AI Insights
The case involves M/s. Vamsadhara Agro Pvt Ltd and its directors, who were convicted by the Special Judge for Economic Offences at Hyderabad for willful evasion of tax. The prosecution was initiated based on an assessment order that demanded a tax payment of Rs.2,39,30,050 for a taxable income of Rs.7,34,49,018. The appellants contested the conviction, arguing that the assessment was incorrect and that they had paid all due taxes, including penalties and interest, following a re-assessment that reduced their tax liability. The High Court agreed with the appellants, noting that the initial assessment order was flawed and had been revised, leading to a lower tax demand. The court set aside the conviction and remanded the case for re-evaluation based on the revised assessment.
Appeal Details
Counselvise Citation
[2022] 140 COUNSELVISE.COM (IT) 732776 (HC-TELANGANA)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Others
Pronouncement Date
17-06-2022
Assessment Year
misc
Judgement Text
"IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD FRIDAY ,THE SEVENTEENTH DAY OF JUNE TWO THCUSAND AND TWENTY TWO PRESENT THE HON'BLE DR. JUSTICE D. NAGARJUN CR!MINAL APPEAL (TR) Nos. 3 and 54 of 2018 Crl.A.(TR) NO:3 oF 2018 Crl. Appeal Under Section 374 l2l of Cr'P'C' aggrieved by the Judgment dated 09-01-2014 in C'C'No' 130 of 2011 on the file of the Court of the Special Judge for Economic Offences at Hyderabad' Between 1. M/s. Vamsadhara Agro Pvt Ltd, B-79' Madhura Nagar' lyder?bal. 39- ' n\"J ov it, Ntanaging oiieitor Shri K Gopalakrishnam Raiu S/o Shri K Rama Raju, aged about 51 Years 2 Shri K. Gopalakrishnu, n'1' S/o K..R9m3, Raru Aoed about 51 years Director or M/s Vamsadhara Asro Pvt Ltd ' *'\" .?il*l\"i-i lliiei}s'i6tD 92 & 93 , Flat No aoa, iii Rimana Enclave' Madhura Nagar' S R Nagar Post, HYderabad. 3. Shri DVS Subba Ralu s/o. D. Krishnam RAju, aged about 46 years' Director of M/s Vamsaonara n-g; Pvt Ltd, R/o Flat No '102' Dhanunjaya Nest i\"\"j, r.r\"gu, Yousufgud-a, Hyderabad-4s o\"\"rr#?:l?T Dy. Commissioner of lncome - tax, Central C -i\"y\"ka, Bhavan, Basheerbagh, Hyderabad ircle -9, Room No. 813, Brh Floor, - 500004. Respondent / ComPlainant Counsel for the Appellant . SRI VINOD KUMAR DESHPANDE ' Senior Counsel Counsel for the Respondent SRI B NARASIMHA SHARMA SC for INCOME TAX And Crl.A.(TR) NO: 54 0F 2014 Crl. Appeal Under Section 374 2) of Cr'P C aggrieved by the Judgment dated0g-01-2014inC,C,No'l3oof20llonthefileofthecourtoftheSpecial Judge for Economic Offences at Hyderabad Between: Shri B. Teja Raju S/o B flamalinga Raju, aged about 34 years, Director of M/s. Vamsadhara Agro Pvt Ltd., H.Plot No. '1245 a , Road No. 63, Jubilee Hills, Hyderabad -33 ,... Appellant / Accused No.2 And Dy. Comm ssioner of lnr:ome - tax. Centrat Circle -9, Room No. 813. 8th Floor, Aayakar []havan, Basheerbagh, Hyderabad. - 500004 Respondent / Complaihant Counsel for the Appellant r SRI VINOD KUMAR DESHPANDE , Senior Counsel Counsel for the Respondent : SRI B. NARASIMHA SHARMA SC for INCOME TAX The Court nrade the follovr ing Common Order l I I THE HON'BLE DR. JUSTICE D.NAGARJUN CRIMINAL APPEAL {TRI Nos.3 and 54 of 2O18 COMMON ORDER: Crl.A.(TR).No.3 ol 20 l8 is liled b-v A1, 43 and A4 i'e ' Company and its two Directors respectively, whereas Crl.A.(TR).No.54 of 2018 is filed by A2, who is another Director of A I / company, being aggrieved by the conviction and sentence imposed by the learned Special Judge for Economic Offences at Hyclerabad in C.C.No.130 of 2O11 vide Judgment dated 09.01.20 14, wherein Accused Nos' I to 4 wcre lound guilty of the offences punishable under Section 276-C(2) read with Section 278-B of the Income Tax Act, 196 I (for short, \"the Act\") r:onsequently accused No.1 was sentenced to pay fine of Rs.10,000/- and in default of payment of fine to initiate appropriate proceedings as required under Section 421 of Cr.P.C.,whereasAccusedNos.2to4weresentencedtoundergo rigorous imprisonment for a period of one year each and to pay fine of Rs. lO,00O/- each and in default of payment of line b1' accused Nos.2 to 4, to undergo simple imprisonmcnt Ibr a period of one month each. 2 Since the issues involved in these appeals are one and the sarne, both the appeals are being disposed of by this common judgment. 