J.K. Synthetics Ltd. vs Income Tax Officer

G.C. Jain, J.—J.K. Synthetics Ltd. (''the company'') is a public limited company duly incorporated under the Indian Companies Act, 1956. It was engaged in the manufacture and sale of synthetic yarn, cement, etc. During the relevant period, i.e., accounting year ending 31-12-1974 (assessment year 1975-76), Shri Sita Ram Singhania was its president. Shri Rama Shanker Bajpai was its secretary and general manager (taxation). For the said year a notice u/s 210 of the Income- tax Act, 1961 (''the Act'') requiring to pay a sum of Rs. 1,43,47,719 as advance tax was served on the company on 30-5-1974. This notice was issued on the basis of the previous assessments. u/s 212 of the Act it was open to the company, instead of making the payment of advance tax demanded u/s 210, to submit an estimate of current income if this current income was likely to be less than the income on which advance tax had been demanded u/s 210. The company in exercise of this right filed an estimate in the prescribed form signed by Shri Rama Shanker Bajpai on 13-6-1974 estimating its total income as nil. Second estimate, estimating the total income at Rs. 311.31 lakhs on which income advance tax payable came to Rs. 179.78 lakhs was filed under the signatures of said Shri Bajpai on 7-9-1974. The third estimate estimating the total income of the company at Rs. 176.92 lakhs was filed under the signatures of said Shri Bajpai on 13-12-1974, i.e., 17 days before the closing of the year. The company filed a return of income for the said assessment year declaring the total income of Rs. 3,88,63,416 on which tax payable came to Rs. 2,24,43,623. After claiming credit for the tax already paid the company paid a sum of Rs. 1,21,31,784 as tax. The assessment was completed and ultimately as a result of appeal, etc., the total income was finally computed at Rs. 4,17,87,323.

Penalty proceedings u/s 273(1)(a) of the Act were initiated against the company for filing false estimates and a penalty of Rs. 12,90,800 was imposed which was reduced to Rs. 7,74,470 in appeal.

On 15-11-1985 Sh. M.K. Chaufla, ITO Central Circle XVIII, New Delhi filed a complaint for offences under sections 277 and 278 of the Act and sections 177 and 109 of the Indian Penal Code, 1860, against the company, Shri Sita Ram Singhania and Shri Rama Shanker Bajpai before the Additional Chief Metropolitan Magistrate, Delhi. It was averred that the company wilfully, deliberately and mala fide delivered the accounts or statements in the shape of estimates of advance tax in Form No. 29 as prescribed under the income tax Rules, 1962, which were false and which it either knew or believed to be false or did not believe to be true. The company had thus committed an offence punishable u/s 277 of the Act and section 177 of the Indian Penal Code. It was further averred that Shri Sita Ram Singhania, Rama Shanker Bajpai had abetted the company to file a false estimate of its total income and had thus committed offences punishable u/s 278 of the income tax Act and section 109 of the Indian Penal Code.

The learned Additional Chief Metropolitan Magistrate by his order dated 15-11-1985 took cognizance of the offences, found sufficient grounds to proceed against the company for offences u/s 277 and section 177 and against Shri Sita Ram Singhania and Shri Rama Shanker Bajpai u/s 278 of the income tax Act and section 109 of the Indian Penal Code and summoned the three accused to appear on 20-12-1985.

Feeling aggrieved the company and Shri Rama Shanker Bajpai have filed this petition u/s 482 of the Criminal Procedure Code, 1898, for setting aside the order of the Additional Chief Metropolitan Magistrate and quashing the proceedings in the criminal complaint pending before him. Shri Sita Ram Singhania filed a separate petition (No. 1464 of 1985) seeking the same relief.

This order shall dispose of both these petitions. The petitioners have mainly raised the following contentions:

(1) The estimates in question had been filed with the ITO at Kanpur. The Additional Chief Metropolitan Magistrate, Delhi, therefore, had no jurisdiction to try the alleged offences.

(2) The alleged false estimates were neither an account nor statements within the meaning of the expression ''an account or statement'' used in section 277.

