S.V Maruthi, J.:— This appeal is filed against the judgment in C.C No. 4 of 1989 by the Special Judge for Economic Offences at Hyderabad.
2. The brief facts are as follows:
3. A complaint was filed pursuant to the direction of the Commissioner of Income-tax, Andhra Pradesh, Guntur, under section 279(1) of the Income-tax Act. A-1 to A-3 along with G. Subba Rao and Kum. G. Subhadramma all belonging to Cuddapah are the owners of the house property bearing D. No. 18/285 situated at Badarkhan Masjid Street, Cuddapah, and they all proposed to sell the said house property to A-4 and another Meda Vijayalaxmi and they have filed an application under section 230A(1) of the Income-tax Act on November 13, 1987, enclosing a copy of the sale deed proposed to be registered with the Sub-Registrar, Cuddapah, before the Income-tax Officer, A-Ward, Cuddapah, requesting for issue of a certificate under section 230A(1) of the Income-tax Act so as to enable them to register the sale deed as proposed. The sale consideration as disclosed by A-1 to A-3 and the other two is Rs. 1,20,000. On November 14, 1987, the Income-tax Officer, A-Ward, Cuddapah, has carried out survey operations under section 133A of the Act on the business premises of A-4 and in the said survey, an agreement for sale of the above said property executed by A-1 to A-3 along with two others on July 27, 1987, on a stamped paper was seized and the sale consideration mentioned in that document was Rs. 3 lakhs as against Rs. 1,20,000 disclosed in the application under section 230A(1) of the Income-tax Act and the said agreement was impounded.
4. The Income-tax Officer, A-Ward, Cuddapah, and B-Ward, Proddutor, summoned the accused and recorded their statements. In the sworn statements given before them, they have, stated that the sale consideration was understated at Rs. 1,20,000 at the instance of A-4 and that they have no intention of evading any tax. Subsequently, on December 28, 1987, all the accused Nos. 1 to 3 along with G Subba Rao and G. Subhadramma have filed separate applications under section 230A(1) of the Act declaring the sale consideration at Rs. 60,000 each. Thus, A-1 to A-3 have made a statement in the application under section 230A(1) filed on November 13, 1987, which they either knew or believed to be false which is punishable under section 277 of the Income-tax Act. Therefore, they are liable to be punished under section 278 of the Income-tax Act.
5. In support of the prosecution case, PWs 1 and 2 were examined and exhibits P-1 to P-17 were marked. On the basis of the evidence, charges under section 277 read with section 278 of the Income-tax Act, 1961, against A-1 to A-3 and charge under section 277 read with section 278 of the Income-tax Act against A-4 were framed. The charges were explained to the accused. Thereafter PWs 1 and 2 were called and cross-examined and exhibit P-18 to P-23 were marked. The accused were examined under section 313, Criminal Procedure Code, after the evidence of the prosecution was closed. In their evidence they stated that they have filed an application in Form No. 34A under section 230A of the Income-tax Act under exhibit P-1 on November 13, 1987, and that the house property as per exhibit P-2 sale deed was proposed to be sold for a consideration of Rs. 1,20,000 and that as per exhibit P-3 the stamped papers were purchased in the name of A-4 on July 24, 1987, and the agreement exhibit P-3 was executed on July 27, 1987, signed by A-1 to A-3 and another and the total consideration for the sale of the house as per exhibit P-3 is Rs. 3 lakhs and a sum of Rs. 40.,000 was also paid to the vendors on July 24, 1987, and further agreed to pay the balance of Rs. 2,40,000 before November 26, 1987. They further stated that A-1 to A-3 have filed another application in Form No. 34A under exhibits P-11 to P-13 and Subhadramma filed exhibit P-14 showing a total consideration of Rs. 3 lakhs and that in their statements they have admitted the sale consideration was only Rs. 3 lakhs but not Rs. 1,20,000 further they stated that as per the market value they have filed the application. They have not examined any in defence.
6. Learned judge dn a consideration of the evidence, acquitted the accused on the ground that A-1 to A-3 are not liable to pay any tax under any enactment mentioned in section 230A. Therefore, the prosecution failed to show that A-1 to A-3 by making a false verification under exhibit P-1 sought to evade any tax as stated in section 230A of the Income-tax Act. In the absence of establishing that the accused in order to evade the tax under the Income-tax Act made a false statement, they cannot be punished either under section 277 or under section 278 of the Income-tax Act. In support of the above view, learned judge relied on the judgment of the A.P High Court in CIT v. T.V Ramanaiah and Sons, [1986] 157 ITR 300 and K.T.M.S Mohammed v. Union of India, [1992] 197 ITR 196 corresponding to Amanullah Quareshi v. Union of India, [1992] 197 ITR 196 (SC) against which the present appeal is filed.
7. In the grounds of appeal, it is stated that the fact that the accused filed false statements in the applications filed under section 230A is not doubted. Therefore, they have committed the offence under section 276(c) and under section 277 read with section 278 of the Income-tax Act and, therefore, they are liable to be punished. It is also stated that the learned judge failed to take into consideration that the Central Board of Direct Taxes Circulars were only guidelines for Departmental purposes and held that they are not liable for punishment under the Income-tax Act, whereas the section categorically says that they are liable for punishment.
8. As regards the contention that the respondents are liable for punishment under section 276(c) of the Income-tax Act, at the outset it may be pointed out that no charge was framed against them under section 276(c) of the Income-tax Act. The charges that were framed were only under section 277 read with section 278 of the Income-tax Act. Therefore, the contention that the respondents are liable to be punished under section 276(c) cannot be permitted to be raised at this stage. In order to consider the grounds raised in the grounds of appeal, it is necessary to refer to section 277 of the Income-tax Act which reads as follows:
“If a person, makes a statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable—
(i) in a case where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine;
(ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine.”
9. The language used in section 277 of the Income-tax Act is where the amount of tax which would have been evaded exceeds one hundred thousand rupees with rigorous imprisonment, etc. Sub-section (2) says that in any other case with rigorous imprisonment for a term which shall not be less than three months and which may extend to three years and with fine. A reading of clauses (i) and (ii) of section 277 makes it clear that the punishment under section 277 can be imposed under clause (i), if evasion of tax exceeds one hundred thousand Rupees with rigorous imprisonment and three months in other cases, other than those cases where the evasion of tax is less than One hundred thousand rupees. Therefore, the punishment under clause (ii) can be imposed only if there is any evasion of tax, otherwise the question of imposing punishment does not arise. In this context the judgment of the Supreme Court in K.T.M.S Mohammad v. Union of India, [1992] 197 ITR 196 (SC), relied upon by the learned judge is relevant. It reads as follows (at page 222):
“section 277 of the Income-tax Act, in general, seeks to penalise one who makes a false statement in order to avoid his tax liability. In the present case, the Revenue has not come forward with the case that the money, represents the income of the third appellant liable to be taxed but on the other hand, it is the case of the Income-tax Officer that it is not the third appellant's money at all. Moreover, a cursory reading of the penal clause proposes to impose punishment depending upon the quantum of tax sought to be evaded. Here no question of evading the tax will arise.”
10. Therefore, the question of punishing the accused arises, provided there is an evasion of tax. Since the appellants have admitted that the accused are not liable for payment of tax, the learned judge is right in acquitting the accused. I do not see any infirmity in the judgment of the learned judge and the appeal is therefore dismissed.