2004 (1) TMI 50 - HC - Income Tax

Order of acquittal of the charge under sections 276C, 277 and 278B one of the partners had wilfully filed wrong return - where an offence is committed by the company, then every person who at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Partner, being the managing director and also the person who had verified the false statement contained in the return, is liable along with the company

Issues:
1. Appeal against acquittal under sections 276C, 277, and 278B of the Income-tax Act, 1961.
2. Liability of partners of M/s. Kamra Trading Co. for tax evasion and false verification.
3. Examination of evidence and witnesses in the trial court.
4. Acquittal of the respondents by the Chief Judicial Magistrate.
5. Appeal filed against the judgment of acquittal.

Analysis:
1. The appeal was filed against the acquittal of the partners of M/s. Kamra Trading Co. under sections 276C, 277, and 278B of the Income-tax Act, 1961. The complaint alleged wilful tax evasion and false verification in the assessment year 1986-87. The partners were charged based on the purchase of demand drafts without proper accounting, leading to an addition in the declared income and penalty proceedings initiated under section 271(1)(c) of the Act.

2. The surviving partners, Dewan Chand and Smt. Sangeeta Kamra, were the focus of the case. Dewan Chand was the managing partner and admitted to the purchase of the drafts, which were not accounted for in the books. Smt. Sangeeta Kamra, a sleeping partner, was acquitted as there was no evidence of her involvement in the day-to-day operations or signing of documents related to the business. Dewan Chand was found guilty of wilful tax evasion and false verification, leading to a fine and conviction under sections 276C and 277 read with section 278B of the Act.

3. The trial court examined witnesses and evidence, including vouchers and statements, to establish the culpability of the accused. The prosecution presented documents proving the purchase of drafts and the subsequent concealment in the books by Dewan Chand. The defense argued innocence based on health issues and lack of involvement in the business operations.

4. The Chief Judicial Magistrate acquitted the respondents based on the lack of criminal liability attributed to Smt. Sangeeta Kamra and the age and health conditions of Dewan Chand. While Dewan Chand was convicted and fined, Smt. Sangeeta Kamra was rightfully acquitted due to her limited role and lack of involvement in the offenses.

5. The appeal against the judgment of acquittal raised legal arguments regarding the liability of partners in tax evasion cases, the role of juristic persons like companies, and the application of specific provisions of the Act. The court upheld the acquittal of Smt. Sangeeta Kamra and imposed a fine and lenient sentence on Dewan Chand considering his age and health conditions.

This detailed analysis highlights the legal proceedings, evidence, and reasoning behind the judgment, emphasizing the key issues and outcomes of the case.

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