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Income-Tax Officer v. Lakshmi Enterprises And Others.
Structured Summary of the Opinion (Ranga Reddy, J.)
Factual and Procedural Background
These five appeals (Nos. 793/1989, 794/1989, 795/1989, 796/1989 and 797/1989) were filed by the complainant in C.C. Nos. 26/1988, 78/1988, 28/1988, 29/1988 and 27/1988, respectively, against the judgment dated 3 January 1989 of the Special Judge for the Economic Offences, Hyderabad.
The appellant-complainant had filed separate criminal complaints alleging that the respondents contravened section 269SS of the Income-tax Act (introduced by the Finance Act, 1984, effective 1 April 1984) by accepting loans or deposits of Rs. 10,000 or more otherwise than by account-payee cheque or account-payee demand draft, and thereby rendered themselves punishable under section 276DD of the Income-tax Act.
The first respondent was a partnership firm and the second respondent its managing partner. The firm was said to have accepted cash deposits in excess of Rs. 10,000 from various depositors on different dates. During trial the Income-tax Officer of Wards Nos. I and II of Kakinada was examined as P.W.1 and some documents were marked. The accused did not dispute receipt of the cash deposits. The managing partner urged leniency on the ground that the deposits were received shortly after section 269SS came into force.
The Special Judge, having considered the circumstances, imposed a fine of Rs. 50 on A-1 and, in respect of A-2, directed simple imprisonment for one week and imprisonment till the rising of the court and a fine of Rs. 50 in each case. The complainant (appellant in these appeals) challenged the sentences as inconsistent with the statutory provision.
Legal Issues Presented
- Whether section 276DD of the Income-tax Act mandates that the fine imposed for contravention of section 269SS must be equal to the amount of the loan or deposit (i.e., whether a minimum fine equal to the deposit amount is required).
- Whether the trial court had discretion not only to impose a fine but also to determine the quantum of the fine, and whether that discretion was improperly curtailed by construing section 276DD as prescribing a mandatory minimum fine.
- Whether appeals challenging the legality of the sentence (on the ground that it did not follow the statutory prescription) are maintainable as appeals or should be treated and disposed of as revisions.
Arguments of the Parties
Appellant's Arguments
- The appellant contended that section 276DD prescribes a minimum fine which must be equal to the amount of the deposit received; because the deposits in the case exceeded Rs. 10,000, imposition of a fine of Rs. 50 was illegal.
- The appellant submitted that these appeals were not simply against the inadequacy of sentence but challenged the legality of the sentence awarded for non-compliance with the statutory prescription.
Respondent's Arguments
- Learned counsel for the respondents argued that section 276DD does not prescribe any mandatory minimum fine; rather the language used ("shall also be liable to fine") gives the court discretion to impose a fine or to refrain from imposing one.
- It was further contended that section 276DD had been deleted by the Direct Tax Laws (Amendment) Act, 1987, which came into force from 1 April 1989, and that the monetary threshold in section 269SS had been raised to Rs. 20,000 — an argument presented in the context of statutory change that occurred after the offences alleged.
- The respondents also argued that appeals challenging legality of sentence were not maintainable as appeals and that, where a sentence is claimed to be illegal for failure to follow statutory minimums, a revision would be the appropriate remedy; accordingly, the present appeals should be treated as revisions.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| [1958] ALT 920 | Illustrates the principle that sentencing discretion vested in a trial court should not lightly be interfered with by an appellate court; appellate intervention is appropriate only where discretion was grossly or perversely exercised. | The court relied on the precedent to support the proposition that it should not substitute its own view of appropriate punishment for that of the trial court merely because the sentence appears lenient, and therefore declined to interfere with the trial court's sentencing exercise. |
Court's Reasoning and Analysis
The court began by extracting and setting out the language of sections 269SS and 276DD of the Income-tax Act. Section 269SS prescribes the mode of taking or accepting certain loans and deposits (preventing acceptance by cash above the stated threshold), and section 276DD prescribes punishment for contravention: imprisonment which may extend to two years and liability to a fine equal to the amount of such loan or deposit.
The court focused on the statutory wording and the different terms used: for imprisonment the statute uses the word "punishable", whereas for the fine the statute says the offender "shall also be liable to fine equal to the amount of such loan or deposit." The judge analysed the word "liable" and observed that in many statutes it has been construed as not necessarily importing an absolute, mandatory obligation to impose a penalty; rather it may indicate the possibility that such an obligation or penalty can be attracted and thus may leave room for judicial discretion.
The court referred to an analogous construction in relation to section 302 of the Indian Penal Code, where the phrase "shall also be liable to fine" has been treated as not mandating imposition of a fine but as leaving the matter to the discretion of the convicting court. On that basis, the court concluded that section 276DD confers discretion on the court both as to whether to impose a fine and as to the quantum of any fine imposed.
