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TMI Blog1997 (2) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... ron and steel materials. The second accused to the seventh accused are partners in the first accused firm and they are proceeded against under section 278B of the Income-tax Act, 1961 (hereinafter called as the "Act"), as they are partners in the first accused firm. In the normal course of business transactions, the first accused firm purchased iron and steel materials from a business concern under the name and style of Iron and Steel Traders, situate at Door No. 77, Sembudoss Street, Madras 600 001. The first accused firm is situate at Door No. 78, South Perumal Maistry Street, South Gate, Madurai. Enquiry and investigations made by the complainant or the Income-tax Department in the case of the first accused firm revealed that the undermentioned demand drafts were purchased by the fourth accused by name, Rajah Hussain, who was a partner in the first accused firm, in favour of one E. Muthu, an employee of No. 77, Sembudoss Street, Madras 600 001. In the course of written statements given to the Assistant Director of Inspector (Investigation), Income-tax Department, the second accused by name Shahul Hameed and the fourth accused Rajah Hussain admitted the purchase of the undermenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of Rs. 25,112. Therefore, it is clear that with a view to evade income-tax and to defraud the exchequer of its legitimate revenue and to mislead and deceive the Income-tax Officer the first accused to the seventh accused committed offences punishable under sections 34, 120B, 193, 196 and 420 of the Indian Penal Code and sections 276C(1) and 277 read with section 278B of the Act in a series of acts which are detailed hereunder and which form the same transaction. All the accused have, in furtherance of the conspiracy and common intention of all, fabricated false evidence in the form of false account books for the aforesaid assessment years with a view to produce them as genuine evidence, and to deliver a false return of income of the first firm with a view to wilfully evade income-tax and fraudulently induced the Income-tax Officer to deliver an assessment order based on the false return of income determining the tax payable by the first accused firm at a far lower amount than the legitimate amount of tax payable by the firm and thereby committed the offences punishable under sections 34, 120B, 193, 196 and 420 of the Indian Penal Code and sections 276C(1) and 277 read with secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in C. C. No. 51 of 1985, who is the same first witness in the other case C. C. No. 52 of 1985. Likewise P. W. 2, Bose, P. W. 3, Sundaresan, P. W. 4, Gurunatha Krishnan, P. W. 5, Muthu, P. W. 6 Mohan, P.W. 7 Sankaranarayanan, P. W. 11, Venkataraman, were examined respectively as P. W s. Nos. 2, 4, 5, 6, 7, 8 and 9 in the other case in C. C. No. 52 of 1985 and the evidence was recorded separately in each one of the case. The complainant examined 11 witnesses in C. C. No. 51 of 1985 while he has examined nine witnesses in C. C. No. 52 of 1985 and marked 51 documents in C. C. No. 51 of 1985 and 21 documents in C. C. No.52 of 1985 on the side of the prosecution. The defence has marked one document in C. C. No. 51 of 1985 while it has marked three documents in the other case in C. C. No. 52 of 1985. During the course of these appeals, the defence has produced the copy of the order of the Deputy Commissioner of Income-tax (Appeals), Madurai, B. Range, dated December 4, 1989, with reference to the assessment years 1980-81 and 1982-83 relating to the first accused firm. The carbon copy of the order dated December 4, 1989, passed by the Deputy Commissioner of Income-tax (Appeals),Madurai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first accused firm situate at Door No. 78, South Perumal Maistry Street, South Gate, Madurai. According to the prosecution, the difference between the invoice price and the actual purchase price was sent by way of demand drafts by the first accused firm in favour of Muthu, who is the employee of Iron and Steel Traders at Madras and for this purpose Vinod Kumar Didwani opened a savings bank account in the name of Muthu having S. B. Account No. 417 in Dena Bank at Madras. Vinod Kumar Didwani introduced his employee, Muthu to Dena Bank at Madras by signing in the form required for opening the savings bank account marked as exhibit P-15 in both the cases in C. C. Nos. 51 and 52 of 1985. Exhibit P-16 in both the cases is the signature of Vinod Kumar Didwani in the application for opening the savings bank account in Dena Bank at Madras marked as exhibit P-15. According to the prosecution, amounts were pouring in from all over India in this savings bank account No. 417 of the witness Muthu. A statement was recorded on August 23, 1982, by the Income-tax Department from the witness Muthu under section 131 of the Act and the same is marked as exhibit P-12 in both the