1999 (11) TMI 10 - HC - Income Tax

Summary

Issues Involved:
1. Wilful failure to file income tax returns for the assessment years 1991-92, 1992-93, and 1993-94.
2. Misjoinder of charges and improper framing of charges.
3. Procedural errors and prejudice to the accused.
4. Binding nature of departmental circulars and guidelines.

Detailed Analysis:

1. Wilful Failure to File Income Tax Returns:
The accused, a senior I.A.S. Officer, failed to submit his income tax returns for the assessment years 1991-92, 1992-93, and 1993-94 within the prescribed time despite receiving notices under sections 148 and 142(1) of the Income-tax Act. The returns were eventually filed on December 9, 1994, showing nil tax liability. The Department alleged that the accused wilfully and deliberately delayed filing his returns and initiated prosecution under section 276CC of the Income-tax Act. The trial court found the accused guilty on three counts and sentenced him to three months of rigorous imprisonment and a fine of Rs. 1,000 for each count, with the sentences to run concurrently.

2. Misjoinder of Charges and Improper Framing of Charges:
The judgment highlighted a significant procedural flaw in the trial court's handling of the case. Section 218 of the Criminal Procedure Code mandates separate charges for distinct offences, with each charge tried separately. The accused faced three distinct offences for different assessment years, yet the trial court framed a single charge covering all three offences. This misjoinder of charges was deemed illegal and not merely an irregularity. The judgment emphasized that each failure to file a return constituted a separate and distinct offence under section 276CC of the Income-tax Act.

3. Procedural Errors and Prejudice to the Accused:
The trial court's approach in clubbing three separate complaints (C.C. Nos. 71, 72, and 73 of 1995) into a single trial without a written application from the accused or a specific order from the magistrate was a procedural error. The judgment noted that the trial court's records did not indicate any request for a joint trial or an order granting it. Furthermore, the judgment rendered only in C.C. No. 73 of 1995 did not provide separate findings or convictions for C.C. Nos. 71 and 72 of 1995. This procedural lapse caused prejudice to the accused, as it affected his right to appeal and resulted in an unlawful conviction on three counts based on a single charge.

4. Binding Nature of Departmental Circulars and Guidelines:
The judgment also considered the binding nature of departmental circulars and guidelines. The accused argued that the Department failed to adhere to its own guidelines, which should have precluded prosecution in cases where the tax liability was minimal. The court acknowledged that the circulars issued by the Income-tax Department are executive in character and binding on the officers. In this case, the tax assessable for the assessment year 1991-92 was less than Rs. 5,000, and the returns were eventually accepted with no loss to the state. The court concluded that the prosecution should not have been initiated, and the sanction for prosecution was not justified.

Conclusion:
The High Court set aside the conviction and sentence passed by the Additional Chief Metropolitan Magistrate (Economic Offences-II) and confirmed by the Principal Sessions Judge. The revision was allowed, and the accused was acquitted of the charges. The fine amount, if paid, was ordered to be refunded, and the bail bonds were cancelled. The judgment underscored the importance of adhering to procedural requirements and the potential prejudice caused by procedural errors in criminal trials.