1. This appeal is preferred by the Public Prosecutor against the acquittal of the respondent, of an offence Under Section 15 (2) (a) and (d) of the Madras General Sales-tax Act 1939 read with Section 45(2) (a) of the Act for non-maintenance of true and complete accounts and wilful submission of untrue returns during the year 1955-56, by the fourth Presidency Magistrate, G. T. Madras.
2. The respondent is a dealer in coffee works at No. 8r C. A. Road, Washermenpet, and was an assessee on the file of the Deputy Commercial Tax Officer, Washermenpet. He reported a gross and net turnover of Rs. 3,85,693-9-0 for the year 1955-56, while the actual income was Rs 3,87,344-12-9. The respondent was also charged that during the year 1955-56 he suppressed the transactions amounting to Rs. 3,02,399-14-0 with one B. Anantaswami, proprietor Boothalinga Agencies, Kilpauk. The taxing authorities assessed the respondent for a total turnover of Rs. 6,89, 745. The respondent preferred an appeal to the Commercial Tax Officer, North Madras, but the appeal was dismissed on 26-10-1957. Then the respondent filed an appeal to the Sales Tax Appellate Tribunal, which was also dismissed on 12-9-1959. A revision to this Court was also dismissed on 10-2-1959. A petition for leave to appeal to the Supreme Court also met with the same fate. The sales tax authorities issued a notice to the respondent asking him whether he was willing to compound the offence of submitting a false return by paying a sum of Rs. 1000. The respondent was not agreeable and therefore this prosecution was instituted.
3. The main defence1 of the respondent in the trial Court was that he never had any dealings with Anantaswami and that the accounts, which Anantaswami submitted to the department, were false and therefore it should not form the basis for holding that the respondent's accounts were false. While confirming the assessment made by the Deputy Commercial Tax Officer, the Commercial Tax Officer as well as the Sales Tax Appellate Tribunal strongly relied on two documents, Exs. D.9 and D.10, which were signed by the respondent, for proving that the respondent had transactions with Anantaswami. Ex. D.9 is a letter written by the respondent to Boothalinga Agencies confirming the various transactions, which he had with Boothalinga Agencies. A statement of account showing their transactions was also given overleaf to the letter. Ex. D. 10 is a statement of account between the respondent and Boothalinga Agencies for the period between 1-4-1955 and 1-2-1956. This statement of account is also signed by the respondent. The Commercial Tax Officer as well as the sales tax appellate Tribunal found these two documents were genuine documents signed by the respondent and did not accept the respondent's explanation that his signature was obtained on a blank paper. A Bench of this Court in the revision preferred by the respondent also held as follows:
'The documents admittedly bore the signature of the petitioner. The only explanation attempted was that they were blank papers on which signatures were obtained from him. That explanation was not accepted by the tribunal and we think rightly.'
As stated already, a petition for special leave to the Supreme Court was also dismissed.
4. It was contended by the Public Prosecutor, relying on a decision in Public Prosecutor v. Ramalingam, ILR : AIR1958Mad544 that in the trial it would not be open to the respondent to question the genuineness of Exs. D. 9 and D. 10 and that plea was in fact raised by the respondent before the authorities set up under the General Sales Tax Act and negatived. Mr. V. Rajagopalachari, the learned counsel for the respondent, submitted that the Full Bench decision is authority only for the proposition that the validity of the assessment of the tax made under the Act could not be questioned in a criminal Court in any prosecution but that it would not bar the respondent from proving that he did not wilfully submit an untrue return by questioning the genuineness of the two documents on which the authorities under the Sales Tax Act relied.
5. The question that was referred to the Full Bench was as follows:
'Whether it is open to a criminal Court to question the validity of the assessment of any tax, or of the levy of any fee or other amount, made under the Madras General Sales Tax Act, or the liability of any person to pay any tax, fee or other amount so assessed or levied in view of the provisions of Section 16-A of the said Act.'
In considering this question Balakrishna Aiyar, J. who spoke for the Full Bench, particularly relied on two decisions reported in Releigh Investment Co. Ltd. v. Governor General in Council, 1947 FCR 59: AIR 1947 PC 78 and Commr. of Income-tax West Punjab v. Tribune Trust Lahore . In 1947 FCR 59 : AIR 1947 PC 78 the Privy Council held that the Income-tax Act, 1922 gave the assessee the right effectively to raise in relation to an assessment made on him the question whether or not a provision in the Act was ultra vires. Their Lordships observed that the scheme of the Act was to set up a particular machinery by the use of which alone total income assessable for income-tax was to be ascertained, and that jurisdiction to question the assessment otherwise than by use of the machinery expressly provided by the Act would appear to be inconsistent with the statutory obligation to pay arising by virtue of the assessment.
