M/s. Swarnamukhi Greenfields Pvt. Ltd., V. Dy. Commissioner of Income-tax,

CRLATR/63/2018

AI Insights

The case involves M/s. Swarnamukhi Greenfields Pvt. Ltd. and its directors, who were convicted under sections 276-C(2) and 278-8 of the Income Tax Act, 1961, for willful evasion of tax. The appellants argued that they did not have the funds to pay the tax on the due date and that there was no willful evasion. The prosecution claimed that the company had sufficient funds but chose not to pay the tax. The trial court found the appellants guilty based on the evidence presented, including the non-payment of tax and penalties imposed. The High Court, after considering the appeals, found substantial issues with the trial court's decision and the evidence presented, leading to the setting aside of the conviction and remanding the case for a fresh trial.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 732783 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 17-06-2022
• Assessment Year: misc
• Other Referred Cases: Akkinapalli Sujatha (smt.) and others v. State of Telangana, Public Prosecutor, High Court of Telangana, Hyderabad and another, POOJA RAVINDER DEVIDASANI v. STATE OF MAHARASHTRA, National Small Industries Corporation v. Harmeet Singh Pahwa, Gunmala Sales Pvt. Ltd. v. Anu Mehta, Peltsi Foods Ltd. v. Special Judicial Magistrate, Alka Khandu Avhad v. Amar Syamprasad Mishra and another
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: B SARMA
• Assessee Lawyers: VINOD KUMAR DESHPANDE; G ASHOK REDDY; V SURENDER RAO
• Keywords: Criminal Appeal; Economic offences; Penalty; Willful evasion of tax
• Section: 143(1); 221(1); 374(2); 143(A); 276-C(2); 140-A; 278-8; 226-C(2)

Judgement Text

"I I i I ) ! IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD FRIDAY, THE SEVENTEENTH DAY OF JUNE TWO THOUSAND AND TWENTY TWO PRESENT THE HONOURABLE DR. JUSTICE D.NAGARJUN CRIMINAL APPEAL TRANSFER NOS : 63 And 75 0F 2018 Crl.A.TR.No .63 of2018: CRIMINAL APPEAL TRANSFER NO: 75 0F 2018 Between: Crl.Appeal Under Section 374 of (2) of Cr.P.C. aggrieved by the Judgment UiteO Og-Of-ZOt4 in CC No. 133 oI 2011 on the file of the Court of the Special Judge for Economic Offences at Hyderabad- Between: 1. M/s. Swarnamukhi Greenfields Pvt. ltd., 2-13131, S S Nagar, opp Hyder Nagar, Hyderabad-72, Rep. by its Managing Director A.V. Raghava Raju' S/o. A.V Rama Raju, aged about 48 Years. 2. A.V. Raghava Raju, Director of M/s. Swarnamukhi Greenlands Pvt. Ltd.' 2- 1 3/31, SS. Nagar,'Opp. Hydernagar, Kukatpally, Hyderabad-7 2 APPellants/ Accused No. 1 & 3 AND Dv. Commissioner of lncome{ax,, Central Circle-9, Room No.B'13, 8th Floor, AiyakarBhavan, Basheerbagh, Hyderabad-500004. - ...RESPONDENT/ ComPlainant Counsel for the Appellant : SRI VINOD KUMAR DESHPANDE SENIOR COUNSEL FOR SRI. G ASHOK REDDY Counsel for the Respondent: SRI B. NARASIMHA SARMA, SC for l'T. Crl.Appeal Under Section 374 ot (2) of Cr.P.C. aggrieved by the Judgment dated 09-01-2014 in CC No. 133 ot 2011 on the file of the Court of the Special Judge for Economic Offences at Hyderabad. 1. D. Srinivasa Raju, Director of M/s- Swarnamukhi Greenfields Pvt Ltd'' Fl/o. H.No. H-75, Madhura Nagar, Hyderabad-38. 2. B. Radha,, Director of M/s. Swarnamukhi Greenfields Pvt' Ltd', R/o Plot No. 1326, Road No. 66, Jubilee Hills, Hyderabad. ... APPellants / Accused 2 & 4 AND Dv. Commissioner of lnconre-t;lx' Central Circle-9' Room No 8\"l 3' 8tr' Erf \"i, irv'r\"r\", i a h, uu n' B a s h e e rb a g n' H vd e ra b ad - 5 0 o 0 04' .RESPONDENT/ ComPlainant SENIOR COUNSEL Counsel for the Appellant : SRI VINOD KUMAR DEllllANDE FOR SRI. V SURENDER RAO Counsel for the Respondent : SRI B' NARASIMHA SARMA The Court delivered the following Judgment i I i i t 1 I i i I I I I I I HONOURABLE DR. JUSTICE D.NAGARJUN CRIMINAL APPEAL ITRI Nos.63 and 75 of 2018 COMMON JUDGMENT: Crl.A.