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A.D. Jayaveerapandia Nadar and Co. and ors. Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberCriminal Appeal Nos. 466, 481, 478 and 482 of 1972
Judge
Reported in[1975]101ITR390(Mad)
ActsIncome Tax Act, 1961 - Sections 2(23), 2(31) and 277; Indian Partnership Act, 1932 - Sections 4
AppellantA.D. Jayaveerapandia Nadar and Co. and ors.
Respondentincome-tax Officer
Appellant AdvocateT.V. Ramanathan, Adv.
Respondent AdvocateC.K. Venkatanarasimham, Adv.
Cases ReferredAgrawal Trading Corporation v. Assistant Collector of Customs
Excerpt:
direct taxation - conviction - sections 2 (23), 2 (31) and 277 of income tax act, 1961 and section 4 of indian partnership act, 1932 - to sustain conviction under section 277 it must be established that each one of accused knew that return was false - not enough if shown that return was false - section 277 stipulates that prosecution has to establish that not only verification made by accused was false but also that every one of them had made such verification with knowledge that such verification was false. - - it was directed that if accused 1 failed to pay the fine, accused 2 shall undergo the default sentence on behalf of accused 1. c. 15. against the said order, the accused preferred an appeal to the appellate assistant commissioner of income-tax and, subsequently, the accused.....krishnaswamy reddy, j.1. the appellants in c.as. nos. 466 and 481 of 1972 are accused 1, a.d. jayaveera pandia nadar and company, accused 2, a.d. jawaharlal pandian, and accused 3, a.d. jayaveera pandia nadar in c.c. nos. 44986 and 40180 of 1969, on the file of the chief presidency magistrate, egmore, madras. they were tried along with accused 4 to 9 for offences under the income-tax act, criminal conspiracy, etc., in both the cases and accused 4 to 9 were acquitted.c.a. no. 466 of 1972 (c.c. no. 44986 of 1969)2. in this case, accused 1 was convicted under charge no. 1 for an offence under section 277 of the income-tax act and accused 2 and 3 were convicted under charges nos. 2 and 3 for offences punishable under section 277 of the income-tax act read with section 34, indian penal code,.....
Judgment:

Krishnaswamy Reddy, J.

1. The appellants in C.As. Nos. 466 and 481 of 1972 are accused 1, A.D. Jayaveera Pandia Nadar and Company, accused 2, A.D. Jawaharlal Pandian, and accused 3, A.D. Jayaveera Pandia Nadar in C.C. Nos. 44986 and 40180 of 1969, on the file of the Chief Presidency Magistrate, Egmore, Madras. They were tried along with accused 4 to 9 for offences under the Income-tax Act, criminal conspiracy, etc., in both the cases and accused 4 to 9 were acquitted.

C.A. No. 466 of 1972 (C.C. No. 44986 of 1969)

2. In this case, accused 1 was convicted under charge No. 1 for an offence under Section 277 of the Income-tax Act and accused 2 and 3 were convicted under charges Nos. 2 and 3 for offences punishable under Section 277 of the Income-tax Act read with Section 34, Indian Penal Code, and each of them was sentenced to pay a fine of Rs. 1,000 under each conviction, in default to undergo simple imprisonment for two months under each conviction. It was directed that if accused 1 failed to pay the fine, accused 2 shall undergo the default sentence on behalf of accused 1.

C.A. No. 481 of 1972 (C.C. No. 40180 of 1969)

3. In this case, accused 1 to 3 (appellants) were convicted under charges Nos. 1 and 3 to 5 under Section 120B, Indian Penal Code, Section 277 of the Income-tax Act read with Section 34, Indian Penal Code (two counts) and Section 196 read with Section 120B, Indian Penal Code, respectively. Accused 1 to 3 were each sentenced to pay a fine of Rs. 1,000 in default to undergo simple imprisonment for two months for each of the convictions under charges Nos. 3 and 4. Under charge No. 5 accused 2 and 3 were each sentenced to undergo imprisonment till the rising of court and, in addition, accused 1 to 3 were each sentenced to pay a fine of Rs. 1,000, in default to undergo rigorous imprisonment for two months. No separate sentence was awarded under charge No. 1 for the offence of criminal conspiracy under Section 120B, Indian Penal Code.

4. The appellants in C.As. Nos. 478 and 482 of 1972 are accused 1, A. D. Jayaveerapandia Nadar and Brothers, accused 2, A. D. Jawaharlal Pandian, and accused 3, A. D. Jayaveera Pandia Nadar, in C.C. Nos. 44987 and 40181 of 1969 on the file of the Chief Presidency Magistrate, Egmore. They were tried along with accused 4 to 6 for offences under the Income-tax Act, for criminal conspiracy, etc., in bath the cases and accused 4 to 6 were acquitted.

C.A. No. 478 of 72 (C.C. No. 44987 of 69):

In this case accused 1 was convicted under charge No. 1 for an offence punishable under Section 277 of the Income-tax Act and accused 2 and 3 were convicted under charges 2 and 3 for an offence punishable under Section 277 of the Income-tax Act read with Section 34, Indian Penal Code, and each of them was sentenced to pay a fine of Rs. 1,000 in default to undergo simple imprisonment for two months under each conviction. It was directed that if accused 1 committed default in payment of fine, accused 2 shall undergo the default sentence.

C.A. No. 482 of 72 (C.C. No. 40181 of 69):

In this case, accused 1 to 3 (appellants) were convicted under charges 1 and 3 to 5 under Section 120B, Indian Penal Code, Section 277 of the Income-tax Act read with Section 34, Indian Penal Code (two counts), and Section 196 read with Section 120B, Indian Penal Code, respectively. Accused 1 to 3 were each sentenced to pay a fine of Rs. 1,000 in default to undergo simple imprisonment for two months for each of the convictions under charges Nos. 3 and 4. Under charge No. 5, accused 2 and 3 were each sentenced to undergo imprisonment till the rising of the court and, in addition, accused 1 to 3 were each sentenced to pay a fine of Rs. 1,000 in default to undergo rigorous imprisonment for two months. No separate sentence was awarded under charge No. 1 for the offence of criminal conspiracy under Section 120B, Indian Penal Code.

C.A. No. 466 of 1972:

This appeal relates to the submission of return of income to the Income-tax Officer for the assessment year 1962-63 (accounting year 1961-62). Accused 1 is a registered partnership firm carrying on business at Nagapattinam. Accused 2 and 3 along with the accused who were acquitted, namely, accused 4 to 9, are partners of the firm (accused 1). The firm (accused 1) was engaging itself in the purchase and sale of imported betelnuts.

5. On January 5, 1963, accused 1 firm filed a return of income, exhibit P-3, for the assessment year 1962-63, and the return has been signed by accused 2. Exhibit P-3 was accompanied by a special power of attorney, exhibit P-4, executed in favour of G. Natesan & Co., Chartered Accountants, on behalf of accused 1 and its partners and in the statement of trading accounts, exhibit P-5, a sum of Rs. 55,995 was shown as business income for the period April 1, 1961, to March 31, 1962. This income has been allocated to the partners of accused 1 as per the allocation statement, exhibit P-7. In conformity with the allocation statement, accused 2 to 9 filed their individual returns of income, exhibits P-8 to P-15.

6. P.W. 2, C. Subba Rao, the then Income-tax Officer, took up the assessment proceedings and conducted an investigation. He found as per cash book, exhibit P-16, and ledger, exhibit P-17, filed by accused 1 firm that the total purchases of betelnuts amounted to Rs. 6,50,559. The particulars of the purchases were furnished by the firm under the letter, exhibit P-18, and the working sheets, exhibit P-19. In the course of the investigation, P.W. 2 suspected the genuineness of the following five items of purchase under entries, exhibits P-19(a), (b), (c), (d) and (e) respectively :

Rs.1.Ramkumar Ramnarayan10,987.102.M/s. Indo Foreign Agents (P.) Ltd.11,034.503. M/s. Jagannath Prasad Agarwallah10,985.524. M/s. Panchanan Mullick10,667.125. M/s. Sen Brothers10,880.64

P.W. 2 enquired into the matter fully.

7. In support of the purchase from Ramkumar Ramnarayan under exhibit P-19(a) the accused produced the invoice, exhibit P-20, but exhibit P-20 did not bear the full address of the seller such as his door number, telephone number, telegraph address, etc. P.W. 2 would state that he made enquiries at Calcutta and, according to him, there was no shop at all in the name of Ramkumar Ramnarayan in Amarthola Street. The accused did not produce any receipt or acknowledgment to prove the payments of Rs. 6,000 on September 18, 1961, to Ramkumar Ramnarayan and Rs. 4,987.10 to the same party through broker, 'A.S.'

8. Similarly, in support of the alleged purchase from Indo-Foreign Agents (Private) Ltd., under exhibit P-19(b) for Rs. 11,034.50, the accused produced the invoice, exhibit P-22. According to P.W. 2 in this invoice also, he noted the same defects as in the case of the invoice, exhibit P-20, and no receipt or acknowledgment was produced in support of the alleged cash payments of Rs. 6,000 and Rs. 5,034.50 to the said firm. P.W. 9, B.M. Purohit, the managing director of Indo-Foreign Agents (P.) Ltd., denied having had any transaction in betelnuts with accused 1 firm and also disowned the invoice, exhibit P-22. P.W. 9 produced the import licence, exhibit P-25, and a copy of invoice, exhibit P-26, to show that the betelnuts imported by his company at the Calcutta port were sold to one Tholsaria and Company and not to accused 1. P.W. 2 would say that he checked the accounts of Tholsaria and Company and found from their accounts that they had purchased betelnuts.

9. As regards the third transaction, namely, the purchase from Jagannath Prasad Agarwallah, the accused produced an invoice, exhibit P-28. P.W. 2 examined P.W. 5, Ram Avathar Agarwallah, the partner of the said firm at Calcutta and obtained a statement, exhibit P-30, from him. P.W. 5 denied having had transactions with accused 1 and also disowned the invoice, exhibit P-28, and the payment purporting to have been made by the accused as per their accounts in respect of his (P.W. 5's) import licence. The import licence, exhibit P-31, in the name of the firm of P.W. 5 showed that their firm had imported only second quality Lunkat whole betelnuts and not the type of quality mentioned in the invoice, exhibit P-28, produced by the accused. The duplicate bill [exhibit P-32(a) produced by P.W. 5 showed that the betelnuts had been sold to 'Nataraja Trading Company', Mount Road, Madras, on March 23, 1962, and not to the accused. Nataraja Trading Company appears to be a fictitious company and I will refer to this again when I discuss about this transaction with reference to the statement of the accused and the evidence given by P.W. 5.

10. In respect of the fourth transaction under exhibit P-19(d), with one Panchanan Mullick, the accused produced the invoice, exhibit P-33. According to P.W. 2 the invoice was suspiciously made and it did not contain the usual details. No evidence has been let in to show that the alleged payment of Rs. 5,286.19 in cash on March 5, 1962, and the adjustment entry on March 27, 1962, of Rs. 5,380.93 towards trading expenses were true. P.W. 6, Poornachandran Mullick, a partner of the firm, denied having had transactions with the accused and he gave a statement to P.W. 2 to that effect under exhibit P-35. P.W. 6, however, stated that the import licence obtained by his firm had been taken away by a broker and he did not know what happened to the licence thereafter. He also stated that he did not receive any amount under this licence. I will refer to this transaction at the appropriate stage. But, even here, I can say that the evidence of P.W. 6 is not convincing.

11. In respect of the last transaction under exhibit P-19(e) with Messrs. Sen Brothers, the accused produced exhibit P-37. According to the prosecution, this invoice is also vague and it does not contain the usual details. There was no receipt or acknowledgment to substantiate the alleged payments of Rs. 5,499.71 in cash to M/s. Sen Brothers and Rs. 5,380.93 by adjustment towards payment of clearing expenses. P.W. 7, Kalipada Pal, manager of M/s. Sen Brothers at Calcutta denied having had transactions with the accused. He produced the import licence, exhibit P-40, and the invoice copy, exhibit P-41, to show that only second quality Lunkat betelnuts were imported by the firm and that they were actually sold to 'Nataraja Trading Company, Madras' and not to accused 1. I have already observed that this Nataraja Trading Company appears to be a fictitious firm.