In the Privy Council held that the Income-tax Act exhaustively defined the obligations and remedies of the tax payer and that it would be wholly incompatible with this that he should have a collateral right, necessarily vague and ill-defined, founded on the principles of equity and good conscience. On the authority of the two Privy Council decisions the Full Bench held as follows:
'Where a statute sets up a tier of authorities before, which a person sought to be made liable can enter his objections and protestations, then normally he will be bound by the decisions given by the authorities to set up. When he is proceeded against in the ordinary courts, he can set up only those pleas which he could not have urged before the authorities created by the statute or which those authorities by reason of the fact that they have' been set up under the statute are precluded from entertaining......... The assessee may have gone up with his objections to the Board of Revenue or the Appellate Tribunal and finally come to this Court, In fact, he might have gone to the Supreme Court. After the amount payable has been ascertained at so high a level and when thereafter the amount is sought to be recovered from him by prosecuting him before a magistrate to say that he can be allowed to plead that he is not liable or that he is liable only in a different amount, is tantamount to calling upon the magistrate to adjudicate on questions which have been settled by the highest Courts in the land...... the matter which one would have supposed to have been finally adjudicated upon and settled is reopened and set at large.'
In re-stating their decision, the Full bench observed:
'When a person is prosecuted Under Section 16-A of the General Sales-tax Act, it will not be open to him to raise any objection plea or contention which he could have raised before the authorities set up under the General Sales Tax Act; it will be open to him to raise only those pleas, objections and contentions which those authorities are precluded from entertaining.'
6. The learned Public Prosecutor relied on the observations of the Privy Council and the Full Bench that, when an assessee was proceeded against in the ordinary Courts, he could set up only those pleas which he could not have urged before the authorities created by the statute, and submitted that the assessee was at liberty to contend and in fact did contend before the authorities that the two documents Ex. D. 9 and D. 10 were not genuine and should not be acted upon, and the finding of the authorities that the two documents were genuine could not be questioned. The Privy Council was of the view that the Income-tax Act did give the assessee the right effectively to raise, in relation, to an assessment made on him. the question whether or not a provision in the Act was ultra vires. It observed that the presence of a machinery to question the vires nature of the section of the Act had the effect of denying an alternative jurisdiction to enquire into the same subject-matter. On the observations of the Privy Council, the learned Public Prosecutor contended that even regarding the question whether a section was ultra vires or not, if it could be agitated against, the Tribunals set up under the Act, the same question could not be agitated in the ordinary civil Courts. The decision of the Privy Council was considered by the Supreme Court in a recent decision in Subbaya Chetti and Sons v. State of Andhra Pradesh, : 50ITR93(SC) . The Supreme Court observed at p. 9 (of Mad LJ): (at p. 326 of AIR) as follows:
'It is true that the judgment shows that the Privy Council took the view that even the constitutional validity of the taxing provision can be challenged by adopting the procedure prescribed by the Income-tax Act; and this assumption presumably proceeded on the basis that if an assesses wants to challenge the vires of the taxing provision on which an assessment is purported to be made against him, it would be open to him to raise that point before the taxing authority and take it for a decision before the High Court Under Section 66(1) of the Act. It is not necessary for us to consider whether this assumption is well founded or not.'
While doubting the assumption made by the Privy Council, the Supreme Court held that the presence of the alternative machinery by way of appeals, which a particular statute provided to a party aggrieved by the assessment order on the merits, was a relevant consideration. The decisions of the Privy Council and the Supreme Court are authorities for the proposition that the assessment made under the Sales-tax Act cannot be questioned. But the question whether ordinary Courts in a subsequent prosecution for wilful submission of false returns are bound by the findings of the Tribunals under the Sales Tax Act was not before them. The learned Public Prosecutor relied on the observations of the Full Bench that normally the assessee would be bound by the decisions given by the authorities set up under the Act. He also referred to the concluding portion of the judgment of the Full Bench, where it is observed,
'It will not be open to him to raise any objection, plea or contention which he could have raised before the authorities set up under the General Sales Tax Act; it will be open to him to raise' only those pleas, objections and contentions which those authorities are precluded from entertaining.'
