INCOME TAX DEPARTMENT V. MS VICKY FOODS

CR.A/29/2004

AI Insights

The case revolves around an appeal by the Income Tax Department against the acquittal of M/s. Vicky Foods (P) Ltd and another, who were initially accused of tax evasion under Section 276(C) of the Income Tax Act, 1961. The respondents had declared a net loss in their tax return for the assessment year 1990-91, which included questionable purchases from a non-existent firm. The trial court acquitted the respondents due to insufficient evidence proving the non-existence of the firm and the lack of concrete evidence linking the respondents to any willful attempt to evade tax. The High Court upheld this decision, emphasizing the absence of cogent evidence and the procedural flaw regarding the limitation period for filing the complaint.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 744107 (HC-HIMACHAL_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 30-09-2011
• Assessment Year: misc
• Other Referred Cases: CTT v. M/S. Prithipal Singh and Company
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M M KHANNA; VAYUR GAUTAM
• Assessee Lawyers: VINAY KUTHIALA
• Keywords: Acquittal; Concealed income; Income Tax; Limitation Period; Penalty; Tax Evasion
• Section: 468; 276 C; 271(1)(a); 278(C)

Judgement Text

" IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Cr. Appeal No.29 of 2004. Date of Decision: 30th September, 2011. _______________________________________________________ Income Tax Department ….Appellant. Versus M/s. Vicky Foods (P) Ltd and another. ……..Respondents. Coram Hon’ble Mr. Justice Surinder Singh, J. Whether approved for reporting1? For the appellant : Mr. Vinay Kuthiala, Advocate. For the respondents : Mr. M.M. Khanna, Senior Advocate with Mr. Vayur Gautam, Advocate. ____________________________________________________ SURINDER SINGH, J. (Oral) : In the present appeal, acquittal of the respondent has been challenged by the Income Tax Department recorded in Case No.456-I-1995 decided on 29.3.2003, by the learned trial Court, for the offences punishable under Section 276(C) of the Income Tax Act, 1961, in short “the Act”. 2. In brief facts are that the respondents, hereinafter to be referred as ‘the accused’, had filed the return of the Income Tax for the assessment year 1990-91 and declared a net loss of `2,53,840/-. The case was Whether reporters of the Local papers are allowed to see the judgment? - 2 - selected for scrutiny and details of expenses by the Income Tax authorities. The accused had shown purchases of `1,55,867/- from M/S Khan Packages, 984, Industrial Area, Phase-II, Ram Durbar, Chandigarh during the aforesaid period. On investigation, the Income Tax Department found no firm in existence on the given address. Despite opportunity, no bill of the said firm was produced by the accused persons. Thus a show cause notice was issued. In reply, they asserted that the said concern was in existence, without any cogent proof. Thereafter the assessment was framed and the claimed expenses were disallowed and the penalty proceedings under Section 271(1)(a) of the Act were initiated and the penalty of `1,11,776/- was imposed. 3. The accused persons filed appeal which was dismissed. Since there was no satisfactory reply by the accused persons to the show cause, as such the proceedings under Section 276(C) of the Act on the written complaint of PW1, were initiated before the learned trial Court. To be precise, charge was framed, they abjured their guilt and claimed trial. At the end of trial, the accused persons were acquitted on the ground that from the facts no case of concealed income is made out to evade the tax and also that the statement of CW3 S.S. Guleria, Income Tax Officer, who was - 3 - deputed to conduct the enquiry did not produce any report of his finding so as to know the nature of the defence taken by the accused persons. Even the voucher of M/S. Khan Packages also did not find the light of the day. Thus in view of above, the non-existence of the said firm was not substantiated by leading cogent evidence. Further that the case was not made out in view of the judgment rendered in 183 ITR 69, CTT v. M/S. Prithipal Singh and Company. 5. Shri Vinay Kuthiala, learned Counsel for the appellant, vehemently submitted that the judgment passed in Prithipal Singh’s case supra stands over-ruled by the Supreme Court in the year 2008 and therefore, the ratio of the judgment in Prithpal Singh’s case supra is not applicable to the present case. He also ventilated that the evidence led to prosecute the accused persons is worth inspiring confidence which establishes the willful attempt to evade the tax by the accused and presumption could have been drawn by the learned trial Court with respect to culpable mental state in view of Section 278(C) of the Act. 6. Shri M.M. Khanna, learned Senior Advocate duly assisted by Shri Vayur Gautam, Advocate, countered the above arguments on the ground that when the present case was decided, ratio of Prithipal - 4 - Singh’s case supra was in vogue. The ITAT had also decided the appeal filed by the accused in their favour. He further ventilated that the evidence on record does not prove the case of the Department in accordance with law and the existence of culpable mental state cannot be presumed rightly so, on the preponderance of probabilities. 7. True, that the accused firm had shown the loss of `2,53,840/- during the assessment year 1990-91 out of which `1,55,867/- was on account of purchases from M/S. Khan Packages, Industrial Area, Chandigarh which was disallowed and added to income of the accused firm and the loss was reduced to `59,210/-. The learned trial Court on the above facts rightly came to the conclusion that the accused firm did not suppress their income on which they attempted to evade tax. Otherwise also, on merits, the case against the accused persons is not made out from the statements of CW2 Shri S.S. Rana, Deputy Commissioner and CW3 Sh. S.S. Rana Inspector of Income Tax. CW2 aforesaid stated that the matter was got enquired from CW3 S.S. Guleria with respect to the accused persons. Shri S.S. Guleria stated that he was orally directed to hold an enquiry and pursuant to which he visited Chandigarh. He could not produce any authenticated record with respect to his - 5 - visit at Chandigarh nor he stated date when he visited Chandigarh. He also testified that on his visit he found the premises of the firm locked. Though, there was no sign board, but expressed his doubt that the said firm might be working in those premises. This statement of the witness is not sufficient to hold the accused guilty of the offence charged nor presumption can be drawn on probablities. 8. It is a cardinal principle of law involving imprisonment that however strong may be the suspicion, but it cannot take the place of proof. Therefore, the case against the accused persons stands not proved. 9. Further, I also find that the appellant had come to know about the alleged offence on its scrutiny and ultimately when the appeal filed by the accused was dismissed by CIT(A) on 3.2.1992. The present complaint was filed on 28.11.1995 after more than three years. The alleged offence against the accused is punishable with three years imprisonment. Section 468 of the Code of Criminal Procedure bars the cognizance of the offence inter alia of the category specified in sub- section (2) after the expiry of period of limitation. Sub- section (2)(c) provides that the period of limitation shall be three years if the offence is punishable with imprisonment for a term exceeding one year but not - 6 - exceeding three years. Therefore, in such a situation, the learned trial Court ought not to have taken the cognizance. In view of this, the grounds of acquittal recorded by the learned trial Court cannot be interfered with. The appeal sans merit and is accordingly dismissed. 10. The respondents are discharged of their bail bonds entered upon by them at any stage during the proceedings of this case. 11. Send down the record forthwith. September 30, 2011. (Surinder Singh), J. (rc) "