IN THE COURT OF SH. GORAKH NATH PANDEY ADDL CHIEF METROPOLITAN MAGISTRATE (Spl. Acts): CENTRAL TIS HAZARI COURTS, DELHI ITO vs Gulati Brothers CC No.34/4 JUDGMENT
(a)Serial no. of the case : 02401R0025571994
(b)Date of commission of offence : Assessment year 198283
(c)Name of complainant : Sh. [ENTITY], Income Tax Officer Ward 14(5), New Delhi
(d)Name, parentage, residence: 1)M/s. Gulati Brothers, 1052, Pan Mandi, Sadar Bazar Delhi Also at B1125, Shastri Nagar, Delhi
[ENTITY]
[ENTITY], both partners of M/s. Gulati Brothers, 1052, Pan Mandi, Sadar Bazar Delhi Also at B1125, Shastri Nagar, Delhi
4)M/s [ENTITY] Delhi
[ENTITY]
[ENTITY] both partners of M/s [ENTITY] Delhi
7)Sat Pal s/o [ENTITY] (now PO) r/o 8613, Roshanara Road, Delhi
(e)Offence complained of/ proved : U/[SECTION] & [SECTION] of [ACT] and u/s [SECTION] [ACT]
(f)Plea of accused : Pleaded not guilty.
(g)Final order : Accused no.1 and 2 convicted Accused no.3, 5 and 6 acquitted [PRECEDENT]. 1 of 16 (h)Date of such order : 04.09.13 Date of Institution of complaint: 20.11.90 Arguments heard/order reserved: 26.08.13 Date of Judgment : 04.09.13 Brief statement of the reasons for the decision:
1. The complainant Sh. [ENTITY], the then Income Tax Officer had filed the present complaint u/[SECTION] r/[SECTION] of the [ACT] (hereinafter to be referred as the Act) and u/[SECTION] r/[SECTION] [ACT] against the accused persons.
As alleged, accused no.1 M/s Gulari Brothers is a registered firm dealing in sheet and cutting etc and accused no.2 and 3 are/were the partners of accused no.1 firm and they were jointly and severally incharge and responsible for the conduct and day to day business of the accused no.1 firm. Accused no.1 had filed the return of income on 13.07.82 for the Assessment Year 198283 declaring an income of Rs.18,220/. The return of income was duly verified and accompanied with various statements of accounts. Thereafter, a revised return of income was filed on 01.03.85, declaring an income of Rs.14,230/. Inquiries were made and assessment proceedings were conducted after which total income of accused no.1 firm was assessed at Rs.55,14,340/. During inquiry it was found that accused no.1 firm was maintaining two bill books etc. The sale in respect of one bill book was being reflected in the books of accounts while the sale in respect of other set was not being reflected in books of accounts. Other irregularities were also noticed. Accused no.1 firm showed various loan accounts with 11 other firms mentioned [PRECEDENT]. 2 of 16 in the complaint and also filed information about it during the course of assessment proceedings. The accounts of those 11 firms were enquired into and it was found that either some of the firms did not exist or the other firms did not advance any loan to the accused no.1 firm. Accordingly accused no.1 firm vide letter dated 08.07.05 was asked to produce those 11 firms with their books of accounts and bank statements for the period w.e.f 01.04.81 to 31.03.82 to prove their claim and contentions but the accused no.1 firm failed to do so. Accused no.1 firm relied that the loan amount taken from M/s Madan Lal & Company (one of the 11 firms) was repaid on 10.12.82 by way of cheque. Photocopy of the cheque was also filed to prove the genuineness of the repayment and loan. Similarly, it was also stated that the loan/credits were paid back to other seven firms by way of cheques. Photo copies of cheques were also filed. Accused no.1 firm disclosed that all those loans/credits were arranged through a commission agent i.e. accused no.7 [ENTITY] (proclaimed offender) and his affidavit was also filed to this effect. On inquiry, it was found that the cheques by which the loan amount was alleged to have been returned to the firms were actually deposited in the name of accused no.4 M/s Oriental Steel of which accused no.5 [ENTITY] and accused no.6 [ENTITY] were the partners. It is alleged that accused no.4 obtained the cheque book bearing no.039351 to 0393400 from Canara Bank (formerly known as Laxmi Commercial Bank Ltd.), H54, Connaught Circus, New Delhi, and made available the said cheque books to the accused no.1 and accused no.7 filed false affidavit and by making false statement during the course of [PRECEDENT]. 3 of 16 assessment proceedings abetted and introduced accused no.1 firm to make and deliver false accounts/statements. Accordingly, this complaint has been by the complainant filed u/[SECTION] read with [SECTION] of the Act against the accused no.1, 2 and 3 and u/[SECTION] read with [SECTION] qua accused no.2, 3, 4, 5, 6 and 7.