2. For convenience, the parties herein are referred to as they are arrayed before the trial Court. i.e., Appellant No.1 as Accused No.1/Company arld Appellant Nos.2 to 4 as Accused Nos. 2 to 4 3. The genesis of these cases, which tead the appellants_ accused to prefer these appeals, a-re narrated in brief as under: i) Accused No.l/Company - M/s. Vamshadara Agro Private Limited, which was registered under the Companies Act witl.r 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 4 herein are the Drrectors of Accused No. 1 / Company. ii) Accused No.i/Company has acquired lands to an extent ol Ac.7.50 guntas in Sy.Nos. 19g and l98 (p) under the limits of Bachupally Mandal, Ranga Reddy District during-fbe financial year 2O02-2003 and developed the -.' 3 said lands by incurring some amounts during the linancial years 2002-03 to 2007-08. Accused No.1/Company along with other companies, who have lands contiguous to the lands of Accused No. 1/Company, 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 sold to various buyers by M/s. Mytas Property Private Limited and pass on the sale proceeds to Accuscd No.1/Company. iii) For the assessment year 2OOB-O9, accused No.1/company has filed income tax returns on 30.09.2008 under Ex.P1 by bifurcating the sale proceeds into long term capital gains accrued lrom the sale proceeds ol the lands and short term capital gains accrued from the sale proceeds of the constructed area by showing gross taxable income as Rs.7,34,49,O181 -, out of lvhich an amount of Rs.4,72,95,383/ - was shown as long term capital gain and Rs.2,70,81,629 l- was shown as short term capital gains. I iv) Accused No. 1/Company is 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 l4O_A of the Act. As per Section 143 (1) of the Act, the tax liabitity of Accused No.1 was arrived at Rs.2,l7 ,73,295 / _ 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. l /Company under Ex.p2. Accused No. l/company was 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 17.11.2OO9 under Section 221 (11 of the Act under Ex.P5, 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 complajnant has issued another show-cause notice dated 25.0g.2010 under Ex.p6 under Section 22 1 (1) read with Section 143-4 of the Acr. ..? 5 Department by giving another shorv-cause notice dated 1i.10.2010 (Ex.P7) under Section 221 (l) read with Section 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.47,00,000/- was imposed by way of order dated 25.10.2010 (Ex. PB) under Section 221 read with Section 140-A(3) ol the Act and the said proceedings were served on accused No.1 on 29.10.2O1O. 4. Considering the willful evasion of payment ol tax, the respondent/ complainant has decided to iniliate prosecution and accordingly a notice was issued to accused No.1/company and other Directors under Section 276 C(21 of the Act, as to why prosecution shall not be initiated against them lor willlul evasion of the tax. A11 of them have given reply stating that there was no intention to evade payment ol tax. Another notice was issued to accused No. I /Company and its directors under Exs.PlO and Pl I dated I i.01.20 1 I asking them as to u,hy prosecution shall Finally, one more opportunity was also given by the .l 43-A of the Act. An opportunity of being heard was also 6 not be initiatecl under Section 276-c(2) of the Act. Again replies were filed by accused No. 1/company and its Directors/ accused Nos.2 to 44 under Exs.pl2 and p13 srating that there was no intention of willful evasion of tax. 5. As Accused No. 1/Company and its Directors/accused Nos.2 to 4 have not paid the tax in response to the demand notice issued under Section 1a3 (1) of the Act and also failed to pay the penalty, the respondent/complainant after obtaining sanction order dated 16.03.201 1 lor launching of prosecution filed a complaint before the Special court for Economic offences against accused No. 1 and accused Nos.2 to 4, the other Directors, aileging that they have committed offence punishable under Section 276-C(2) read with Section 2ZB_B of the Act, as the1, have willfully evaded tax even though they were having sufficient resources. 