{1} CRI. APPLN No.2085/07 IN THE HIGH COURT OF JUDICATURE OF BOMBAY BENCH AT AURANGABAD CRIMINAL APPLICATION NO. 2085 OF 2007 1. Suresh Anandraj Jain Age-50 years, Occ-Business R/o 94, Tatiya House, Navi Peth, Jalgaon 2. Sau Ujwala Paraschand Jain Age-61 years, Occ-Household R/o 94, Tatiya House, Navi Peth Jalgaon 3. M/s Tatiya Credit Corporation, Through petitioners No.1 and 2 C/o 94, Tatiya House, Navi Peth, Jalgoan APPLICANTS VERSUS Union of India Through B.T.Pali Age-33 years, Occ-Income Tax Officer, Ward 1(3), Income Tax Office, Bhikamchand Jain Market, Jalgaon RESPONDENT WITH CRIMINAL APPLICATION NO. 2086 OF 2007 1. Paraschand Anandraj Jain Age-55 years, Occ-Business R/o 94, Tatiya House, Navi Peth, Jalgaon 2. Sau Chanchala Devi Sureshchand Jain {2} CRI. APPLN No.2085/07 Age-44 years, Occ-Household R/o 94, Tatiya House, Navi Peth Jalgaon 3. M/s Paras & Company, Through petitioners No.1 and 2 C/o 94, Tatiya House, Navi Peth, Jalgoan APPLICANTS VERSUS Union of India Through B.T.Pali Age-33 years, Occ-Income Tax Officer, Ward 1(3), Income Tax Office, Bhikamchand Jain Market, Jalgaon RESPONDENT ....... Mr.J.R.Shaikh, APP for the applicants Mr.Alok Sharma, Assistant Solicitor General for respondent ....... [CORAM : A.V.POTDAR, J.] DATE: 11 th February 2010 ORAL JUDGMENT: 1. By these applications, filed under section 482 of the Criminal Procedure Code, the applicants have prayed to quash and set aside RCC No.194/2004 and 193/2004, respectively. The said cases are pending on the file of Chief Judicial Magistrate, Jalgaon for an offence punishable u/s 276 (C), 277 r/w 238 of the Income Tax Act. {3} CRI. APPLN No.2085/07 2. Rule. Rule made returnable forthwith. With the consent of the parties, heard finally at the stage of admission itself. 3. Before considering the rival submissions, it is necessary to enumerate brief facts of the case, which are as follows: a) On 22.03.2004, a private complaint was lodged by the respondent, against the applicants in Criminal Application No. 2085/2007, who are arrayed as accused along with late Shri Anandraj Jain, in the Court of CJM, Jalgaon. It is alleged that the accused were the partners of the firm, respondent No.3, and the said partnership firm had filed income tax returns for the assessment year 1994-95. It is alleged that the said firm was engaged in providing finance for purchase of automobile vehicles. It is further alleged that the firm has maintained book of accounts during the said period and when the same was assessed by the then Income Tax Officer Ward 2(9), Jalgaon the total income of the firm was fixed at Rs.4,29,991/- on 28.02.1997 against the turned income of Rs.96,291/- and hence notice was issued to the accused u/s 274 r/s 271 (1) (c) of the Income Tax Act for concealment of the income. b) It further appears that the accused had preferred an appeal against the said assessment order, before the Commissioner of Income Tax, (Appeals)-II, Nashik. The said appeal, which was {4} CRI. APPLN No.2085/07 numbered as Appeal No.JLG/ITO/W-2(9)/17/97-98, was dismissed vide order dated 08.12.1997. It also appears that the said order was challenged by the accused by preferring appeal No. 128/PN/98 before the Income Tax Appellate Tribunal, Pune. However, the same is dismissed vide order dated 23.02.2001. It also appears that the said order of dismissal passed by the Income Tax Appellate Tribunal has not been challenged by the applicants and hence the same has attained finality. c) It further appears that as the firm of the applicants found in the said assessment order to have concealed taxable financial charges income by not showing the same in the return of income to the tune of Rs.2,05,407/-and further found to have concealed income on account of bogus claim of remission/rebate at Rs.1,28.293/-. Thus, the total concealed income on account of financial charges not shown and false claim of remission / rebate works out to Rs.3,33,700/- and hence minimum penalty in the sum of Rs.1,54,120/- was levied vide order dated 14.09.2001 by the respondent. Hence, the applicants were held liable for prosecution for the aforesaid offences for making attempt to evade payment of taxes and for making false verification in the return of income signed by late Shri Anandraj Manaklal Jain, one of the partners of the said firm and hence the applicants have filed criminal application No.2085/2007 for quashing of the said proceedings. d) The facts which gave rise to file criminal application {5} CRI. APPLN No.2085/07 No.2086/2007 are that, a complaint was filed by the respondent alleging that the partnership firm, applicant No.3, of which applicants No.1 and 2 are the partners, had filed income tax return during the Assessment year 1994-95. The said firm had also maintained books of accounts during the said period and the firm was assessed by the then Income Tax Officer Wand No. 2(9) Jalgaon for that assessment year. The total income of the applicant firm was fixed at Rs.4,66,541/- on 28.02.1997 against the returned income of Rs.92,350/-. Hence, the order of assessment along with notice was issued u/s 274 r/w 271 (1) (c) of the Act for concealment of the income. e) It further appears that the said order was challenged by the accused by preferring appeal No.JLG/ITO/W-2(9)/16/97-98 before the Commissioner of Income Tax (Appeals)-II. However the said appeal was dismissed vide order dated 08.12.1997. It also appears that the said order of dismissal was challenged by the accused by preferring an Appeal No.128/PN/98 before the Income Tax Tribunal, Pune, however the same was also dismissed vide order dated 23.02.2001. This order of dismissal is nowhere challenged by the accused and thus it has attained finality. f) It appears that the applicant firm was found to have concealed taxable financial charges income by not showing the same in the return of income to the tune of Rs.1,78,963/- and further found to have concealed income on account of bogus claim {6} CRI. APPLN No.2085/07 of remission / rebate at Rs.1,77,994/-. Thus, the total concealed income on account of financial charges not shown and false claim of remission / rebate works out to Rs.3,56,157/- and hence minimum penalty of Rs.1,59,560/- was levied against accused firm by the Income Tax Officer, Ward No.1 (3) Jalgaon vide order dated 14.09.2001 and the accused were made liable for prosecution u/s 276C and u/s 277 of the Income tax Act for making an attempt to evade payment of taxes and for making false verification in the return of income signed by applicant No.2, in the complaint before the CJM, Jalgaon. 