(TR).No.63 of 20 18 is filed by Al and ,A3 i.e., Company and its Director respectively, whereas Crl.A.(TR).No.75 of 2O 18 is filed by A2 and A4, who are another Director of A I / compan_r', being aggrieved by the conviction and sentence imposed by the learned Special Judge for Economic Offences at Hyderabad in C.C. No. I 33 of 2Ol1 vide Judgment dated O9.0 1.20 14, ivherein Accused Nos. I to 4 were found guilty of the offences punishable under Section 27 6-C(21 read with Section 278-8 of the lncome Tax Act, 196 1 (for short, \"the Act\") consequentll, accuscd No. I was sentenced to pay fine of Rs.10,00O/- and in default of payment of fine to initiate appropriate proceedings AS required under Section 421 of Cr.P.C., whereas Accused Nos.2 and 3 were sentenced to undergo rigorous imprisonment for a period of one year each and A4 was sentenced to undergo rigorous imprisonment for a period of six months and to pay fine of Rs.I0,OOO l- each and in default of payment of fine by accused Nos.2 to 4, to undergo simple imprisonment for a period of onc month each. -I Sincc thc tssues tllr'olr r:cl irr thcse appeals are one and the same, botl-t the appe al s ztre ht'r t tg disposed of by this comlnon judgment' For conveniencc, the p:rrties herern are rcferred to as they I I 2 triai Court t e Appeliant No'1 S are arraYed bcfore tht Accused No 1/ComPanv Nos. 2 to 4' zln cl Appellant Nos'2 to 4 as Accused ii) Accused No.1 /ComPanY has acquired lands to an extenl of Ac.6.63 guntas in Sy'No' 192 under the limits of 3. The gencsis of thcse cascs' u'hich lead the appellants accused to prefer thesc appcals' are narrated in brief as under: i) Accused No 1/company M/s Swarnamukhi Greenfields Private Lrrnited' which was registered under the Comparries Act with the Registrar of Companies at Hyderabad as Privatc Limited Company' was engaged in the business of acquisition and sale of lands' Appellant Nos. 2 to 4 herelr-t are the Directors of Accused No.1/ ComPanY' i i I t Bachupaliy Mandal' Ranga Reddy District during the -......--*ry$:?-lll -ra 3 I I ! ; ; i i I 0 t I I I t t I I financial year 2002-2003 and dcveloped rhe said lands by rncurring some alrrounts cluring the financial years 2OO2 03 to 2OO7-OB. Accused No.l/Companv along r'vith other companies, u,ho have lands contiguous to the lands of Accused No. 1/Company, have agreed to develop the lands jointly u,ith M/s. Mytas Property Private Limited. As per the said development agreement, the built up area agreed to be given to Accused No. I / company, 4ras allowed to be sold to various buycrs by M/ s. Mytas Property Private Limited and pa ss on the sale proceeds to Accused No.1/Company. iii) For the assessment year 2008-09, accused No.1/company has filed income tax returns on 30.O9.2OOS under Ex.Pl by trifurcating the sale proceeds into long term capital gains accrued from the sale proceeds of the lands and short term capital gains accrued from the sale proceeds of the constructed area by showing gross taxable income as Rs.7,25, 17,587 /-, out of which an amount of Rs.4,61,12,998/- was shown as long term capital gain and Rs.2,64,04,589/ - was shown as short term capital gains. -:.