6. The Special Court for Economic Offences took cognizance of the ollences against Accused No. 1/Company and its Directors i.e., Accused Nos. 1 to 4, under Section 226_C(21 read with Section 278-8 of the Act and charges were framed against them under Section 276 - C(2) read with Section 228-B(ll of the Act F-- 7 and all the accused have pleaded not guilty of the charges and claimed to be tried. 7. In order to prove the charges leveled against the appellants, 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 143(l ) of the Act and issued intimation determining the total taxable income as Rs.7 ,34,49,O2O l- and tax liability as Rs.2,39,30,050/-. The evidence of PW2/Income Tax officer is to the extent that he has considered the annual report ol accused NoHfgompany for the Iinancial year 2OO7-O8 under Ex'P3 and bank account statements of accused No. 1 / Company with the 8 AXIS Bank Limited under Ex. p4 and found that accused No.1/Company did not pay the tax returns in spite of having surplus and stLllicient funds. pW3 is the Income Tax Officer, who has succerlded pW2. His evidence is that he has passed penalty order under Ex.pB imposing penalty of Rs.47 iakhs and raised demand under Ex.p9 and the same was served on the accused. He also deposed that as there was no response from the accused, show cause notices under Sectio n 226_C of the Act were issued against all the accused through which accused were informed that the department is initiating criminal proceedings and consequently the department has liled the complaint. 9. After fuil-lledged trial, on considering the entire material on record, the tria.l Court has found Accused No.i/Company and A2 lo A4, the Directors of A1 company, guilty of the offences punishable under Sections 226-C(21 and 27g_B of the Act and were sentenced as stated supra. Aggrieved by the said judgment and conviction ol Special Judge for Economical Offences at Hyderabad, the present appeals are filed originally before the Metropolitan Sessions .Judge Court at Hvderabad. - 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 28.O8.2O17, wherein it is clarilied that against any orders passed by the Special Judge for 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 appeals, not the Sessions Court. In view of the said circular, these appeals filed by the appellants have been transferred lrom Metropolitan Sessions Judge Court, Hyderabad, to the High Court lor the State of Telangana. 11. 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 accu sed 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. t 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 10 b) The trial court has misconstrued the presumption under Section 278-tr of the Act and erred in holding that the burden of proof is on the accused to prove that there was no willful evasion of payment of tax. c) The trial Court erred in holding that the accused failed to prove non-existence of culpable mental state in non-payment of taxes on the date of filing returns and as on the date of demand notice and that the trial Court failed to appreciate that in spite of not having an) cogent evidence to show that a,l1 the accused have wi1lfu11y evaded the tax, the trial Court has concluded that accused have committed wiliful evasion in payment of tax. d) The trial court failed to see that all the assets belong to accused No.1/Oompany were attached under Section 281-B of the Act and due to paralyzing of Iinanciai activities of accused No.1, tax could not be paid in time. e) The trial ccurt failed to consider the admission of pW3 that the amount received by Accused No. l/Company is towards No.1/Companl has received sale proceeds from M/s. Mytas Property Private Limited. l1 share application money does not attract tax liability and that the trial Court could not consider Lhat accused No.1 has not received Rs.7 crores 3O lakhs from M/s. Mytas Property Private Limited. f) The Trial Court should not have concluded that accused Nos.2 to 4 are responsible for day to day affairs of accused No.i/company and should have taken into consideration the notices issued under Section 278-8 of the Act proposing the prosecution did not reler accused Nos.2 to 4 as principal officers and thereby accused Nos.2 to 4 should have been acquitted. 13. Appellants have liled an application under Section 39 I Cr.P.C., along with the appeals for receiving of two documents i.e., (1) Common order passed by the Appellate Tribunal in ITA.No. 1O2O of 2O14, dated 22.O5.2O15 and (2) consequential I 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 materia.l on record, relevant provisions of the Act and the authorities cited. 