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Indian Builders Vs. Commissioner of Income-tax and ors. - Court Judgment

LegalCrystal Citation
Subject;Direct Taxation
CourtPatna High Court
Decided On
Case NumberC.W.J. Case No. 263 of 1993(R)
Judge
ActsIncome Tax Act, 1961 - Sections 143(1), 143(2), 276C and 277; Constitution of India - Article 226 and 227
AppellantIndian Builders
RespondentCommissioner of Income-tax and ors.
Appellant AdvocateP.S. Dayal, Adv.
Respondent AdvocateK.K. Jhunjhunwala, Adv.
Prior history
R.N. Sahay, J.
1. The petitioner is a registered firm and is an assessee under the Income-tax Act. The petitioner submitted returns for the assessment year 1990-91 declaring a total income of Rs. 95,760. On January 17, 1992, they filed a revised return showing an income of Rs. 3,50,660.
2. The Deputy Commissioner of Income-tax, vide annexure 1, made assessment of the income taking into consideration both the returns and fixed the net profit at 10 per cent. of the gross receipts amounting
Excerpt:
.....made in complaint, no case was made out--those were matters to be considered during the trial-- prosecution, therefore, cannot be quashed--(1982) vol. 133 i.t.r. 909 distinguished-- - - 1,43,05,513. the tribunal observed :the above facts clearly go to show that various returns filed by the assessee and the discrepancy therein was not properly explained. we agree with the submission that books of account were not reliable and have rightly been rejected,'9. the tribunal held that the assessment of net profit was also in order......year, depreciation had been allowed. the tribunal noticed that the assessee in the first instance filed a return showing a loss of rs. 6,18,581 but in the revised return, an income of rs. 3,50,660 was shown. the gross receipt during the accounting year was rs. 1,43,05,513. the tribunal observed : 'the above facts clearly go to show that various returns filed by the assessee and the discrepancy therein was not properly explained. we agree with the submission that books of account were not reliable and have rightly been rejected,' 9. the tribunal held that the assessment of net profit was also in order. the tribunal, however, held that disallowance of depreciation was not in order because allowance of depreciation under section 32 of the income-tax act is mandatory and was not a matter.....
Judgment:

R.N. Sahay, J.

1. The petitioner is a registered firm and is an assessee under the Income-tax Act. The petitioner submitted returns for the assessment year 1990-91 declaring a total income of Rs. 95,760. On January 17, 1992, they filed a revised return showing an income of Rs. 3,50,660.

2. The Deputy Commissioner of Income-tax, vide annexure 1, made assessment of the income taking into consideration both the returns and fixed the net profit at 10 per cent. of the gross receipts amounting to Rs. 14,30,550 without giving the necessary depreciation rebate which was being given every year. The petitioner filed an appeal before the Commissioner of Income-tax (Appeals) challenging the aforesaid order. The appeal was dismissed on June 29, 1992. The petitioner then preferred an appeal before the Income-tax Appellate Tribunal and that appeal was pending before the Tribunal. A complaint was filed against the petitioner for prosecution for having committed offences under Sections 276C and 277 of the Income-tax Act. The complaint was filed in the Court of Special Judicial Magistrate (Economic Offences), Jamshedpur. The gravamen of the accusation in the complaint petition is as follows :

'That the accused firm is a registered firm deriving income from contract work with Subarnrekha Multipurpose Project, Jamshedpur, and has filed its original return on November 30, 1990, disclosing total income at Rs. 95,760. Subsequently, a revised return of income was filed on January 17, 1992, disclosing a total income at Rs. 3,50,660. The accused firm showed loss of Rs. 6,18,581 in its book and debited Rs. 90.17 lakhs as wages and Rs. 52 lakhs as expenses payable in its books of account. But neither evidences were produced nor satisfactory explanation were offered either in respect of negative income or in respect of wages paid or expenses incurred. On being compelled by the facts and circumstances of the case, the Assessing Officer took net profit at 10 per cent. of the gross receipts and completed the assessment under Section 143(3)/182(1) determining the total income at Rs. 14,30,550. The Commissioner of Income-tax (Appeals), vide his order dated June 29, 1992, in Income-tax Appeal No. 257/ Jar/91-92, has confirmed the income determined by the assessing officer. Penalty proceedings under Section 271(1)(c) have also been initiated during the course of assessment proceeding.