4. It appears that the learned CJM, Jalgaon had issued process against the respective applicants for the said offence, which is the subject matter of both the applications. 5. In this background, heard learned counsel fro the applicants followed by the submissions of learned Assistant Solicitor General for the respondent, Income Tax Department. 6. During the submissions, my attention is drawn towards section 278 B of the Income Tax Act, which speaks for offence by companies. Section 278 B of the Income Tax Act reads thus - Offences by Companies. 278B. (1) Where an offence under this Act has been committed by a company, every person who, at the time offence was committed, was in charge of, and was {7} CRI. APPLN No.2085/07 responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. (2) Notwithstanding anything contained in sub section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. 3) Where an offence under this Act has been committed by a person, being a company, and the punishment for such offence is imprisonment and fine, then, without prejudice to the provisions contained in sub-section (1) or sub section (2), such company shall be punished with fine and every person, referred to in sub-section (1) or the director, manager, secretary or other officer of the company referred to in sub-section (2) shall be liable to be proceeded against and punished in accordance with the provisions of this Act. Explanation – For the purposes of this section, - (a) “company” means a body corporate, and includes- (i) a firm: and (ii) an association of persons or a body of {8} CRI. APPLN No.2085/07 individuals whether incorporated or not; and (b) “director”, in relation to - (i) a firm, means a partner in the firm; (ii any association of persons or a body of individuals, means any member controlling the affairs thereof.” 7. In the explanation for the purpose of this section, it is made clear that company means a body corporate and includes a firm. 8. It is not disputed that applicants No.3 in both the applications are firms of which applicants No.1 and 2 in the respective applications are the partners. It is also not disputed that the returns were filed by one of the partner of the firm in capacity as a partner of the firm and the returns were signed and verified by the said partner in the capacity of a partner and not in his/her individual capacity. 9. Learned counsel for applicants, relying on the judgment reported in 2005 (4) SCC 530 in the matter of “Standard Chartered Bank V/s Directorate of Enforcement” has urged that considering the provisions of section 276C though the offence is committed by the firm, yet the applicants are not liable for imprisonment. Section 276C reads thus- {9} CRI. APPLN No.2085/07 Willful attempt to evade tax, etc. 276C (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 - (i) in a case where the amount sought to be evaded exceeds one hundred thousand rupees, without rigorous imprisonment for a term which shall not be less than six months but which may extend to sever 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. (2) If a person willfully attempts in any manner whatsoever to evade the payment of any tax, penalty or interest 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 with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and shall, in the discretion of the court, also be liable to fine. Explanation – For the purposes of this section, a willful attempt to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof shall include a case where any person- (i) has in his possession or control any books of account or other documents (being books of account or other documents relevant to any proceeding under this Act) containing a false {10} CRI. APPLN No.2085/07 entry or statement; or (ii) makes or causes to be made any false entry or statement in such books of account or other document; or (iii) willfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents; or (iv) causes any other circumstance to exist which will have the effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof.” 10. Judgment in the matter of Standard Chartered Bank, is in connection with the earlier judgment rendered in the matter of “Assistant Commissioner V/s Velliappa Textles” reported in (2003) 11 SCC 405. This judgment is overruled by the judgment in Standard Chartered Bank. In para 62 of the judgment in respect of Assistant Commissioner Bangalore, 2003, as per majority view, the appeal was dismissed against respondent No.1 firm and allowed in respect of prosecution against respondent No.2. For liability of the company or firm, the Apex Court in the judgment of Standard Chartered Bank, has observed thus - “29. The contention of the appellants is that when an offence is punishable with imprisonment and fine, the court is not left with any discretion to impose any one of them and consequently the company being a juristic person cannot be prosecuted for the offence for which custodial sentence is the mandatory punishment. If {11} CRI. APPLN No.2085/07 the custodial sentence is the only punishment prescribed for the offence, this plea is acceptable, but when the custodial sentence and fine are the prescribed