MS ONKAR CHAND CO. V. INCOME TAX DEPTT.

CRMMO/107/2007

AI Insights

The case involves two petitions filed by M/s Onkar Chand & Co. and M/s Shanker Dass Balram Kumar against the Income Tax Department, challenging the criminal proceedings initiated under various sections of the Income Tax Act, 1961. The proceedings were based on allegations of concealing income to evade tax. The main legal issues revolved around the territorial jurisdiction of the trial court and the liability of the partners under the Income Tax Act. The court examined whether the trial court had the authority to summon all partners and whether the complaints adequately specified the roles of the partners in the alleged offences.

• Counselvise Citation: [2009] 140 COUNSELVISE.COM (IT) 748124 (HC-HIMACHAL_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 16-03-2009
• Assessment Year: misc
• Laws Referred To: Code of Criminal Procedure, Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: VINAY KUTHIALA
• Assessee Lawyers: BALDEV SINGH
• Keywords: Concealing Income; Income Tax; Tax Evasion; Territorial jurisdiction; Vicarious Liability
• Section: 271(1)(c); 132; 143; 482; 227; 277; 177; 278-B; 276 C (1)

Judgement Text

" Whether reporters of local papers may be allowed to see the judgment? Yes. IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA. Cr. MMO No.107 of 2007 & Cr. MMO No.109 of 2007 Dated of Decision: March 16, 2009. 1. Cr.MMO No. 107 of 2007. M/s Onkar Chand & Co. and others. .… Petitioners. Versus Income Tax Department. ….Respondent. 2. Cr.MMO No. 109 of 2007. M/s Shanker Dass Balram Kumar and others. .… Petitioners. Versus Income Tax Department. ….Respondent. Coram The Hon’ble Mr. Justice Surinder Singh, Judge. Whether approved for reporting? Yes. For the Petitioners : Mr. Baldev Singh, Advocate. For the Respondent : Mr. Vinay Kuthiala, Advocate. Surinder Singh, J (oral): Both the petitions titled above preferred under Section 482 of the Code of Criminal Procedure read with Article 227 of the Constitution of India involves the common questions of law, therefore, taken together for its disposal. The respondent has filed two 2 complaints one bearing No.196-III/2005 against petitioners M/s Onkar Chand and its partners; and another complaint No.195-III/2005 against its sister concern M/s Shankar Dass Bal Ram Kumar and its partners under Section 276 C(1), 277 and 278 B of the Income Tax Act, 1961, in short ‘the Act’ allegedly for concealing the particulars of Income to evade tax, willfully and intentionally, which otherwise was payable under the Act. Finding reasonable grounds to summon the petitioners, the learned trial court (Additional Chief Judicial Magistrate) issued the process against the petitioners firms and to all its partners, which have been assailed in these petitions. Admittedly, the petitioner firms, in both the petitions are business firms dealing in food grains and Karyana goods in village Jhalera, Tehsil and District Una, H.P. On 16.12.1991, the respondent department conducted the survey in the premises of the petitioner firms, which was converted into search and seizure under Section 132 of the Act. Both the firms in both the petitions had offered an amount of Rs.13 lacs for their taxing. The petitioner firm in 3 Cr.MMO No.107/07 filed the return on 30.10.1992, declaring their income to the tune of Rs.1,29,390/-. The return of the income was duly signed and verified by Mr. Onkar Chand s/o late Shri Shanker Dass on 29.10.1992 in his capacity as a partner of the firm. The assessing authority after completing the assessment under Section 143 of the Act at Rs.23,68,060/- enhanced the amount after rectification to Rs.25,79,710 and with regard to the addition of Rs.2,10,382/- the Income Tax Tribunal remanded back the matter to the assessing authority, who computed the income at Rs.14,20,120/- and penalty of Rs.12,57,360/- was imposed which was reduced in appeal to Rs.7,26,814/-. In Cr.MMO No.109/07 the petitioner firm, filed return on 31.8.1992, declaring their income to the tune of Rs.2,22,020/-. The return of the income was duly signed and verified by Mr. Yash Pal s/o late Shri Shanker Dass on 28.10.1992 in the capacity of the partner of the firm. Similarly the Assessing Authority completed the assessment under section 143 of the Act on Rs.31,63,438/-, which amount was reduced in appeal to Rs.25,37,120/- and in further appeal it was 4 reduced to the tune of Rs.18,66,158/- by the Income Tax Tribunal and returned the matter to the assessing authority, who imposed penalty of Rs.8,62,524/- under Section 271(1)( c) of the Act. The petitioner firms, were given a show cause notice for furnishing incorrect income, which was replied to by them. After considering their objections, the prosecution was launched against them after the sanction was accorded by the Commissioner, Income Tax, for the offences above mentioned. Now the contentions of the learned counsel for the petitioners is that:- (i) the learned Additional Chief Judicial Magistrate, Palampur has no territorial jurisdiction to try and hear the case; (ii) All its partners were not incharge and responsible for the conduct of business of the firm(s) and no allegation has been imputed against them in the complaint(s), therefore, the proceedings against them deserves to be dropped and prayed to dismiss the complaints. The learned counsel for the petitioners has not seriously contested the first point but however, it is born out from 5 the record that although the petitioner firms are engaged in business in Una, where the learned Additional Chief Judicial Magistrate Palampur District Kangra has no territorial jurisdiction, but it is alleged that the petitioner-firm(s) through its partner had filed false and incorrect returns before the Assistant Commissioner of Income Tax in his office at Palampur (Kangra). Section 177 of the Code of Criminal Procedure, in short ‘the Code’ for the trial of cases and it reads as under:- “ 177. Ordinary place of inquiry and trial.