12. In respect of those transactions, P.W. 2, brought to the notice of the auditors of the accused-firm on March 11, 1967, the results of his enquiry at Calcutta and informed them that if they (accused) so desired, the Calcutta parties would be summoned at Calcutta for being cross-examined, in the investigation of the case. The accused sent a reply, exhibit P-46, stating that the transactions with the Calcutta parties were gone through with the brokers. The accused also furnished the names of the five brokers. They also mentioned in that letter that the Calcutta parties may be summoned to Madras for cross-examination, but, however, P.W. 2 informed them that, on account of the distance, it was not possible for him to summon the Calcutta parties to Madras.

13. As requested by the accused, P.W. 2 issued summons to the five brokers named in exhibit P-46. The summons issued to the broker, Rajasekaran, was returned with the endorsement 'not known', vide, exhibit P-48. The other four brokers, viz., P.W. 10, Kanniappan, P.W. 11, Chinnasamy, P.W. 12, Dhansekaran, and P.W. 13, A. Shanbagakutty Nadar, appeared before P.W. 2 and gave statements, exhibits P-49 to P-52, respectively. P.Ws. 10 to 13 stated before P.W. 2 that they merely introduced Calcutta parties to the accused, that they had no further participation in the business transactions between the parties and that no payments were made through them to the Calcutta parties.

14. After the enquiries, P.W. 2 was of the view that the returns in respect of those five items were false and that they have been submitted by the accused knowing them to be false and, therefore, added two sums of Rs. 10,987 and Rs. 11,034 representing payments to Ramkumar Ramnarayan and Indo-Foreign Agents (P.) Ltd., and also added a further sum of Rs. 74,450 on an estimate to take into account the business income of accused 1-firm and passed an assessment order, exhibit P-56, in terms thereof.

15. Against the said order, the accused preferred an appeal to the Appellate Assistant Commissioner of Income-tax and, subsequently, the accused made a request as per the letter, exhibit P-58, that there may be a settlement of all assessments, completed as well as pending. The accused agreed to a sum of Rs. 59,000 being added towards betelnut trade for the assessment year 1962-63. The offer was accepted and the Appellate Assistant Commissioner added a sum of Rs. 59,000 to the income derived by accused 1-firm from betelnut trade and passed an order, exhibit P-60.

16. Subsequently, the accused were prosecuted.

17. When the accused were examined, accused 2, who represented the firm, stated that he was managing the affairs of the firm, that the transactions shown in the accounts of the firm were not bogus or fictitious ones, that the transactions were effected through brokers and payments were also made through them, that the Calcutta parties and the brokers who had given evidence in the case were not speaking the truth and that the firm had agreed to add Rs. 59,000 to the assessment only with a view to purchase peace in the long pending matter and not on account of the fact that the returns were false.

18. Accused 3 to 9 stated that accused 2 was directly in charge of the affairs of the firm, that the rest of the partners were only sleeping partners and that they have not been responsible for the incorrect return and documents being filed. In addition, accused 3 stated that he gave his consent for adding Rs. 59,000 solely for the reason that he wanted the long drawn out assessment proceedings to come to a termination.

19. The accused on their side examined, G. M. Omer, Deputy Commercial Tax Officer as D.W.I. He stated that the assessments under the Madras General Sales Tax Act were made against the firms of Jagannath Prasad Agarwalla, Panchanan Mullick, Sen Brothers and Indo-Foreign Agents (P.) Ltd., in respect of their turnover in arecanuts within the State of Madras during the financial year 1961-62. He also filed exhibits D-2 to D-5, the assessment files showing that the aforesaid four persons were assessed to sales tax. D-2 to D-4 would disclose that M/s. Jagannath Prasad Agarwallah had paid a sum of Rs. 229.72, M/s. Panchanan Mullick had paid a sum of Rs. 229.34, M/s. Sen Brothers had paid a sum of Rs. 219.62, towards the sales tax. Exhibit D-5, the assessment file, would disclose that a sum of Rs. 220.70 has been demanded from Indo-Foreign Agents (P.) Ltd. towards sales tax and that the company has not repudiated its liability.

20. This is not a case where the transactions were omitted to be brought into the account books. The transactions were brought into the account books of the firm; but it is the case of the prosecution that of those transactions which were brought into account, five transactions as enumerated above were not genuine transactions, and even if there were such transactions, the amounts were boosted up. So far as the boosting of amounts is concerned, the learned counsel appearing for the accused-appellants had pointed out that in similar transactions which were entered in the account books, such as exhibit P-19 and admitted to be genuine by the department, the amounts found in the suspicious transactions were more or less the same as those of the transactions admitted to be genuine. This argument, of course, deserves some consideration.

21. It will be useful to note the general features in this case. It appears that excepting Ramkumar Ramnarayan, the other four parties held licences for the import of betelnuts and the Calcutta firms had parted with these licences for consideration to others. The appellant-firm which was importing betelnuts into this country had used some of the licences for clearing the goods at Nagapattinam Sea Port, but showing that such goods were imported in the name of the licence-holders preparing invoices in the names of the firms which held licences purporting to have been sold to the appellant-firm. The invoices, according to the prosecution, are not genuine invoices. The firms which parted with their licences denied having made such invoices and having sold the goods under the invoices to accused 1-firm. It is the common case of the accused-appellants and the Calcutta firms which held licences that the transactions were carried on through the brokers. But, however, the brokers would say that they had introduced the accused-appellants to the Calcutta firms and that they did not do anything more excepting getting a small commission. It is the case of the accused-appellants that the invoices were obtained by the brokers from the respective Calcutta firms and they handed over the same to them, that they paid cash into the hands of the brokers and that they did not know what happened further in the matter. The brokers, namely, P.Ws. 10 to 13, have denied the payment of cash from the accused-appellants covered under the invoices to be paid to the respective firms in Calcutta. Admittedly, there was no correspondence between the accused-appellants on the one side and the Calcutta firms on the other. It has also to be noted in this context that the accused had not produced any stamped receipt in respect of the alleged payments made to the brokers relating to the five transactions. We will now take into consideration each of the five transactions individually.

1. Ramkumar Ramnarayan [exhibit P-19(a)], The accused-appellants produced exhibit P-20, au invoice dated October 3, 1961, purporting to have been received from one Ramkumar Ramnarayan, Amrotolla Street, Calcutta-1, for a sum of Rs. 10,987.10, being the cost of 16 bags of whole betelnuts and delivery of the goods at Nagapattinam. The prosecution suggest that this invoice is not a genuine one. According to the prosecution, this firm never existed; it is a fictitious firm and the invoice has been made falsely in the name of the fictitious firm. P.W. 2 would say that, in spite of his enquiries, he was unable to locate this firm either in the address given in the invoice or anywhere in Amrotolla Street, Calcutta-1. It is also the case of the prosecution that though the invoice would show that the goods were delivered at Nagapattinam, thereby suggesting that the goods were cleared under a licence at Nagapattinam Port, the register, exhibit P-53, maintained by the customs at Nagapattinam does not show that there was such an import in the name of Ramkumar Ramnarayan either on that date or in that year. The accused-appellants merely stated that they did not know anything about the firm of Ramkumar Ramnarayan and they acted only through the brokers, that the brokers gave the invoice, exhibit P-20, and that the goods were delivered by them at Nagapattinam. But, however, they are unable to say as to by what mode the goods were delivered to them. In exhibit P-17, the account book maintained by the accused-appellants, at page 101 (marked as exhibit P-21), the particulars of the transaction with Ramkumar Ramnarayan are given. As per the entry, a sum of Rs. 6,000 had been paid in cash to Ramkumar Ramnarayan on September 18, 1961, and on January 8, 1962, a further sum of Rs. 4,987.10 is shown to have been paid to Ramkumar Ramnarayan in cash through accused 5. There was no receipt or acknowledgment in respect of these amounts either from Ramkumar Ramnarayan or from the broker to whom the accused-appellants had paid the amounts. It is also not known as to why the amounts payable to Ramkumar Ramnarayan were split up into two parts and the payments were shown as though they were given on two occasions with a gap of about four months. It is contended by the learned counsel for the accused-appellants that the firm of Ramkumar Ramnarayan might have existed somewhere in 1961-62 when the transaction took place, that subsequently the firm might have been shifted to some other place or it might have become defunct and that, therefore, it cannot be said with certainty that no such firm existed in 1961-62. Though such a possibility can be conceived yet, there are circumstances which would indicate that the transaction with the firm of Ramkumar Ramnarayan could not be true. Normally, we expect some correspondence between the parties in business transaction. There was no such correspondence. Even if the brokers are there, for payments of huge amounts, the receipts and acknowledgments would be taken. No such receipts or acknowledgments were produced by the accused-appellants. Of the five brokers mentioned by the accused-appellants, four were traced and one could not be traced. There is no evidence to show that this firm of Ramkumar Ramnarayan was introduced by any broker to the accused-appellants and that an invoice like exhibit P-20 was handed over to them (accused) by a broker. P.W. 13, Shenbaga Kutty Nadar, a broker, though he stated that he introduced some Calcutta firms to the accused-appellants, could not say whether he had introduced the firm of Ramkumar Ramnarayan to the accused-appellants ; but, however, he asserted that he never received any money from the accused-appellants for payment to any firm in Calcutta. In respect of the omission of the name of the firm of Ramkumar Ramnarayan in exhibit P-53, it was contended by the accused that the register is not full and complete. It is a register maintained in the ordinary course of business. Normally, it is entitled to weight, I am, therefore, of the view that this transaction is not a genuine one.

2. M/s. Foreign Agents (P.) Ltd. [exhibit P-19(b)]:

In respect of the transaction relating to this firm a sum of Rs. 11,034.50 is entered in exhibit P-17, the account book of accused 1-firm, as the purchase price of betelnuts covered under the invoice, exhibit P-22. Exhibit P-22, the invoice dated October 2, 1961, of the Indo-Foreign Agents (P.) Ltd. shows delivery of the goods at Nagapattinam for the price mentioned therein. According to the prosecution, this invoice is not genuine ; it is a faked up one. The prosecution has let in evidence to show that the bill of entry, exhibit P-25, regarding the import of betelnuts covered under the licence in the name of M/s. Indo-Foreign Agents (P.) Ltd. was at the Calcutta Sea Port on or about August 19, 1961. It is the case of the prosecution that the goods covered under the licence in the name of M/s. Indo-Foreign Agents (P.) Ltd. were not cleared at Nagapattinam Port. P.W. 9, B. M. Purohit, the managing director of Indo-Foreign Agents (P.) Ltd., Calcutta, stated that the company had an import licence for importing Rs. 500 worth of betelnuts for the half year April 1, 1961, to September 30, 1961, and in pursuance of that licence, 13 bags of betelnuts were imported at Calcutta under bill of entry, exhibit P-25, and that all the 13 bags were sold to Tolsaria and Company at Calcutta on October 14, 1961, under invoice copy, exhibit P-26, for Rs. 5,525.16. P.W. 9 stated that his firm did not have any transaction with accused, that exhibit P-22, the invoice for Rs. 11,034.50, dated October 2, 1961, is a bogus one and that the invoice does not belong to his company. He also stated that the person who signed exhibit P-22 is not concerned with his firm. P.W.9 also stated that he did not receive any money under exhibit P-22 either on that day or on any other day. But, however, he admitted that there was a demand for sales tax from the sales tax authorities, Madras, for a sum of Rs. 220.70, and that his firm had refused to pay sales tax on the ground that they were not liable to pay the tax and that assessment had been wrongly made. According to him, the matter is still pending. In cross-examination, P.W. 9 admitted that they did not write to the Sales Tax Officer, Nagapattinam, stating specifically that they had not sold betelnuts to accused 1-firm and, therefore, they were not liable to pay sales tax.

The learned counsel appearing for the accused-appellants strenuously urged that the bill of entry regarding the import at Calcutta showed excess and, therefore, the bill of entry (exhibit P-25), produced by P.W, 9 remains unexplained. When P.W. 9 was in the box, no question was put to him as to how the discrepancy occurred in the bill of entry. I do not, therefore, attach much importance to this point.

