M/S Uttarashada Bio-Tech Pvt. Ltd., V. Dy. Commissioner of Income-tax,

CRLATR/72/2018

AI Insights

The case involves M/s. Uttarashada Bio-Tech Pvt. Ltd. and its directors, who were convicted for willful evasion of tax under Sections 276-C(2) and 278-8 of the Income Tax Act, 1961. The conviction was based on an initial assessment order which was later found to be incorrect and was subsequently modified. The appellants challenged the conviction, arguing that the assessment order on which the prosecution was based was erroneous. The High Court agreed, noting that the modified assessment order significantly reduced the tax liability and that the appellants had paid the revised amount along with penalties and interest. The court set aside the conviction and remanded the case for a fresh trial based on the new assessment.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 726598 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 17-06-2022
• Assessment Year: misc
• Other Referred Cases: V. Srinivas Reddy Vs. State of Andhra Pradesh
• Laws Referred To: Income Tax Act, 1961, Cr.P.C.
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: B SHARMA
• Assessee Lawyers: VINOD DESHPANDE; V RAO
• Keywords: Assessment Order; Economic offences; Income Tax Return; Penalty; Prosecution; Willful evasion of tax
• Section: 143(1); 221(1); 227; 278(E); 276-C(2); 140-A; 278-8

Judgement Text

"IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD FRIDAY, THE SEVENTEENTH DAY OF JUNE TWO THOUSAND AND TWENTYTWO Criminal Appeal under Section 37 4(2) ot Cr.P.C against the Judgment dated Ogl01l2o14 in CC No.132 of 2011 on the file of the Court of the Special Judge for Economic Offences at Hyderabad. Between: 1. M/s. Uttarashada Bio-Tech Pvt. Ltd.,2-13131 , S.S.Nagar, Opp: HyderNagar, Hyderabad-72, rep. by its Managing Director Shri A.V.Raghava Raju, S/o.A.V.Rama Raju, aged about 48 years 2. Shri K.Gopalakrishnam Raju, S/o. Shri K.Rama Raju, aged about 51 years, Director of M/s. Uttarashada Bio-Tech Pvt. Ltd., H.No.8-3-222lB17l35,36lD-92 & 93, Flat No.304, Sd Ramana Enclave, Madhura Nagar, S.R.Nagar, Post, Hyderabad. I I I i I PRESENT THE HONOURABLE DR. JUSTICE D.NAGARJUN CRIMINAL APPEAL (TR) NOS: 6 AND 72 OF 2018 CRL.A.(TR} NO.6 OF 2018: Between: / Shri D.Srinivasa Raju, S/o.Shri D.Satyanarayana Raju, Director of M/s.Uttarashada Bio-Tech Pvt. Ltd., R/o. H.No.H-75, Madhura Nagar, Hyderabad-38. ...APPELLANT/ ACCUSED NO.2 AND Dy. Commissioner of lncome-Tax, Central Circle-9, Room No.813, 8rh floor, Aayakar Bhavan, Basheerbagh, Hyderabad-500004. ...RESPONDENT/ COMPLAINANT FoT the PetitioneT : SRI VINOD KUMAR DESHPANDE, SENIOR COUNSEL FOR SRI.V.SURENDER RAO For the Respondent : SRI B.NARASIMHA SHARMA, SC FOR l.T. CRL.A.0R) NO.72 0F 2018: Criminal Appeal under Section 374(2) ot Cr.P.C against the Judgment dated 0910112014 in CC No.132 of 2011 on the file of the Court of the Special Judge for Economic Offences at Hyderabad. I I lr 3. Shri A.V.Raqhava Raju, S/o.A.V.Rama Raju, aged about 48 years, Director of tvl/s. Uttarashada Bio-Tech Pvt. Ltd., 2-13131, SS Nagar, Opp: Hyder Nagar, kukatpally, Hyderabad-7 2. 4. Sri lvl. Surayanarayana Raju, S/o.M.V.Ramakrishnam Raju, aged about 36 years, Director of M/s. Uttarashada Bio -Tech Pvt. Ltd., H.No.37, Vikaspuri, S. R.Nagar Post, Hyderabad-38. ....Appellants/ Accused 1, 3, 4 & 5 And Dy Bh . Comrnissioner of lncome-Tax, Central Circle-9, Room No.813. 8th floor, Aayakar avan, Basheerbagh, Hyderabad-500004. ...RESPONDENT/ COMPLAINANT For the Petitioner : SRI VINOD KUMAR DESHPANDE, SENIOR COUNSEL FOR SRI. G.ASHOK REDDY For the Respondent : SRI B.NARASIMHA SHARMA, SC FOR l.T. The Court delivered the following : COMMON JUDGMENT I I THE HON'BLE DR. JUSTICE D.NAGARJUN COMMON JUDGMETN: Cr1.A.(TR).No.72 ol 2O7B is filed by Al and A3 to A5 i.e., Company and its three Directors respectively, whereas Crl.A.