cases in C. C. Nos. 51 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax authorities on August 23, 1982, and exhibit P-21 in C. C. No. 51 of 1985, is the further statement of the witness Muthu before the income-tax authorities on December 15, 1984. Exhibit P-25 is another statement of the witness Muthu given before the income-tax authorities on December 22, 1984. On the date of giving the statement on December 22, 1984, the witness Muthu handed over some of the documents to the income-tax authorities and the said documents are exhibit P-23 marked in C. C. No 51 of 1985. Exhibit P-27 is one of the documents marked in C. C. No. 51 of 1985 handed over by the witness Muthu to the income-tax authorities and it is the secret account of his master, Vinod Kumar Didwani. Exhibit P-29 in C. C. No. 51 of 1985 is the English translation of the secret account of Vinod Kumar Didwani in Hindi. Learned counsel for the appellant, Mr. K. Ramaswamy, took me through several paragraphs of the complaint and the relevant material records and contended that the transactions of the two demand drafts taken in the name of the witness Muthu by the fourth accused, Rajah Hussain, on the instruction of his brother, the second accused, Shahul Hameed, who are the partners of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. Per contra learned counsel appearing for the accused contended that the complaint of the Income-tax Department is that the first accused firm purchased these two demand drafts-one for Rs. 7,965 on August 2, 1979, and another for a sum of Rs. 25,112 on August 11, 1981, and these two demand drafts were not accounted for in the account books of the first accused firm and, therefore, the first accused and their partners, who are the second accused to seventh accused, committed an offence under section 276C(1) of the Act on the ground that the accused concealed their income and paid a lesser tax. According to the defence counsel, Thiru R.Janakiraman, on the date of the complaint the assessment of income under section 143 of the Act was made in which these two amounts covered by the two demand drafts were not shown in the income of the first accused firm and this criminal complaint was filed on the basis of search made by the income-tax authorities in the business premises of Vinod Kumar Didwani and on the basis of the statements obtained from his employee, P. W. 5, Muthu. The premises of the first accused firm were surveyed under section 133A of the Act and the statements were obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1992] 197 ITR 196 (SC) at page 200, it was held by the Supreme Court that though the criminal court had to judge the case before it independently on the materials placed before it, there was no legal bar to giving due regard to the proceedings under the Income-tax Act. A similar view was taken by our court in the case reported in Mohammed I. Unjawala v. Asst. CIT [1995] 213 ITR 190 (Mad) at page 203, wherein it was laid down as follows : "Even though the Supreme Court in [1984] 149 ITR 696 has made the observation that the result of the proceedings under the Act is not binding on the criminal court and the criminal court has to judge the case independently on the evidence placed before it, a rider also is provided expressing that the criminal court no doubt has to give due regard to the result of any proceedings under the Act, having a bearing on the question in issue and in an appropriate case, it may drop the proceedings in the light of an order passed under the Act. Therefore, it cannot be treated that every finding of the authorities under the Income-tax Act had to be disregarded and ignored for the criminal prosecution. On the other hand, due regard must be given and in ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued on behalf of the appellant that the Deputy Commissioner of Income-tax (Appeals), Madurai, did not consider all the materials placed before the criminal court in these cases and in such circumstances due regard should not be given to the order passed by the income-tax appellate authority in arriving at a conclusion in these criminal cases. One cannot expect the income-tax appellate authority to sit in judgment over the materials placed before the criminal court. However, the Deputy Commissioner of Income-tax (Appeals), Madurai, has referred to the statement given by some of the partners of the first accused firm in these cases. The order dated December 4, 1989, of the Deputy Commissioner of Income-tax (Appeals). Madurai, marked as additional evidence on the side of the defence reads as follows: "For the assessment year 1980-81 in the revised order, the Income tax Officer has added an amount of. Rs. 7,965 and for the assessment year 1982-83 he has added an amount of Rs. 25,112 to the income returned. It is against these additions that the petitioner has filed these appeals.... The demand draft of Rs. 7,965 taken by My. Raja Hussain for the assessment year 1980-81 relating to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criminal