The real point to be considered is whether exhibit P-22, the invoice produced by the accused-appellants for the alleged purchases of betelnuts for Rs. 11,034-50, is true. The evidence of P.W. 9 and the fact that the goods were imported at Calcutta Port and they were sold to Messrs. Tolsaria and Company for Rs. 5,425.16 as borne out by exhibit P-26, the invoice, and also exhibit P-25, the extract from the accounts of M/s. Tolsaria & Co., clearly indicate that the accused-appellants could not have purchased the goods under the invoice, exhibit P-22. Even otherwise, exhibits P-26 and P-27 show that the goods were sold only for Rs. 5,425.16 to Messrs. Tolsaria & Company. Therefore, it is clear that the amount of Rs. 11,034.50 shown as the purchase price in the invoice, exhibit P-22, could not be correct and the said amount is inflated. It is the case of the accused-appellants that it was only through the broker, this transaction with M/s. Indo-Foreign Agents (P.) Ltd., was entered into and that they paid the amount covered under the invoice in cash to the broker. No vouchers were produced. The brokers examined in this case would say that they never received any cash from the accused.

The learned counsel for the accused-appellants strenuously urges that the demand for sales tax from Messrs. Indo-Foreign Agents (P.) Ltd. by the sales tax authorities at Madras would clearly suggest that there was a transaction between the said firm and the accused in respect of the purchase of betelnuts from the said firm under this item. Though at the outset, the contention appears to be attractive, yet it appears to my mind that since the accused have produced the invoice which, according to the prosecution is bogus, the sales tax authorities at Madras might have believed the invoice, exhibit P-22, and hence demanded sales tax from M/s. Indo-Foreign Agents (P.) Ltd. In any event, this possibility cannot be eliminated. When there is positive evidence that exhibit P-22 is a bogus invoice and P.W. 9 has never sold betelnuts covered under licence during that half year to the accused and, on the other hand, they had sold the goods to Messrs. Tolsaria and Company, I do not think that the contention of the learned counsel that there was a transaction between the accused and M/s. Indo-Foreign Agents (P.) Ltd. is true. I am, therefore, of the view that the return and verification in respect of this purchase by accused 1-firm are false.

3. M/s. Jagannath Prasad Agarwallah [exhibit P-19(c)] :

In the return submitted by the accused in respect of this transaction with M/s. Jagannath Prasad Agarwallah, a sum of Rs. 10,985.52 is shown as the purchase price of the betelnuts. The accused produced exhibit P-28, the invoice dated January 15, 1962. The invoice shows that the goods covered under the invoice were imported at the Nagapattinam Port under bill of entry No. 160 dated January 8, 1962. The accused in their letter, exhibit P-31, dated March 2, 1967, to the Income-tax Officer stated the circumstances under which they purchased the goods covered under the invoice, exhibit P-28, and also enclosed the bill of entry No. 160 dated January 8, 1962. It is the prosecution case that the amount has been inflated both in the account books of the accused and the return submitted by them.

P.W. 5, Ram Avathar Agarwal, the partner of M/s. Jagannath Prasad Agarwallah, stated that his firm had an import licence (exhibit P-31) for importing betelnuts during the year 1961-62. According to him, the consignment of betelnuts imported under exhibit P-31 were sold by them to Nataraja Trading Company under bills, exhibits P-32 and P-32(a). He stated that during 1961-62, his firm did not sell any quantity of betel-nuts to accused 1-firm. In respect of the invoice, exhibit P-28, P.W. 5 swore that the same was not issued by anyone connected with his firm and that the letter-head in which the invoice was prepared was not theirs. According to him, no amount was received by his firm from accused 1-firm on the dates January 11, 1962, and January 17, 1962, i.e., Rs. 5000 and Rs. 586.71. He further stated that no one paid such amounts to them on behalf of accused 1-firm. He further stated that his firm did not have any transaction in betelnuts with accused 1-firm during the period April 1, 1961, to March 31, 1962. In cross-examination, it has been elicited from this witness that he had paid sales tax at Madras but it was in respect of sale of betelnuts to other parties and not to accused 1-firm during the period in question, that the sale was to Nataraja Trading Company and that the same was effected at Calcutta through their agents. But, however, he admitted that he did not know whether a company by name Nataraja Trading Company actually existed in Madras.

There cannot be any doubt that exhibit P-28, the invoice produced by the accused, is not a true one. At the same time, from the evidence given by P.W. 5, I am of the view that there must have been some transaction in respect of betelnuts between the firm of P.W. 5 and accused 1-firm. The goods covered under the licence were cleared at Nagapattinam Sea Port by accused 1-firm under bill of entry No. 160, dated January 8, 1972. This was submitted by the accused along with their letter sent to the Income-tax Officer. It appears that the introduction of a fictitious firm 'Nataraja Trading Company, Madras' is, in my opinion, to suppress the actual transaction between the firm of P.W. 5 and accused 1-firm. It also appears to my mind that the firm of P.W, 5 and the accused must have agreed to introduce the fictitious firm.

In respect of this transaction, it is also significant to note that P.W. 5 had paid the sales tax as demanded by the sales tax authorities at Madras. This would show that P.W. 5 sold the goods covered under the licence to a party in Madras. In all probability, accused 1-firm would have purchased the goods from the firm of P.W. 5 either personally or through brokers. Though the transaction between these two parties appears to be true, the amount mentioned in exhibit P-28 must be inflated as, as has already been pointed out by me, exhibit P-28 itself is a bogus one. There is absolutely no reason for the accused to have created a false invoice unless the amount is inflated. The learned counsel argued that there are several other instances where betelnuts of the same quantity covered under this transaction were purchased for nearly the same amount shown in the invoice, exhibit P-28, and they were accepted by the income-tax authorities. Though there is some force in this contention, it cannot be said that in some other transactions, the income-tax authorities accepted the amounts mentioned in the present invoice as not being inflated. It may be that in the other cases, the income-tax authorities could not successfully detect the truth or otherwise of those transactions. I am of the view, so far as this transaction is concerned, that there must have been a transaction between the firm of P.W. 5 and accused 1-firm, but the amount has been inflated and, therefore, the return in respect of this transaction does not give the correct figure.

4. M/s. Panchanan Mullick :

In respect of the alleged transaction with this firm, accused 1-firm produced an invoice, exhibit P-33 for Rs. 10,667'12, dated February 28, 1962. The goods concerned with this invoice were shown to have been cleared at Nagapattinam Port under bill of entry No, 80 dated February 21, 1962. So far as this transaction is concerned, this firm has been assessed to sales tax by the Deputy Commercial Tax Officer, Nagapattinam, and a demand was made for Rs. 223.34. P.W. 6, Purnachandra Mallick, a partner of the firm, appears to have accepted the transaction and enclosed a demand draft for Rs. 223.34. According to the prosecution, this invoice is a fabricated invoice and, in any event, the amount mentioned therein was inflated. P.W. 6 stated that his firm was doing business in oils, pulses and spices and that they also used to import goods. He stated that exhibit P-33, the invoice, was not issued by his firm and that it was a forged document. P.W. 6 also stated that they never sold 18 bags of betelnuts for Rs. 10,667.12 to accused 1-firm on February 28, 1962, as shown in exhibit P-33 or at any other time. He further stated that he did not receive any remittance from accused 1-firm. But, however, he admitted that in 1961, his firm imported betelnuts, that the consignment was cleared at Bombay Port and the same was sold to Amritlal Company, Bombay, that they had another import licence for betelnuts but they gave it to a broker and that they had no information as to what the broker did with it. But, however, he would say that the broker must have cleared the goods and sold them. P.W. 6 admitted that his firm received a demand notice from the sales tax authorities of Madras State, but would say that though they had not effected any sales of imported betelnuts to Madras parties during the year 1961-62, they nevertheless paid the sales tax demanded of them because it was only about Rs. 200 and because they had effected sales during the previous years to Madras parties and they did not take the trouble of contesting the assessment or finding out for which year sales tax had been levied. The evidence of this witness does not appear to be wholly true. This witness would not even admit that he got some amount under the import licence. He would merely say that he gave it to the broker and he did not know what the broker did with it. This witness suppresses the truth. It is quite clear from the sales tax demanded from him (P.W.6) that this transaction was effected between the firm of P.W. 6 and accused 1-firm, but it is not known whether this transaction was effected personally or through a broker. It is the case of the accused that the transaction was effected through the broker. But, however, according to accused 1-firm, they paid the entire money into the hands of the broker. As already pointed out, it is surprising that when such large amounts were handed over to a broker, they had not obtained any receipt for such payment. The brokers stated in general that they had not received any money from accused 1-firm though they stated that there were certain transactions as brokers. In this context, the prosecution relies upon the transaction between M/s. Indo-Foreign Agents (P.) Ltd. and Messrs. Tolsaria and Company where the same quantity of betelnuts was sold for Rs. 5,4251.16. According to the prosecution, therefore, accused 1-firm had inflated to the extent of about Rs. 5,000 and odd and, to that extent, the return submitted by accused 1-firm is false. There is some force in this argument. The sale of the same quantity of betelnuts, during that period, by Messrs. Indo-Foreign Agents (P.) Ltd. to Messrs. Tolsaria and Company gives an indication about the probable price of the quantity. I am, therefore, of the view that there was inflation in the return and verification submitted by accused 1-firm to the extent of Rs. 5,000 and odd. 5. Messrs. Sen Brothers : The accused produced exhibit P-37, an invoice for Rs. 10,880.64 dated March 1, 1962, showing bill of entry No, 85 dated February 21, 1962. According to the prosecution, this invoice is a fabricated one. P.W. 7, Kalipadapal, the manager of Messrs. Sen Brothers, stated that the business in the name, 'Messrs. Sen Brothers', is carried on by Sri Satyaranjan Sen as a proprietary concern. He further stated that between January and March, 1962, his proprietor, Sri Sathyaranjan Sen, imported 18 bags of betelnuts and that exhibit P-40 is the document relating to the same. As per exhibit P-41, the counterfoil copy of the invoice, 18 bags were sold to Nataraja Trading Company, No. 87, Mount Road, Madras, on April 13, 1962. P. W. 7 stated that exhibit P-37 produced by the accused was not the invoice prepared by his firm, that it was fabricated and that it is signed by one Rattanlal. P. W. 7 would state that there was no such person concerned with their firm. P. W. 7 also stated that their invoices are not similar to exhibit P-37 and that they never had any transaction with the accused nor had they received any money under the invoice, exhibit P-37.

Exhibit P-41, the invoice produced by P. W. 7, would show that they sold betelnuts to Nataraja Trading Company for Rs. 1,080, that they got a profit of only Rs. 583.88, and that they got the amount in cash through broker. Exhibit P-40, the bill of entry, shows that betelnuts were imported from Malaysia and they were cleared at Nagapattinam Sea Port by accused 1-firm as the Custom House agent for Messrs. Sen Brothers. Exhibit P-40 further shows that the value of the goods so imported was Rs. 530.70 for which amount the licence was granted in favour of Messrs. Sen Brothers, Exhibit P-40 further shows that Rs. 4,800.82 was paid as total duty. It, therefore, appears that a sum of Rs. 5,331.40 was actually paid at the time of clearance. The invoice would show that the accused purchased the quantity for Rs. 10,880.64, the difference being about Rs. 5,550. The prosecution would say that the amount inflated will be about Rs. 5,500. We have to take into consideration in this context that the accused must have paid some amount to Messrs. Sen Brothers for using their licence. Exhibit P-41 shows that a sum of Rs. 1,080 was received from the brokers and that this must be the amount, in all probability, paid by the accused through the brokers to Messrs. Sen Brothers. If this figure is taken to be correct, the accused could have inflated the amount to the extent of about Rs. 4,000. The brokers would say that they never received any amount from the accused. They merely introduced the accused to the Calcutta parties and so far as the payment of money is concerned, they had nothing to do. That the amount has been inflated to the extent of Rs. 4,000 is of course dependent upon the acceptability of exhibit P-41, the invoice produced by Messrs. Sen Brothers.

22. The Deputy Commercial Tax. Officer, Nagapattinam, assessed Messrs. Sen Brothers for the sales in respect of this transaction of Rs. 10,880.64 and sent a demand notice for Rs. 229.62. P. W. 7 on behalf of Messrs. Sen Brothers accepted the demand and sent a draft for Rs. 229.62. The learned counsel for the accused urged that P. W. 7 accepted the sales for Rs. 10,880.64 and without any demur paid the sales tax, and, therefore, the amount shown by the accused in the invoice, exhibit P-37, must be deemed to be correct. Though, as already pointed out elsewhere, the argument seems to have some force, yet from the evidence of P. W. 7 it appears that he was not aware of any demand made by the sales tax authorities and that probably his firm would have been assessed to sales tax on the information given by the accused. But the firm had nothing to do with the assessment nor did they send any draft for Rs. 229.62.