(TR).No.6 of 2Oi8 is filed by A2, who is another Director of A 1 / company, being aggrieved by the conviction and sentence imposed by the learned Special Judge lor Economic Olfences at Hyderabad in C.C.No. 132 of 2Ol1 vide Judgment dated O9.Ol.2Ol4, wherein Accused Nos. 1 to 5 were found guiity of the offences punishable under Section 276-C(21 read with Section 278-8 of the Income Tax Act, 196 1 (for short, \"the Act\") consequently accused No.I was sentenced to pay fine of Rs.1O,O00/- and in default of payment of {ine to initiate appropriate proceedings required under Section 421 of Cr.P.C., whereas Accused Nos.2 to 5 were sentenced to undergo rigorous imprisonment for a period of one year each and to pay fine of Rs.10,0OO/- each and in default of payment of fine by accused Nos.2 to 5, to undergo simple imprisonment for a period of one month each. I CBI]4INA! 4EPE4! 1I& Nos.6 an4 72 of 2o18 2 i Since the issues involved in these appeals are one and the same, both the appeals are being disposed of by this common judgment. 2. For convenience, the parties herein are referred to as they a,re a,rrayed before the trial Court. i.e., Appellant No.1 as Accused No.1/Company arrd Appellant Nos.2 to 5 as Accused Nos. 2 to 5 3. The genesis of these cases, which lead the appellants- accused to prefer these appeals, are narrated in brief as under: i) Accused No.l/Company - M/s. Uttarashada Biotech Private Limited, which was registered under the Companies Act with the Registrar of Companies at Hyderabad AS Private Limited Company, was engaged in the business of acquisition and sale of lands. Appellant Nos. 2 to 5 herein are the Directors of Accused No.1/Company. i0 Accused No.l/Company has acquired lands to an extent of Ac.7.O3 guntas in Sy.Nos.198 and 282 under the limits of Bachupally Mandal, Ranga Reddy District during the financial year 2002-2003 and developed the said lands 3 by incurring some arrounts during the financial years 2OO2-03 to 2007-O8. Accused No.1/Company along with other companies, who have lands contiguous to the lands of Accused No. 1 / Compan- ,, have agreed to develop the lands jointly with M/s. Mytas Property Private Limited. As per the said development agreement, the built up area agreed to be given to Accused No. 1/company, was allowed to be soid to various buyers by M/s. Mytas Property Private Limited and pass on the sale proceeds to Accused No.1/Company iii) For the assessment year 2008-09, accused No.llcompary has filed income tax returns on 30.09.2008 under Ex.P1 by bifurcating the sale proceeds into long term capital gains accrued from the sale proceeds of the lands arrd short term capital gains accrued from the sale proceeds of the constructed area by showing gross taxable income as Rs.5,17,35,7751-, out of which an amount of Rs.3,28,98,1 12 /- was shown as long term capital gain and Rs.1,88,37,663/- was shown as short term capital gains. : l I iv) Accused No. 1/Company 1S expected to pay the income tax either by way of advance tax as required under Section 2OB of the Act or at least along with filing of returns in terms of Section i4O-A of the Act. As per Section 143 (1) of the Act, the tax 1iabi1it1' of Accused No.1 was arrived at Rs.1,53,88,9 19l- by the respondent/complainant and raised a demand under Section 156 read with Section 143 of the Act and issued an intimation to Accused No.1/Company under Ex.P2. Accused No.1/company ras required to pay the tax demanded within 30 days of service of notice, but it has committed default. v) Respondent/complainant has issued show-cause notice dated 17.ll.2OO9 under Section 221 (11 of the Act untler Ex.PS, wherein the appellants were asked to show cause as to why penalty should not be levied for committing default in payment of tax. As there was no response from the appellants, the complainant has issued another show-cause notice dated 25.08.201O under Ex.P6 under Section 221 (ll read with Section 143-A of the Act I) Finally, one more opportunitl, u,as also given bv the Department by giving another show-cause notice dated 12.1O.2OlO (Ex.P7) under Section 221 (1) read with Section 143-A of the Act. An opportunity of being heard was also given by the respondent/ complainant to Accused No.1/Company fixing the date of hearing as 18.10.2010, but there was no response, on which a penalty of Rs.34,00,000/- AI S imposed by rvay of order dated 25.1O.2O1O (Ex.PB) under Section 227 read with Section 140-A(3) ol the Act and the said proceedings were served on accused No. 1 on 29 .lO .2O 10 . 