Gheru Lal Bal Chand and Others vs Income Tax Officer

Adarsh Kumar Goel, J.—The respondent filed a complaint u/s 276C/ 277 of the Income Tax Act, 1961 (for short, "the Act"), read with Section 109 of the Indian Penal Code, alleging that the petitioners-accused, i.e., petitioner No. 1, partnership firm, and petitioners Nos. 2 to 6, partners of the said firm, were guilty of maintaining duplicate set of books of account to evade Income Tax. It is stated in para. 5 of the complaint that Shanker Lal Sharda, petitioner No. 2, submitted a return of Income Tax for the assessment year 1977-78. From the books of account, concealment of income was found. On the basis of information received, the statement of Madhu Sudhan Sharda, petitioner No. 3, was recorded, from which an inference of concealment of income was drawn. Finally, the complaint was filed on March 31, 1984, alleging commission of offence as above. Apart from the firm, petitioner No. 1, petitioners Nos. 2 to 6, who were partners, were also arrayed as accused.

The petitioner filed an application before the trial court for dropping the proceedings on the ground that the order of assessment for the year 1977-78 had been set aside in appeal and since the order of assessment dated September 3, 1983, was made the basis of the complaint, the prosecution could not continue. The trial court dismissed the application holding that the order of assessment was set aside on a technical ground and allegation of concealment of income could be examined in a criminal case on the basis of evidence, which may be led. Aggrieved by the order of the trial court dated October 17, 1985, this petition has been filed.

Counsel for the petitioners, inter alia, contends that once the order of assessment has been set aside, the complaint was not competent ; the petition has been pending in this court and stay has been in operation for the last 15 years and on this ground, proceedings are liable to be quashed ; the complaint with regard to accused Nos. 4 to 6 is liable to be quashed, as no allegation is made against them nor is it shown that they are in charge or responsible for the conduct of the business of the firm within the meaning of Section 278B of the Act, which provides for vicarious liability of persons in charge or responsible to the company for conduct of its business, where an offence has been committed by a company (which expression includes a firm).

Counsel for the Department contested the submissions made on behalf of the petitioners and supported the view expressed by the trial court.

The first contention raised on behalf of the petitioner that since the order of assessment has been set aside, the offence of tax evasion u/s 276C of the Act could not be tried cannot be accepted. The said offence is independent of the assessment proceedings and there is no legal bar to the trial being conducted for such an offence, where the parties could lead all relevant evidence. The plea of delay can also not be accepted, as it is the petitioners themselves, who got the proceedings stayed and have been benefited by the delay in proceedings. With regard to the third contention, on a perusal of the complaint, I do not find any specific averment against petitioners Nos. 4 to 6. The only averment is that they are partners, which is not enough to continue proceedings against them at this stage.

For the above reasons, I allow this petition qua petitioners Nos. 4 to 6, Anil Kumar Sharda, Anandi Devi and Krishna Devi, and quash proceedings against them without prejudice to their being summoned u/s 319 of the Code of Criminal Procedure, if a case is so made out. The petition qua petitioners Nos. 1 to 3 is dismissed.