1991 (9) TMI 54 - HC - Income Tax

Summary

Issues:
1. Setting aside the order of the Additional Sessions Judge and quashing the complaint under sections 276C and 277 of the Income-tax Act, 1961, and under sections 193/196, IPC.
2. Discrepancy in income declaration by the partnership firm leading to concealment of income.
3. Legal implications of the Tribunal's order canceling the penalty imposed by the Income-tax Officer.
4. Consideration of section 278B of the Income-tax Act regarding offenses committed by a company and its responsible individuals.
5. Allegations against individual partners of the firm and their liability in the criminal proceedings.

Analysis:

1. The case involves a partnership firm, Jaswant Rai Mittal & Co., facing a complaint under sections 276C and 277 of the Income-tax Act, 1961, and sections 193/196, IPC, for alleged concealment of income. The firm's petition to set aside the order of the Additional Sessions Judge and quash the complaint was based on discrepancies in the income declaration and verification process.

2. The firm declared an income of Rs. 97,480 for the assessment year 1977-78 but was found to have concealed income of Rs. 24,154 during a construction contract. Despite explanations, the Income-tax Officer imposed a penalty, later canceled by the Tribunal. The issue of concealment and intentional false statements in the income declaration forms the basis of the criminal complaint.

3. The Tribunal's order canceling the penalty did not absolve the firm of the discrepancy in income calculation. While the penalty was set aside, the Tribunal did not rule out the existence of the concealment. The prosecution was based on false declarations and intent to evade taxes, not solely on the penalty imposition.

4. Section 278B of the Income-tax Act addresses offenses by companies and their responsible individuals. The complaint primarily targeted Jaswant Rai, the partner who signed the verification/declaration, and participated in assessment proceedings. The legal provision holds individuals responsible for company offenses unless they prove lack of knowledge or due diligence.

5. Not all partners of the firm were implicated in the allegations. The judgment differentiated between the liability of individual partners based on their roles in the firm's conduct. Partners without direct involvement or responsibility for the firm's business operations were excluded from the criminal proceedings, aligning with legal precedents on individual liability in such cases.