23. It appears to be doubtful whether Messrs. Sen Brothers received the demand notice from the sales tax authorities though they were assessed to sales tax. The acknowledgment in respect of the demand notice, exhibit D-4(a), by Messrs, Sen Brothers contains only the Nagapattinam postal stamp. It does not contain the Calcutta stamp. Messrs. Sen Brothers have their business firm only in Calcutta. It, therefore, appears to my mind that sales tax might have been paid by some one, most probably by accused 1-firm on behalf of Mersrs. Sen Brothers. Some one has signed the acknowledgment for Messrs. Sen Brothers. This acknowledgment was not put to P. W. 7 when he was in the box though this document has been marked by the accused as their exhibit. I have already noted that P.W. 7 had emphatically denied either having received the demand notice or having paid the sales tax. As admittedly there were transactions between the firm of P. W. 7 and a firm in Madras, though fictitious (Nataraja Trading Company), the assessment of sales tax must have been made in the name of Messrs. Sen Brothers and someone interested must have paid the sales tax as already pointed out by me, without Messrs. Sen Brothers knowing about it. Thus, I find that accused 1-firm had transactions with Messrs. Sen Brothers in respect of this item and the amount mentioned in the invoice has been inflated and, therefore, the return and verification submitted by accused 1-firm to the extent of the inflation must be false.

24. In respect of those five transactions, the learned counsel appearing for the accused, Sri T. V. Ramanathan, as observed by me elsewhere, strongly relied upon the fact that similar quantities of betelnuts were purchased for similar sums as evidenced by exhibit P-19 and such transactions were accepted by the income-tax authorities and, therefore, contended that the submission of returns with similar amounts in respect of these transactions cannot be false. I have already observed that the income-tax authorities, during their investigation, in respect of those items covered under exhibit P-19, could not get sufficient materials to include those transactions also as false. It is also significant to note that the same quantities of betelnuts were sold by Messrs. Indo-Foreign Agents (P.) Ltd. to Messrs. Tolsaria and Company for Rs. 5,425.16 as borne out by exhibit P-26 and this would give an indication that a sum of Rs. 11,000 and odd claimed by the accused is undoubtedly inflated and false.

25. The learned counsel also strenuously urged that it will not be safe to depend upon the accounts of the Calcutta firms and that their account books might not show the true state of affairs and, therefore, it would be unsafe to declare the returns submitted by the accused as false when the accounts of the Calcutta firm could not be true. This argument cannot avail in respect of Ramkumar Ramnarayan. This firm is found to be a fictitious firm. This firm was not traced at all. There is no licence in the name of Ramkumar Ramnarayan for importing betelnuts; nor is there any evidence to show that these goods were cleared at any sea port, either in Calcutta or in Nagapattinam. The case of the accused is that the betelnuts were delivered at Nagapattinam by the brokers. They are not able to say as to when, by what means and on what date, they got delivery of the betelnuts. Therefore, so far as the transaction with Ramkumar Ramnarayan is concerned, there cannot be any doubt that the return submitted by the accused must be false and it is also doubtful whether there was a transaction at all with Ramkumar Ramnarayan and whether the accused did purchase betelnuts by payment of Rs. 10,987'10. Similarly, this argument will not avail also in respect of the transaction with Messrs. Indo-Foreign Agents (P.) Ltd. It is clear from the evidence, as pointed out earlier, that Messrs. Indo-Foreign Agents (P.) Ltd., never had any transaction covered under the invoice, exhibit P-22, produced by the accused. On the other hand, it is established from the documentary evidence that Messrs. Indo-Foreign Agents (P.) Ltd. had imported 13 bags of betelnuts under the bill of entry, exhibit P-25, and cleared them at the Calcutta Sea Port and all the 13 bags were sold to Messrs. Tolsaria and Company of Calcutta on October 14, 1961, under invoice copy, exhibit P-26, and, therefore, in respect Of this transaction, there cannot be any doubt that the return submitted by the accused is false. I have no reason to doubt the genuineness of accounts maintained by Messrs. Indo-Foreign Agents (P.) Ltd.

26. So far as the other transactions, namely, with Messrs. Jagannath Prasad Agarwallah, Messrs. Panchanan Mullick and Messrs. Sen Brothers are concerned, it appears that these firms had sold their licences for importing betelnuts to Madras parties. The goods in these cases were cleared at Nagapattinam Sea Port by the accused. The duty was paid by accused 1-firm for clearing the goods. It is possible that these three firms might not have entered the exact amount received by them as the sale of their licences was itself improper, if not illegal. Even assuming that the accounts maintained by these three firms were not wholly true, the accused cannot escape from the liability of having submitted returns, supported by fabricated invoices. I am, therefore, of the view that the return submitted by accused 1-firm in respect of these transactions are false.

27. The learned counsel for the accused rightly contended that it was not enough to sustain the conviction under Section 277 of the Income-tax Act by merely showing that the return was false, but it must also be established that each one of the accused knew that the return made is false to his knowledge. There cannot be any doubt that in cases like this, those individuals who knew, before the return was submitted that it contained false particulars, would alone be liable under Section 277 of the Income-tax Act. The learned counsel also contended that the firm cannot be convicted under Section 277 of the said Act as the firm has no mind and it cannot be said that the firm had also knowledge that the return was false. Elaborate arguments were advanced by both sides about the liability of the company and they relied upon the case law on the subject. I shall deal with this at the appropriate stage.

28. Section 277 of the Income-tax Act runs thus :

'If a person makes a statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable with rigorous imprisonment for a term which may extend to two years:.........'

29. It is, therefore, clear from this section that the prosecution has to establish that not only the verification made by the accused in this case was false but also that every one of them had made such verification with the belief and knowledge that such verification was false or at least that they believed such verification not to be true. The learned Chief Presidency Magistrate rightly acquitted accused 4 to 9 on the ground that though they were partners of the firm, belief or knowledge could not be attributed them as there was nothing to show that they took any part in verification of the return. Applying the same standard, I am of the view that there is no material to hold that accused 3, A.D. Javaveerapandia Nadar, had any belief or knowledge that the verification in respect of the return submitted was false. It may be true that amongst the partners, he might have been more active than accused 4 to 9 who were also partners, but that by itself would not make him liable unless there are circumstances to indicate that accused 3 had a hand in the verification or that he knew or believed that the verification was false or that it was untrue. I am, therefore, of the view that accused 3 is entitled to an acquittal.

30. So far as accused 2 is concerned, there is no doubt that it was he who submitted the return and made verification on behalf of the firm. In the normal course, a person who makes the return with a verification under his signature will be deemed to be liable for the contents of the return and the verification. Accused 2 in his verification has stated that the return submitted by him on behalf of the firm was true to his knowledge and belief. It is not the case of accused 2 that he merely submitted the return without knowing the truth or otherwise of the return and the verification made by him. But his case is that all the transactions entered in the return were true. Therefore, it is not open for accused 2 to say that he could not have knowledge or belief that the return was not true.

31. It is contended by the learned counsel for the accused that since the authorities had, after investigation, ultimately agreed to compound the matter by adding about Rs. 60,000 to the income shown in the return, the prosecution should not have been instituted, while the Special Public Prosecutor, Sri C.K. Venkatanarasimhan, contended that the very fact that the accused agreed to add Rs. 59,000 would indicate that the return submitted by the accused could not be true and that otherwise, there is no reason for the accused to submit to an addition to the income shown in the return. I do not think that there is force in the argument of either. This circumstance cannot be taken at all into consideration either to fix the liability as contended by the Special Public Prosecutor or to exonerate the accused as contended by the defence counsel. The accused might have agreed to an additional figure to avoid further trouble, and this would not mean that the return or the verification of the return must be necessarily false. Similarly, it cannot be said that since the accused agreed for adding some amount, the prosecution cannot be instituted. What we are concerned in the prosecution is whether the verification was false, and the verification was made with the knowledge and belief that such verification was false. I am, therefore, of the view that the conviction of accused 2 is correct.

32. The more important point in this case to be considered is the liability of accused 1-company. It is not in dispute that the company is a person as defined under Section 2(31) of the Act. It runs thus:

' 'person' includes-

(i) an individual,

(ii) a Hindu undivided family,

(iii) a company,

(iv) a firm,

(v) an association of persons or a body of individuals, whether incorporated or not,

(vi) a local authority, and

(vii) every artificial juridical person, not falling within any of the preceding sub-clauses.'

33. Company is defined under Section 2(17) which is as follows:

' 'company' means-

(i) any Indian company, or

(ii) any association, whether incorporated or not and whether Indian or non-Indian, which is or was assessable or was assessed under the Indian Income-tax Act, 1922 (11 of 1922), as a company for the assessment year commencing on the 1st day of April, 1947, or which is declared by general or special order of the Board to be a company for the purposes of this Act.'

34. As the learned counsel, in the course of his arguments, has submitted that accused 1 cannot be considered to be a 'company' but a 'firm', it would be relevant to note the definition of 'firm' under the Act. Section 2(23) of the Act adopts the definition of 'firm', 'partner' and 'partnership' as defined in the Indian Partnership Act, 1932. Section 4 of the Partnership Act, 1932, is as follows ;

' 'Partnership' is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.

Persons who have entered into partnership with one another are called individually 'partners' and collectively 'a firm', and the name under which their business is carried on is called the 'firm name'.'

35. The 'act of a firm' is defined under Section 2 of the Partnership Act as 'any act or omission by all the partners, or by any partner or agent of the firm, which gives rise to a right enforceable by or against the firm.'

36. I will show at a later stage that, so far as this case is concerned, the definition of 'company' or 'firm' may not have much relevance as, as already pointed out by me, the definition of 'person' under the Act includes both 'company' and 'firm'.

37. The liability of a company in a prosecution for the offence committed by its agents had come into question in a number of cases, both English and Indian.

38. In the decision in Director of Public Prosecutions v. Kent and Sussex Contractors Ltd., [1944] KB 146 , a question arose whether a limited company, being a body corporate, can in law be guilty of the offences charged against the respondents therein, or whether a company is incapable of any act of will or state of mind such as that laid in the information (charge). In that case, the Director of Public Prosecutions laid information against the respondents therein, namely, Kent and Sussex Contractors Ltd., charging the company that they, with intent to deceive, made use of a document, namely, a fortnightly vehicle record in respect of a specified vehicle, which was false in a material particular in that it mis-stated the journeys and mileage done by the vehicle in question during a particular period and that, in furnishing information on the appropriate form in respect of the said vehicle for the purposes of the Motor Fuel Rationing Order, 1941, they made a statement which they knew to be false in a material particular contrary to regulation 82(2) of the Defence (General) Regulations, 1939. It was proved at the hearing that the respondent-company sent to the proper authority on the prescribed form a fortnightly vehicle record containing the alleged mis-statement, the document being signed by the transport manager of the company. The Justices found that the record was false in the material particular alleged to the knowledge of the servants of the company, but they held that a body corporate could not in law be guilty of the offences charged, since an act of will or state of mind, which could not be imputed to a corporation, was implicit in the commission of those offences. They accordingly dismissed the complaint laid by the Director of Public Prosecutions.

