2024 (12) TMI 120 - HC - Income Tax

Offence u/s 278 of Income Tax Act for abetting filing of false returns - Petitioner convicted as an abettor of the offence committed by Munilal Devi - presumption of culpable mental state - Munilal Devi had disclosed to the Income Tax Department in her show cause reply that it is the petitioner who had abetted her to file false return - Effect of non-examination of Munilal Devi as a witness. HELD THAT - Non-examination of Munilal Devi has a serious bearing in the case. The argument of the opposite party, Income Tax Department, that Munilal Devi could not have been examined as she was a co-accused in connection with the same transaction is not acceptable as Munilal Devi was not to depose against herself, but was to depose in support of her stand taken in her show cause reply and she was not a co-accused in the same complaint case and was already convicted in a different complaint case in connection with the same refund. This Court is of the considered view that under the aforesaid circumstances, it cannot be said that the prosecution has proved the foundational facts of abetment of Munilal Devi by the petitioner. While dealing with the plea of non-examination of Munilal Devi, the learned trial court observed that so far as non-examination of assessee namely, Munilal Devi is concerned, it does not affect credibility of her reply as contained in Ext.6. This Court is of the considered view that such a finding is perverse in as much as the credibility of reply of Munilal Devi could be tested only upon her examination and cross-examination. The finding of the learned trial court that the petitioner ought to have taken steps for examination of Munilal Devi is also perverse as it was for the prosecution to establish the foundational facts on the basis of which the petitioner was to be prosecuted. This Court is of the considered view that the foundational fact to bring home the charge against the petitioner for abetting filing of false return by Munilal Devi was not proved by the prosecution. Accordingly, presumption in terms of Section 278E regarding presumption of mens rea does not come into play. The role of presumption of mens rea would come into play only if the foundational facts are proved by the prosecution beyond reasonable doubts. The foundational fact was proved only to the extent that the return filed by Munilal Devi were based on forged and fabricated documents and that Munilal Devi had taken stand in her show cause reply giving the entire blame on the petitioner. This Court is of the considered view that the aforesaid fact was not sufficient to bring home the charge of abetment against the petitioner and consequently the petitioner could not have been convicted on the basis of presumption of culpable mental state , that is presumption of mens rea by referring to Section 278E of Income Tax Act. The fact remains that the same show cause reply was found not acceptable while convicting Munilal Devi in another complaint case and in this case, the same reply has been accepted to convict the petitioner. Hon ble Supreme Court 2011 (5) TMI 156 - SUPREME COURT has clearly held that once a person put signature on the verification form, he cannot wriggle out from his responsibility and the provisions of Section 278E comes into play. Such evidence is strong evidence against the maker, but he is at liberty to prove that such admission was mistaken or untrue. This Court is of the view that the conviction of the petitioner cannot be sustained in the eyes of law and in order to secure the ends of justice, the impugned judgment of conviction and sentence of the petitioner under Section 278 of Income Tax Act is set aside.Consequently, the petitioner is acquitted and discharged from the liability of his bail bonds.

Summary

Issues Involved:

1. Whether the petitioner abetted the filing of a false income tax return by Munilal Devi.
2. The impact of non-examination of Munilal Devi as a witness.
3. Applicability of presumption under Section 278E of the Income Tax Act regarding 'mens rea'.

Detailed Analysis:

1. Abetment of Filing False Return:

The petitioner was convicted under Section 278 of the Income Tax Act for allegedly abetting Munilal Devi to file a false income tax return for the assessment year 2003-04. The prosecution's case was based on the claim that the petitioner managed and fabricated the return filed by Munilal Devi, which was supported by her show cause reply. The trial court relied on this reply, which alleged that the petitioner had filled out the return using false information and documents. The appellate court upheld this conviction, emphasizing the petitioner's role in facilitating the submission of the false return.

2. Non-Examination of Munilal Devi:

The petitioner argued that Munilal Devi, whose reply was crucial to the prosecution's case, was not examined as a witness, which affected the credibility of the evidence against him. The trial court dismissed this argument, stating that the petitioner could have called Munilal Devi to testify. However, the High Court found this reasoning flawed, noting that the prosecution should have established the foundational facts by examining Munilal Devi, which would have allowed the petitioner to cross-examine her. The failure to do so was deemed to have a serious bearing on the case, as the credibility of her written statement could only be tested through cross-examination.

3. Presumption of 'Mens Rea' under Section 278E:

The trial court applied the presumption under Section 278E of the Income Tax Act, which assumes a culpable mental state unless proven otherwise by the accused. However, the High Court highlighted that this presumption is only applicable if the foundational facts are established beyond a reasonable doubt. In this case, the prosecution failed to prove these facts, as the evidence relied upon was primarily the unexamined show cause reply of Munilal Devi. The High Court emphasized that the presumption of 'mens rea' could not be invoked without first proving the foundational facts of abetment.

Conclusion:

The High Court concluded that the prosecution did not prove the foundational facts necessary to sustain the charge of abetment against the petitioner. Consequently, the presumption of 'mens rea' under Section 278E could not be applied. The conviction and sentence of the petitioner were set aside, and he was acquitted of the charges. The court highlighted the importance of examining key witnesses to establish the credibility of evidence and the necessity of proving foundational facts beyond a reasonable doubt before invoking statutory presumptions.