AI Structured Summary
Not yet generated for this judgment
Judgment
K. Ramanna, J.—All these criminal revision petitions are filed by the Deputy Commissioner of Income Tax, Central Circle, Bangalore, against the orders dated 20.10.2001 passed by the Special Court for Economic Offences, Banglaore, in C.C. Nos. 71, 73, 205, 208, 206 and 207 of 1999, respectively, whereby the trial Court allowed the applications filed by the Respondents-accused u/s 245(2) Code of Criminal Procedure and discharged them mainly on the ground that the notice issued by the (sic).
The case of the prosecution is that the search of the Respondents'' premises was conducted in the month of February, 1997 and seized the cash, certain books of accounts and then issued notice u/s 158BC of the Act of the respective Respondents calling upon them to furnish the return of the income for the period 1986-87 to 1996-97 within 45 days from the date of receipt of that notice. But the Respondents failed to submit the reports even after lapse of 45 days therefore the revision Petitioner filed a complaint u/s 275CCC of the Act, after obtaining necessary sanction from the competent authority.
The grounds urged by the revision Petitioner are that the trial Court erred in discharging the accused on the ground that the notice u/s 158BC of the Act was not served on them. In fact the notice was served on their chartered accountants who represents before the income tax authorities. Even though the service of notice was valid the trial Court has not considered about the service of notice on their agent/chartered accountant. The trial Court has not considered about the admission made by the Respondents in their letters of request to grant some more time to submit returns as their chartered accountants are busy in connection with time barring assessments which are to be completed during March, 1997 and the records for the relevant years have been seized during the course of the search, being numerous, out of which most of the documents are yet to be scrutinized by them. In spite of that the trial Court has ignored the point of admission made by the Respondents about the service of notice on their chartered accountant and discharged them which amounts to illegality committed by the trial Court.
Heard the learned Counsel for the both parties and perused the records.
It is an undisputed fact that the revision Petitioner conducted raids during the month of February, 1997 in respect of the business premises of the Respondents in all these cases. At that time books of accounts, cash and other records were seized from their premises. After seizure, notice u/s 158BC of the Act was issued to them. On behalf of Respondents said notices were served on the respective chartered accountants of the firm. As per Section 158BC the revision Petitioner has granted 45 days time to the Respondents to submit their income tax returns for the years 1986-87 to 1996-97. In spite of that Respondents in all these cases have not submitted their returns. Therefore, the revision Petitioner herein has filed a complaint u/s 276CCC of the Act before the Special Court for Economic Offices, Bangalore. In this behalf the learned Counsel for the revision Petitioner vehemently argued that though notice was served on the Respondents through their authorised chartered accountants and subsequently the Respondents sought time to submit their returns which amounts to valid service and they had knowledge about the service of the notice on their respective chartered accountants therefore they sought further time to file income tax returns. But the trial Court without considering that aspect of the matter straightaway allowed the applications filed by the Respondents u/s 245(2) Code of Criminal Procedure and discharged them, which is highly illegal and incorrect. The trial Court has recorded perverse finding which calls for interference. The learned Counsel for the revision Petitioner drawn my attention to the letter dated 22.1.1998 addressed by the Respondents with a prayer to grant some more time to submit income tax returns. Once a party acknowledges about the receipt of the notice served either on him/it or his/its agent it amount to valid service. If a party ratifies the action of the agent then he is estopped from contending that the revision Petitioner has not complied with the mandatory provisions of Section 158BC of the Act. In support of these contentions the learned Counsel for the Petitioner relied on a decision reported in the case of Maharana Mills (Private) Limited v. The Income Tax Officer, Porbander, AIR 1959 SC 881 wherein the Apex Court has held that:
The object of the provision as to notice in the second Sub-section of Section 35 is that no order should be passed to the detriment of an assessee without affording him an opportunity but it cannot be said that the rule is so rigid that if, as a matter of fact, the assessee knows of the proceedings and the matter has been discussed with him then, an adverse order would be invalid merely because no notice u/s 63 was given.
Per contra the learned Counsel for the Respondents submitted that criminal proceedings have been initiated against Respondents in all these cases and Section 158BC is mandatory on the part of the revision Petitioner to serve notice on the Respondents, since the revision Petitioner has not complied with the mandatory provisions of Section 158BC therefore the trial Court has rightly allowed the applications filed by them u/s 245(2) Code of Criminal Procedure Therefore, the order of discharge of the Respondents passed by the trial Court is in accordance with law and there is no perverse or illegal finding recorded by it to interfere with its order. In this regard he has drawn my attention to Order 5, Rule 12 CPC about the mode of service of summons or notice. It is further contended that the chartered accountants on whom the notice said to have been served by the revision Petitioner is not their authorised agents as on the date of alleged service of notice, therefore the revision Petitioner utterly failed to comply with the mandatory provisions of the Act. Hence, initiation of criminal proceedings u/s 276CCC of the Act is illegal and incorrect.