39. Thereupon, the Director of Public Prosecutions filed an appeal. In that appeal, it was contended on behalf of the appellant that the company is a fictional entity and the ordinary doctrine relating to master and servant cannot be applied when dealing with criminal offences committed by the officers of a company and that in ordinary cases it may be right to say that a master cannot be held responsible for the criminal acts of his servants, because the servant is a separate person from the master, but a company can only commit offences by its servants. On behalf of the appellant, it was argued that though in Rex v. Cory Brothers and Co., [1927] 1 KB 810 , it was held that an indictment will not lie against a company either for felony or a misdemeanour involving personal violence, yet, as decided in Triplex Safety Glass Co. Ltd. v. Lancegaye Safety Glass (1934) Ltd., [1939] 2 All ER 613 (CA), it was possible to prove against a limited company all the constituent elements of the crime of publishing a defamatory libel, the vital ingredients of which is a malicious state of mind. Based upon this decision, it was contended by the counsel for the appellant therein that if a company can be guilty of malice, it must be assumed to have that kind of fictitious mind which can be affected with malice and that equally so, it can have knowledge and an intent to deceive and so can be held to be guilty of the offences charged in that case. On the contrary the counsel for the respondent-company contended that a company can only be held to be responsible in respect of the intention or knowledge of its agents, the officers of the company, to the same extent as a private individual is responsible for the acts of his agent, and, therefore, that the respondent-company cannot be held to form the intention or to have the knowledge necessary to constitute the offences charged. Viscount Caldecote C.J., after having referred to the case law, observed that though a company cannot be found guilty of certain criminal offences, such as treason or other offences for which it is provided that death or imprisonment is the only punishment, yet a company can be convicted for certain offences. The learned judge goes on giving certain offences, in respect of which a corporation can be convicted. The learned judge referred to the decision in Chuter v. Freeth & Pocock Ltd. [1911] 2 KB 832 , where Lord Alverstone C.J. held that the corporation can give a warranty through its agents, and through its agents it can believe or not believe, as the case may be, that the statements in the warranty are true and that similarly in regard to actions which, in the case of an individual, would involve an inquiry into a state of mind, such as fraud, libel or malicious prosecution, a corporation will be liable in all those actions. The learned judge agreed in toto with the principle laid down in that decision. After having referred to the decisions in Pearks, Gwnston & Tee Ltd. v. Ward, [1902] 2 KB 1, Mousell Bros. Ltd. v. London and North Western Rail Co., [1917] 2 KB 836 , Pharmaceutical Society v. London and Provincial Supply Association, [1880] 5 App Cas 857 (HL) and Law Society v. United Service Bureau Ltd., [1934] 1 KB 348, the learned judge observed as follows:

'Bearing that in mind, I think that a great deal of Mr. Carey Evans' argument on the question whether there can be imputed to a company the knowledge or intent of the officers of the company falls to the ground, because although the directors or general manager of a company are its agents, they are something more, A company is incapable of acting or speaking or even thinking except in so far as its officers have acted, spoken or thought.'

40. In the same case, in respect of an argument by the counsel for the respondent that a company cannot have mens rea and that a mens rea cannot be imputed to it even if and when its agents have been shown to have one, it was observed by the learned judge that the mens rea in that case was not relevant, but, however, stated that the offences created by the regulation are those of doing something with intent to deceive or of making a statement known to be false in a material particular and, therefore, the company will be liable for the acts done by its agents.

41. Macnaghten J., in the same decision, stated as follows:

'If the responsible agent of a company, acting within the scope of his authority, puts forward on its behalf a document which he knows to be false and by which he intends to deceive, I apprehend, that, according to the authorities that my Lord has cited, his knowledge and intention must be imputed to the company.'

42. Hallett J., while agreeing with the observations made by the other two learned judges, after referring to the expression 'any person' in regulation 82, including a limited liability company, observed as follows :

'Inasmuch as a body corporate, being a fictitious person, can only act through a servant or agent, it can never commit a tort or a crime except through the act or omission of a servant or agent.'

43. It is worthwhile to note the observations made by the learned judge as to how the principle relating to the liability of a body corporate for torts or crimes had developed in due course:

'With regard to the liability of a body corporate for torts or crimes, a persual of the cases shows, to my mind, that there has been a development in the attitude of the courts arising from the large part played in modern times by limited liability companies. At one time the existence, and later the extent and conditions of such a body's liability in tort was a matter of doubt, due partly to the theoretical difficulty in imputing wrongful acts or omissions to a fictitious person and it required a long series of decisions to clear up the position. Similarly, the liability of a body corporate for crimes was at one time a matter of doubt, partly owing to the theoretical difficulty of imputing a criminal intention to a fictitious person and partly to technical difficulties of procedure. Procedure has received attention from the legislature, as for instance, in Section 33 of the Criminal Justice Act, 1925, and the theoretical difficulty of imputing criminal intention is no longer felt to the same extent.'

44. In Rex v. I. C. R. Haulage Ltd., [1944] 1 All ER 691 (CCA), it was held that an indictment for a common law conspiracy to defraud will lie against a limited company. In that case, the question arose whether a limited company can be indicted for conspiracy to defraud. The appellant-company therein was charged along with others at Maidstone Assizes with a common law conspiracy to defraud. Before the hearing of the charge, objection was taken on behalf of the company that an indictment alleging a common law conspiracy to defraud would not lie against a limited company. The Commissioner of Assizes refused to quash the indictment and the jury convicted the company who were ordered to pay a fine. The company appealed. In the course of the arguments in that case, it was conceded by counsel for the company that a limited company can be indicted for some criminal offences, while the counsel for the Crown also conceded that there were some criminal offences for which a limited company cannot be indicted. So, the controversy centered round the question where and on what principle the line must be drawn and on which side of the line an indictment such as the company's liability to a common law conspiracy to defraud falls. Counsel for the company contended that the true principle was that an indictment against a limited company for any offence involving as an essential ingredient 'mens rea' in the restricted sense of a dishonest or criminal mind, must be bad joy the reason that a company, not being a natural person, cannot have a mind honest or otherwise and that, consequently, though in certain circumstances, it is civilly liable for the fraud of its officers, agents or servants, it is immune from criminal process. Counsel for the Crown contended that a limited company, like any other entity recognized by the law, can as a general rule be indicted for its criminal acts which from the very necessity of the case must be performed by human agency and which in given circumstances become the acts of the company, and that for this purpose there was no distinction between an intention or other function of the mind and any other form of activity. It was further contended by the Crown that the offences for which a limited company cannot be indicted are exceptions to the general rule arising from the limitations which must inevitably attach to an artificial entity, such as a company. Included in these exceptions are the cases in which, from its very nature, the offence cannot be committed by a corporation, as, for example, perjury, an offence which cannot be vicariously committed, or bigamy, an offence which a limited company, not being a natural person, cannot commit vicariously or otherwise. A further exception, but for a different reason, comprises offences of which murder is an example, where the only punishment the court can impose is corporal, the basis on which this exception rests being that the court will not stultify itself by embarking on a trial in which, if a verdict of guilt is returned, no effective order by way of sentence can be made. Stable J., who pronounced the judgment on behalf of the court stated :

'In our judgment these contentions of the Crown are substantially sound and the existence of these exceptions, and it may be that there are others, is by no means inconsistent with the general rule.'

45. While agreeing with the decision in Director of Public Prosecutions v. Kent and Sussex Contractors Ltd., Stable J. observed as follows which is worthwhile to note:

'We are not deciding that in every case where an agent of a limited company acting in its business commits a crime the company is automatically to be held criminally responsible. Oar decision only goes to the invalidity of the indictment on the face of it, an objection which is taken before any evidence is led and irrespective of the facts of the particular case.

Whether in any particular case there is evidence to go to a jury that the criminal act of an agent, including his state of mind, intention, knowledge or belief is the act of the company, and in cases where the presiding judge so rules whether the jury are satisfied that it has been so proved, must depend on the nature of the charge, the relative position of the officer or agent and the other relevant facts and circumstances of the case.'

46. In Moore v. I. Bresler Ltd., [1944] 2 All ER 515 (KB), it was held that the officers were acting within the scope of their employment in making the sales and the returns and the fact that these were made with intent to defraud the company did not render the officers any the less agents of the company acting with authority. In that case, the secretary of the respondent-company, who was also the general manager and the sales manager of the company's Nottingham branch, sold, with the object of defrauding the company, certain of the company's goods intended for sale. The secretary, who alone kept the accounts, and the general manager made certain returns in respect of purchase tax on the sales which were false in material particulars and made with intent to deceive contrary to the provisions of the Finance Act. The company and the two officers of the company were charged with the appropriate offences under the Act. The company was convicted but in appeal to Quarter Sessions the convictions were discharged on the ground that the sales were not made by the officers of the company as the agents of or with the authority of the company but in fraud of the company. Viscount Caldecote L.C.J., following the principles laid down in Director of Public Prosecutions v. Kent and Sussex Contractors Ltd., and in R. v. I. C. R, Haulage Ltd., while setting aside the order of acquittal by the Quarter Sessions observed that when both the secretary of the respondent-company and the general manager of the Nottingham branch together, sold goods which were the property of the respondent-company and intended for sale, they were acting within the scope of their authority; and the sales which were effected were made by them as agents and with the authority of the respondents and that, therefore, by their act, they made the company also liable for the offence which was committed.

47. Subsequently, in Bollon (Engineering) Co. v. Graham and Sons, [1957] 1 QB 159 , Denning L. J., while approving the principle laid down in the earlier cases cited above, stated clearly and succinctly, which is the present position of law that a company can be indicted for the criminal act of its agents, the liability depending upon the nature of the charge, the relative position of the agents and other relevant facts.

48. In Harish Chandra v. State of Madhya Pradesh, : [1965]1SCR323 , it was held that the association can be held liable for contravention of the Madhya Bharat Iron, Steel and Scrap (Production, Procurement and Distribution) Control Order, 1949. In that case, the accused-appellant was the president of the Scrap Dealers Association at Indore which was an unincorporated body consisting of wholly retail dealers. Sales of scrap iron were effected by the association through their employees at prices fixed by that body but these prices were in excess of the prices fixed by Government for sales by the association. The accused was prosecuted for contravention of the provisions of the Iron and Steel (Scrap Control) Order, 1943, by selling or causing to be sold scrap iron to different customers at a rate higher than that was authorised by notification. It was held that as the sales in question were not sales by individual dealers who composed the association but were sales by and through the association, the association can be held liable for contravention of the order and that it was the association that was given the facility of obtaining scrap at more favourable prices than dealers and it was that body which was subjected to control in the shape of having to sell what it had purchased from controlled sources at the prices specified in column II. It was further held that though the appellant was merely the president of the association, he could be held liable for the sales effected by its employees as under Section 8 of the Essential Supplies (Temporary Powers) Act, 1946, any person who abets the contravention of any order shall be deemed to have contravened the order. The principle enunciated in this decision is that the association can be made liable for the acts done by its agents for the contravention of the order.

49. In the decision in State of Maharashtra v. Syndicate Transport Co. (P.) Ltd., : AIR1964Bom195 it was held that a corporate body ought to be indictable for criminal acts or omissions of its directors, or authorised agents or servants, whether they involve mens rea or not, provided they have acted or have purported to act under authority of the corporate body or in pursuance of the aims or objects of the corporate body and that the question whether a corporate body should not be liable for criminal action resulting from the acts of some individuals must depend on the nature of the offence disclosed by the allegations in the complaint or in the charge sheet, the relative position of the officer or agent vis-a-vis the corporate body and the other relevant facts and circumstances which could show that the corporate body, as such, meant or intended to commit that act. The learned judge has elaborately discussed both the English law and the Indian law on the subject. In paragraph 17 of the judgment (page 200) following the English and Indian cases, the learned judge has observed that a company cannot be indictable for offences like bigamy, perjury, rape, etc., which can only be committed by a human individual or for offences punishable with imprisonment or corporal punishment.

50. In the decision in Express Newspapers v. Raisina Publications (P.) Ltd., AIR 1964 P&H; 428it was held that a corporation like a private limited company doing business as a printer and publisher of a newspaper cannot escape vicariousliability for a publication if it amounted to a contempt of court and that theagents and officers who act for the corporation are liable to punishment.

51. It was contended by the learned counsel for the accused that a firm is different from a company, that the law applying to the company will not apply to a firm of partners and that since accused 1 is a partnership firm, it cannot be held liable for the acts or omissions of the partners.

52. The learned counsel relied upon the decision in Dulichand Laxminarayan v. Commissioner of Income-tax, [1966] 29 ITR 535. It is, of course, true that in this case, it is held that a firm is not a 'person' and as such is not entitled to enter into a partnership with another firm or Hindu undivided family or individual. The learned counsel relied strongly upon the following passage in the said case:

'It is clear from the foregoing discussion that the law, English as well as Indian, has, for some specific purposes, some of which are referred to above, relaxed its rigid notions and extended a limited personality to a firm. Nevertheless, the general concept of partnership, firmly established in both systems of law, still is that a firm is not an entity or 'person' in law but is merely an association of individuals and a firm name is only a collective name of those individuals who constitute the firm. In other words, a firm name is merely an expression, only a compendious mode of designating the persons who have agreed to carry on business in partnership. According to the principles of English jurisprudence, which we have adopted, for the purposes of determining legal rights 'there is no such thing as a firm known to the law' as was said by James L.J. in Ex parte Corbett: In re Shand, [1880] 14 Ch D 122. In these circumstances, to import the definition of the word 'person' occurring in Section 3(42) of the General Clauses Act, 1897, into Section 4 of the Indian Partnership Act will, according to lawyers, English or Indian, be totally repugnant to the subject of partnership law as they know and understand to be. It is in this view of the matter that it has been consistently held in this country that a firm as such is not entitled to enter into partnership with another firm or individuals.'