2. Since beginning accused no.7 [ENTITY] remained absent and accordingly he was declared proclaimed offender vide order dated 01.11.2001.
3. Accused persons were summoned and after precharge evidence, charge was directed to be framed against all the accused persons. Accordingly, a charge was framed on 15.03.11 against the accused persons u/[SECTION] r/[SECTION] of [ACT] and u/[SECTION]/[SECTION] of [ACT] to which they pleaded not guilty and claimed trial. However, it appears that name of accused no.6 [ENTITY] left inadvertently though from the order sheet dated 15.03.11 it is clear that charge was directed to be framed against all the accused persons.
4. In order to substantiate the allegations against the accused, the complainant/the then ITO Sh. [ENTITY] examined himself as PW1 and Smt. [ENTITY], ITO as PW2.
PW1 Sh. [ENTITY] was the complainant who deposed that accused no. 2 and 3 were the partner of accused no.1 at the relevant period and were the persons responsible and incharge of day to day business of accused no.1 and [PRECEDENT]. 4 of 16 proved on record the complaint as Ex.PW1/1 and his authorization to file the present complaint as Ex.PW1/2.
PW2 Smt. [ENTITY] reiterated the facts of the complaint and deposed that Sh. [ENTITY] framed the assessment order Ex.PW2/12 and levied penalty Ex.PW2/13 on the accused. PW2 has proved on record relevant documents i.e. annual return Ex.PW2/1 for the Assessment Year 198283 filed on 13.07.82 by the accused, letter dated 13.07.84 Ex.PW2/3, another letter dated 19.07.84 Ex.PW2/4, notice u/[SECTION] issued on dated 28.09.84 Ex.PW2/5, order u/[SECTION] dated 19.10.84 Ex.PW2/6 passed by Mr. [ENTITY] and letter dated 14.11.84 Ex.PW2/7. PW2 has also proved on record the revised return of income Ex.PW2/8 filed on 01.03.85 by the accused, letter dated 22.08.85 Ex.PW2/9 received from SS Gulati Brothers, copy of statement of account of accused no.1 with Laxmi Commercial Bank (now known as Canara Bank) Ex.PW2/10 and letter 10.12.85 Ex.PW2/11 issued to accused no.1.
5. Statements of accused no.2 [ENTITY], no.3 Smt. [ENTITY], no.5 [ENTITY] and no.6 [ENTITY] were recorded u/[SECTION] [ACT] read with [SECTION] [ACT] separately. Accused no.2 [ENTITY] did not dispute that accused no.1 was a partnership firm and he and accused no.3 were its partners. Accused no.2 also admitted that he was the person and incharge of day to day business of the accused no.1 firm. In regard to loan of Rs.40,000/ allegedly received from M/s VK Enterprises which was found wrong on verification, accused stated that he cannot tell anything as every [PRECEDENT]. 5 of 16 thing was done by broker. In regard to the credit of Rs.50,000/ shown in the name of M/s Sindhu Iron Syndicate which was, on inquiry, found that no such credit balance was outstanding, accused stated that the loan entries were arranged by the broker so he cannot say anything.
