1. Facts giving rise to this petition under Section 482, Cr. PC. are as follows:
2. Parkash Chand, petitioner, is a partner of M/s. Sharma Textile and General Industries, village Piao-Maniyari, District Sonepat, along with Deep Chand, Ishwar Singh and Prahlad Singh. The aforesaid firm carries on business as traders and manufacturers of tapes, newar and wicks.
3. The ITO, Sonepat, filed a complaint against the petitioner and his co-partners, Deep Chand, Ishwar Singh and Prahlad Singh on 28th March, 1974, in the Court of the Chief Judicial Magistrate, Sonepat, under Section 277 of the I.T. Act, 1961, and under Sections 192, 193, 467, 468 and 471 read with Section 34 of the IPC pertaining to the assessment year 1970-71. The petitioner was charged for the offences under Section 227 of the I.T. Act, 1961, and Sections 193 and 471 of the IPC, by the learned Additional Chief Judicial Magistrate, but his three co-partners were discharged by him. The case against the petitioner is pending before the Additional Chief Judicial Magistrate. It is in this situation that the present petition for quashing the proceedings pending in the criminal court against the petitioner is filed.
4. Mr. H. L. Sibal, learned counsel for the petitioner, canvassed that in view of the findings given by the Income-tax Appellate Tribunal in its order dated July 22, 1978 (copy of which is annexed with the petition as annex. "P-1 "), the proceedings before the Magistrate cannot continue. I find merit in this contention. The assessment order for the assessment year 1970-71 was passed by the ITO on 28th February, 1973, whereby he also initiated penalty proceedings under Section 271(1)(c)of the I.T. Act against the petitioner. On a reference by the ITO, the penalty proceedings came before the IAC, Ambala Range, Ambala, who, vide his order dated 17th March, 1975, imposed a penalty of Rs. 13,192 upon the petitioner. Aggrieved by the order of the IAC, the petitioner preferred an appeal before the Income-tax Appellate Tribunal, Chandigarh Bench, which was allowed and the penalty levied on the petitioner was cancelled. The revenue approached the Tribunal for referring the matter to the High Court, which was dismissed on 7th December, 1978. Thereupon, the revenue approached the High Court for the issuance of a writ of mandamus to the Tribunal to refer the question of law to the High Court, but the same was also declined by the High Court, vide its order dated 25th September, 1979 (copy of which is annexed with the petition as annex. " P-3 ").
5. The Tribunal while setting aside the order of IAC in para. 14 of its judgment gave the finding that none of the authorities below established clearly that particular items of purchases were inflated and as such there was no proof that the assessee had concealed income or furnished inaccurate particulars of income to the extent of Rs. 13,912. The operative part of the Tribunal's order is reproduced below :
" Now coming to the merits of the penalty, we find that in the impugned assessment order, the Income-tax Officer states at page 2 that purchases to the extent of Rs. 1,12,911.80 shown by the assessee in the accounts, were not susceptible or verifiable. Thereafter, he points out that it was confessed by Shri P. C. Sharma, one of the partners, that some of the documents in the form of letter-heads, etc., by which the purchases were shown as having been made were fabricated. But when he gives the final analysis, he estimates the genuine purchases at Rs. 1,00,000 and deducts this amount from the purchases of Rs. 1,13,912 and treats the balance of Rs. 13,912 as on account of inflation in purchases. In doing so, he does not specifically pinpoint the inflated purchases. Now, in the impugned order, the Inspecting Assistant Commissioner has done precious little to improve upon this situation. He has merely referred to the order of the Income-tax Officer and proceeded to levy the penalty. Thus none of the authorities below established clearly particular items of purchases which were inflated and as such there is no proof that the assessee had concealed income or furnished inaccurate particulars of income to the extent of Rs. 13,912, The penalty on merits is unsustainable. The penalty levied is, therefore, cancelled on all the above grounds."
6. The High Court also affirmed the findings of the Tribunal and on p. 7 of its judgment it held that
" the Tribunal rightly came to the conclusion that there was no concealment. In this view of the matter, in our considered opinion no question of law arises and thus the prayer made in the application cannot be allowed."
It was on the basis of false returns, false accounts and inflated items of purchases that the prosecution
case against the petitioner was initiated at the instance of the ITO, Sonepat. But on these matters, the Tribunal has held that the authorities below have not established clearly as to the particular items of purchases which were inflated and that there is no proof that the assessee (petitioner) had concealed income or furnished inaccurate particulars of income to the extent of Rs. 13,912. The IAC held as under :
" His arguments regarding non-disclosure of wages and interest paid to partners are found to be correct and to that extent it is held that no concealment had been made by the assessee."
7. In Uttam Chand v. ITO (Special Leave Petition No. 1194 of 1978) [since reported in [1982] 133 ITR 909] the Supreme Court observed as under (p. 910):
" In view of the finding recorded by the Income-tax Appellate Tribunal that it was clear on the appraisal of the entire material on the record that Shrimati Janak Rani was a partner of the assessee-firm and that the firm was a genuine firm, we do not see how the assessee can be prosecuted for filing false returns. We, accordingly, allow this appeal and quash the prosecution."
8. In view of the clear findings of the Tribunal that there was no concealment and no inaccurate accounts were filed by the petitioner, criminal proceedings against the petitioner cannot continue.
9. Reliance was placed by Mr. Awasthy, learned counsel for the revenue, on Amar Chand Agarwala v. Shanti Bose, AIR 1973 SC 799, wherein it was observed by the Supreme Court as under (headnote):
"Where the accused moved the High Court at the time when the trial was almost coming to a close and what remained to be done was the examination of two prosecution and one court witnesses and the High Court quashed the charge and the entire proceedings on the grounds that the complainant suppressed material facts and that the evidence on record did not establish the alleged offence, the order was liable to be set aside. The proper course at that stage to be adopted by the High Court was to allow the proceedings to go on and to come to its logical conclusion, one way or the other, and decline to interfere with those proceedings. The questions whether there was suppression and whether the evidence established the alleged offence were matters to be considered by the trial court after an appraisal of the entire evidence."
10. But, in this case, relied upon by Mr. Awasthy, there was no finding by the Tribunal. In Uttam Chand's case [1982] 133 ITR 911, the High Court had declined to quash the criminal proceedings on the grounds, inter alia, that the findings of the Tribunal were not binding on the criminal courts, but the Supreme Court quashed the proceedings on the basis of the finding of the Tribunal. Therefore, the ratio of the decision relied upon by Mr. Awasthy is not applicable to the facts of the present case in view of the latest Supreme Court's observation in Uttam Chand's case [1982] 133 ITR 909.
11. Accordingly, this petition is allowed and the criminal proceedings pending against the petitioner before the learned Addl. Chief Judicial Magistrate, Sonepat, are quashed.