53. The decision was rendered in completely different circumstances. The facts in that case are these : In connection with the assessment for the assessment year 1949-50 of Dulichand Laxminarayan, an unregistered firm, an application was made under Section 26A of the Income-tax Act before the Income-tax Officer for its registration as a firm constituted under a deed of partnership dated the 17th February, 1947. The Income-tax Officer, finding that Dulichand Laxminarayan constituted under the aforesaid deed of partnership consisted of three firms, one Hindu undivided family business and one individual and taking the view that a firm or a Hindu undivided family could not as such enter into a partnership with other firms or individuals, held that the said Dulichand Laxminarayan could not be registered as a firm under Section 26A and, accordingly, rejected the application. On appeal, the Appellate Assistant Commissioner while holding that there was no legal flaw in the constitution of the bigger firm of Dulichand Laxminarayan consisting of the other smaller firms, however, found that the application for registration had not been signed personally by all the partners of the three smaller firms as required by Section 26A of the Act, and as there was no valid application for registration, dismissed the appeal. Then the assessee appealed to the Income-tax Appellate Tribunal. The Tribunal agreed with the Appellate Assistant Commissioner that a valid partnership had been brought into existence but reversed the decision of the Appellate Assistant Commissioner on the ground that as all the five executants of the deed had signed the application for registration, the requirements of law had been satisfied. Accordingly, the Tribunal directed registration of the firm. On the application of the Commissioner of Income-tax, Madhya Pradesh, the Tribunal drew up a statement of case and submitted to the High Court of Nagpur the following question of law, namely :

Whether on the fact of the case the assessee is entitled to registration under Section 26A of the Income-tax Act ?

54. The High Court answered the question in the negative. But, however, in view of the importance of the question involved, gave a certificate of fitness for appeal to the Supreme Court.

55. Thus, the question on reference in that case is completely different from the point that arises in the present case. The question did not arise in that case whether a firm of partnership for the tax purposes is liable as an assessee. The reference has been answered in that case only with reference to the capacity of a firm of partnership entering into a partnership with another firm or individual. In that context, it is pointed out that the firm is not an entity and, therefore, as such, a firm cannot enter into partnership with another firm of individuals.

56. In this context, it will be relevant to note once again and refer to the definition of 'person' under Section 2(31) of the Income-tax Act, which includes a company, a firm and an association of persons or a body of individuals, whether incorporated or not, for the purpose of assessment.

57. In the decision in Commissioner of Income-tax v. A. W. Figgies and Co., : [1953]24ITR405(SC) it is held that for purposes of assessment to income-tax a firm is a different entity distinct from its partners, and a mere change in the constitution of the firm does not bring into existence a new assessable unit or a distinct assessable entity and that in spite of the changes in the constitution of the firm, the business of the firm as originally constituted continued right from its inception to the time it was succeeded by the limited company and the firm was the same unit all through, and the reconstitution of the firm did not make it a different unit.

58. In the decision in Kapurchand Srimal v. Tax Recovery Officer, : [1969]72ITR623(SC) it is held, that when a Hindu undivided family is the assessee, the manager cannot be deemed to be an assessee where the income assessed is of the Hindu undivided family. In that case, the manager of a Hindu undivided family was authorised to sign and verify the return of income and a notice under the Act was served upon him as the manager of the Hindu undivided family. It was held that the manager of a Hindu undivided family cannot be treated as an assessee and, as such, the manager cannot be arrested and detained in prison for the non-payment of tax by the Hindu undivided family, which is the assessee. This decision emphasises the fact that a Hindu undivided family which is a combination of coparceners can be made liable for failure to pay tax.

59. In the decision in Agrawal Trading Corporation v. Assistant Collector of Customs, [1972] 42 Comp Cas 532 (SC) it was held that a company for the purpose of Section 23-C of the Foreign Exchange Regulation Act is defined to mean any body corporate and includes a firm or other association of individuals and a director in relation to a firm means a partner in the firm. It was further held therein that once it is found that there has been a contravention of any of the provisions of the Foreign Exchange Regulation Act read with the Sea Customs Act by a firm, the partners of it who are in charge of its business or are responsible for the conduct of the same, cannot escape liability, unless it is proved by them that the contravention took place without their knowledge or they exercised all due diligence to prevent such contravention. In paragraph 7 of the judgment (page 540), in respect of the contention raised by the counsel for the appellant therein that the firm is not a legal entity and that it cannot be a person within the meaning of Section 8 of the Foreign Exchange Regulation Act or of Section 167 of the Sea Customs Act, the Supreme Court observed that it is of course true that no definition of 'person' is given in either of these Acts, but the definition in Section 2(42) of the General Clauses Act, 1897, or Section 2(3) of the Act of 1868 would be applicable to the said Acts in both of which 'person' has been defined as including any company or association or body of individuals whether incorporated or not, and in respect of a further contention that a firm is not a natural person and has no legal existence, the Supreme Court negatived and held that a company will include a body corporate, a firm or other association of individuals and that a director, in relation to a firm, would mean a partner in the firm.

60. The law on the subject can be summarised as follows :

A corporation could not be subjected to bodily punishment. It could, however, be fined; and to this day fine remains the only mode of punishment applicable to a corporation. Since fine only is the type of punishment appropriate to a corporation, if a crime is not punishable with fine, a corporation cannot be convicted of it. The acts of the organs of the corporation were attributed to the corporation and treated for legal purposes as though they were acts of the corporation itself. However, when will an act or mental strain be imputed to a company as its own, is a question that has to be considered by a court, depending upon the facts and circumstances of each case. A company can commit crimes only by its agents, who must themselves be responsible for the crime, and it is a question in each case whether the act of the agent, including his state of mind, intention, knowledge or belief can be imputed to the corporation, It depends upon the nature of the charge, the position of the officer or agent relative to the corporation and the other relevant facts and circumstances of the case.

61. A company cannot be guilty of any criminal offence which, by their very nature, can only be committed by natural persons (such as bigamy), nor of those which cannot be committed vicariously (such as perjury, bigamy, rape, homicide, etc.). A company cannot be indicted for a crime where the only punishment is death or imprisonment. A company may be guilty both of statutory and common law offences (of course in exceptional cases in respect of common law offences), even though the latter involves mens rea. A Corporation can be indicted for contempt and libel.

62. Wherever a duty is imposed by statute in such a way that a breach of the duty amounts to a disobedience of the law, then if there is nothing in the statute either expressly or impliedly to the contrary, a breach of the statute is an offence for which a corporation will be indicted, whether or not the statute refers in terms to corporations.

63. A statute which creates a criminal offence may expressly or by necessary implication define the particular state of mind which is an element of offence or it may be silent on this point. It is of utmost importance to the protection of the liberty of the subject and of the corporation or company to which such state of mind is imputed by fiction that a court shall always bear in mind that unless a statute either clearly or by necessary implication rules out mens rea as a constituent part of a crime, the court should not find a man guilty of an offence against the criminal law unless that person has a guilty mind. This principle will apply to the corporations also.

64. Applying those principles to the facts of this case and on the finding that accused 2 had submitted a false return knowing or believing such return to be false, accused 1-company will also be liable for the offence as such knowledge or belief can be imputed to accused 1-company, In the result, the conviction of accused 1 under charge No. 1 for an offence under Section 277 of the Income-tax Act and that of accused 2 under charges Nos. 2 and 3 for offences punishable under Section 277 of the Income-tax Act read with Section 34, Indian Penal Code, are confirmed, while the convictions and sentences of accused 3 under charges Nos. 2 and 3 are set aside. Accused 3 is acquitted.

65. So far as the sentences of accused 1 and 2 are concerned, I am of the view that the firms in Calcutta are not free from blame and they were also equally responsible for having sold the licences unauthorisedly, thus faciliating the accused in making false returns, through the brokers. Further, after the submission of the return, in the course of the enquiry, the matter has been compounded and the department agreed to assess the income agreed to by both the accused and the department. Taking these facts into consideration, I reduce the sentence of fine imposed on each of the accused to Rs. 250 under each conviction; in default, accused 2 will undergo simple imprisonment for one month. If the fine has already been paid by them, the excess will be refunded to them. As accused 3 is acquitted, the entire fine amount, if paid, will be refunded to him.

66. The appeal of accused 1 and 2 is dismissed with the modification mentioned above and the appeal of accused 3 is allowed.

C.A. No. 481 of 1972:

67. In this case, in respect of the same subject-matter in C. A. No. 466 of 1972 which has been just now disposed of, the accused were charged for having conspired to fabricate the evidence in support of the false return made by them. In this case also, nine accused were charged and, ultimately, accused 4 to 9 were acquitted and accused 1 to 3 alone were convicted by the learned Chief Presidency Magistrate.

68. In the course of my discussion in the previous case, I have found that the return was false and that the invoices produced by the accused could not be true. It is not necessary to repeat those facts as they have been referred to in my judgment in C. A. No. 466 of 72. The fabrication of evidence related to the invoices, exhibits P-20, P-22, P-28, P-33 and P-37. So far as exhibit P-20 is concerned, it has been clearly established by the prosecution that the firm mentioned in the invoice, namely, Ramkumar Ramnarayan, is a fictitious one and that it never existed. I have fully discussed about this in my judgment in C. A. No. 466 of 72. There cannot be any doubt that exhibit P-20 has been fabricated. Similarly, the partners of the Calcutta firms who gave evidence in this case had stated that the invoices relating to their firms, produced by the accused, namely, exhibits P-22, P-28, P-33 and P-37, are not the invoices belonging to those firms. There is no reason to disbelieve the evidence of those witnesses. I have also discussed about the evidence of the witnesses who spoke about these invoices in my judgment in C. A. No. 466 of 1972. But, however, for the reasons given by me in C. A. No. 466 of 1972, the convictions and sentences imposed on accused 3 cannot be sustained. When accused 4 to 9 were acquitted on the ground that they were sleeping partners and they were not acting, the same will apply to accused 3 also. It is true that accused 3, as found by the learned Chief Presidency Magistrate, took an active part in the business. But, so far as the returns and invoices are concerned, there is nothing to show that accused 3 also took part in it. It was accused 2 who submitted the returns; and the invoices also were produced by him in support of the returns. In any event, accused 3 would be entitled to the benefit of doubt and his convictions and sentences are set aside. The convictions of accused 1 and 2 under charges Nos. 1 and 3 to 5 under Section 120B. Indian Penal Code, Section 277 of the Income-tax Act, read with Section 34, Indian Penal Code (two counts), and Section 196 read with Section 120B, Indian Penal Code, respectively, are confirmed and for the reasons mentioned by me in C. A. No. 466 of 1972, I reduce the sentence of fine imposed on accused 1 and 2 to Rs. 250 under each count under charges Nos. 3, 4 and 5 ; in default, accused 2 will undergo simple imprisonment for one month. If the fine amount has already been paid by accused 1 and 2, the excess amount will be returned to them. If accused 3 has paid the fine amount, the entire amount will be refunded to him.

69. In the result, the appeal of accused 1 and 2 is dismissed with the modification mentioned above and the appeal of accused 3 is allowed.

C.A. No. 478 of 1972:

70. In this case, six accused were tried for offences under the Income-tax Act, for criminal conspiracy, etc., of whom accused 4 to 6 were acquitted. Accused 1-firm was convicted under charge No. 1 for an offence punishable under Section 277 of the Income-tax Act and accused 2 and 3, the partners of the firm, were convicted under charges 2 and 3 for an offence punishable under Section 277 of the Income-tax Act, read with Section 37, Indian Penal Code, and each of them was sentenced to pay a fine of Rs. 1,000 under each conviction.