mode of punishment, the court can impose the sentence of fine on a company which is found guilty as the sentence of imprisonment is impossible to be carried out. It is an acceptable legal maxim that law does not compel a man to do that which cannot possibly be performed (impotentia excusat legem). This principle can be found in Bennion’s Statutory Interpretation, 4th Edn. At P.969. “All civilized systems of law import the principle that lex non cogit ad impossibilia .....” As about lPatterson, J. said the law compels no impossibility.” Bennion discussing about legal impossibility at P.970 states that: “If an enactment requires what is legally impossible it will be presumed that Parliament intended it to be modified so as to remove the impossibility element.” This Court applied the doctrine of impossibility of performance (lex non cogit impossibili) in numerous cases (State of Rajasthan V. Shamsher Singh and Special Reference No.1 of 2002, in Re. 30. As the company cannot be sentenced to imprisonment, the court has to resort to punishment of imposition of fine which is also a prescribed punishment. As per the scheme of various enactments and also the Indian Penal Code, mandatory custodial sentence is prescribed for graver offences. If the appellants’ plea is accepted, no company or corporate bodies could be prosecuted for the graver offences whereas they could be prosecuted for minor offences as the sentence prescribed therein in custodial sentence or fine. We do not think that the intention of the legislature is to give complete immunity from prosecution to the corporate bodies for these grave offences. The offences mentioned under section 56 (1) of the FERA Act, 1973, namely those under section 13; clause (a) of sub-section (1) of section 18, Section 18-A; {12} CRI. APPLN No.2085/07 clause (a) of sub section (1) of section 19; sub-section (2) of section 44, for which the minimum sentence of six months’ imprisonment is prescribed, are serious offences and if committed would have serious financial consequences affecting the economy of the country. All those offences could be committed by company or corporate bodies. We do not think that the legislative intent is not to prosecute the companies for these serious offences, if these offences involve the amount or value of more than Rs.one lakh, and that they could be prosecuted only when the offences involve an amount or value less than Rs one lakh. 31. As the company cannot be sentenced to imprisonment, the court cannot impose that punishment, but when imprisonment and fine is the prescribed punishment, the court can impose the punishment of fine which could be enforced against the company. Such a discretion is to be read into the section so far as the juristic person is concerned. Of course, the court cannot exercise the same discretion as regards a natural person. Then the court would not be passing the sentence in accordance with law. As regards company, the court can always impose a sentence of fine and the sentence of imprisonment can be ignored as it is impossible to be carried out in respect of a company. This appears to be the intention of the legislature and we find no difficulty in construing the statute in such a way. We do not think that there is a blanket immunity for any company from any prosecution for serious offences merely because the prosecution would ultimately entail a sentence of mandatory imprisonment. The corporate bodies, such as a firm or company undertake a series of activities that affect the life, liberty and property of the citizens. Large-scale financial irregularities are done by various corporations. The corporate vehicle now occupies such a large portion of the industrial, commercial and sociological sectors that amenability of the corporation {13} CRI. APPLN No.2085/07 to a criminal law is essential to have a peaceful society with stable economy.” 11. It is urged on behalf of the applicants that as the offence is committed by the firm, of which applicants No.1 and 2 are the partners and considering the provisions of section 276C the firm cannot be punished by imprisonment. It is urged that at the most punishment of fine can be imposed. This proposition is based on the observations in the judgment in case of Standard Chartered Bank. However for this ground the FIR cannot be quashed. Whether the applicants can be punished u/s 276C for the offence committed u/s 278B by the firm or not can be considered after trial and after giving opportunity to both the sides to lead the evidence. However, the fact remains that the appeals filed before the Income Tax Tribunal, Pune are dismissed and the decision has attained finality, as the same is no challenged by the original accused. In the premise, there are no merits in the submission that as the penalty provided u/s 276 of the said Act is of imprisonment and fine the applicants are not liable for prosecution us. 276C r/w 277 and 278B of the said Act, as it is made clear by the Apex Court in the judgment of Standard Chartered Bank that whether the firm and the partners of the firm can be prosecuted or not. In substance, both the applications are devoid of any merit and hence are liable to be dismissed. 12. In the result, for the above discussion, both the {14} CRI. APPLN No.2085/07 applications are dismissed. Rule stands discharged accordingly. 13. The applicants are directed to appear before the learned Chief Judicial Magistrate, Jalgaon within a period of 4 weeks from today, failing which the CJM, Jalgaon to take necessary steps for causing their appearance. At the same time, in RCC No.194/2004, process is issued against the dead person and as there cannot be any prosecution against a dead person, the order of issuance of process against accused No.3, Late Shri Anandraj Jain is hereby quashed and set aside, though not challenged. [A.V.POTDAR, J.] drp/A10/criapln2085-07