- Every offence shall ordinarily be inquired into and tried by a court within whose local jurisdiction it was committed.” [Emphasis mine] This section governs all the trials held under the Code, which includes even the trials of all the offences punishable under Local or Special Laws. The word “ordinarily” used in this section means except where otherwise provided in the Code itself or in any other law. The Income Tax Act, 1961, as amended from time to time, does not make any provision for the trial of offences committed under the 6 Act, otherwise than as provided in Section 177 of the Code. In the instant case as stated above, the false and incorrect returns were allegedly filed/ delivered at Palampur, by the said firms. Thus the offence prima-facie is complete at Palampur, therefore, in my opinion the learned Additional Chief Judicial Magistrate, Palampur has a territorial jurisdiction to try the offence(s) and in the circumstances, the Court also feels that the trial of the offence(s) shall take place before the said court against the persons against whom there are reasonable grounds to proceed. As far as the second contention is concerned, the petitioners are sought to be prosecuted for the offences 276 C(1), 277 and 278 B of the Income Tax Act. In complaint No.196-III/2005, in para 3 it is alleged: “The assessee had filed the return of Income Tax on 30.12.92, declaring net taxable income for Rs.1,29,390/-.The return of income tax was duly signed and verified by Shri Onkar Chand s/o Shri Shankar Dass on 28.10.1992, in the capacity of the partner of the firm.” 7 Apart from the firm and Onkar Chand the action has been sought against other partners namely Smt. Usha and Santosh, being its partners. Similarly, in complaint No.195-III of 2005, against M/s Shanker Dass Balram Kumar in para 3, the alleged taxable income was declared to the tune of Rs.2,22,020/- under the verification of Shri Yash Paul s/o Sh. Shanker Dass its partner. Besides the firms and Yash Paul Srv. Sh. Tilak Raj, Surinder Kumar, Kamal Kumar and Lajya Devi have been impleaded as accused. Except Srv. Shri Onkar Chand and his brother Yash Paul in the above complaints, there is no allegation against other accused persons whether they have committed or that they were responsible for the commission of such offences. There is also not even a fleeting reference against them that they have made the false entries or made any false statements before the Assistant Commissioner Income Tax or other tax authorities. Section 278 B of the Income Tax reads as under:- “278 B.(1) Where an offence under the Act has been committed by a Company, every 8 person who, at the time the offence was committed, was incharge of, and was responsible to the Company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly…..” [Emphasis supplied] The ‘Company’ includes a firm or other association, and the same test must apply to a Director-in-charge and a partner of a firm-in-charge of a business. In that context a person ‘in charge’ would mean that the person should be in overall control of the day to day business of the company or firm. A liability under Section 278 B(1) of the Income Tax Act is sought to be fastened vicariously on the partners of the firm, where Principal accused is the firm itself. Thus a clear case should be spelt out in the complaint against the Partners sought to be made liable, which has not been done in the present case. There is almost unanimous judicial opinion even by the apex court that necessary averments are to be contained in a complaint before a person can be subjected to criminal process. 9 Adverting to the facts of the present case, in both the complaints there is no allegation worth the name against the partners namely Smt. Usha and Santosh in complaint No.196-III of 2005 against which Cr.MMO No.107 of 2007 is filed and also against Tilak Raj, Surinder Kumar, Kamal Kumar and Lajya Devi in Cr. Complaint No.195-III of 2005 in Cr.MMO No.109 of 2007, except that the above named persons happened to be the partners of respective firms not even incharge or responsible to the business of the firm. Therefore in these circumstances, the prosecution against them is not sustainable. Accordingly, both the petitions are partly allowed, to the extent that in complaint No.195-III of 2005, the issuing of process against petitioners Tilak Raj, Surinder Kumar, Kamal Kumar and Smt. Lajya Devi and in Complaint No.196-III of 2005 against Usha and Santosh, as accused is hereby quashed and set-aside, the proceedings against them are ordered to be dropped. However, qua other accused petitioners it shall continue. Parties are directed to be present before the learned Additional Chief Judicial Magistrate at Palampur on 21.4.2009. 10 The records of the trial court be returned forthwith. March 16, 2009. (Surinder Singh) (Pds) Judge. "