1. The above two criminal revision cases arise out of C.C. No. 24 of 1981 on the file of the court of special judge for Economic Offences, Hyderabad. In all, eight charges were framed against the two accused therein. Charges 1 and 2 were framed against A-1 under ss. 276C(1)(ii) and 277(ii) of the I.T. Act. Charges 3 and 4 were framed against A-2 under s. 278(ii) of the I.T. Act for abetment of commission of the offences by A-1 and covered by charges 1 and 2. Charges 5 and 7 were framed against A-2 under ss. 193 and 196 of the Indian Penal Code, 1860, while charges 6 and 8 were framed against A-1 for abetment of commission of the said offences by A-2. The first accused was convicted of the first charge by the learned Special Judge under s. 276C(1)(ii) of the I.T. Act and sentenced to suffer rigorous imprisonment for a term of one year and also to pay a fine of Rs. 2,000, in default to suffer R.I for six months. He was acquitted of all the other charges. The second accused was convicted by the learned Special Judge under ss. 193 and 196 of the Indian Penal Code and sentences having been directed to run concurrently.
2. Assailing their convictions, the accused preferred Criminal Appeals Nos. 309 and 310 of 1982, before the learned Metropolitan Sessions Judge, Hyderabad. The learned Metropolitan Sessions Judge confirmed the conviction of A-1, but reduced the sentence of imprisonment inflicted upon A-1 from one year to six months. He, however, enhanced the amount of fine from Rs. 2,000 to Rs. 4,000. The conviction of A-2 was also confirmed by the learned Melropolitan Sessions Judge. He, however, reduced the sentence inflicted upon A-2 from one year to one month under each of the counts. No fine was levied by the Special Judge on A-2. The learned Metropolitan Sessions Judge also imposed a fine of Rs. 1,000 on A-2 on each of the counts.
3. Aggrieved by the common judgment rendered by the learned Metropolitan Sessions Judge, Hyderabad, the first accused preferred Crl. R.C. No. 212 of 1983, while the second accused preferred Crl. R.C. No. 213 of 1983.
4. The material facts giving rise to the above Crl. Revision Cases which lie in a narrow compass and do not admit of any controversy may be briefly stated :
5. The first accused is an exhibitor of films at Anakapalli, having taken on lease for the purpose 'Sri Ramakrishna Picture Palace' situated at Anakapalli. He has a fleet of buses also. He is an income-tax assessee. The second accused was his clerk at he relevant time and was in charge of maintenance of the accounts relating to his businesses. For the assessment year 1976-77, the first accused filed a return, Ex. P-1, on September 15, 1976, before the then ITO, Anakapalli, Sri K. K. Viswanatham, showing an income of Rs. 14,308. That return was signed and verified by A-1. Along with the return A-1 filed Exs. P-2 and P-3, statements of computation of income and profit and loss from the businesses. The return was taken up for enquiry by P.W. 3 on November 10, 1976. The authorised representative of A-1 and A-2 appealed before P.W.3. A-2 filed Ex. P-4, a list of the books of account before P.W. 3. Among others, the books included Exs. P-7 and P-8, the days book and the ledger maintained by A-2. P.W. 3 directed the then Inspector of Income-tax, Anakapalli, Sri S. Suryanarayana, P.W. 2, to examine the books. During the course of the examination, P.W. 3 noticed some interpolations in the day book and the ledger. He also noticed that the expenditure by way of purchase of spare parts to the buses and repairs to the buses and was inflated by Rs, 31,000. The authorised representative of A-1 was called upon to the file vouchers in support of the entries made in the cash book and the ledger. In compliance with the demand, A-2 filed the vouchers, Exs. P-9 to P-21. After scrutinising the vouchers, P.W. 2 submitted a report Exs. P-25 to P.W. 3, on November 18, 1976. On April 29, 1978 (sic) P.W. 3 was succeeded by Sri B. Krishna Murthy (P.W. 1) and enquiry into the assessment was taken up by P.W. 1 on January 28, 1978 (sic). The authorised representative of A-1 and A-2 appeared before P.W. 1 and filed before him Exs. P-7 to P-21. Noticing the very same interpolation earlier noticed by P.W. 2, P.W. 1 examined A-2 on oath. Exhibit P-22 is the statement of A-2 so recorded. P.W. 1 also examined A-1 on November 10, 1978. Exhibit P-23 is that statement of A-1 so recorded. P.W. 1 completed the assessment of A-1 on September 30, 1978. Two years later, P.W. 1 again examined A-1 and A-2 consequent upon initiation of penalty proceeedings against A-1. Exhibits P-24 and P-25 are the statement of A-1 and A-2 recorded on August 7, 1980. Again on November 28, 1980, P.W. 1 examined A-1 and A-2 recorded their statements, Exs. P-26 and P-27. A-1 consistently maintained that A-2 was entrusted with the maintenance of the accounts, that he never scrutinised the accounts and that he had no personal knowledge of the impugned entries in the cash book and the ledger. A-2, however, admitted that he made the impugned entries on his won accord and without reference to the first accused. He asserted that all the vouchers produced were genuine and that he made the interpolations to compare favourably with the balance-sheet.
