J K SYNTHETICS LTS Vs. N C SHARMA

JUDGEMENT

(1.) This petition has been filed under Section 482 of the Code of Criminal Procedure (Code for short) for quashing proceedings started on a complaint dated 26.3.1992 filed by respondent Sh.N.C.Sharma, Assistant Commissioner of Income Tax against the petitioners for having committed offences under Section 276 C(l), 277 read with Section 278 B of Income tax Act (Act for short) in relation to the Income tax return filed on 30.7.1985 by the first petitioner for assessment year 1985-86.

(2.) For appreciating the contentions raised in this petition, it is necessary first to advert to the allegations made in the complaint against the petitioners by the respondent. A copy of the complaint is Annexure A with this petition. The substance of the allegations is that petitioner No.1 is a limited Company registered under the Companies Act,1956 while petitioners 2 and 3 were the Managing Director and Vice Chairman-cum-Managing Director of petitioner No.l during the assessment year 1985-86. The company filed a return of income for the aforesaid assessment year on 30.7.85, declaring a loss of Rs.91,55,88,488.00 along with various statements, accounts and other documents. They claimed depreciation allowance to the tune of Rs.5,07,59,917.00 in respect of Padam Polyester Division as they claimed to have installed a new plant and machinery. Trial production was alleged to have been started in March,1985. It was further claimed that part of the plant and machinery was installed in the Nylon division of this unit, where the production had started in various divisions between 28.6.84 and 13.9.84 with uninterrupted power supply system. Other part of the plant and machinery was claimed to have been installed in the same division in which production had started on 30.3.85. Various supporting ledger, project register etc. were also produced. Thus the company also claimed investment allowance to the tune of Rs.3,72,697.00 . Plant was stated to have been inaugurated on 21st March, 1986. But the enquiries conducted by the Assessing Officer revealed that the plant and machinery were not installed as claimed and that it did not start production during the period relevant to the assessment year 1985-86. Enquiries from Income tax department, Jaipur, Inspector of Factories and Boilers and Electricity Board of Rajasthan also indicated that no such production was commenced. Various officers of the accused company were also examined. All these factors indicated that the claim of the Company was false and bogus. Other circumstances were also mentioned in this complaint which further supported the fact that no such production was commenced and the claim was incorrect. During the assessment proceedings the Company also filed some invoices of a foreign company showing services rendered by them during the period from November, 1986 to April, 1987. A totality of the circumstances indicated that no plant and machinery belonging to Padam Polyester Division were installed in the Nylon division. As such no depreciation could be allowed. The Company could not even produce satisfactory evidence to show if any employee was working in the Unit during the relevant period. Thus it was foufound that the Company was not entitled to claim depreciation or installation allowance. The assessment was completed with passing of the assessment order on 28.3.88. It was held therein that the Company had claimed bogus depreciation amount of Rs.5,7,59,917.00 aninstallation charges of plant and machinery amounting to Rs.3,84,72,697.00 . The total income of the Company was also assessed at Rs.3,06,ll,9,460/ An appeal was filed by the Company and the findings recorded above were confirmed by Commissioner of Income tax (Appeals). Thus it was alleged in the complaint that petitioners made wilful attempt to evade tax, penalty or interest chargeable or recoverable under the Act, had in their possession or control books of accounts and other documents containing false entries or statements in books of accounts and other documents, willfully omitted or caused to be omitted relevant entries or statement in such books of accounts or documents and caused such circumstances to exist which bad the effect of enabling these persons evade tax. It was also established that the petitioners made a statement in verification under the Act and delivered accounts or statements, which were false, which they either knew or believed to be false or did not believe to be true and thus had committed offences under Sections 276(1), 277 read with Section 278B of the Act.

(3.) I have heard arguments advanced by learned counsel for the parties. The first contention raised on behalf of the petitioners is that even if all the allegations and contentions set out in the complaint are taken as correct and proved, even then no case of evasion or attempted evasion of tax by the petitioner company was made out. In support of this proposition my attention has been drawn to three cases, namely, Madhu Limaye Vs. State of Maharashtra AIR 1978 SC 47, State of U.P. through C.B.I. S.P.E., Lucknow and another Vs. R.K.Srivastava and others AIR 1989 SC 2222 and Madhavrao Jiwajirao Scindia and others Vs. Sambhajirao Chandrojirao Angre and others (1988) 1 SCC 692. In the First case the bare facts were that in a press conference at New Delhi on 27.9.74 the appellant was said to have made certain statements and handed over a "press hand-out" containing allegedly some defamatory statements concerning Sh. A.R. Antulay, the then Law Minister of the Government of Maharashtra. Those statements were published in various newspapers. The State Government decided to prosecute the appellant for an offence under Section 500 of the Indian Penal Code as the Law Minister was defamed in-respect of his conduct in the discharge of his public functions. Necessary sanction under Section 199(4) of the 1973 Code was purported to have been accorded by the State Government. The complaint was filed by the Public Prosecutor in the court of Sessions Judge, Greater Bombay. Process was issued against the appellant. Chief Secretary of the State was examined as a witness to prove the sanction order. Then the appellant filed an application for dismissal of the complaint on the ground that the Court bad no -jurisdiction to entertain the complaint because the allegations were made against Sh. Antulay in relation to what he had done in his personal capacity and not in the capacity of discharging his functions as a Minister. The Sessions Judge rejected various contentions raised on behalf of the appellant. That order was challenged in revision before the High Court. High Court did not go into the merits and dismissed the revision application on the ground that it was not maintainable in view of Section 397(2) of the Code. After noticing Amar Nath's case reported in AIR 1977 SC 2185 wherein it was held that a revision to the High Court against the order of the subordinate Judge was expressly barred under Section 397(2) of the 1973 Code, the inherent power under Section 482 would not be available to defeat the bar contained in Section 397(2), the Supreme Court held that generally the following principles have been followed almost invariably, barring a few exceptions, in relation to the exercise of the inherent power of the High Court.