EDAYANAL CONSTRUCTIONS Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) Revision petitioners were accused in CC No. 179 of 1988 on the file of Addl. Chief Judicial Magistrate (Economic Offences), Ernakulam. They were convicted and sentenced to undergo rigorous imprisonment for three months and a fine of Rs. 7,500 and in default rigorous imprisonment for one month each for each of the offences under Sections 276C.(1)(ii) and 277(ii) of IT Act. Petitioners challenged the conviction and sentence before Sessions Court, Emakulam in Crl. Appeal No. 105 of 1992. The learned Addl. Sessions Judge confirmed the conviction and sentence and dismissed the appeal, which is challenged in the revision.

(2.) First respondent is the ITO, the complainant in the case. First petitioner is a partnership firm and the second petitioner is its managing partner. They submitted a return of income for assessment for the year 1984-85. It was verified and signed by the managing partner, second petitioner. Along with the return, P&L a/c and balance sheet were also filed. The income from the contract business declared in the return was Rs. 1,22,460. The ITO verified the return as well as the books of account. The accounts of the firm had shown credits in the name of C.V. Jacob, P.C. David, T.V. Devassia, P.T. Varghese, N.A. George and Saramma Varghese. The ITO on verification found that Rs. 1,65,000 so shown is not genuine credit and therefore, treated it as income from other sources liable for income-tax. Holding that petitioners concealed the said income which is liable for payment of an income-tax of Rs. 28,800 directed the petitioners to pay the income-tax for the same. Proceedings were also initiated under Section 271(1)(c) of the IT Act. A penalty of Rs. 1,30,000 was levied under Section 271(1)(c) and a complaint was lodged before the learned Magistrate for the offences under Sections 276C(1)(ii) and 277(ii) of the IT Act. Petitioners pleaded not guilty. Prosecution examined eight witnesses and marked Exts. P1 to P17. On the side of the petitioners Exts. Dl to D5 were marked. By that time under Ext. D5 order, the order levying penalty under Section 271(1)(c) of the IT Act was cancelled by CIT(A). The learned Magistrate on the evidence found that petitioners submitted false return and Rs. 1,65,000 shown as credits were not genuine credits and therefore, petitioners committed offences both under Sections 276C(1)(ii) and 277(ii) of IT Act. They were convicted and sentenced accordingly. Petitioners challenged it in Crl. Appeal No. 105 of 1992. Learned Addl. Sessions Judge after analysing and reappraising the evidence confirmed the finding that petitioners concealed the income and though the order levying penalty was set aside by the appellate authority, that is not a bar for prosecuting petitioners for the offences and confirmed the conviction and sentence. Subsequent to the filing of the revision, the Tribunal, Cochin Bench disposed of the appeal filed by the first respondent challenging Ext. D5 order cancelling penalty imposed under Section 271(1)(c). As per order dt. 28th Feb., 2001, the Tribunal accepted the explanation offered by the petitioners. Cancellation of the penalty imposed under Section 271(1)(c) by the appellate authority was upheld.

(3.) Revision petitioners contended that the basis for prosecution is the original order of assessment whereunder it was found that petitioners concealed the income to the extent of Rs. 1,65,000 which was claimed as cash credits and as the order levying penalty under Section 271(1)(c) was cancelled by the appellate authority which was further affirmed by the Tribunal holding that the explanation offered by the petitioners is satisfactory, prosecution will not lie and the Courts below should have acquitted petitioners on that ground. It was contended that petitioners had furnished all evidence regarding the credits both in the course of assessment proceedings and in the course of appellate proceedings and therefore, there was no concealment of income and in any event there was no submission of any false returns or statements and therefore, the conviction is to be set aside.