1992 (1) TMI 54 - HC - Income Tax

Summary

Issues Involved
1. Liability of partners under Section 278B of the Income-tax Act, 1961.
2. Allegations against the partners and the sufficiency of the complaint.
3. Effect of a settlement with the Income-tax Department on criminal prosecution.
4. Impact of filing revised returns on criminal prosecution.
5. Pendency of appeals before the Income-tax Appellate Tribunal.
6. Age-based exemption from criminal prosecution as per CBDT guidelines.

Detailed Analysis

1. Liability of Partners under Section 278B of the Income-tax Act, 1961
The petitioner argued that partners could only be held liable under Section 278B of the Income-tax Act, 1961, which came into force on October 1, 1975. The prosecution contended that the offenses occurred after this date, covering assessment years 1976-77 to 1979-80. The court noted that specific allegations were made in the complaint against all partners, indicating they were in charge of and responsible for the firm's conduct during the relevant period.

2. Allegations Against the Partners and the Sufficiency of the Complaint
The petitioner claimed the complaint lacked specific allegations against partners Nos. 3 to 5, merely reproducing statutory language. The court found that the complaint contained detailed allegations, including the conspiracy to fabricate false evidence and the submission of false returns. The court referenced various judgments, including *Shital N. Shah v. ITO* and others, affirming that the complaint's allegations were sufficient to proceed against the partners.

3. Effect of a Settlement with the Income-tax Department on Criminal Prosecution
The petitioner contended that a settlement with the Income-tax Department, which included filing revised returns, should preclude criminal prosecution. The prosecution denied any such settlement terms preventing prosecution. The court emphasized that only the allegations in the complaint should be considered at this stage, not extraneous matters. The court found no basis in the complaint to infer a settlement barring prosecution, thus rejecting this contention.

4. Impact of Filing Revised Returns on Criminal Prosecution
The petitioner argued that filing revised returns should negate the criminal charges. The court noted the timing: original returns were filed between 1976 and 1979, assessments completed by 1979, and revised returns filed only after a search in 1980. Citing *S. R. Arulprakasam v. Smt. Prema Malini Vasan, ITO* and *Hakam Singh v. CIT*, the court held that filing revised returns under compulsion does not expiate the original false returns, allowing criminal prosecution to proceed.

5. Pendency of Appeals Before the Income-tax Appellate Tribunal
The petitioner suggested that ongoing appeals against penalty orders should halt criminal proceedings. The court dismissed this argument, stating that the pendency of appeals does not bar criminal prosecution, thus affirming the continuation of the criminal cases.

6. Age-based Exemption from Criminal Prosecution as per CBDT Guidelines
The petitioner argued for exemption from prosecution based on his age (72 years), citing CBDT guidelines against prosecuting individuals over 70. The court noted that the prosecution was initiated in 1988 when the petitioner was not yet 70, rendering this argument inapplicable.

Conclusion
The court dismissed the petitions, finding no legal infirmity in the complaints. The detailed allegations in the complaints, the timing of the revised returns, and the lack of any binding settlement terms against prosecution justified proceeding with the criminal cases. The court emphasized that the allegations, taken at face value, sufficiently constituted the offenses charged, warranting a trial.