1991 (5) TMI 21 - HC - Income Tax

Summary

Issues:
Challenge to a complaint filed under sections 276C, 277, and 278B of the Income-tax Act, 1961.

Analysis:
The petitioners sought to quash a complaint alleging a fictitious liability to evade tax. The complaint stated that no SRP personnel were deployed at the factory, making the liability false. The petitioners argued jurisdictional issues based on subsequent developments, accounting principles, and lack of wilful tax evasion.

The respondents contended that the complaint disclosed offenses under the Income-tax Act sections cited. They argued that delayed bills from the government did not invalidate the complaint and suggested producing bills for verification.

The judge upheld the respondents' contentions. She found that the complaint was not without jurisdiction based on the facts presented. The mercantile accounting system's principles were discussed, emphasizing the disputed liability's basis in the complaint.

The judge rejected the petitioners' argument regarding lack of wilful tax evasion due to the statutory presumption of a guilty mind under section 278E of the Act. The judge noted that previous cases cited by the petitioners did not consider this statutory provision.

Regarding the petitioners' reliance on Madhavrao Jiwaji Rao Scindia's case, the judge clarified the test for quashing a criminal proceeding. She highlighted that the likelihood of conviction should be assessed based on the complaint's allegations, not the accused's defense.

Ultimately, the judge dismissed the writ application, allowing the petitioners to raise their points before the Magistrate. The judge emphasized that the defense's strength should not be a general basis for quashing a complaint. The court's decision was based on the presented facts, and no costs were awarded.

In conclusion, the judge rejected the petitioners' challenges to the complaint, emphasizing the importance of considering the complaint's allegations rather than the accused's defense when assessing the likelihood of conviction. The court upheld the complaint's validity and allowed the petitioners to address their concerns before the Magistrate.