71. The facts of the case are these: Accused 1-firm furnished to the Income-tax Officer, Nagapattinam, its return of income for the assessment year 1962-63 (accounting year 1961-62), along with the trading account and other statements, exhibits P-3 and P-5. The return with the verification was submitted under the signature of accused 2 on behalf of the firm. In that return, the income from the business has been declared at Rs. 1,85,213 whereas, according to the prosecution, the real income must have been Rs. 3,65,112. In the trading accounts submitted by the firm, it was stated that arecanuts were purchased for Rs. 18,42,926.06, during the year ending March 31, 1962. On investigation, it was found that in respect of the following purchases, either the firm mentioned therein was non-existent or the firms which existed did not sell arecanuts as shown in the accounts or the purchases were inflated in respect of the sale of arecanuts by certain firms:

Rs.1.Ramkumar Ramnarayan21,577.502.Messrs. R. K. Santosh3,968.523.Messrs. Jayashree Importers22,443.954.Messrs. Indo-Foreign Agents (P.) Ltd.10,969.505.Messrs. R. M. Jhunjhunwalla & Co.11,016.366.Messrs. Jaybharath Co. (P.) Ltd.10,681.927.Messrs. Mansukroy Hazarimal10,872.008.Messrs. K. H. Gupta & Co.32,054.009.M. R. Ranganathan Chettiar11,534.17

72. It is the case of the prosecution that party No. 1, namely, RamkumarRamnarayan, never existed and, therefore, the item of purchase shown inthe name of Ramkumar Ramnarayan is false, in consequence of which thereturn made in respect of that item is also false. The accused producedexhibit P-22, the invoice dated November 16, 1961, in respect of 30 bags forRs. 21,577.50. It is the case of the accused that they had purchased themthrough a Calcutta broker and the amount was handed over to them andthe amount found in the invoice was paid in cash to the broker. So far asthis firm is concerned, as already pointed out, the enquiries made by theIncome-tax Officers showed that this firm never existed in Calcutta. Thereis nothing to show from the invoice, exhibit P-22, that the cash was paidinto the hands of the broker. No broker has come forward to say that thisfirm, namely, Ramkumar Ramnarayan, was introduced to the accused. Ifreally the cash was paid into the hands of the broker, the accused musthave got a receipt. I do not think that such a large amount could havebeen paid into the hands of an unknown broker. The 30 bags of Penangwhole betelnuts were said to have been delivered at Nagapattinam. It isnot known as to by what mode those goods were delivered. Exhibit P-22(a)will also show that the acknowledgment in respect of a registered lettersent by P. W. 2, the Income-tax Officer, to Ramkumar Ramnarayan wasreturned unserved and this would indicate that the address of the said firmgiven in the invoice, exhibit P-22, could not be true. P. W. 4, Sriramulu,the Income-tax Officer, during the relevant period, who was deputed toinvestigate into this case stated that he inspected exhibit P-83, the Importand Export Register at Nagapattiuam for the relevant period and that hedid not find the name Ramkumar Ramnarayan mentioned as one of the importers of arecanuts. So far as this firm is concerned, even in the previous appeal (C. A. No. 466 of 72), I have discussed about the purchases made from this firm and held that this was a fictitious one and I have given reasons therefor. I am, therefore, of the view that the accounts relating to this firm, maintained by the accused, and the return and verification in respect of this item are false.

2. M/s R. K. Santosh :

73. In support of the alleged purchase from this firm, the accused produced the invoice, exhibit P-24, dated May 2, 1961, for Rs. 3,968.52. This invoice relates to six bags of betelnuts which were imported at Nagapattinara under the bill of entry, exhibit P-27, dated February 3, 1961, which shows that ten bags were imported at Nagapattinam. This invoice was purported to have been signed by one broker by name Swaminathan, The invoice would show that the goods were imported under the licence dated January 4, 1960, held by Santosh, for goods to be imported to the value of Rs. 500. Exhibit P-28(a), dated May 27, 1961, is the sale bill for Rs. 4,220 in respect of ten bags of betelnuts, at the rate of Rs. 422 per bag. This bill is made in the name of Messrs. S. K. Somasundara Nadar, Nagapattinam, South India. This is purported to have been signed by a partner of R.K. Santosh. P. W. 10, Ramkanth, Kajaria, the partners of Messrs. R.K. Santosh, stated that their firm imported ten bags of betelnuts on or about April 12, 1961, under bill of entry, exhibit P-27, and got the goods cleared at Nagapattinam Sea Port and that they sold the entire consignment for Rs. 4,220 under bill, exhibit P-28(a), dated May 27, 1961, to S. K. Somasundara Nadar, Nagapattinam. P.W. 10 further stated that exhibit P-24 produced by the accused was not the bill of their company, that they never issued a bill like that and that the bill is a bogus one. He also stated that they did not sell six bags of betelnuts to accused 1-firm as mentioned in exhibit P-24 and that they did not receive a sum of Rs. 3,968.52 from the accused. In cross-examination, this witness stated that the sale to Somasundara Nadar was not supported by any correspondence as the sale was done through brokers. The witness denied that exhibit P-24 was issued by their authorised brokers. It was suggested to this witness that he was giving false evidence to evade income-tax. It is the case of the accused that they gave the amount in cash to the broker, Swaminathan, and the invoice was issued by him. The broker, Swaminathan, was not examined. The bill of entry would show that ten bags of betelnuts were imported, and exhibit P-28(a), would show that they were sold to Somasundara Nadar for Rs. 4,220 at Rs. 422 per bag. This is borne out by documentary evidence. If the documentary evidence is true (which must be true), the invoice produced by the accused showing that they purchased six bags concerned under this licence from Santosh could not be true. It must necessarily be false. I am, therefore, of the view that the invoice, exhibit P-24, for Rs. 3,968.02 produced by the accused is false.

3. M/s. Jayashree Importers :

74. The accused produced exhibit P-29 dated August 21, 1961, for Rs. 22,443.95 purporting to have purchased 33 bags of betelnuts from Jayashree Importers, Calcutta. These betelnuts appear to have been imported under the licence of Jayashree Importers of Nagapattinam as per bill of entry No. 27 dated May 20, 1961. According to the prosecution, this invoice is false. P.W. 15, Jugal Kishore Kajaria, a partner of Jayashree Importers, Calcutta, stated that in May, 1961, his firm imported 33 bags of betelnuts by steamer 'Rajula' and that the consignment was unloaded at Nagapattinam and sold to accused 1. He stated that the sale was effected through brokers and as soon as the ship touched Nagapattinam, the bill was made out on August 21, 1961, for Rs. 14,454 and the same was entered in the accounts of the firm. The said entry in the account book has been marked as exhibit P-107. Exhibit P-108 is a true copy of exhibit P-107 entry in Marwari language and P-109 is a true translation in English of exhibit P-108. They show that a sum of Rs. 14,454 has been debited to the account of accused 1 under date August 21, 1961, and credited to the betelnut account. This extract shows that 33 bags of betelnuts weighs ing 7,227 pounds were sold at Rs. 2 per pound, amounting to Rs. 14,454. P.W. 15 further stated that accused 1 paid a sum of Rs. 10,119 towards customs duty, clearing charges, etc., at Nagapattinam and he further paid a sum of Rs. 1,361.25 towards the account of their firm in the bank and cleared the documents through the bank and that the balance amount of Rs. 2,973.75 was paid in cash to them through brokers on October 11, 1961. This statement of P.W. 15 was supported by the account books produced in court, the English translations of which are marked as exhibits P-114 and P-115. This witness stated that exhibit P-29 is a bogus invoice, and that even the letter-head in which the invoice was prepared was not the letter-head of the firm though it looks similar to their letter-head. The witness also stated that their letter-heads will not contain the code particulars. He further stated that their firm has got invoice forms and that they will not use letter-heads for preparing invoices. In cross-examination, this witness had stated that the brokers will not issue bills and invoices on behalf of the firm and that they were not authorised to do so. He denied the suggestion that the brokers received money from accused 1 as per the invoice, exhibit P-29, and those brokers issued exhibit P-29 on behalf of the firm. He stated that, according to their books, their profit in the transaction was only Rs. 2,973.75. Thus, it is the case of the prosecution that about a sum of Rs. 8,000 has been inflated by the accused and that to that extent the return and the trading accounts are false. It is clear from the evidence and the documents produced by P.W. 15 that they sold the consignment for Rs. 14,454. This is borne out by documents. I have absolutely no reason to disbelieve the evidence of this witness. I am, therefore, of the view that exhibit P-25, the invoice, is not a genuine invoice and a sum of Rs. 8,000 and odd has been inflated and that the return, the verification and the trading accounts to that extent are false.

4. M/s. Indo-Foreign Agents (P.) Ltd.:

75. The accused produced the invoice, exhibit P-32, dated December 20, 1961, for a sum of Rs. 10,969.50 purporting to have purchased 16 bags of betelnuts. The invoice shows that those bags of betelnuts were imported under bill of entry No. 19 dated December 11, 1961, and they were taken delivery at Nagapattinam Sea Port. It is mentioned in that invoice as follows:

Rs. P.' To the cost of 16 (Sixteen bags whole betelnuts)weighing gross 3,709 less 64 lbs. net 3,645 lbs. at the rate of Rs. 79.00 per 25 lbs. Nagapattinam delivery10,935.00Cost of gunnies32.00Cooly2.50

10,969.50

76. In exhibit P-35, the bill of entry, we find that what were imported were split betelnuts and not whole betelnuts. The cost of the betelnuts is mentioned as Rs. 1,296.59 and the duty paid thereon is shown as Rs. 3,889.77. It was cleared under the licence owned by M/s. Indo-Foreign Agents (P.) Ltd. Thus, it is the case of the prosecution that the invoice under which this purchase was said to have been made is bogus and that the return and the trading accounts in respect of this transaction are false and the amounts were inflated.

77. P.W. 9, R.M. Purohit, the managing director or Indo-Foreign Agents (P.) Ltd., Calcutta, stated that their firm had an import licence to import betelnuts for the value of Rs. 500 for the second half year of 1961-62. He also stated that they appointed accused 1 as the clearing agents for the clearance of 16 bags covered under that licence and that the entire consignment was sold to accused 1 for Rs. 6,427.85 under invoice exhibit P-106, dated December 20, 1961. According to this witness exhibit P-32 is a bogus invoice and the letter-head in which the invoice was prepared by the accused was not their letter-head and that the invoice was not issued or signed by any one concerned in that firm. He also stated that even the name of the company was not correctly noted in exhibit P-32. He further stated that they did not receive Rs. 4,350 on November 28, 1961, or Rs. 1,191.65 on December 21, 1961, from accused 1-firm, According to him, they received only Rs. 1,000 on November 21, 1961. He stated that as per sales invoice, all the taxes, customs clearance charges, etc., have to be borne by the purchasers. It is clear from exhibit P-106, produced by the witness, that 16 bags of betelnuts were sold for Rs. 6,427.85. There was no cross-examination of this witness at all. Therefore, there can be no doubt that exhibit P-32 is a false invoice and the amount shown therein has been inflated and, consequently, the return and verification made by the accused to the Income-tax Officer and the trading accounts are also false.

5. M/s. R. M. Jhunjhunwala & Co.:

78. The accused produced exhibit P-38, an invoice dated January 25, 1962, for Rs. 11,016.80 for purchase of 16 bags of betelnuts purporting to have been issued by R. M. Jhunjhunwala and Company, No. 9, Ezra Street, Calcutta. These bags, according to the bill of entry No. 247 dated January 19, 1962, were cleared at Nagapattinam Sea Port on January 19, 1962.

79. P. W. 6, Sawalram Jhunjhunwala, director of M/s. R. M. Jhunjhunwala and Co. (P.) Ltd., stated that their firm had a licence for importing 16 bags of betelnuts for the first half year of 1962, that the goods were cleared by accused 1-firm at Nagapattinam Sea Port on their behalf and that the consignment was sold by them to Messrs. Nataraja Trading Company through their agents who contacted them at Calcutta. He stated that they sold them for Rs. 6,217.15. The witness further stated that they never sold betelnuts to the firm of accused during the first half of 1962, that exhibit P-38 was not the invoice issued by their company and that it is a forged one. The witness produced sale bills, exhibit P-41 series, which clearly show that the consignments were cleared by accused 1-firm and the goods were sold to Messrs. Nataraja Trading Company, Madras. There was no cross-examination of this witness. According to the prosecution, so far as this transaction is concerned, a sum of about Rs. 5,000 was inflated by the accused and that, to that extent, the return made by the accused and the trading accounts relating thereto are false, lam of the view that under the bogus invoice, exhibit P-38, a sum of Rs. 5,000 and odd was inflated and that the return and the verification made in the return are false.