appeals, and so the entire basis of the charge in these criminal cages has gone. The liability to pay higher income-tax is interconnected with the concealment of income by the first accused firm. When the liability to pay higher amount of income-tax has been erased by virtue of the order passed by the Deputy Commissioner of Income-tax (Appeals), Madurai, then the question of concealment of income by the first accused firm or the fabrication of account books does not arise at all, In such circumstances, I am of the view that having due regard to the order passed by the Deputy Commissioner of Income-tax (Appeals) the charge against the accused in these criminal cases must fall to the ground. Even assuming and without admitting that the order of the Deputy Commissioner of Income-tax (Appeals), Madurai, has to be ignored to some reason or other and the criminal cases have to be decided independently as urged by learned counsel for the appellant, let us consider the same on the available materials on record. So far as the second accused, Shahul Hameed, is concerned, he has given two statements before the income-tax authorities and they are exhibits P-4 and P-9 marked in C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out a case that the funds of the first accused firm were utilised for the purchase of these two demand drafts and in such circumstances all the accused being partners cannot be made liable for the falsification of accounts and for the concealment of income. Now turning to the statement of the fourth accused, Rajah Hussain, given to the income-tax authorities on August 10, 1984, marked as exhibit P-8 in C. C. No. 51 of 1985 it runs as follows : [The portion of the judgment in vernacular is not printed here.-Ed.] A perusal of the statement of the fourth accused, Rajah Hussain, would also make it clear that the funds of the first accused firm were not made use of for the purchase of the two demand drafts. On the other hand, his statement would establish that at the instructions of his brother second accused, Shahul Hameed and third accused, Abdul Wahab, he purchased the demand drafts and he did not know any other thing or matter. In such circumstances, the statement of the fourth accused, Rajah Hussain, will not lend support to the prosecution case that the funds of the first accused firm were provided for the purchase of the impugned two demand drafts and thereby the first acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners to conceal the income of the firm. It is merely stated in para. 9 of the complaint that all the accused have in furtherance of the conspiracy fabricated false accounts and filed false returns and dishonestly induced the Income-tax Officer to deliver an assessment order based on the false return of income, determining the tax payable by the first accused firm at a far lower amount than the legitimate amount of income-tax. There is no satisfactory evidence available on record to show that all the accused have conspired together to fabricate false evidence to induce the Income tax Officer to pass an assessment order for a lesser amount of income than the amount that was originally due. A careful scrutiny of the materials on record would go to show that all the accused except the second and fourth accused had no knowledge about these two demand drafts. Therefore, the charge of conspiracy as set out in para. 9 of the complaint is not entitled to any acceptance in these cases. If at all there could have been a conspiracy in these cases, it would have been a conspiracy between the second accused, Shahul Hameed, and fourth accused, Rajah Hussain, on the one hand and Vinod Kumar Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awn from the savings bank account of Muthu marked as exhibit P-14 and the very same sum of Rs. 8,000 finds a place in the secret account of Vinod Kumar Didwani marked as exhibit P-33 (English translation) in this case. Merely because these amounts are reflected in the savings bank account of P. W. 5 and in the secret account of Vinod Kumar Didwani, it cannot be presumed that these two demand draft transactions had taken place with reference to the first accused firm. But these documents may establish that those transactions were brought about by the second accused, Shahul Hameed, with the assistance of the fourth accused, Rajah Hussain, on the one side and by Vinod Kumar Didwani and the witness Muthu, on the other side. Such is not the prosecution case put forth in the complaints in these two cases. On. the other hand the specific case of the prosecution in the complaint is that all the accused have conspired and fabricated their books of account and filed false returns and thereby induced the Income-tax Officer to levy a lesser amount of income-tax. For the above reasons, I am of the view that the prosecution has not proved the case beyond all reasonable doubt. To sum up, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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