INCOME TAX OFFICER Vs. ARIHANT TRUST

JUDGEMENT

(1.) ALL these revisions arise from the common order of the learned Additional Chief Metropolitan Magistrate (E.O. II), Madras, in M.P. No. 670 of 1989 in E.O.C.C. Nos. 305 of 1988 to 331 of 1988 discharging the respondent herein under section 245(1), Code of Criminal Procedure.

(2.) THE complainant, namely, the Income-tax Officer, filed 27 complaints against these respondents under section 276B of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for the failure of the respondents, the trust and its trustees, to deduct income-tax at source from the interest amount paid to the 27 beneficiaries of the trust. THE trustees filed M.P. No. 670 of 1989 to discharge them as the first respondent trust has to be treated as an individual under section 194A of the Act and, therefore, the failure by the trust to deduct the tax will not amount to an offence. THE learned Additional Chief Metropolitan Magistrate (E.O. II), accepting the contention of the respondents/accused that the first respondent has to be treated as an individual, discharged the respondents as no offence was made out under the Act. THErefore, the complainant has come forward with these revisions.

(3.) LEARNED counsel, Mr. Ramasamy, appearing for the appellant, referring to the decision of the Supreme Court in P. Jayappan v. S. K. Perumal, First ITO [1984] 149 ITR 696 would contend that the question in issue before the Commissioner of Income-tax in the assessment proceedings may not be relevant for the penal action taken by the Department and the criminal court has to judge the case independently on the evidence placed before it. In the decision cited above, the observation of the Supreme Court is that the criminal court no doubt has to give due regard to the result of any proceedings under the Income-tax Act having a bearing on the question in issue and in an appropriate case, it may drop the proceedings in the light of an order passed under the Act, but it does not mean that the result of a proceeding under the Act would be binding on the criminal court and the criminal court has to judge the case independently on the evidence placed before it. In another decision cited by learned counsel Associated Industries v. First ITO [1983] 139 ITR 269 (Mad), it is held that a complaint filed by the Income-tax Officer was independent of the assessment order passed by him and there could be parallel proceedings both in civil and criminal courts, that the proceedings before the income-tax authorities should be construed only as civil proceedings and it was for the complainant to establish offences in the criminal court. In this decision also, the criminal proceedings are said to be proceedings independent of the assessment order. There cannot be a second view with regard to the responsibility of the criminal court to judge independently on the evidence placed before it, but at the same time as observed above by the Supreme Court, the criminal court may arrive at its conclusion after giving due weight to the order passed under the Act and it need not always take a different view. LEARNED counsel for the respondents relying upon the decision of the Kerala High Court in Madras Spinners Ltd. v. Dy. CIT [1993] 203 ITR 282 would argue that when the Income-tax Appellate Tribunal as given a finding and the same was in force, the criminal court cannot come to a contrary conclusion a the effect of the decision of the Tribunal would be taken away by any contrary view and the criminal court's view should be in line with the view taken by the authorities under the Income-tax Act. In this case on hand, the short question is whether the first respondent is an individual or not for the purpose of section 194A of the Act. Section 2(31) of the Act, while defining a person, mentions the category of persons including the artificial juridical person as a person under this Act and such persons include an individual, a Hindu undivided family, a company, a firm, an association of persons or a body of individuals, a local authority and every artificial juridical person not falling within the category mentioned above as a person. Therefore, under this definition, "person" has the widest meaning inclusive of not only the human beings, but also of a company, a firm and artificial juridical persons. In the light of this definition, it has to be considered whether the word "individual" referred to in section 194A of the Act will include artificial juridical persons. According to learned counsel for the revision petitioner, the word "individual" could refer only to a human being and for this argument, he draws the support from the decision of the Orissa High Court in Udham Singh v. CIT [1988] 171 ITR 471 which relates to a case of voluntary disclosure by individuals, who are members of a Hindu undivided family. In that case, it is expressed that an individual is a unit of assessment and referable only to a natural person, that is, a human being - a situation different from that in the Indian Income-tax Act, 1922. So, according to this view, individual would refer only to a human being and not to any other person falling within the definition of section 2(31) of the Act. But the Calcutta High Court has taken a different view in CIT v. Shri Krishna Bandar Trust [1993] 201 ITR 989, wherein it is observed that now the word "individual" does not necessarily and invariably always refer to a single natural person and a group of individual may as well come in for treatment as an individual under the tax laws if the context so requires and the trustees in that case were to be assessed in the status of an individual. Jogendra Nath Naskar v. CIT [1969] 74 ITR 33 is another decision of the Supreme Court on this question. In that case, after narrating the definition of person occurring in section 2(31) of the Act of 1961, it was argued that there was no ambiguity with regard to the word "individual" under the Act of 1961, but it had the restricted meaning under section 3 of the old Income-tax Act of 1922. In answer to that argument, the Supreme Court observes (at page 40) :