B.T.X Chemicals (Pvt.) Ltd. And Others v. Suraj Bhan And Another

Gheewala, J.:— These Special Criminal Applications filed under Art. 216 of the Consitution of India seek to quash the complaints which have been filed against the petitioners, who are the asscssees. Petitioner No. 1 is a Company of which the remaining petitioners are the directors. In the accounting year ending 30th June 1979, the petitioner-Company sustained a loss on account of some fire having taken place in the Company's premises. The said loss was reimbursed by the Insurance Company and in the return that was filed on 30th June 1980 this particular reimbursement made by the Insurance Company was not reflected with the result that the Income-tax Officer while making the assessment found that there was an attempt to conceal the income and reap the advantage by claiming deduction. Therefore proceedings were started under Section 276 of the Income-tax Act as well as also under the provisions of the Indian Penal Code. The petitioners being aggrieved by the same have preferred the present applications for quashing the complaints.

2. Lengthy arguments were advanced by the senior Counsels appearing for the rival sides but it appears that what would be punishable under Section 276(c) of the Income-tax Act would be a dishonest intention or a mala fide intention and there should be mens rea for committing a particular crime before an assessee can be prosecuted. All bona fide mistakes made by the assessee while filling in the Income-tax return forms would not necessarily amount to an intention to commit crime and if Section 276(c) were to be used for penalising every delinquent assessee on that score, it would wreck havoc. What is to be found by the Court is as to whether the assessee wanted to defraud the revenue. Thus from that angle it appears that in the instant case the assessee could not have harboured such an intention. I am tempted to hold this wise for the simple reason that the return that was filed on 30th June 1980 pertained to the accounting period which ended on 30th June 1979.

3. It would, therefore, reflect the picture of the Company's finances and the Company's affairs between the period 1st July 1978 and 30th June 1979. A thing which transpired in December 1979, namely reimbursement by the Insurance Company would not be reflected in such a return because it was an event which had taken place subsequently. To expect an assessee to reflect this thing in the return for the said period would be an anachronism.

4. The second ground which Mr. Bhatt learned Advocate appearing for the revenue urged was that the loss of Rs. 100112/-, if it was not deducted by the Income-tax Officer, would have resulted in an advantage to the assessee by way of double deduction and it was only when the Income-tax Officer drew the attention of the assessee that the assessee came out with a story that it was a mistake of the Chartered Accountant. Here also there is a snag inasmuch as the assessee could not have escaped with impunity because this loss of Rs. 100112/- would have been definitely found out in the next year's opening stock and with the enormous powers with which the Income-tax Officer are armed for re-opening the previous year's assessment, this would certainly have been found out. So ultimately it would not have resulted in any advantage to the assessee. I, therefore, feel that the complaints were misconceived and would, if allowed to continue, definitely amount to an abuse of the process of the Court. Under the circumstances, the petitions are required to be allowed. They are accordingly allowed. The complaints are ordered to be quashed and the, Rule in each of these two petitions is made absolute accordingly.

5. Rule made absolute.