Sri. A.P. Singh vs Chandrappa

N. Ananda, J.—Crl. A. No. 1039/2007 and Crl. A. No. 1040/2007 are filed against the judgment made in Crl. A. No. 1389/2005 and Crl. A. No. 1390/2005 dated 05.02.2007. The respondent in Crl. A. No. 1040/2007 was arrayed as accused No. 1 and respondent in Crl. A. No. 1039/2007 was arrayed as accused No. 2 in C.C. No. 424/2002 and they were tried for contravention of Section 269-UC punishable u/s 276-AB of the Income Tax Act, 1961 (for short "the Act"). The Department of Income Tax represented by Judicial Member (Appropriate Authority) initiated a complaint u/s 200 Cr.P.C. alleging the afore-stated offences against accused Nos. 1 and 2, inter alia contending that accused No. 1 being the owner of immovable property bearing No. 403-A, New No. 39, 6th main, 13th cross, Malleswaram, Bangalore, to circumvent the provisions of Section 269-UC had bifurcated the property into two portions and transferred eastern portion under a registered sale-deed dated 15.03.2001 to accused No. 2 for sale consideration of Rs. 20,50,000/-. and again transferred western portion of the same property under a registered sale deed dated 18.04.2001 to accused No. 2 for sale consideration of Rs. 19,50,000/- The accused No. 1 had purchased the aforesaid property under two registered sale deeds dated 05 02.1998 executed by one Srinivas and Ravishankar under total consideration of Rs. 45,00,000/-. The accused No. 1 in the returns filed by her for the year 2000-2001 had declared cost of acquisition of the entire property as a sum of Rs. 60,13,780/-. Thus, accused Nos. 1 and 2 had entered into afore-stated sale transactions to violate provisions of Section 269-UC. Accused Nos. 1 and 2 had bifurcated the property into two portions and shown the lesser sale consideration in the afore-stated two sale deeds and had committed an offence punishable u/s 276-AB of the Act.

The learned trial Judge on appreciation of evidence, has held the accused guilty of an offence punishable u/s 276-AB of the Act and sentenced them to undergo Rigorous imprisonment for a period of one year and to pay a fine of Rs. 25,000/- each, in default to undergo simple imprisonment for a period of six months. Therefore, accused Nos. 1 and 2 were before the 1st Appellate Court in Crl. A. No. 1389/2005 and Crl. A. No. 1390/2005.

The learned Judge of the 1st Appellate Court, on reconsideration of the matter, acquitted the accused by assigning following reasons:--

(i) At the relevant time, the compliance of Section 269-UC of the Act was necessary if the sale consideration exceeded Rs. 25 lakhs. The sale consideration in the afore-stated sale deeds being less than Rs. 25 lakhs, there was no need for the accused to comply the provisions of Section 269UC of the Act.

(ii) On 09.01.2001, accused No. 1 had filed an application u/s 230-A of the Act seeking permission to transfer eastern portion of the property to accused No. 2 for sale consideration of Rs. 20,50,000/-. As the sale consideration was below Rs. 25 lakhs, no application in Form No. 37 was made before the Appropriate Authority. The Appropriate Authority had issued a certificate u/s 230-A of the Act. Accordingly, accused No. 1 sold the eastern portion of the property to accused No. 2.

The learned judge of the I-appellate court following the judgment reported in 1991 Income Tax Reports Page 585 has held that there is no prohibition under the Act to divide or sub divide the property to transfer the property on different dates.

The learned judge of the I-appellate court has held that evidence adduced by the Department is hardly sufficient to hold that accused No. 1 and 2 had entered into aforestated sale deeds to violate the provisions of Section 269UC of the Act.

I have heard Sri. Jeevan J. Neeralgi, learned counsel for appellant and Sri. B.B. Bajentri, learned counsel for respondents.

The learned counsel for appellant submits that the I-appellate court was not justified in reversing the judgment of the trial court. The documents produced by complainant would clearly establish that accused No. 1 had bifurcated property into Eastern Half and Western Half and sold the same to accused No. 2 under two different sale deeds showing lesser sale consideration to bring the sale consideration within a sum of Rs. 25,00,000/- to violate the provisions of Section 269UC of the Act. It is apparent from the fact that first accused had declared the cost of acquisition of the above property as Rs. 60,13,780/- in the fixed assets shown in the return filed by her on 31.03.2001. The total sale consideration recited in the sale deeds dated 15.03.2001 and 18.04.2001 is Rs. 40,00,000/-. The consideration shown in the sale transaction is far below the cost of acquisition and accused have recited the lesser sale consideration in the sale deeds dated 15.03.2001 and 18.04.2001.

