Jamnadas Madhavji & Co.& Others. v. D.C.Sreedhar & Ors.,

Cases referred :

158 ITR 496 [ 4 ]

171 ITR 257 [ 4 ]

72 CTR 228 [ 4 ]

32 Taxman 206 [ 4 ]

179 ITR 387 [ 4 ]

Advocates appeared :

Mr. Amit K. Desai i/by Mr. M.B.Sabnis, Advocates for Petitioners.

Respondent No.1 though served, absent.

Mr. S.R.Borulkar, A.P.P. for Respondent No.2 State.

: This is a petition under Section 482 of the Code of Criminal Procedure for quashing the proceedings and issue of process in Criminal Case No.3/S of 1987 on the file of Metropolitan Magistrate, 28th Court , Esplanade, Bombay . Heard the learned Counsel for the petitioners and the learned Assistant Public Prosecutor appearing for the State second respondent. None appeared for the first respondent-complainant.

2. The petitioners along with one more accused were prosecuted by the first respondent for offences under Sections 276-C, 277 and 278B of the Income-Tax Act.

The main allegation is that on 30th April, 1981 the original accused No.5 who is not a party to this petition, was detained by the Customs Department officials at Santacruz Airport and an amount of Rs.22,87,000/- was seized from him. It appears that the original accused No.5 Mr. K.C.Mehta made a statement that this amount belonged to the firm of the first petitioner. Petitioners 2 to 4 are partners of that firm. Then it appears the Income-tax Department conducted some enquiry. It is also seen that subsequently Mr. Mehta retracted his earlier statement and gave a further statement on 4th May 1981 stating that the disputed amount belongs to another firm viz. M/s. Rohitkumar and Co.

On the basis of the enquiry made by the Income-tax Department, the Income-tax Department through the respondent No.1 filed a private complaint in the Court below alleging that the petitioners and accused No.5 have not disclosed this income of Rs.22,87,000/- in their income-tax return for the year 1982-83, that they have attempted to evade tax and thereby committed an offence punishable under Section 276C of the Income-tax Act. This is a gist of the offence alleged against the accused persons.

3. In the meanwhile, the Income-tax Department took steps and levied income-tax on the said seized amount treating it as undisclosed income of the petitioners. The petitioners challenged the same by filing an appeal before the Commissioner of Income-tax (Appeals), who dismissed the appeal. Then the petitioners challenged the same by further appeal before the Income-Tax Appellate Tribunal in ITA No.4356/BOM/87. The Income-tax Appellate Tribunal went into this question in detail and considered the relevant facts and recorded a finding in favour of the petitioners in the following terms :-

We are in the circumstances of the case, of the opinion that the addition of Rs.22,87,000/- made in this case is without any justification based on slander evidence and the same cannot be sustained. The order of the C.I.T. (Appeals) is, therefore, reversed and the addition is deleted.

It is, therefore, seen that on the appellate side, the Income-tax Appellate Tribunal has held that the amount in question has been wrongly included as the income of the petitioners and it was excluded from consideration. Now the present prosecution is launched on the same ground viz. that the accused persons have committed an offence by not disclosing this amount in their income-tax return for the year 1982-83. The question is whether the prosecution is liable to be quashed or not ?

4. The learned Counsel for the petitioners invited my attention to some of the decisions on the point that if the income-tax authorities have prosecuted an assessee for violation of the provisions of the Income-tax Act and in the meanwhile on the judicial side if the default on the part of the assessee has been waived or condoned or it is held that the assessee has not committed any irregularity and the penalty is quashed, then on the same ground the prosecution cannot be launched or continued and if it is already launched it is liable to be quashed (vide 158 ITR 496, 171 ITR 257, 72 CTR 228, 32 Taxman 206 and 179 ITR 387). In all these cases it is observed that the prosecution is liable to be quashed if on the civil side or on the judicial side the assessee is found to have not committed any default.

5. In the present case, the appellate Tribunal has clearly held that the amount in question does not belong to the accused and it cannot be included in the income of the accused persons. The prosecution on the same amount cannot be allowed to continue, otherwise it will be a sheer abuse of process of the Court. Hence in my view, the prosecution of the petitioners cannot be continued. Even accused No.5 was included as an employee of the petitioners. Hence the prosecution of the entire firm, its partners and employee is liable to be quashed in view of the specific finding of the Tribunal mentioned above. However if accused No.5, who is not before this Court, has committed any offence individually on his own, it is always open to the Income-tax Department to take necessary action according to law.

6. In the result, the criminal application is allowed. The issue of process and the prosecution of the petitioners in the criminal case mentioned above are hereby quashed.

Application allowed.