4. That from the facts and circumstances stated hereinabove, it is clear and established that the accused firm, M/s. The Indian Builders and its partners (1) Shri D. K. Banerjee, and (ii) Shri A. K. Banerjee, had wilfully and deliberately attempted to evade tax liability by furnishing inaccurate particulars of income and making false verification in the return of income. Thus, the accused made itself along with its partners liable to be prosecuted under sections 276C and 277 of the Income-tax Act, 1961.'

3. The Special Magistrate took cognizance and summoned the petitioner for trial. The petitioner has filed the present writ application for quashing the complaint case ; the ground being that prosecution was premature and impermissible so long as the appeal was sub judice before the Tribunal and, consequently, the allegations in the complaint constitute no offence under sections 276C and 277 of the Income-tax Act.

4. The Tribunal disposed of the appeal by order dated December 15, 1993 (annexure 10). The appeal was partly allowed. The Supreme Court in Uttam Chand v. ITO : [1982]133ITR909(SC) quashed the criminal prosecution of the assessee for filing false return as the appeal preferred by the assessee was allowed on the finding that the firm was a genuine firm. The Supreme Court observed (at page 910) :

'We do not see how the assessee can be prosecuted for filing false returns' (when the appeal was allowed by the Appellate Tribunal on an appraisal of the entire material on record).

5. The facts of the case are not stated in the judgment.

6. Sri P. S. Dayal, senior counsel argues that the appeal of the petitioner having been allowed, prosecution for furnishing false return cannot survive and it will be an abuse of the process if the proceeding is allowed to continue. In our opinion, the decision of the Supreme Court in Uttam Chand's case : [1982]133ITR909(SC) cannot be applied to the facts of the present case for the reasons stated hereinafter.

7. In the present case, the assessment order was made under Section 143(3)/182(1) of the Income-tax Act. In the original return, the assessee declared a total income of Rs. 95,760. During the course of assessment proceedings, the assessee filed a revised return showing an income of Rs. 3,50,660. Both the returns were processed under Section 143(1)(a) and thereafter it was selected for scrutiny after obtaining the prior approval of the Commissioner of Income-tax, Ranchi. Notice under Section 143(2) was issued on March 14, 1991. On March 20, 1991, the assessee was advised to produce its books of account. He was asked to attend on March 27, 1991. But despite opportunities, accounts were not produced. The assessee had shown a loss of Rs. 6,18,581 for the current assessment year giving no explanation for the loss. The assessee was directed to show cause as to why profit would not be taken at 10 per cent. of the gross receipt. The assessee had debited Rs. 90.17 lakhs to the wage account. At the end of the year, there were general entries by which an amount of Rs. 52 lakhs had been debited as expense payable for the year. No vouchers were shown for the full period. The Deputy Commissioner held that the petitioner had deliberately not produced the complete set of books despite enough opportunities being given. His income was assessed at Rs. 14,30,551 (taking 10 per cent. of the gross receipt). The Deputy Commissioner directed penalty proceeding under Section 271(b) to be initiated. The Commissioner of Income-tax upheld the assessment order for the reasons mentioned in paragraph 3 of his order (annexure 2).

8. In the appeal before the Income-tax Appellate Tribunal, the case of the petitioner was that the assessment of net profit by the Assessing Officer was erroneous as no deduction was allowed for depreciation. The depreciation claimed by the assessee could not be completely ignored. The assessee, however, did not dispute the defect in maintenance of accounts. But it was submitted that the accounts have been statutorily audited under Section 44AB of the Income-tax Act. In the previous year, depreciation had been allowed. The Tribunal noticed that the assessee in the first instance filed a return showing a loss of Rs. 6,18,581 but in the revised return, an income of Rs. 3,50,660 was shown. The gross receipt during the accounting year was Rs. 1,43,05,513. The Tribunal observed :

'The above facts clearly go to show that various returns filed by the assessee and the discrepancy therein was not properly explained. We agree with the submission that books of account were not reliable and have rightly been rejected,'

9. The Tribunal held that the assessment of net profit was also in order. The Tribunal, however, held that disallowance of depreciation was not in order because allowance of depreciation under Section 32 of the Income-tax Act is mandatory and was not a matter dependent on the genuineness of the books of account. The Tribunal directed the revised return to be accepted. The appeal was allowed in part. Therefore, in our opinion, the contention of Sri Dayal cannot be accepted. Considering the fact that other findings were not disturbed by the Appellate Tribunal, it cannot also be argued that on the allegation made in the complaint no case is made out. These are matters which are to be considered during the trial. The prosecution, therefore, cannot be quashed. The application is, therefore, dismissed. There will be no order as to costs.

P.K. Deb, J.

10. I agree.


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