--'!:-ix.a.g 1 I I i i I I t I I I I i i I ! I I L I I -E---- + iu) Accused No. I / Cornpan,r ls income tax cithcr b.r' r.r':r,r' of advance tax as rcquircd under returns jn te rms of Scction 140 A of the Act. As per cxpected to pav the Section 208 of thc Act or at least along with filing of Section 143 (1) of the Act, the tax liabilitl, of Accused No. 1 respondent /complainant and raiscd a demand under Section 156 read u'itl-r Scction 143 of thc Act and issued an intimation to Accuscd No. i /Company under Ex.P2. Accuscd No.1 / com pan-v VAS required to pay the tzr-x demandeci within 30 davs of service of notice. but it has committed default. v) Respondent/ complainant has issued show-cause notice dated 17 .11.2OO9 under Sectioo 221 (Il of the Act under Ex. P5, wherein the appellants were asked to show cause as to why penalty should not be levied for committing delault in payment of tax. As there was no response lrom the appellants, the complainant has issued another show cause notice dated 25.08.2010 under Ex.p6 under Section 221 (l) rcad wirh Section 143_A of the Act. was arrived at Rs.2,15,70,486/- bv the i) a t i i { I t I I r I I I Finally, one morc opportunit_ . u,as also given by thc Department by giving another show-cause norice dated l,2.lO.2OlO (Ex.P7) undcr Section 221 (l) read ,ith Secrion 143-A ol the Act. An opporturrity of bcing heard q,as also given by the respondent/ complainant to Accused No. 1/Company flxing the date of hearing as l8.1O.2OlO, but there rvas no response, on which a penalty of Rs.47,00,O00/ vas imposed by wa,y of order dated 25.10.20 10 (Ex. P8) under Section 221 read with Section 140-A(3) of the Act and the said proceedings were served on accused No. 1 on 29.IO.2OlO 4. Considering the willfui evasion of payment of tax, the respondent/complainant has decided to initiate prosecution and accordingly a notice was issued to accused No. 1/company and other Directors under Section 226-C(21 of the Act, as to why prosecution shall not be initiated against them for willful evasion of the tax. All of them have given reply stating that there was no intention to evade payment of tax. Another notice was issued to accused No. 1 / Company and its directors under Exs.p 10 and Pl I dated 13.01.20 I 1 asking them as to why prosecution shall f 6 nor bc ipiLiatcd yncler Scr:tir,tr 276 C(21 of thc A(rt. Again replies Ncre filed br accusecl No. 1,i Companr. and its Dtrcctors/accused Nos.2 to , 4 unde r Exs.Pl2 ar-rd P13 stating that there ! 'as no intention of u'i11ful cvasion ol'tax' 5. As Acr:used No. 1/Company and its Directors/ accused Nos.2 to 4 tiavc not pald the ta-x tn responsc to the demand r-rotice issued undcr Section I r+3 (1) of the Act and also lailcd to paY the penalt-y, the re spolldent/ complainant after obtaining sanction order dated 16.03 20i 1 for launching ol prosecution liled a complaint before the Special court for Economic offences against accused No.1 and accused Nos 2 to 4' the other Directors, alleging that the,v have committed offence punishable under Section 276-C(21 reacl with Section 278-8 of the Act, as they have wiilfully evaded t ax even though they were having sufhcient resources. 6. The Special Court for Economic Offences took cognizance of the offences against Accuscd No.1/company and its Directors i.e., Accused Nos. 1 to 4, under Section 27 6-C(21 read with Section 278-8 of the Act ancl charges were framed against them under Section 276 - C(21 read lr.ith Section 278-8(1) of the Act 7 1 and all the accused have pleaded not guilty of the charges and claimed to be tried 7. In order to prove the chargcs leveled against the appellants, the respondent/ complainant has examined pWs.l to 3 and got marked trxs.Pl to p14. After closure of evidence of the complainant, the incriminating evidence elicited against the appellants was read over and explained to them under Section 313 of the Cr.P.C., for which all ol them have denied and reported that they did not choosc to examine any witness on their behalf. However, they got marked Exs.D i to D3 on their behalf. 