2011 (9) TMI 483 - HC - Income Tax

Penalty & Prosecution - Purchases worth Rs 1,55,867 were shown from M/S Khan Packages, on his visit he found the premises of the firm locked. Though, there was no sign board, but expressed his doubt that the said firm might be working in those premises - Held That - law involving imprisonment states however strong may be the suspicion, but it cannot take the place of proof. Offense and Prosecution - Period of limitation - complaint was filed after more than 3 years - Section 468 of the Code of Criminal Procedure bars the cognizance of the offence inter alia of the category specified in subsection (2) after the expiry of period of limitation. Subsection (2)(c) provides that the period of limitation shall be three years if the offence is punishable with imprisonment for a term exceeding one year but not exceeding three years. - Since 3 years has passed extended period of limitation cannot be applied.

Summary

Issues:
Challenge to acquittal under Section 276(C) of the Income Tax Act, 1961.

Analysis:
The judgment in question deals with the challenge to the acquittal of the respondent under Section 276(C) of the Income Tax Act, 1961. The case revolved around the respondent's declaration of a net loss in their Income Tax return for the assessment year 1990-91, with specific scrutiny on expenses related to purchases from a non-existent firm, M/S Khan Packages. Despite the absence of concrete evidence, a show cause notice was issued, leading to the imposition of a penalty. The accused filed an appeal which was dismissed, prompting the initiation of proceedings under Section 276(C) based on a written complaint. The trial resulted in acquittal due to the lack of substantial evidence proving concealed income or tax evasion, with key points being the absence of a report from the investigating officer and the non-substantiation of the firm's non-existence. The judgment referenced a previous case but was contested based on a subsequent Supreme Court ruling.

The appellant argued that the earlier case's ratio had been overruled by the Supreme Court, emphasizing the evidence presented as indicative of willful tax evasion. In contrast, the respondents contended that the evidence did not align with legal standards, and the presumption of a culpable mental state was unwarranted. The trial court correctly concluded that the accused did not suppress income to evade tax, supported by statements from relevant officers indicating insufficient proof of guilt. The judgment highlighted the principle that suspicion, no matter how strong, cannot substitute proof, reinforcing the lack of substantiated claims against the accused.

Furthermore, the judgment addressed the issue of limitation under Section 468 of the Code of Criminal Procedure, barring cognizance after a specified period. Given the time lapse between the alleged offense and the filing of the complaint, the court deemed the cognizance improper, leading to the dismissal of the appeal. The respondents were discharged from their bail bonds, and the record was directed to be sent down promptly. The decision ultimately upheld the acquittal, emphasizing the importance of legal principles and evidence in determining guilt under the Income Tax Act.