1999 (2) TMI 6 - SC - Income Tax

Conviction under section 276C - order of Session Judge is based on appreciation of evidence which have not been reversed by the High Court - High Court was not justified in setting aside the judgment of acquittal passed by session Judge because - HC was not justified in affirming the conviction and sentence of the appellant passed by the Chief Judicial Magistrate.

Summary

Issues Involved:
1. Conviction under Sections 276C and 277 of the Income-tax Act, 1961.
2. Validity of the High Court's interference with the order of acquittal passed by the Sessions Judge.
3. Applicability of Section 132(4A) presumption in establishing criminal offenses under Sections 276C and 277.
4. Impact of penalty proceedings and Section 279(1A) of the Income-tax Act on criminal prosecution.

Detailed Analysis:

1. Conviction under Sections 276C and 277 of the Income-tax Act, 1961:
The appellant was initially convicted under Section 276C for wilfully attempting to evade tax and under Section 277 for making false statements in verification. The Chief Judicial Magistrate sentenced him to six months of imprisonment and a fine, with additional imprisonment in default of payment. The Sessions Judge later acquitted the appellant, citing insufficient evidence and unclear charges.

2. Validity of the High Court's Interference with the Order of Acquittal:
The High Court reversed the Sessions Judge's acquittal based on the presumption under Section 132(4A) of the Income-tax Act. The Supreme Court emphasized that the High Court must examine the reasons for acquittal and should only interfere if the view taken by the trial judge was unreasonable. The Supreme Court found that the High Court did not consider the detailed reasons provided by the Sessions Judge and relied solely on the statutory presumption, which was inappropriate.

3. Applicability of Section 132(4A) Presumption in Establishing Criminal Offenses under Sections 276C and 277:
Section 132(4A) allows presumption that documents found during a search belong to the person in possession and are true. However, the Supreme Court clarified that this presumption alone does not establish the necessary mens rea for offenses under Sections 276C and 277. The prosecution must prove wilful intent to evade tax and knowledge or belief in the falsity of statements, which was not established in this case.

4. Impact of Penalty Proceedings and Section 279(1A) of the Income-tax Act on Criminal Prosecution:
The Supreme Court noted that the penalty proceedings had concluded in favor of the appellant, with findings that the case was based on differences in opinion regarding income estimates rather than concealment or false statements. Section 279(1A) indicates that no prosecution shall be initiated if the penalty is waived or reduced. The High Court failed to consider this legislative mandate and the findings of the appellate authorities, which should have influenced the decision on criminal liability.

Conclusion:
The Supreme Court held that the High Court erred in reversing the acquittal without addressing the detailed reasoning of the Sessions Judge and relying solely on the presumption under Section 132(4A). The necessary mens rea for offenses under Sections 276C and 277 was not established, and the legislative intent under Section 279(1A) was overlooked. Consequently, the Supreme Court set aside the High Court's order, affirmed the Sessions Judge's acquittal, and allowed the criminal appeal, canceling the appellant's bail bond.