The court further relied on the cited precedent ([1958] ALT 920) to emphasize that sentencing discretion is primarily that of the trial court and an appellate court should not interfere merely because the sentence appears lenient unless the discretion has been exercised so improperly as to justify substitution. Applying those principles, the court held that the trial court's exercise of discretion in imposing small fines and short terms of imprisonment did not present such a case of improper exercise of discretion as to warrant interference.
The court also addressed procedural posture: since the appellant contended that the trial court had ignored statutory prescription and awarded an illegal sentence, those appeals were treated as revisions and disposed of accordingly (the court explicitly states that point in recounting the respondents' submissions and proceeds on that basis).
Holding and Implications
Holding: The appeals are dismissed.
Implications:
- Direct effect on the parties: the sentences imposed by the Special Judge (fine of Rs. 50 on A-1; for A-2 simple imprisonment for one week, imprisonment till the rising of the court and a fine of Rs. 50 in each case) are upheld and remain in force.
- The court held that section 276DD does not prescribe a mandatory minimum fine equal to the amount of the deposit; the language used ("liable") leaves the imposition and quantum of fine to judicial discretion. The appellate court declined to substitute its own sentencing judgment for that of the trial court in the circumstances of these cases.
- No new broad legal rule beyond the application of established principles concerning sentencing discretion was articulated; the decision applies those principles to the facts and does not purport to create a novel precedent beyond affirming the exercise of trial-court discretion in sentence quantification in the present matters.
Ranga Reddy, J.:— These five Appeals Nos. 793 of 1989, 794 of 1989, 795 of 1989, 796 of 1989 and 797 of 1989 are filed by the complainant in C.C Nos-. 26 of 1988, 78 of 1988, 28 of 1988, 29 of 1988 and 27 of 1988, respectively, on the file of the Special Judge for the Economic Offences, Hyderabad, against the judgment dated January 3, 1989.
2. The facts so far as are necessary for the disposal of these matters can briefly be stated as follows: The appellant-complainant filed separate complaints against the respondents herein alleging that they have contravened the provisions of section 269SS of the Income-tax Act and have rendered themselves liable for punishment under section 276DD of the Income-tax Act. The first respondent in these appeals is a partnership firm and the second respondent is its managing partner. According to the provisions of section 269SS of the Income-tax Act introduced by the Finance Act of 1984, with effect from April 1, 1984, no person shall, after the 30th day of June, 1984, take or accept from any other person any loan or deposit otherwise than by an account-payee cheque or account-payee demand draft if the amount is Rs. 10,000 or more. section 276DD of the Income-tax Act provides a punishment for contravention of the provisions of section 269SS of the Income-tax Act. According to that section, any person who accepts a loan or deposit in contravention of the provisions of section 269SS of the Income-tax Act, without reasonable cause or excuse, is punishable with imprisonment for a term which may extend to two years and shall also be liable to fine equal to the amount of such loan or deposit. In the instant case, the first respondent firm is said to have accepted deposits in excess of Rs. 10,000 by way of cash from various depositors on different dates. So, the appellant herein filed the complaints as mentioned above. During the trial, the Income-tax Officer of Wards Nos. I and II of Kakinada was examined as P.W-1 and some documents were also marked. The accused did not dispute the fact of having received the deposits in cash as alleged by the complainant. The second respondent who is the managing partner of the firm requested that a lenient view may be taken in view of the fact that the deposits were received within a short time after the provisions of section 269SS of the Income-tax Act came into force. The learned special judge, taking into consideration all the circumstances, imposed a fine of Rs. 50 on A-1 and directed A-2 to undergo simple imprisonment of one week and further A-2 was sentenced to imprisonment till the rising of the court and pay a fine of Rs. 50 in each case.
3. The appellant-complainant has filed these appeals contending that the punishment-awarded is not according to section 276DD of the Income-tax Act and, according to him, the fine amount must be equal to the amount of loan or deposits received by the respondent. He, therefore, requests for the award of sentence in accordance with the provisions of the section.
4. Learned counsel for the appellant contended that section 276DD of the Income-tax Act provides a minimum fine which should be equal to the amount of deposit received and as the deposits received in this case exceed Rs. 10,000, imposition of fine of Rs. 50 is illegal. Thus, the appeals are not against inadequacy of sentence but the appeals are on the ground that the sentence awarded is illegal inasmuch as a minimum sentence of fine is prescribed under the Act.