In support of his contention the learned Counsel for Respondents relied on a decision reported in the case of Income Tax Officer v. Mukesh Kumar, 2002 (123) Taxman 55 (Punjab and Haryana) wherein the High Court of Punjab and Haryana held that,
...failure to furnish return of income-Assessment year 1976-77 - Whether penal consequences of punishment u/s 276CC can ensue only when it is proved as a fact that assessee has willfully failed to furnish return in due time after service of notice u/s 148 and, thus, service of notice is a condition precedent before proceeding to punish assessee under aforesaid provision - Held, yes - whether notice accepted by Chartered accountant working for assessee or service of notice on accountant of assessee could be deemed to be service of notice on assessee - held, no - Whether, therefore, trial Court was justified in rejecting criminal complaint filed u/s 276CC - Held, yes.
In the aforesaid case notice was served on the agent of the assessee and subsequently submitted a return showing a net loss of Rs. 20,930/- and then a criminal proceeding has been initiated. Whereas, in the instant case though the notice was served on the respective chartered accountants subsequently Respondents acknowledged the receipt of the notice by letter dated 22.1.1998, the their respective letters Respondents sought further time to submit the returns, that means that they had the knowledge about the service of notices on their chartered accountants. Therefore the ratio laid down in the aforesaid decision will not be applicable to the present cases.
Further, the learned Counsel for the Respondents relied on another decision reported in the case of Commissioner of Income Tax Andhra Pradesh Vs. K. Adinarayan Murty, wherein the Supreme Court held that:
...Under the scheme of the Income Tax Act the "individual" and the "Hindu undivided family" are treated as separate units of assessment and if a notice u/s 34 of the Act is wrongly issued to the assessee in the status of an "individual" and not in the correct status of "Hindu undivided family" the notice is illegal and all proceedings taken under that notice are ultra vires and without jurisdiction.
In the aforesaid case the notice was issued by the income tax authories to kartha of the Hindu undivided family but not in individual names of the members of the undivided family and the proceedings initiated against the members of the Hindu undivided family was held to be ultra vires and without jurisdiction. Therefore, the ratio laid down in the aforesaid decision relied upon by the learned Counsel for the Respondents is not applicable to the present cases.
Further the learned Counsel for the Respondent relied on another decision reported in the case of Commissioner of Income Tax Vs. Girdharilal, wherein Rajasthan High Court held that the notice on agent was not proper service on the assessee so as to hold that the assessee had an opportunity of being heard for the purpose of passing an order u/s 263 of the Act. Further it was held, "it is well settled that the power of attorney given to an agent should be construed strictly and from that power of attorney only such authority which has been conferred expressly or by implication, should be taken into consideration.
In the aforesaid case the Respondents herein have not executed any power of attorney on behalf of them to their respective chartered accountants to receive notice issued by the income tax authorities or on behalf of Respondents. Since the chartered accountants who represented the Respondents in the present cases, though not authorised, received notice issued to the Respondents by the authorities, subsequently ratified the act of the chartered accountants about the receipt of the notice then the Respondents are estopped from contending that they have not received mandatory notice issued u/s 158BC of the Act. Therefore, the ratio laid down in the aforesaid decision also is not applicable to the facts of the present cases.
Further, learned Counsel for the Respondents also relied on a decision reported in the case of P. DOSHI Vs. COMMISSIONER OF Income Tax, GUJARAT, wherein the Division Bench of Gujarath High Court held that:
As a jurisdictional provision which was mandatory and enacted in public interest could never be waived and the want of jurisdiction was discovered by the Appellate Assistant Commissioner, there was no question of waiver by the assessee. No question of finality of the remand order of the Tribunal could arise because the mandatory conditions for founding jurisdiction for initiating reassessment proceedings had not been fulfilled. The order of reassessment was, therefore, not valid.
But in the instant case the mandatory notices were duly served by the revision Petitioner on their chartered accountants (i.e., agents) and which has been admitted by the Respondents, therefore, the provisions of Order 5, Rule 12 of CPC will not at all come to the aid of the Respondents to hold that service of notice on chartered accountants is not a valid service. Therefore it could be said that the trial Courts lost sight of the provisions of the Order V, Rule 12 of CPC and the letter or request made by the Respondent in all these cases to grant time to extend the time to submit the return is perverse and incorrect which calls for interference u/s 379 of Code of Criminal Procedure
In view of the above, the order under revision passed by the trial Court is liable to be set aside. Accordingly, the revision petitions are allowed and the orders under challenge passed by the trial Court are set aside. The matter is remitted back to the trial Court for fresh disposal in accordance with law.