  verification under  the  Act can be an offence under Section 277  if  the person making the same either knew or believe the same to be false  or  does not believe to be true.  Necessary  mensrea, therefore,  is required to be established by the prosecution to attract the provisions of Section 277.  We see nothing in Section  132 (4)(A) which would establish the ingredients of aforesaid  two criminal offence contemplated under  Sections 276C  and  277  of  the Indian Income Tax Act.   It  may  be noticed  at  this  point  of time that  the  Tribunal  while interfering  with  the  penalty imposed  under  Section  271 (1)(C)  of the Act came to a positive finding that there  is no act of concealment on the part of the assessee and he had returned  the  income  on  estimate  basis.   The  Tribunal, further  found  that  it is a case purely on  difference  of opinion as to the estimates and not a case of concealment of income  or  even  furnishing of  inaccurate  particulars  of income.

     In  the aforesaid premises, the High Court was totally in  error in interfering with the order of acquittal  passed by  the  learned  Sessions Judge by an  elaborate  and  well reasoned  judgment.   We have no hesitation to come  to  the conclusion  that  the ingredients of offence under  Sections 276C and 277 of the Income Tax Act have not been established by  the prosecution beyond reasonable doubt, and  therefore, the  appellant cannot be convicted of the offence under  the said Sections.

     We also find sufficient force in the contention of Mr. Salve that the legislative mandate in Section 279(1A) of the Income  Tax Act has not been borne in mind by the High Court while  interfering with an order of acquittal.  Mr.  Shukla, no  doubt has indicated that the said provision will have no application  as the penalty imposed has not been reduced  or waived by an order under Section 273A.  We do not agree with the  aforesaid  literal interpretation of the provisions  of Section   279(1A)  of  the  Act,   when  we  find  that  the Commissioner  of Income Tax(Appeal) has reduced the penalty. Further  the  tribunal  has  totally set  aside  the  order, imposing  penalty  could not have been lost sight of by  the High  Court while considering the question whether the order of  acquittal  passed  by  the  Sessions  Judge  has  to  be interfered  with or not, particularly, when the gravamen  of indictment  relates to filing of incorrect return and making wrong verification of the statements filed in support of the return,  resulting  in  initiation of  penalty  proceedings. Bearing  in  mind  the legislative  intent  engrafted  under Section  279(1A) of the Income Tax Act and the conclusion of the  learned Sessions Judge, on appreciation of evidence not having  been  reversed by the High Court and the grounds  of acquittal  passed  by  the Sessions Judge  not  having  been examined by the High Court, we have no hesitation to come to the  conclusion  that  the High Court was not  justified  in interfering with an order of acquittal.

     In  the  aforesaid  circumstances, we  set  aside  the impugned order of the High Court and acquit the appellant of the  charges  levelled against him.  The order of  acquittal passed  by the Sessions Judge is affirmed and this  criminal appeal is allowed.  The bail bond furnished by the appellant stands cancelled.

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