4. . Considering the willlul evasion ol payment of tax, the respondent/complainant has decided to initiate prosecution and accordingly a notice was issued to accused No.l/company and other Directors under Section 276-C(21 of the Act, as to why prosecution shall not be initiated against them for willful evasion of the tax. A11 of them have given repiy stating that there was no intention to evade payment of tax. Another notice was issued to accused No.l/Company and its directors under Exs.PlO and Pl1 dated 11.01.201 1 asking them as to why prosecution shall 6 not lre: initiated under Section 276-C(2 of the Act. Again replies r,',,ere llled b1' accused No. 1/company and its Drrectors/ accused Nos.2 to 5 under Exs.P1l and P13 stating that there ras no intention of wi1lful evasion of tax. 5. As r ccused No. 1/Company and its Directors/ accused Nos.2 to 5 have not paid the tax in response to the demand notice isstred under Section 1a3 (1) of the Act and a-lso failed to pa-y the penalty, the respondent/complalnant alter obtaining sanction order dated 16.03.2011 for launching of prosecution filed a complaint before the Special Court for Economic Offences agair, st accused No.1 and accused Nos.2 to 5, the other Directors, alleging that they have committed offence punishable under Section 276-C(21 read with Section 278-8 of the Act, as thev have willlully evaded tax even though they r,ere having sufficient resources. 6. The Special Court for Economic Offences took cognizance of the offences against Accused No,1/Company and its Directors i.e., Accused Nos. 1 to 5, under Section 276-C(21 read with Section 278-8 of the Act and charges were framed against them under Section 276 - C(2) read with Section 278-B(ll of the Act -/ and ali the accused have pleaded not guilty of the charges and ciaimed to be tried. 7. In order to prove the charges leveled against the appeilants, the respondent/complainant has examined PWs. 1 to 3 and got marked Exs.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 of them have denied and reported that they did not choose to examine any witness on their behalf. However, they got marked Exs.Dl to D3 on their behalf. 8. The substance of the evidence of PW1 is that after receiving of returns of income tax filed by accused No. l/company, the respondent/complainant has processed the same under Section 1a3(1) of the Act and issued intimation determining the total taxable income as Rs.5,17,36,320/- and tax liability AS Rs.1,69,13,4701-. T}l'e evidence of PW2/Income Tax ofhcer is to the extent that he has considered the annual report of accused No.1/company for the financial year 2OO7 -O8 under Ex.P3 and trtt account statements of accused No.l/Company with the 8 .t AXIS Bank Limited under Ex.P4 and found that accused No.1/Company did not pay the tax returns in spite of having surplus ald sufficient funds. PW3 is the Income Tax Officer, who has succeeded PW2. His evidence is th:rt he has passed penaltl' order under Ex.P8 imposing penaltv of Rs.34 lakhs and raised demand under Ex.P9 and the same u'as served on the accused. He also deposed that as there was no response from the zrccused. show cause notices under Section 276-C of the Act q,ere issued against all the accused through w'hich accused u'ere informed that the department is initiating criminal proceedings ancl consequently the department has filed the complaint. 