(3) The complaint had been filed under the directions of the Board of the Commissioner and not at the instance of the Commissioner as required u/s 279 of the Act, and was, therefore, not maintainable.

(4) The complaint had been filed without holding any preliminary inquiry and without giving any opportunity to the petitioners of being heard and was violative of principle of natural justice.

(5) The company was an artificial juridical person. It could not be attributed with any mens rea which was required to be proved for offence u/s 277 and, therefore, the complaint against the company was not competent.

(6) The maximum sentence for the offences u/s 277 at the relevant time was rigorous imprisonment for two years. This sentence could not be imposed on the company which was a juridical person and the complaint against the company was, therefore, liable to be quashed.

Section 177 reads as under:

Ordinary place of inquiry and trial. --Every offence shall ordinarily be inquired into and tried by a court within whose local jurisdiction it was committed.

The provisions contained in this section govern all trials held under the provisions of the Code, including trials of offences punishable under local or special laws. The word ''ordinarily'' used in the section means except where provided otherwise in the Code itself or other law--See Narumal Vs. State of Bombay, . The Act does not provide for trial of offences under that Act otherwise than as provided in section 177. It is thus clear that the offences subject-matter of the complaint could be tried only by the Court within whose jurisdiction these were committed.

The company is alleged to have delivered the estimates which were false and which it either knew or believed to be false or did not believe to be true and thus committed offences u/s 277 and section 177. The offences, obviously, were committed where the alleged false estimates were delivered. The estimates in question were admittedly delivered to the ITO at Kanpur. The said offences were thus committed by the company at Kanpur and the Court at Kanpur only was competent to try the said offences.

Shri Sita Ram Singhania and Shri Rama Shanker Bajpai are alleged to have abetted the company to deliver the false statements of its total income and, thus, had committed offences u/s 278 of 1961 Act and section 109 of Indian Penal Code. This abetment admittedly took place at Kanpur and, therefore, the offences committed by them also were triable by a competent Court at Kanpur. The Delhi Court in these circumstances had no jurisdiction to try the offences subject-matter of the complaint.

Mr. D.K. Jain, the learned counsel for the complainant, contended that section 277 has to be read along with sections 273 and 275 of the Act. It was pointed out that assessments were completed at Delhi where it was found that estimates delivered by the company were false. The penalty proceedings were taken at Delhi and, therefore, the Delhi Courts had jurisdiction to try the case. It was also contended that no prejudice was likely to be caused to the petitioners if the complaint was tried at Delhi and all the records were at Delhi and, therefore, it would be convenient to try the case at Delhi.

On a careful examination I find no force in these submissions. The act which constitutes offences u/s 277 is the act of delivering accounts or statements which are false and which the person delivering either knew or believed to be false and did not believe to be true. The offence is committed at the place where the false statement is delivered. The offences u/s 277 and section 177 are complete the moment the false statement is delivered. Similarly offences u/s 278 and section 109 are complete where the abetment was made. These acts were committed at Kanpur. These offences were not at all dependent on assessment proceedings or penalty proceedings. The question of prejudice is not relevant because the objection regarding want of jurisdiction has been raised at the earliest stage. The question of convenience also is of no relevance. The convenience cannot override the provisions contained in section 177.

Mr. Jain, the learned counsel for the complainant sought assistance from the provisions contained in section 179. These provisions have no application. The act of delivering false statement is an offence by itself. It is not an offence by reason of assessment proceedings or the penalty proceedings.

I, consequently, hold that the Delhi Courts had no jurisdiction to try the offences, subject-matter of the complaint. The impugned order was illegal and liable to be quashed.

The learned counsel for the complainant contended that in case Delhi Courts had no jurisdiction, the complaint was liable to be transferred to Kanpur Courts. The learned counsel for the petitioners conceded this contention and had no objection if the complaint was transferred to Kanpur.

In the view taken above, it is neither desirable nor proper for me to record findings on other submissions made on behalf of the petitioners. I, consequently, accept these petitions, set aside the impugned order and instead transfer the complaint to the Court of Chief Judicial Magistrate, Kanpur, for deciding the same in accordance with law. The complainant is directed to appear there on 20-1-1987.