S M BADSHA Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) A complaint was filed by the ITO, Special Circle, Ernakulam, against M/s Metalex Agencies and its partners and also some of its officers. The said agency is a firm having eleven partners. The complaint was taken on the file of the judicial Magistrate of the Ist Class, Ernakulam, and was later transferred to the Court of the Addl. Chief Judicial Magistrate (Economic Offences), Ernakulam. There are seventeen accused of which the firm is the first accused. Offences alleged against the accused are those under Ss. 277 and 278 of the IT Act, 1961(for short "the Act"), besides offences under Ss. 120 B, 193, 196, 420 and 109 of the IPC, 1860. Almost a decade after the institution of the complaint, one of the accused (the 13th accused) filed a petition in the trial Court praying for discharge of the accused on various grounds. The learned Magistrate dismissed the petition by order dt. 12th March, 1985, against which Crl. R. P. No. 201 of 1985 has been filed. Not being satisfied with the said revision petition, the 13th accused filed Crl. M. C. No. 717 of 1985 under s. 482 of the CrPC, 1898, for quashing the complaint and all subsequent proceedings thereunder.

(2.) THE allegations in the complaint are briefly these : On 26th June, 1971, returns were filed by the partners of the firm showing the income for the asst. year 1971 72. The total income shown in the returns is a little above Rs. 4 1/2 lakhs. The ITO rejected the returns holding that the partners concealed substantial portion of their income and submitted false returns. He made his best judgment assessment by adding an amount which is a little over Rs. 20 lakhs to the returned income. But the AAC, on appeal filed by the assessee, slashed down the amount and modified the assessment by adding Rs. 3 lakhs to income returned. When the above order of the AAC was challenged in second appeal by both the Revenue and the assessee, the Tribunal enhanced the addition to income from Rs. 3 lakhs to Rs. 4 1/2 lakhs. The IAC, under S. 271(1) of the Act, imposed a penalty of Rs. 5 lakhs on the firm, but that was subsequently quashed by the Tribunal on the ground that the IAC has no jurisdiction to impose penalty. However, regarding the question of jurisdiction of the IAC, a reference has been made at the instance of the Revenue under S. 256 (1) of the Act.

(3.) BEFORE I discuss the points urged during the time of arguments, some more facts are to be stated. Sec. 279 of the Act provides that no person shall be proceeded against for certain offences (including offence under S. 277) under the Act "except at the instance of the Commissioner". So the complainant has stated in para 13 of the complaint that the CIT, Kerala II, has authorised the complainant to file the complaint. A copy of the authorisation issued by the Commissioner has been produced along with the complaint. When the order of the AAC was challenged, both by the Revenue as well as by the assessee, the Judicial Member of the Tribunal has observed that the partners of firm are innocent of the concealment and that the concealment was actually done by the officers who carried on the business. Accused 2 to 12 in the complaint are shown as partners of the firm. Accused 13 to 17 are the officers of the firm who actually did the business according to the other petitioners.