9. After full-fledged trial, on considering the entire material on record, the trial Court has found Accused No.l/Company and 42 to A5, the Directors of A1 company, guilty of the offences punishable under Sections 276-C(21 and 278-8 of the Act artd were sentenced as stated supra. Aggrieved by the said judgment and conviction of Special Judge for Economical Offences at Hycterabad, the present appeals are filed originally before the Metropolitan Sessions Judge Court at Hyderabad. t- 9 10. The erstwhiie High Court for the States of Telangana and Andhra Pradesh has issued circular ROC.No.34, Criminal Section/20 17, dated 2B.OB.2Ol7, u,herein it is clarified thar against any orders passed by the Special Judge for Economic Offences, Hyderabad, in the State of Teiangana and Visakhapatnam in the State of Andhra Pradesh, the High Court has the jurisdiction to entertain the appeals, not the Sessions Court. In view of the said circular, these appeals filed by the appellalts have been transferred from Metropolitan Sessions Judge Court, Hyderabad, to the High Court for the State of Telangana. t J. 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.1/company was not having funds to pay the tax on the due date as reflected in Ex.P4-balk statements and that accused Proper[z Private Limited, thereby the respondent/ complainant has not produced any evidence to show that accused No.l has not received any sale proceeds from M/s. Mytas i0 No.l /Company has received sale proceeds lrom M/s. Mytas Property Private Limited b) The trial court has misconstrued the presumption under Section 278-E of the Act and erred in holding that the burden of ploof is on the accused to prove that there ras no u'illful evasion of payment of tax. c) The trial Court erred in holding that the accused failed to prove non-existence of culpable menta-l state in non-payment of ta-xes on the date of filing returns and as on the date ol demand notice and that the trial Court lailed to appreciate that in spite of not har.,ing arry cogent evidence to show that a1l the accused have willfuily evaded the tax, the tria-l Court has concluded that acr:trsed have committed willful evasion in payment of tax. d) The triai court failed to see that all the assets belong to acc:u sed No.1/Company were attached under Section 281-B of the .q.ct and due to paralyzing of financial activities of accused No. 1, tax could not be paid in time. e) The tria.l court failed to consider the admission of PW3 that the amount received by Accused No.l/Company is toyards i - 11 share application money does not attract tax iiability and that the triai Court could not consider that accused No.1 has not received Rs.S crores 17 iakhs from M/s. Mytas Propert,r, Private Limited. l) The Trial Court should not have concluded that accused Nos.2 to 5 are responsible for day to day affairs of accused No. l/company and should have taken into consideration the notices issued under Section 278-8 of the Act proposing the prosecution did not refer accused Nos. 2 to 5 as principal oflicers and thereby accused Nos.2 to 5 should have been acquitted. 12. Heard Sri Vinod Kumar Deshpande, learned Senior counsel for the appellants and Sri B. Narasimha Sharma, learned Standing counsel for the income tax department, considered the entire material on record, relevant provisions of the Act and the authorities cited. 13. Appellant No.l/company has filed an application under Section 39 1 Cr.P.C., along with the appeal for receiving of two documents i.e., (1) Common order passed by the Appellate Tribunal in ITA.No.1OO6 of 2014, dated 22.05.20 15 and (2) 12 consequentiai order, dated 2i.03.2016 passeC by the Assessing Officer, Assistant Commissioner of Income Tax, Central Circle 3(2), Hvderabad, as additional evidence. As per the common ordel of the Tribunal, dated 22.05.2015 (doctrment No.1), the assessment order dated 02.l2.2OIO on which the prosecution is inil-ratcd ri'as directed to be modified. Basing on the orders of the Income Ta-x Appellate TribunaJ, the assessment oflicer has mo