8. The substance of the evidence of pWl is that after receiving of returns of income tax liled by accused No. l /company, the respondent/complainant has processed the same under Section 143(1) of the Act and issued intimation determining the total taxable income as Rs.7,25,17,590/_ and tax liability as Rs.2,37,O7 ,l4O /-. The evidence of pW2/lncome Tax ofhcer is to the extent that he has considered the annual report of accused No.l/company for the hnancial year 2OOZ-Og under Ex.p3 and bank account statements of accused No. 1 / Company with the { i ! AXIS Llank Linrited undcr Iix No. l/Compartl did not pit- the tzLX rcturlts in spitc ol havir-rg surplus and sr-rl'ficicnt funcls. PW3 is the Income 't'a-x Officcr. s'ho has slrcceeded I)W2. I{is evidence is thal he has passcd perraltr, ordcr under Ex.P8 imposing penalty of Rs.47 lakhs and acc:usccl. Hc erlso deposcd that as there u,as no response lrom thc irccursccl. shoin czruse notices under Seclion 276 C of the Act u'crc issued agatnst all thc accused through which accused u,ere inlormcd that the department is initiating criminal proceedings and consequenth' the departmcnt has filed the complaint P4 and lound thitt:rccuscd raised dem:rnd under trx. P9 and the same vgas served on the 9. After full fledged trial, on considering the entire material on rccord, the trial Court has found Accused No.1/Company and A2 Lo A4, the Directors of z 1 company, guilty of the offences pu n ishable under Scctio ns 27 6-C(21 and 27 8 B of the Act and were sentenced as stated supra. Aggrieved by the said judgment and conviction of Special Judge for Economical Offences at Hyderabad, the present appcals are filed originally before the Metropolitan Sessions Judge Court at Hyderabad. 9 ,,| 10. The erstrvhile High Court for the States o[ Telangana and Andhra Pradesh has issucd circular ROC.No.34, Criminal Section/2O 17, dated 28.O8.2O17 , whcrein it is clarificd that against any orders passed by the Special .Judge lor Economic Offences, Hyderabad, in the State of Telangana and Visakhapatnam in the State of Andhra Pradesh, the High Court has the jurisdiction to entertain the appcals, not the Sessions Court. In view of the said circular, these appcals filed by the appellants have been translerred from Metropolitan Sessions Judge Court, Hyderabad, to the High Court lor the State of Telangana. 1 1 . The summary of grounds of appeal as filed by the appellants in brief are as under: a) The trial Court has failed to see that accused No. l/company was not having funds to pay the tax on the due date as reflected in Ex.P4-bank statements and that accused No.l has not received any sale proceeds from M/s. Mytas Property Private Limited, thereby the respondent/ complainant has not produced any evidence to show that accused I I I i I I I -_- 10 No. I /Com1>:rn,, has rcceir r,cl salc proceeds from M/s. Mr-tas Propcrt-r' Priva' c- Lirlitccl b) Thc trial court has misconstrued the presumption under Section 278-E, ol thc Act anrl erred in holding that thc burden of prool is on the accused to prove that there ras no u,illfui evasion of payment of I zL{ c) l'he trial Court err'ed in holding that thc accused failed to prove non cxistencc of culpable mental state in non paymcnt of taxes on the drrtc ol filing rcturns and as on the date of demand notice and th.rl thc t rial Cor-Lrt failed to appreciate that in spite ol not having an. ' cogent evi