12 orcler, dated 21.O3.2016 passed by the Assessing Officer, Assistant Commissioner of Income Tax, Central Circle-3(2), Hyderabad, as additional evidence. As per the common order of the Tribunal, dated 22.O5.2015 (document No.1), the assessment orcler dated 20.12.2010 on which the prosecution is initiated was directed to be modified. Basing on the orders of the Income Ta-x Appellate 'lribunal, the assessment officer has modified the earlier orders rlated 20.12.2olo by re-assessing the tax liability, which the appellants were expected to pay for the assessment yeer 2OO7-2008 (document No.2). Considering the above, and on hearing both sides, this Court is of the opinion that these two do<:uments a-re very relevant to consider the appeals on hand, thereby these documents are received. 14. It is submitted vehemently by the learned Senior Counsel for the appellants that during the pendency ol the complaint before the trial Court, the accused have paid entire tax as demanded, including the pena_1ty and interest and that the appellants have challenged the assessment orders dated 20.l2.2OlO under Ex.D2 before the learned CIT(A). On hearing both sides, lear-ned CIT(A) has found that there are no merits in 1.) l.) the contentions raised by the appellants, and dismissed the appeal upholding the orders passed by the Assessing Officer for assessment year 2OOB-09. Aggrieved by the sarne, the appellants have preferred appeal before the Income Tax Appellate Tribunal (in short, \"the Tribunal\"), and on hearing both sides, learned Tribunal has partiy allowed the appeal vide orders dated 22.O5.2015 in ITA.No'943lHydl2Ola and batch linding that the Assessing Officer has committed error in calculating the tax to be paid by the appellants and directed the Assessing Ollicer to re-assess the tax by computing the income of the appellants from the transfer of lands held by accused No'1/company as capital assets by way of development agreement and subsequent to sale of flats and bungalows received as consideration for such transferred amounts to stock in trade on conversion ' These orders are passed after passing conviction vide judgment dated Og.Ol.2O14 in C.C.No'130 of 2011 by the learned Special Judge' It is also submitted by the learned Senior counsel that the Assessing officer has re-assessed the tax as per the directions of the Tribunal and passed consequential order, dated 21'03'2016' wherein the tax liability was substantially reduced and found that the tax, which was already paid to the tune of 14 Rs.2,17,73,295/- was in excess of the revised tax thereby, the excess tax paid Rs, 1,37, 16,262/_ and interest of Rs.46,98,637/_ the total of which was Rs. l,g4,15.,3gg/_, was ordered to be refunded and the same was also adjusted against the demand for the accounting year 2009_ 10 vide RO.No.3O352 1 dated 28.O3.2016. On considering the submissions of the learned Senior counsel it is clear that the appellants have not only paid the tax demanded along with interest and penalty, but also on account of re-assessment of tax, the tax already paid was in excess of tax liability, and that the same was adjusted for future tax liability and hence, sought for allowing of the appeals. 15. Learned standing counsel representing the Income Tax Department staterd that as on the due date, the accused have not paid the tax having sufficient funds and committed willful evasion of payment of tax. It is also submitted that Accused No.1/company has liled annual returns (Ex.p3), through its chartered Accountant for the financial year 2ooz -og relevant for the assessment year 2OOg-09, according to which Accused No. 1 made profit on sale of land to a tune of Rs.7,35, 19,24O/_ and the 15 bank statements show that Accused No. 1 /Company has received part of sale consideration in respect of \"Mytas Hill County\" from time to time, but did not choose to pay the advance tax. It is further submitted that the balance sheet of Accused No.l/Company also shou,s Rs.9,33,53,420/- under the head reserves and surplus, so also Rs.11,38,13,095/ under the head current assets by way of loans and advances. It is further submitted that accused No.1/Company having enough liquid cash during the relevant accounting year, willfully evaded in payment of tax, thereby the accused have committed the oflence punishable under Section 276-C(21 read with Section 278-8 of the Act and hence conviction recorded by the trial Court is proper. 