In her statement, accused no.3 [ENTITY] denied that she was incharge or responsible for the day to day affairs of the business of accused no.1 firm or had signed any document pertaining to the business of the firm. She also denied to have signed any return of income.
In his statement, accused no.5 [ENTITY] admitted that he was having cheque book but he had never given the same to anybody and the same remained throughout in his custody. No stamp of Sadar Bazar Bank, Delhi, was put by him at any time and he has no concern with accused no.1 M/s Gulati Brothers.
In his statement, accused no.6 [ENTITY] admitted that he was partner of accused no.4 M/s Orient Steel, but stated that the other partner and his accountant were dealing with the bank and were the signatories. He never got any cheque book issued from the bank. Other partner and accountant were responsible for dealing with the bank. The cheque book always remained with other partner or with the account department. Accused failed to lead any defence evidence.
6. I have given my thoughtful consideration to the submissions advanced on behalf of parties and gone through the records/written arguments filed.
[PRECEDENT]. 6 of 16 Learned defence counsel has also placed reliance upon the judgments reported in [CASE NUMBER], (b) [CASE NUMBER], (c) [PRECEDENT],
(d) 2003 VII AD (SC) 569, (e) [PRECEDENT], (f) 1999 III AD (SC) 73 and
(g) [PRECEDENT]", in support of his claim and contentions. I have also considered the relevant provisions of the [ACT].
7. Relevant provisions of [SECTION] [SECTION] are reproduced for ready reference: [276C. Willful attempt to evade tax, etc. (1) If a person willfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable, in a case where the amount sought to be evaded exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine; in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine. [[SECTION]. False statement in verification, etc. 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 rue, he shall be punishable, i. in a case where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine; ii. in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine]
8. Learned defence counsel argued that there is no sufficient evidence on record against the accused persons. The testimony of PW1 and PW2 does not prove sufficient material to held them guilty for the aforesaid offences. The testimony [PRECEDENT]. 7 of 16 of PW2 is based upon documents and she has no personal knowledge and placed reliance upon the testimony of PW2 Smt. [ENTITY], recorded in [CASE NUMBER] on 17.07.2008 titled as [PRECEDENT], in support of his claim and contentions.
It is pertinent to mention here that Sh. [ENTITY] earlier had appeared as PW2 but his examination was partly done. Thereafter, he did not appear and his whereabouts were not known to the complainant and therefore, he was given up. In his cross examination by the accused, PW1 admitted that he has no personal knowledge and also admitted that return of income was not signed by accused no.3. From the statement of PW1 and PW2, it is also clear that they never worked with Mr. [ENTITY] who framed the assessment order. In view of the same, it is clear that PW1 and PW2 have no personal knowledge and thus they can not depose each and every fact which was in personal knowledge of Mr. [ENTITY]. Thus, it was argued that since the witness failed to depose on the basis of personal knowledge and therefore, documents including assessment order can not be read in evidence. Therefore, all the accused are entitled for acquittal. Since, it is a legal submission and therefore, being discussed first.