6. Jayabharath and Company:

80. The accused produced the invoice, exhibit P-43, dated February 28, 1962, for Rs. 10,681.92 purporting to have been issued by Jayabharat and Company in respect of the purchase of 18 bags of betelnuts. This invoice shows that 18 bags of betelnuts were cleared at Nagapattinara Sea Port under the bill of entry No. 86 dated February 21, 1962, on behalf of Jayabharath and Company. Exhibit P-46 shows that 16 bags of betelnuts were sold to one Haji Peeran of Vijayawada for Rs. 6,006. It is the case of the prosecution that the invoice, exhibit P-43, is bogus and the return made in respect of this purchase is false. No one has been examined on behalf of Jayabharath and Company and, therefore, it would not be safe to hold that the return is false as the evidence to hold so is not available. But, however, taking into consideration the pattern adopted by the accused in preparing bogus invoices, it may throw a considerable suspicion that the return and verification in respect of this transaction must also be false.

7. M/s. Mansukroy Hazarimull :

81. The accused produced the invoice, exhibit P-50, dated March, 1962, for Rs. 10,872, purporting to have been issued by Mansukroy Hazarimull. It appears that the consignment covered under this invoice was cleared at Nagapattinam under bill of entry No. 79 dated February 21, 1962. P. W. 7, Kesava Prasad Parasuramka, one of the partners of M/s. Mansukroy Hazarimull, Calcutta, stated that under exhibit P-54, the bill of entry, their firm imported 18 bags of betelnuts in February, 1962, that they sold the entire consignment to Nataraja Trading Company, Mount Road, Madras, under the invoice, exhibit P-53(a), dated March 14, 1962, for Rs. 1,246.12, and that they made a profit of Rs. 750. This witness stated that exhibit P-50 is a bogus invoice and it was not issued by their firm. He further stated that they did not sell any goods to the firm of the accused and that they did not receive any money from or on behalf of the accused. In cross-examination, this witness admitted that he did not know whether any company by name Nataraja Trading Company existed in Madras and stated that they effected the sale in the name of the company through brokers. This witness denied that exhibit P-50 was a genuine invoice and it was issued by an authorised broker to the accused. He further denied that any broker received payment on their behalf from the accused. There is no reason to disbelieve the evidence of P.W. 7. I am, therefore, of the view that in respect of this transaction also, the purchase amount has been inflated by about Rs. 5,000 and the return and the verification made to that extent are false;

8. Messrs. K. H. Gupta and Company:

82. The accused produced exhibit P-55 invoice dated February 28, 1962, for Rs. 32,054.20, in respect of three items of consignments of betelnuts, purporting to have been issued by K. H. Gupta and Company. It appears that these consignments were cleared under bill of entry Nos. 80, 84 and 87 dated February 21, 1962, at Nagapattinam Sea Port, the total quantity of bags being 54.

83. P.W. 8, Kailashnath Gupta, a partner of Messrs. K. H. Gupta and Company, Calcutta, stated that their firm imported 54 bags of betelnuts during the period April 1, 1962, to March 31, 1962, under bills of entry, exhibits P-58(a), P-59(a) and P-60(a), at Nagapattinam Sea Port and that those bags of betelnuts were sold under three separate invoices, exhibits P-58, P-59 and P-60, to Messrs. Nataraja Trading Company, No. 87, Mount Road, Madras. This witness stated that exhibit P-55 produced by the accused is a bogus one and it was never issued by their firm. He further stated that no one connected with their firm had signed the invoice and that the invoice was not in their letter-head. He stated that they did not sell betelnuts to the accused and did not receive any payment as shown in the invoice and the account books of the accused. This witness of course admitted in cross-examination that he did not know whether Nataraja Trading Company existed but stated that someone on behalf of the said company came and purchased betelnuts. He admitted that there was no correspondence. However, he denied that they really sold betelnuts to the accused, that they did not make any sales to Nataraja Trading Company and that they were suppressing the truth and deposing falsehood. Though it appears to my mind that all was not well with the Calcutta firm, yet there cannot be any doubt that the invoice, exhibit P-55, produced by the accused is bogus and the amount shown therein has been inflated. As already pointed out by me in respect of the other instances, the return and verification made by accused 1-firm are false.

9. M. R. Ranganathan Chettiar :

84. The accused produced exhibit P-61 dated December I, 1961, for Rs. 11,534.17, in respect of 16 bags of betelnuts purported to have been purchased through broker, P.A. According to the prosecution, this invoice is bogus and the amount shown therein has been inflated. This invoice was purported to have been issued by Ranganathan Chetty Brothers, signed by one D. Ramaswami. P.W. 5, Bhakthavathsalam, stated that he and his brother were doing business in groceries and betelnuts till 1969 in the name, Ranganathan Chetty Brothers, and that they also used to import betelnuts. He stated that in 1961, they had imported 16 bags of betelnuts and had appointed the accused as the clearing agents. He further stated that he sold 16 bags of betelnuts so cleared by the accused to the firm of accused itself for Rs. 8,880 under the invoice, exhibit P-101, dated December 1, 1961. They also produced exhibit P-62, a copy of the sale bill, issued in the name of the accused, which was signed by M/s. Swami and Vasan. They further produced exhibit P-63, the true copy of the extract from the ledger page No. 48, which clearly shows that on December 1, 1961, 16 bags of betelnuts were sold for Rs. 8,880. This witness further stated that the invoice, exhibit P-61, produced by the accused was not issued by their firm and it was a bogus one. There was no cross-examination of this witness. The evidence of this witness is unimpeachable. It is clear from the evidence of this witness that exhibit P-61 is a bogus invoice and that a sum of Rs. 3,000 was inflated in respect of this purchase. I have no hesitation to hold in respect of this transaction that the return and verification made by the accused to the extent mentioned above is false.

85. The main contention of the learned counsel for the defence, as already pointed out in disposing of the other appeals connected with this appeal, is that exhibit P-21 gives the details of purchases of betelnuts showing comparative costs for accepted Calcutta purchases which are more or less the same as the alleged false items and, therefore, the return for the same amount accepted in respect of the other Calcutta transactions cannot be deemed to be false. I am unable to agree with this contention. There is nothing to show that the department had accepted the other Calcutta purchases showing that the price of the quantity of betelnuts is the same as found in the alleged false invoices. The department might have left out those items as they may have felt that they could not secure evidence to prove that those purchases were also inflated.

86. The learned counsel also raised a contention that since the matter has been compounded and the department had agreed for a certain figure, the institution of a complaint in respect of the same matter which has been compounded is unfair. On the other hand, I find that the learned Chief Presidency Magistrate had taken this compounding by the accused as a circumstance showing that they (accused) knew that the return submitted by them could not have been true. But, however, I take the view that this circumstance of compounding is neither here nor there. It might be that the accused agreed for determination of a certain figure as they might have thought to give a quietus to this matter. Or it might be that the accused knew that the department might prove the return to be false by letting in evidence, and to avoid a determination by the department on the evidence, the accused might have agreed to compound. I, therefore, do not take the compounding as a piece of evidence that can be put against the accused.

87. I have already discussed in the paragraphs supra as to how each invoice relating to the respective purchase has been fabricated and the amount inflated.

88. The next question that has to be considered is whether the convictions of the accused can be sustained. So far as accused 1 and 2, namely, the firm and the person who submitted the return under his signature are concerned, there cannot be any difficulty in holding that they are liable for punishment. Accused 2 while he submitted the return must have had the knowledge or at least the belief that what was contained in all the bogus invoices must be false. I confirm the conviction of accused 1 under Section 277 of the Income-tax Act and that of accused 2 under Section 277 of the Income-tax Act read with Section 34, Indian Penal Code. But, so far as accused 3 is concerned, though he may be an active partner, still there are no materials to show that the return submitted under the signature of accused 2 was submitted with his knowledge and consent about the contents of the same. He will be entitled to the benefit of doubt. Accused 3 is acquitted.

89. So far as the sentence is concerned, for the reasons stated by me in C.A. No. 466 of 1972, I reduce the sentence of fine imposed on accused 1 and 2 to Rs. 250 under each conviction; in default, accused 2 will undergo simple imprisonment for one month. If the fine has already been paid by them, the excess will be refunded to them. As accused 3 is acquitted, the entire fine amount, if paid, will be refunded to him.

90. In the result, the appeal of accused 1 and 2 is dismissed with the modification mentioned above and the appeal of accused 3 is allowed.

C. A. No. 482 of 1972 :

91. In this case, on the same facts which are the subject-matter of C.A. No. 478 of 1972, accused 1 to 3 were convicted under charges 1 and 3 to 5 under Section 120B, Indian Penal Code, Section 277 of the Income-tax Act read with Section 34, Indian Penal Code (two counts) and Section 196 read with Section 120B, Indian Penal Code.

92. While discussing the evidence in respect of each invoice in C.A. No. 478 of 1972, I have found that all those invoices are false and consequently the return and the verification made by the accused were also false. It is, therefore, not necessary to repeat the discussion in this appeal as both C.A. No. 478 of 1972, and this appeal are connected appeals.

93. Charges 3 and 4 relate to the accused having knowingly delivered false documents, namely, invoices, trading accounts, etc., in support of the return. There cannot be any doubt in this case, as already found by me in C.A. No. 478 of 1972, that the invoices and the trading accounts were delivered to the Income-tax Officer in support of the return, which were false. The charges under Section 196 read with Section 120B, Indian Penal Code, under which the accused were convicted relates to using false documents as true or genuine evidence in support of the return. I have found that the invoices and the trading accounts were false and fabricated. Therefore, there cannot be any doubt that whoever used those documents as genuine will be liable for punishment under this charge.

94. So far as accused 3 is concerned, I am of the view that the prosecution has failed to establish that he had delivered the documents knowing them to be false or that he had used those documents knowing them to be false. He is entitled to the benefit of doubt. He is acquitted of all the charges. His convictions and sentences are set aside.

95. So far as accused 1 and 2 are concerned, it has been made clear that it was accused 2 who delivered the documents and also used those documents knowing them to be false. He submitted the return himself under his signature and, therefore, his convictions under all the charges are confirmed. Accused 1 being a firm, as observed by me in the other appeal, is liable for the acts done by accused 2. Therefore, the convictions of accused 1 are also confirmed.

96. So far as the sentence is concerned, for the reasons mentioned by me in the other appeal, I reduce the sentence of fine imposed on accused 1 and 2 to Rs. 250 under each count under charges Nos. 3, 4 and 5; in default, accused 2 will undergo simple imprisonment for one month. If the fine amount has already been paid by accused 1 and 2, the excess amount will be returned to them. If accused 3 has paid the fine amount, the entire amount will be refunded to him.

97. In the result, the appeal of accused 1 and 2 is dismissed with the modification mentioned above and the appeal of accused 3 is allowed.

98. In the above four appeals, so far as accused 1 and 2 are concerned, their convictions by the lower court under all the counts are confirmed. But so far as the sentence is concerned, under each count in all these appeals, the sentence of fine is reduced to one of Rs. 250; in default, accused 2 to undergo simple imprisonment for one month. It is stated by the learned counsel for accused 1 and 2 that the fine amount has been paid. If so, the excess amount will be refunded to them. It is also stated by the learned counsel that even accused 3 had paid the entire fine amount. Since he is acquitted of all the charges, the entire fine amount will be refunded to him. I make it clear that on account of these convictions, the accused shall not suffer any disqualification.

99. Before parting with this case, I must commend the investigation done by Sri R. V. Viswanathan, Assistant Director of Investigation, Intelligence, Madras, in collecting materials to prove the case against the accused. I must also place on record my appreciation of the work done by Sri Subba Rao (P.W. 2), Appellate Assistant Commissioner of Income-tax, Calcutta, Sri C. K. Venkatanarasimhan, the Special Public Prosecutor, and Sri T. V. Ramanathan, the counsel for the accused, were of immense help to me both in presenting the facts of the case and elucidating the subtleties of law.


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