5. Learned counsel for the respondent contended that section 276DD of the Income-tax Act does not provide any minimum punishment in respect of the fine as contended by learned counsel for the appellant and that the court has every discretion to impose fine or not. It was also further contended that section 276DD, providing punishment for contravention of section 269SS is deleted by the Direct Tax Laws (Amendment) Act, 1987, which came into force from April 1, 1989. Apart from that, the monetary limit of deposits which are to be made only by account payee cheque or account payee demand draft is enhanced to Rs. 20,000. As section 276DD is deleted, it was contended by learned counsel that it should be deemed that such a provision never existed. It is also contended that these appeals which are filed questioning the legality of the sentence are not maintainable. If the sentence awarded is illegal and not in accordance with the provisions of the Income-tax Act or if any minimum sentence is prescribed under the provisions of the Act and the lower court has failed to award such minimum sentence, definitely a revision is maintainable against such order or judgment. As it is contended in “all these appeals” that the learned special judge had ignored the provisions of section 276DD of the Income-tax Act prescribing a minimum punishment but imposed a fine of Rs. 50, these appeals are treated as revisions and are being disposed of accordingly.
6. For the purpose of convenience, I would like to extract the provisions of sections 269SS and 276DD of the Income-tax Act which read as follows:
“Section 269SS. Mode of taking or accepting certain loans and deposits.—No person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if,—
(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit; or
(b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount Or the aggregate amount remaining unpaid; or
(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b) is ten thousand rupees or more…”
“Section 276DD. Failure to comply with the provisions of section 269SS.—If a person, without reasonable cause or excuse, takes or accepts any loan or deposit in contravention of the provisions of section 269SS, he shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine equal to the amount of such loan or deposit.”
7. Thus, according to section 276DD, a person who contravenes the provisions of section 269SS is given punishment with imprisonment for a term which may extend to two years and shall also be liable to fine equal to the amount of such loan or deposit. Thus, so far as the sentence of imprisonment is concerned, the word “punishment” is used and, so far as the fine is concerned, the word “liable” is used.
8. Learned counsel for the respondent contended that the word “liable” occurring in many statutes has been held as not conveying the sense of an absolute obligation or penalty but merely importing a possibility of attracting such obligation, or penalty, even where this word is used along with the words “shall be”. So, it was contended that the section only gives a right to impose a fine and that it does not prescribe any minimum punishment as contended. Even in the provisions of section 302 of the Indian Penal Code, the phrase “shall also be liable to fine” are found but it is always construed that it does not convey any mandate but leaves it to the discretion of the court convicting an accused of the offence of murder, to impose or not to impose fine in addition to the sentence of death or life. So the word “liable” used in the section gives a discretion to the court as regards imposition of fine. So, the power to impose the sentence of fine is discretionary. When such is the case, it cannot be said that when once the court chooses to impose a fine, it should be equal to the amount of the deposit. When the Legislature has chosen to leave the matter regarding imposition of fine to the discretion of the court, it cannot be construed that the Legislature would have intended to curtail that discretion by prescribing a minimum amount of fine when the fine is proposed to be imposed. In the decision in [1958] ALT 920, it is observed as follows: Apparently, the Legislature must have thought that, in certain circumstances, an offence falling under the second part of section 304 may be of a less serious nature than even a grievous hurt and may be punished with a mere fine notwithstanding that there is loss of life. That being the legal position, it is possible for me to say, sitting as an appellate court, that the discretion exercised by the trial court in sentencing the appellant to a term of 3 years' rigorous imprisonment for an offence under section 304, Part II, Indian Penal Code, is so grossly inadequate and so shockingly low that I should exercise my extraordinary power and enhance the sentence? It is true that the sentence errs on the side of leniency, but that by itself does not justify interference by me. If I have to enhance the sentence, what is the sentence that I should impose? Is it to be four years, five years, six years, seven years or ten years, what is the optimum sentence that should be awarded? What is the right measure of punishment for an offence under section 304, Part II, Indian Penal Code? Is it possible to weigh the quantum of punishment in golden scales? I apprehend not. The discretion rested initially with the trial court and, having regard to the offence of which the appellant has been convicted, I cannot say that the discretion has been so wrongly exercised as to call for the substitution of my discretion for that of the trial court.
9. In view of the above reasons, I feel that it would not be proper to interfere with the sentence awarded even on the ground that the sentence awarded is inadequate. In view of the above discussion, I find that the contention of learned counsel for the appellant that the provisions of section 276DD of the Income-tax Act prescribe that imposition of fine should always be equal to the amount of deposits is untenable. The word “liable” used in the section gives discretion to the court with regard to the imposition of fine. The court may either choose to impose fine or may dispense with imposition of fine. When such discretion is there with regard to the imposition of fine itself, it cannot be said that the court has no discretion with regard to the quantum of fine to be imposed. As the appeal is on the ground that the learned special judge has failed to award the sentence in accordance with the provisions of section 276DD of the Income-tax Act on the presumption that the fine amount should be equal to the amount of deposit and as I am not prepared to agree with that contention of learned counsel for the appellant, I hold that the appeals are liable to be dismissed.
10. In the result, the appeals are dismissed.
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