9. Witness PW2 testified in cross examination that she had never worked with Mr. [ENTITY] nor the documents were filed in her presence. Relying upon her said deposition, it is argued that witness failed to prove the documents. In this regard law is settled. It is so held in the following judgment. Relevant para of the judgment is reproduced: [PRECEDENT] Supreme Court Cases 752 Ordinarily, an objection to the admissibility of evidence should be taken when it is tendered and not subsequently. The objections as to admissibility of documents in evdence may be classified into two classes:
(i) an objection that the document which is sought to be proved is itself inadmissible in evidence; and (ii) where the objection does not dispute the admissibility of the document in evidence but is directed towards the mode of proof alleging the same to be irregular or insufficient. In the first case, merely because a document has been marked as "an exhibit", an objection as to its admissibility is not excluded and is available to be raised even at a later stage or even in appeal or revision. In the latter case, the objection should be taken when the evidence is tendered and once the document has been admitted in evidence or that the mode adopted for proving the document is irregular can not be allowed to be raised at any stage subsequent to the marking of the document as an exhibit. The latter proposition is a rule of fair play. The crucial test is whether an objection, if taken at the appropriate point of time, would have enabled the party tendering the evidence to cure the defect and resort to such mode of proof as would be regular. The omission to object becomes fatal because by his failure the party entitled to object allows the party tendering the evidence to act on an assumption that the opposite party is not serious about the mode of proof. ON the other hand, a prompt objection does not prejudice the party tendering the evidence, for tow reasons: firstly, it enables the court to apply its mind and pronounce its decision on the question of admissibility then and there; and secondly, in the event of finding of the court on the mode of poof sought to be adopted going against the party tendering the evidence, the opportunity of seeking indulgence of the court for permitting a regular mode or method of proof and thereby removing the objection raised by the opposite party, is available to the party leading the evidence. Such practice and procedure is fair to both the parties. Out of the two types of objections, referred to hereinabove, in the latter case, failure to raise a prompt and timely objection amounts to waiver of the necessity for insisting on formal proof of a document, the document itself which is sought to be proved being admissible in evidence. In the first case, acquiescence would be no bar to raising the objection in a superior court".
10.Thus, from the above, it is clear that accused has taken the objection regarding mode of proof stating that documents were neither executed, nor signed nor filed by the witness or in their presence for the first time during final [PRECEDENT]. 9 of 16 arguments. However, there was no such objection taken at the time of exhibiting documents. All the documents were duly exhibited. It is not the case that documents relied upon by the complainant are forged and fabricated. Nor there is any denial that documents have not been produced form proper custody. Thus, the objection so raised regarding admissibility is without any merit.
11.Before discussing the merits of this case qua accused no.1 and 2, it is deemed appropriate to first discuss the case of accused no.3, 5 and 6. It is argued on their behalf that they ought not to have been prosecuted as neither they were controlling the affairs of the firm nor looking after its day to day affairs. The allegations of the complainant in the complaint has been that accused no.2, 3 and 5 were partners of firm and both were incharge and responsible for the day to day affairs of the accused no.1 firm. The allegations against the accused no.6 is that he was partner of accused no.4 and allowed his cheque book to his brother i.e accused no.2 and his mother i.e accused no.3 to misuse. As such to prove these particular allegations, the onus was on the complainant to put on record some concrete evidence. These allegations of the complainant does not find any support from the documents proved by them during their evidence. The complainant was required to establish on record that accused no.3, 5 and 6 were also responsible for the day to day affairs of the accused no.1 firm and was actively participating in the business of accused no.1 firm. Only then, they could be held liable for concealment of income and [PRECEDENT]. 10 of 16 false statement. It was mandatory for the complainant to prove that the return of income of the accused no.1 firm bears their signatures also. The Income Tax Return has been proved as Ex.PW2/1. It is clear from Ex.PW2/1 that the return of income has been signed only by accused no.2 [ENTITY] and not by any other accused persons. Complainant has not proved on record any other documents to show that other accused persons ever actively participated in the affairs of the firm or took part in the assessment proceedings. Except, bald statement, there is nothing on record to show that other accused persons (except accused no.2) ever actively participated in the affairs of firm. One could be a sleeping/dormant partner despite having a big share in the firm. It is clear from the statement of accused no.2 recorded u/[SECTION] [ACT] that he took over the entire responsibility of affairs of the partnership firm on his shoulder and admitted that he was incharge and responsible for the day to day affairs of the accused no.1 firm.
12.Present case is a criminal proceedings and criminal responsibility cannot be fastened on a particular partner unless he/she was personally responsible for the acts of the partnership firm. For holding a particular partner liable, it has to be proved on record that he/she was responsible for looking after the day to day affairs of the accused firm and was also liable to file the return of income and in the absence of any such evidence, the complaint has to fail against that particular partner. This court does not find any evidence on record which could to show that accused no.3, 5 and 6 were active partners and were responsible [PRECEDENT]. 11 of 16 for filing return of income on behalf of accused firm.