The observations of the Full Bench will have to be understood in the context in which they were made. The Full Bench was considering the effect of Section 16-A of the Madras General Sales Tax Act, which runs as follows:
'The validity of the assessment of any tax, or of the levy of any fee or other amount, made under this Act, or the liability of any person to pay any tax, fee or other amount so assessed or levied shall not be questioned in any criminal Court in any prosecution or other proceeding, whether under this Act or otherwise.'
The question that was referred to the Full Bench was whether it was open to a criminal Court to question the validity of assessment of any tax made under the General Sales Tax Act. The point that was considered by the Full Bench was whether an assessment made under the Sales Tax Act could be questioned in a criminal Court. That the decision was confined only to the validity of the assessment is clear from the several passages in the judgment. In stating that an assessee would be bound by the decisions given by the authorities, they were stating with reference to a person sought to be made liable for the assessment. So also by the statement 'When an assessee was proceeded against in the ordinary Courts', the Full Bench was referring to the assessee, who was being proceeded for failure) to pay the tax Under Section 15(b) of the Madras General Sales Tax Act and was not dealing with a prosecution Under Section 15 (2) (a) and (d) of the Madras General Sales Tax Act, 1939
The position is made clear by the observations of the Full Bench that when the amount was sought to be recovered from an assessee by prosecuting Kim before a magistrate, he could not be allowed to plead that he was not liable but liable only to a different amount, even though the amount payable had been ascertained at so high a level. Thus, the entire reference was about the right of the assessee to question the assessment made by the sales tax authorities, when he was prosecuted for failure to pay the amount assessed. The decision did not deal with a prosecution Under Section 15 (2) (a)' and (d) of the Madras General Sales Tax Act. Section 16-A of the Act only provides that the validity of the assessment cannot be questioned in any criminal Court. It does riot make the finding of the sales tax authorities regarding the genuineness or otherwise of a document binding on the criminal Court and thereby absolve it from the responsibility of deciding in a prosecution under, Section 15(2) of the Madras General Sales Tax Act, whether the assessee wilfully submitted an untrue return. Before a person could be convicted for wilfully submitting an untrue account the prosecution has to establish all the facts in a criminal Court, It will not be normally assumed that the findings by Tribunals under other Acts would be final and binding on the assessee, unless it is stated in very clear and unmistakable terms. The exclusion of the jurisdiction of the criminal Courts to determine the relevant issues will not be assumed, unless there are express provisions in the statute. As already pointed out, Section 16-A of the Act makes the assessment already made final. There is no provision in the Act, which makes the findings of the tribunals regarding the genuineness of the documents binding on the criminal Courts. Before holding the assessee guilty of the offence charged, it is the duty of the criminal Court to determine whether all the requirements of the section are made out.
7. The question, therefore, has to be considered whether the prosecution has established that the respondent had wilfully submitted an untrue return and whether the order of the trial Court is liable to be reversed. (His Lordship reviewed the evidence and proceeded): The genuineness of the two documents has been amply established by the prosecution and there is no reason for not acting on them. The documents clearly establish that the respondent sold coffee to Boothalinga Agencies and those transactions were not shown in his return to the sales tax authorities. The facts disclose that the respondent wilfully submitted an untrue return, an offence punishable Under Section 15 (2) (a) of the Madras General Sales Tax Act.
8. The trial Court came to the conclusion that Exs. D. 9 and D. 10 were forged and cooked up documents. It is not disputed that the signatures in Exs. D. 9 and D. 10 are those of the respondent. Though I agree with the view of the trial Court that the accounts of Boothalinga Agencies are not above board, there is no ground for not acting on Exs. D. 9 and D. 10, which are admissions by the respondent. The lower Court was of the view that the expression of gratitude in Ex. D. 9 was made only for the purpose of covering the space between the signature of the respondent and the faked up document. On a close examination of Ex. D.9 I am unable to share the view of the trial Court. The trial Court may be right in observing that the prosecution ought to have cited D. W. 3 and D. W. 6 as their witnesses, but the defence chose to examine these witnesses through whom Exs. D. 9 and D. 10 were marked. After having admitted the signature the burden is upon the respondent to prove that the contents were typed above his blank signature. The respondent has not succeeded in this attempt.
9. In the result I hold that the prosecution has established that the respondent had wilfully submitted an untrue return, an offence punishable under S. I5(2)(a) and (d) of Act IX of 1939 read with Section 45(2) of the Madras Act I of 1959. The order of acquittal is set aside and the respondent is convicted accordingly.
10. The wilful submission of false accounts relates to the period 1955-56. Though the offence of tax evasion is a grave one, taking into consideration the lapse of time I sentence him to pay a fine of Rs. one thousand only in default six weeks S.I. Time for payment of tine two months.