The learned counsel for first respondent would submit that the first accused had acquired the aforestated property under two sale deeds dated 05.02.1998 executed by one Sri. C. Ravishankar and Sri. C. Srinivas for consideration of Rs. 45,00,000/-, therefore, the allegation of division of properties into Eastern Half and Western Half to violate the provisions of Section 269UC of the Act is not tenable. The contention of complainant that accused No. 1 had bifurcated the aforestated property into Eastern Half and Western Half to violate the provisions of Section 269UC of the Act is not tenable. If accused No. 1 and 2 had shown lesser sale consideration in sale deeds dated 15.03.2001 and 18.04.2001, the department should have proceeded against accused No. 1 and 2 for evasion of tax. Therefore, the learned judge of the I-appellate court was justified in acquitting the accused.

After going through the relevant provisions of the Act, I find that the sale transactions took place during the year 2001. During the relevant period,, the seller and purchaser had to comply with the provisions of Section 269UC of the Act, if the sale consideration exceeded Rs. 25,00,000/- in relation to properties situate within the areas notified under Rule 48A of the Income Tax Rules, 1962 (hereinafter referred to as "Rules")

In the complaint, it is alleged that accused No. 1 had purchased the property under two different sale deeds. In the circumstances, the contention of complainant that accused No. 1 had bifurcated the property into Eastern Half and Western Half to violate the provisions of Section 269UC of the Act cannot be accepted.

In the complaint, it is stated that accused No. 1 had shown the cost of acquisition of aforestated property as a sum of Rs. 60,13,780/- in the return filed by accused No. 1 on 31.03.2001. The complainant for the reasons best-known to him has not tendered in evidence the copy of return filed by accused No. 1 on 31.03.2001. The complainant has failed to prove that accused No. 1 had shown the cost of acquisition as a sum of Rs. 60,13,780/- in return filed on 31.03.2001. Even otherwise, if the property had been undervalued either for the purpose of registration or to avoid tax, the complainant should have proceeded against the accused under the relevant provisions of Act.

The eastern portion of property was sold on 15.03.2001 and the western portion of property was sold on 18.04.2001. The complainant has not adduced evidence to prove that aforestated sale deeds were entered into between accused No. 1 and 2 to violate the provisions of Section 269UC of the Act. This being a criminal prosecution, the complainant is bound to prove offences beyond reasonable doubt.

The learned counsel for complainant referring to the provisions of Section 278E of the Act would submit that, in any prosecution for any offence under the Act requires a culpable mental state on the part of the accused, the court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution.

The presumption u/s 278E cannot be disputed. The complainant can invoke presumption after proving basic facts to raise the presumption. Above all, the presumption is rebuttable. The accused can rebut the presumption relying upon evidence adduced by complainant or by adducing defence evidence.

The complainant has failed to prove that the property was grossly undervalued to violate the provisions of Section 269UC of the Act. The complainant has failed to prove that accused No. 1 had bifurcated the properties to violate the provisions of Section 269UC of the Act.

The learned counsel for complainant has relied on the judgment of Madras High Court reported in Soffia Software Ltd., R. Venkata Subramani Vs. Mrs. Kalpagam Bhaskaran Member-I Appropriate Authority Income Tax Department, to contend that, when the owner of single unit, of property splits single unit into two undivided halves and transfer equal undivided shares by two sale deeds, that would be a clear violation of Section 269UC. In the instant case, the first accused had not divided his property to transfer undivided half shares to the second accused under two sale deeds dated 15.03.2001 and 18.04.2001. As already stated, the first accused had purchased the properties under two registered sale deeds and the property has been demarcated in the first sale deed dated 15.03.2001 and the property is succinctly described in second sale deed dated 18.04.2001. Therefore, it is not possible to hold that property transferred by the first accused under first sale deed was undivided half share and the second sale deed was executed to transfer the remaining undivided half share of the property. Therefore, what has been held in the aforestated judgment is not applicable to the instant case.

There are no reasons to interfere with the impugned judgment. The appeals are dismissed.