2009 (10) TMI 449 - HC - Income Tax

Offence and Prosecution- The petitioner along with his partner dealt in the sale and purchase of wholesale cloth. Both the courts below found sufficient evidence to hold that the petitioner was actively connected with the business of the firm and was responsible for maintaining the accounts and conduct of the business of the firm. The petitioner was convicted. On a revision petition. Held that- the petitioner by willfully attempting to evade tax penalty or interest. Thus he had been awarded the minimum sentence of rigorous imprisonment for six month.

Summary

Issues:
1. Conviction under section 276C of the Income-tax Act, 1961.
2. Responsibility for maintaining accounts and business conduct.
3. Evasion of tax by not depicting true stock in books of account.

Issue 1: Conviction under section 276C of the Income-tax Act, 1961

The revision petition was filed against the judgment convicting the petitioner under section 276C of the Income-tax Act, 1961. The petitioner was sentenced to undergo rigorous imprisonment for six months and pay a fine of Rs. 1,000. The case originated from a complaint filed by the Income-tax Officer against the petitioner and three others, partners of a wholesale cloth business. The petitioner was the only one convicted under section 276C, while the co-accused were acquitted. The petitioner was found to have evaded payment of tax, penalty, or interest by not accurately reflecting the stock position in the books of account.

Issue 2: Responsibility for maintaining accounts and business conduct

The courts found that the petitioner was actively involved in the business affairs of the firm and was responsible for maintaining accounts and conducting business. Despite claiming that all purchases and sales were properly vouched for, the petitioner did not deny responsibility for the firm's operations. The discrepancy between the actual stock and the stock as per books indicated an attempt to operate capital outside the books, leading to evasion of taxes legally due. The petitioner's willful attempt to evade tax, penalty, or interest led to the conviction under section 276C of the Act, with a minimum sentence of rigorous imprisonment and a fine imposed.

Issue 3: Evasion of tax by not depicting true stock in books of account

The petitioner's failure to accurately reflect the stock position in the books allowed for tax evasion. By not showing the true stock in the stock books, the petitioner evaded the payment of taxes legally required to be paid. This evasion constituted an offense punishable under section 276C of the Act. The judgment upheld the conviction and sentence, concluding that there were no grounds for interference in the revision petition. Consequently, the revision petition was dismissed for lacking merit.

This detailed analysis of the judgment highlights the key issues involved in the case, focusing on the conviction under section 276C of the Income-tax Act, the responsibility for maintaining accounts and business conduct, and the evasion of tax by not depicting the true stock in the books of account.