SHAMRAO BHAGWANTRAO DESHMUKH Vs. DOMINION OF INDIA

JUDGEMENT

(1.) This appeal arises from the judgment and decree dated 28-2-1945, of the High Court of Nagpur upholding the dismissal of the suit by the First Addl. District Judge, Nagpur, on 30-6-1938. The certificate for Leave to Appeal to this Court was granted on 23-2-1951. The circumstances giving rise to the Appeal are shortly these:

(2.) P.B. Deshmukh, deceased (now represented on record by his legal representatives) and S.B. Deshmukh, both cousins, formed a joint Hindu family of which the former was the manager. For facility of the management of business S.B. Deshmukh managed moneylending shops at Kelod and Rajegaon, while P.B. Deshmukh managed the shop at Badegaon. On 1-4-1930, the Income-tax Officer, Nagpur, issued a notice under S. 22 sub-s (2), Income-tax Act, against the three shops of the firm calling for the return of the total income of the joint family during 1928-29. On 3-7-1930, M. K. Hirde, who held a general power of attorney from the two cousins, filed a return which was signed and verified by him as agent. Pursuant to a notice issued under S. 23(2) by the Income-tax Officer, the account books of the firm for 1924-19 were produced and P. B. Deshmukh was examined on oath by the Income-tax Officer on 23-11-1930, in respect of certain omissions in the return. P. B. Deshmukh explained that the omission of an item of Rs. 7,231 was due to the fact that it was advanced from his own personal funds and had nothing to do with the joint family, while the omissions of other items of repayment amounting to Rs. 30,477 by the debtors were due to the mistake of his agent, one Raghunath Choudhary, who had been dismissed since 1929. Not being satisfied with his explanation, the Income-tax Officer recommended P. B. Deshmukh's prosecution and the Assistant Commissioner of Income-tax issued notice to him to show cause why his prosecution in respect of these omissions should not be sanctioned. The Assistant Commissioner examined P. B. Deshmukh on 13-12-1930, when he admitted that he had concealed income of over Rs. 30,000. He was told that he would be prosecuted under S. 52 of the Act. As a result of the discussion which followed. P. B. Deshmukh proposed that the offence should be compounded under S. 53 upon payment by him of Rs. 30,000 to the taxing authorities and this was agreed to by the Assistant Commissioner. The payment was made in two instalments and the matter was closed.

(3.) In January 1934, the two cousins filed a suit for recovery of Rs. 30,000 and Rs. 5,331-1-3 as interest, against the Secretary of State for India in Council. The ground of the claim was that P. B. Deshmukh statement of 13-12-1930, was incorrectly recorded and that the sum of Rs. 30,000 was extorted from him under a threat of legal proceedings which were without jurisdiction and that he had committed no offence. The plea that the omission was due to the mistake of the agent was reiterated. The suit was resisted and it was pleaded in defence that both the statements of P. B. Deshmukh dated November 23 and December 13, 1930, were correctly recorded, that the proposal for compounding the offence on payment of Rs. 30,000 emanated from P. B. Deshmukh himself after he had consulted his counsel and that there was no coercion exercised on him in compounding the offence. It was stated that the agent was fully competent, by virtue of his general power of attorney, to act on behalf of P. B. Deshmukh the manager and that he was fully aware of the omissions from the returns. The trial Court framed issues embodying the controversy between the parties, and after a careful consideration of the entire evidence, held that the statements made by P. B. Deshmukh before the Income-tax authority represented a correct record of facts, that he voluntarily offered to pay Rs. 30,000 by owning his mistakes and that he was not compelled to agree to the composition of the offence upon payment of Rs. 30,000. The trial Court held that the claim was the outcome of legal advice rather than one of an aggrieved person compelled to pay under threat of legal prosecution with a show of domination under power of authority. The trial Court also held that the agent who held the general power of attorney from P. B. Deshmukh was competent to sign and verify the income-tax returns and that the latter was liable to prosecution under S. 107 read with S. 177, I. P. C. Upon these findings the claim was dismissed.