13.It has been held by the Hon'ble Supreme Court in the following case which was a case u/[SECTION] of [ACT] that in the absence of any proof, no partner can be convicted and in this regard relevant para of the judgment reads as under: [PRECEDENT] "9. It is, therefore, necessary to add an emphatic note in this regard. More often it is common that some of the partners of a firm may not even be knowing of what is going on day to day in the firm. There may be partners, better known as sleeping partners who are not required to take part in the business of the firm. There may be ladies and minors who were admitted for the benefit of partners. They may not know anything about the business of the firm. It would be a travesty of justice to prosecute all partners and ask them to prove under the proviso to subsection (1) that the offence was committed without their knowledge. It is significant to note that the obligation for the accused to prove under the proviso that the 'offence took place without his knowledge or that he exercised all due diligence to prevent such offence arises only when the prosecution establishes that the requisite condition mentioned in subsection (1) is established. The requisite condition is that the partner was responsible for carrying on the business and was during the relevant time in charge of the business. In the absence of any such proof, no partner could be convicted".
14.Further, vicarious liability cannot be imputed merely on the ground that accused was director of the company. The complainant was required to prove its case beyond reasonable doubt. The burden of proof in a criminal trial never shifts and it is always the burden of the prosecution to prove its case beyond reasonable doubt. It is held in the following case laws: "[PRECEDENT]".
"10. The presumption under [SECTION] in reference to an offence under [SECTION] [ACT] is, as already noticed, a rebuttable presumption. The only evidence led [PRECEDENT]. 12 of 16 in this case is to establish charge under [SECTION] [ACT], of appellant having received gratification other than legal reward, as a motive or reward for doing or forbearing to do any official act in the exercise of his official functions to favour the prime mover is the statement of the contractor, PW2. As already noticed, the contractor has given different versions of the occurance in his statement before the vigilance wing and in the court. At the trial, he has not supported the prosecution case fully. On the other hand, the explanation given by the appellant both during the crossexamination of prosecution witnesses and in his own statement, recorded under [SECTION] [ACT] is quite plausible. Where an accused sets up a defence or offers an explanation, it is well settled that he is not required to prove his defence beyond a reasonable doubt but only by preponderance of probabilities. On prosecution's own showing, in this case, that onus can be said to have been duly discharged by the appellant, more particularly, when the prosecution did not lead any evidence to show as to who made the payment to [ENTITY] who had removed the bump from the road which bump was otherwise required to be removed by PW2 for getting refund of his earnest money and security. May be, the allegation that the appellant accepted the amount as bribe to process his refund application is true but the court can not convict an accused only on such probability or suspicion, howsoever strong it may be. 'Between may be true and must be true, there is a long distance to travel' and in this case the prosecution has failed to travel that distance through any unimpeachable evidence. The case of the prosecution has not been established beyond a reasonable doubt".
2003 [3] JCC 1358 "It is no doubt a matter of regret a foul coldblooded and cruel murder should go unpunished. There may also be an element of truth in the prosecution story against the accused. Considered as a whole, the prosecution story may be true; but between 'may be true' and must be true' there is inevitably a long distance to travel and the whole of this distance must be covered by the prosecution by legal, reliable and unimpeachable evidence before an accused can be convicted." 2007(1) Crimes 181 (SC)
15 "153. A close analysis of this decision would show that the following conditions must be fulfilled before a case against an accused can be said to be fully established.
iii. The circumstances from which the conclusion of guilt is to be drawn should be fully established.
It may be noted here that this Court indicated that the circumstances concerned "must or should" and not "may be" established. There is not only a grammatical but a legal distinction between "may be proved" and must be or should be proved" as was held by this court in [PRECEDENT] where the observations were made:[SCC para 19, p.807: SCC (Cri) p.1047] [PRECEDENT]. 13 of 16 "Certainly, it is a primary principle that the accused must be not merely may be guilty before a court can convict and the mental distance between 'may be' and 'must be' is long and divides vague conjectures from sure conclusions".