16. Now, the points for determination in these appeals are: i ) Whether the conviction recorded based on the assessment order dated 20. 12.2010 can be sustained, since the said assessment order dated 20.12.2O1O was subsequently revised? 2) Whether the accused have committed willful evasion of tax? 16 3) To v,hat relieP Point No.1: 17. The cause of action for the respondent department/cornplainant to file the complaint against the appellants is the assessment order dated 20.12.2010, according to which the appellants were asked to pay tax of Rs.2,39,30,050/- for the taxable income of Rs.7,34,49,01g/_ and accordingly an intimation was sent by the Assessing officer to the appellants under Section 143 (1) of the Act. Admittedly as on the date ol initiating the prosecution against the appellants, demanded tax of Rs.2,39,30,050/- was not paid by the appellants. It is also an admitted fact that after initiating the prosecution, the appellants have paid the entire tax demanded alorrg with penalty, interest etc. Therefore, as on the date of pronouncement of the judgment by the trial Court, there was no tax liability to be paid by the appellants. 18. It is to be noted that the Income Tax Appellant Tribunal having considered the appeals of the appellants found that the assessment order, dated 20.12.2O1O directing the appellants to pay Rs.Q*.3p,30.050/- was incorrect and the Assessment Officer 1.7 was directed to assess the income tax afresh in terms of the directions given by the Tribunal. Accordingly, the Assessment officer has re-assessed the income tax and passed modified orders, dated 21.03.2016 determining the tax liability, which is far less than what was assessed at the lirst p1ace. The basis for respondent/complainant to initiate prosecution against the appellants is the assessment order, dated 20.12.2010, on the ground that the appellants have committed delault in payment of the tax as per the said assessment order. When assessment order dated 20.12.2OlO itself is re-assessed as per the directions of the Tribunal which held that the assessment of tax dated 20.12.2O1O is incorrect and the tax to be paid u'as substantially reduced, it cannot be atleged that the appellants have committed default in payment of tax and willfuliy evaded. When the assessment order dated 20 .l2.2OlO itself was modified holding that the Assessment Officer has incorrectly assessed the tax, whatever the consequential proceedings that have been initiated, including the initiation of prosecution of the appellants by the respondent/complainant, conviction recorded by the trial Court, cannot sustain. Basing on the lresh assessment order, dated 21.03.2016, it is to be examined afresh that whether the - 18 appellants have commrtted any u,i11ful evasion of tax, as defined undr-'r Section')'76-C of the Act. 19. Therefore, on considering the above discussion, it is clear that the finding of the trial Court that the appellants were guilty of the oflences trnder Section 276-C(2) read with Section 278-8 of the Act is erroneous as the same is based on incorrect assessment order, dated 20.12.2O1O and hence, shall not sustain, and required to be set aside. Considering the same, point No. 1 is decided in favour of the appellants / accused. POIIIT No.2:- 20. The appellants have also raised other issues i.e., they have not committed any willful evasion in payment of tax since, as on the
Other Referred Cases
V. Srinivas Reddy Vs. State of Andhra Pradesh
Laws Referred To
Income Tax Act, 1961, Criminal Procedure Code
1:1 Consultation on Tax Litigation
₹1
Tax Holiday Secrets for Startups
₹0
1:1 Consultation on Business Development
₹1
HUF Deed
Mehul₹500
Startup Dissolution Resolution
₹0
Finance Bill, 2026: Key GST Reforms that will Reshape Compliance and Cash Flows
Team Counselvise - February 03, 2026
Why Lacoste Won a 20-Year Trademark Battle Against Crocodile ?
Team Counselvise - March 10, 2026
Minimum Alternate Tax (MAT): Comprehensive Overview and Key Changes under Finance Bill, 2026
Team Counselvise - February 06, 2026