5. P.W. 1 determined the income of A-1 from all sources at Rs. 64,440 which amount included the infalted expenditure of Rs. 31,000. Exhibit P-2 is the order of assessment passed by P.W. 1. On appeal, the same was confirmed by the AAC of Income-tax, Visakhapatnam. Exhibit P-29 is the order passed by him. Later, the Commissioner of Income-tax, Hyderabad, directed P.W. 1 to prosecute the accused. Exhibit P-30 is the order passed by the Commissioner of Income-tax in that behalf. In support of the case of the prosecution, P.Ws. 1 to 3 were examined and Exs. P-1 to P-30 were marked. Before the learned Special Judge, A-1 pleaded the A-2 was entrusted with the maintenance of the accounts, that he never scrutinised the same and that he had no personal knowledge of the impugned entries. A-2 admitted having made the impugned entries on his own accord and without reference to A-1. He would have it that he was sick for some time and that as the balance-sheet did not tally, he a made the interpolations. In support of the defense, there witnesses were examined as D.Ws. 1 to 3. The learned Special Judge found the there was no evidences on record that A-1 abetted commission of the offecnes punishable under ss. 193 and 196 read with 109, I.P.C. by A-2. A-1 was, therefore, acquitted of the charges 6 and 8. He and the second accused were acquitted of the charges 2 to 4 on the ground that there was on sanction obtained by the Commissioner of Income-tax to prosecute them for the said offecnes. A-1 was, however, convicted under s. 276C(1)(ii) read with Explanation (i) of the I.T. Act on the sole ground that he had possession and control of the cash books and the ledger containing false entries. A-2 was convicted by the learned Special Judge of the charges 5 and 7 on his own admission.
6. It is not denied that the cash book and the ledger containing the impugned entries were maintained only by A-2. It is also not in dispute that the vouchers, Exs. P-9 to P-21, are genuine, though the vouchers were not properly reflected in the cash book and the ledger and the interpolations in the same were made by A-2. It was also very easy for the accused to produce some other vouchers to explain away the interpolations. Be that as it may, the day book and the ledger, Exs. P-7 and P-8, containing the impugned entries were not produced by A-1 either before P.W. 1 or before P.W. 2. The same were produced by A-2 only. This circumstance by itself is of no assistance to A-1 as it cannot be said that he had no control over Exs. P-7 and P-8.
7. The crucial question which, however, falls for determination is the cope of Explanation 1 appended to s. 276C of the I.T. Act. The explanation has to be read with both sub-clauses of the section. The opening words of s. 276C(1) imply existence of a particular guilty state of mind in the person sought to be punished. The requisite mens rea is defined by the expression 'wilfully'.
8. The Explanation runs Thus :
'For the purposes of this section, a willful attempt to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof shall include a case where any person -
(i) has in his possession or control any books of account or other documents (being books of account or other documents relevant to any proceeding under this Act) containing a false entry or statement...'
Explanation (i) does not in any way restrict or cut down the ambit of the expression 'wilfully' occurring either in clause (i) or (ii) of s. 276C(1) of the Act. Mere possession or control of the any books of account and other document containing a false entry or statement is not punishable. It is only where a person in possession or control of such books of account or there documents has knowledge of the false entry or statement that he renders himself punishable. Any other interpretation would sometimes lead to disastrous results. To take an example, if X carries on several businesses and maintains duplicate sets of accounts in relation there to and preserves the incriminating set of accounts in the house of his innocent father-in-law and if the same are seized during a raid conducted by income-tax authorities, can the innocent father-in-law of X be successfully prosecuted under s. 276C(1), clause (ii) read with Explanation (i) of the I.T. Act The answer to my mind is emphatically it in the negative. It is not difficult to visualise that a person can come into possession of books of account containing false entries or statements without knowledge of the same. The requisite mens rea, namely, knowledge on the part of a person of a false entry or statement in any books of account or other documents in his possession or control must be established before he is sought to be visited with the penalty prescribed thereunder. I must also observe that both the Special Judge as will as the Metropolitan Special Judge found that A-1 had not abetted the commission of the offences under ss. 193 and 196 of the I.P.C. by A-2. I, therefore, set aside the conviction of A-1 and the sentence inflicted on him. The amount of fine if paid by A-1 shall be refunded to him. The conviction of A-2 is not open to attack as on his own admission, he had made the false entries or statements in Exs. P-7 and P-8. The offences were committed in the year 1976. Nearly eight years have elapsed form the date of commission of the offences. I do not, therefore, consider it desirable to send back A-2 to jail to undergo a month's rigorous imprisonment. I, accordingly, confirm the conviction of A-2 and reduce the sentence of imprisonment inflicted on him from one month to on week. The sentence of fine inflicted on him shall stand.
9. In the result, Crl. R.C. No. 212 of 1983 is allowed while, subject to the modification on the question of sentence indicated in this order, Crl. R.C. No. 213 of 1983 is dismissed.