15.Thus, it is clear that for holding a partner responsible for a criminal offence, it has to be established by the prosecution that he/she was the person incharge for the day to day affairs of the firm during the relevant time. It is also clear from the law laid down by the Hon'ble Supreme Court that a partner cannot be made personally liable for the offences committed on behalf of the firm and the criminal liability can not be extended to another partner merely by virtue of his being partner in the firm unless something concrete is proved on record to show that he/she was the person incharge and responsible for the conduct of the business of the firm. Thus, in view of the aforesaid discussions, it is held that accused no.3, 4, 5 and 6 are not liable for any of the offences allegedly committed by the firm u/[SECTION] and [SECTION] of [ACT]. Since they did not file any return of income nor there is any evidence that accused no. 5 & 6 connived with accused no.2 and handed over the cheque, as such, it cannot be said that they had filed any false return or made any false statement through income tax return or they were involved in conspiracy. Thus, they are liable to be acquitted of both the charges leveled against them. Accordingly accused no.3 Smt. [ENTITY], [ENTITY] and [ENTITY] are hereby acquitted of the charges leveled against them. However, their bail bonds already on record are extended in terms of [SECTION] for a period of six months.
[PRECEDENT]. 14 of 16
16.Now let us examine the case of accused no.1 and 2. There is no dispute that accused no.1 (the firm) was assessed to the [ACT] and was liable to file its annual return of income. It is also not disputed that the firm had filed its return of Income through accused no.2. In one way or the other, accused no.2 took over the entire responsibility of affairs of the firm on his shoulder and admitted that he was incharge and responsible for the day to day affairs of the accused no.1 firm. Admission is the best evidence to prove the allegations. The accused has challenged the present proceedings on the basis that loan amount of Rs.40,000/ allegedly taken from M/s VK Enterprises and a credit of Rs.50,000/ in the name of M/s Sindhu Iron Syndicate, Kanpur, were managed and arranged by broker. Accused no.2 has simply stated that aforesaid loan and entry of credit balance was arranged and managed by broker i.e accused no.7 but he failed to bring on record anything on record to show aforesaid loan of Rs.40,000/ was taken from M/s VK Enterprises and a credit balance of Rs. 50,000/ was outstanding in the name of M/s Sindhu Iron Syndicate, Kanpur. On the other hand, prosecution witnesses have clearly stated that on verification no such loan was found. Likewise, no such credit balance of Rs. 50,000/ was also found outstanding and these facts have not been specifically denied by the accused no.2 in his statement. Further, accused no.2 did not specifically deny that he had tampered with the cheque book of account no. 5394 with Laxmi Commercial Bank in the name of M/s Orient Steel of which accused [ENTITY] and [ENTITY] were the partners and simply stated that he does not remember being old matter. He also admitted [PRECEDENT]. 15 of 16 that he had got issued cheque book from the said bank.
In view of the aforesaid discussions, it is held that accused no.1 and 2 concealed their actual income for the assessment year 198283 and eventually evaded tax, consequently, they are held guilty for the offence punishable u/[SECTION] of [ACT] read with [SECTION] of the Act. Since this return of income was not correct, hence, it is to be held that false statement in regard to their income was made by the accuseds in their return of income. Accordingly accused no.1 and 2 are also held guilty for the offence punishable u/[SECTION] of [ACT]. Let accused no.1 and 2 be heard on sentence on 09.09.13 at 2.00 pm. Main file be consigned to the record room. [ENTITY] to prepare a Miscellaneous file for the purpose of arguments on sentence.
Judgment be sent to the server www.delhidistrictcourt.nic.in.
([ENTITY]) ACMM(Special Acts) CENTRAL TIS HAZARI COURTS DELHI Announced in open court on 4th September, 2013 (Total number of page 16) (One spare copy attached) [PRECEDENT]. 16 of 16