IN THE HIGH COURT OF JUDICATURE AT PATNA Cr.Misc. No.17649 of 1998 SMT. SHAILBALA PODDAR WIFE OF SHRI L.N. PODDAR, RESIDENT OF EXHIBITION ROAD, PATNA……. …………………….. PETITIONER Versus 1. THE COMMISSIONER OF INCOME TAX, PATNA 2. THE ASST. COMMISSIONER OF INCOME TAX, INVESTIGATION CIRCLE 2 (3) PATNA………………………….RESPONDENTS…. ----------- FOR THE PETITIONER :- MR. D.V.PATHY,ADVOCATE FOR THE RESPONDENTS :- NONE. 7 19-3-2010 Heard learned counsel for the petitioner. Nobody appears on behalf of respondents who are officials of the Income Tax Department at patna. 2. Petitioner has prayed for quashing of order dated 29- 6-1998 passed by the Special Judge, Economic Offences, Patna whereby he rejected the application of the petitioner for discharge and directed for her appearance before the court for framing of charges under section 277 of the Income Tax Act 1961 ( for the sake of gravity hereinafter referred to as the `Act’) in Complaint Case No. 442 of 1992 leading to trial no. 2612 of 1992. 3. On the basis of petition of complaint which has been appended as annexure-1 it was shown that gist of allegation 2 against the petitioner is as follows:- The petitioner is a partner in firm M/S Eastern Asbestos Products and she was being assessed to tax for a period more than 12 years on 15-1-1990. The petitioner filed an application under section 230-A(1) of the Act before the Income Tax Officer of Ward (3) Patna who was having jurisdiction over new cases only. The petitioner in her application wrongly marked Column 4(i) and (ii) with cross marks to indicate that she was earlier not assessed to tax and did not furnish the details of return of income or details as to whether any return has been submitted earlier. According to complaint petition, by such negative answers to column (i) and (ii) the petitioner made a false statement knowing well that she has been filing return and is being regularly assessed for more than 12 years. She also did not disclose that she was a partner in M/S Eastern Asbestor Products, Exhibition Road,Patna. Since wrong information was furnished in the aforesaid relevant columns, the affidavit filed along with application was also found to be in support of false statements and therefore a false affidavit. 4. Learned counsel for the petitioner highlighted paragraph-6 of the complaint petition wherein it is alleged 3 that the petitioner had made a false verification and had filed false affidavit with intention to secure a certificate knowing or pleading that her statement was false. On the basis of such allegation it was submitted that there is no allegation made by the concerned officials that petitioner had any intention to escape assessment of any taxable income or to gain any monetary advantage and in absence of such allegation of bad motive or bad intention there could be no presumption of mens rea and hence the prosecution of the petitioner was bad in law and fit to be quashed. 5. In the context of facts and submissions noticed above, it would be proper to notice the provisions of Section 277 of the Act which reads 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. Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for less than six months.” 6. Learned counsel for the petitioner has submitted that since the statute has used the terms “ knows or believes to be true” it is implied that the falsehood must be deliberate so as 4 to be within the knowledge of the accused and in order to be deliberate the falsehood must relate to some advantage derived by such false statement. In support of this submission he highlighted that two different punishments have been prescribed under section 277of the Act. Punishment no (1) is rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years with fine. But it is only in a case where the amount of tax which would have been evaded in case the statement or account had been accepted as true, exceeds one lakh. The other punishment is for any other case wherein punishment shall not be less than three months but may extend to 3 years with fine. 7. According to learned counsel for the petitioner, punishment no.1 which is rigorous imprisonment for a longer period because of the evasion in case of success would be of big amount indicates that the second punishment is also only for evasion of tax but of a lesser amount. According to him the other punishment cannot be inflicted if the case of the department does not disclose that there would have been some evasion of tax. On the basis of such contention it has been submitted that like section 276 mens rea is applicable 5 even for an offence under section 277 of the Act. In support of submission learned counsel has placed reliance upon various judgments of different High Courts but many of them relate to setting aside of conviction after a trial for various reasons and not purely on the basis of interpretation of section 277 of the Act. Hence, those judgments are not taken into consideration. In the case of J.M. Sah Vrs. I.T.O. (Mad) reported in 218 I.T.R. 38, the Madras High Court held that when the finding was that incorrect particulars had been furnished due to negligence, the prosecution under section 277 of the Act was not valid. This judgment proceeded on the basis that if the incorrect facts had been furnished due to negligence, they could not be said to be statements false to the knowledge of the accused. 8. A single Judge of this Court had the occasion to consider that submission in the case of Ram Gulam Shah and Sons vrs. Commissioner of Income Tax ( 1999 (3) PLJR 409) . In that case the prosecution initiated against the petitioner was under section 276(c) and 277 of the Act. The Court noted the provisions of Section 276 ( C ) which has an explanation that for the purpose of that section, a willful 6 attempt to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof shall include cases of various nature in clause (i) to clause (iv). On the basis of word willful attempt the court held that since the Tribunal in that case had not recorded a finding of willful attempt to evade any tax, therefore, prosecution was not permissible although the Income Tax Officer did not accept the correctness of the account of the assessee and made addition in the accounts on estimate basis. 9. In the present case there is no prosecution under section 276 of the Act and hence the issues have to be confined to provisions in section 277 of the Act for finding out whether they require mens rea or bad intention on the part of the accused. 10 For the purpose of facilitating the court to come to a correct conclusion in this regard, learned counsel for the petitioner placed reliance upon a Circular of the Central Board of Direct Taxes, bearing no. 179 dated 30-9-1975 which has been extracted in paragraph-13 of this application. The clarification is to the effect that under the amended provision, punishment for a false verification in a statement or 7 for delivery of a false account or statement has been linked to the quantum of the tax sought to be evaded. It has been submitted that such clarification supports the submission that where the quantum of tax sought to be evaded is admittedly zero or nil there should be no punishment at all and hence such provisions in section 277 have indirectly introduced the concept of mens rea or bad intention which should be relatable to tax sought to be evaded. 11. On giving anxious consideration to the provisions of law , the precedents and the submissions, this court is of the view that if a negligent act resulting into furnishing wrong particulars may not be subject matter of prosecution then element of mens rea must be alleged and proved which can rule out the element of negligence and this can be done safely only by alleging and proving that the false verification or statement would have resulted into evasion of tax. In absence of such allegation showing mens rea on the part of the accused it is not permissible to prosecute an accused for offence under section 277 of the Act. 12. In view of aforesaid discussions the prayer made in 8 this application is allowed. The impugned order rejecting the petition of the petitioner for discharge is quashed and petitioner shall stand discharged from the criminal proceeding in question. ( Shiva Kirti Singh,J) Naresh