(a) Income-tax----

----Concealment of income ---Prosecution---Mens rea---Prosecution would not follow in every case where a wrong statement was made and it would have to be judged as to whether the assessee harboured the required mens rea which was the essential ingredient of an offence.

P. Jayappan v. S.K.Perumal, First ITO (1984) 149 ITR 696 (SC); Sant Parkash v. CIT (1991) 188 ITR 732 (P & H) and Parkash Chand v. ITO (1982) 134 ITR 8 ref.

(b) Income-tax---

----Concealment of income---Prosecution---Delay of seventeen years from the date of occurrence and more than eight years from the date of judgment of acquittal of assessee---Termination of criminal proceedings against the assessee, held, were justified in circumstances.

S. Guin v. Grindlays Bank Ltd. AIR 1986 SC 289 ref.

A.K. Mittal and S.G. Sandhawalia for Appellant.

Raj Mohan Singh for Respondents.

JUDGMENT

S.D. BAJAJ, J.--Complaint filed by the Income Tax Officer `A' Ward, Kurukshetra, against Messrs Rulia Ram Dewan Chand and its five partners under sections 277 and 273 of the Income Tax Act, 1961 (as amended up to date) read with section 34, of the Indian Penal Code was dismissed by the learned Trial Court on January 3, 1983, on the ground that the finding recorded by the Income-tax Officer in regard to the concealment of income by the concern in its income-tax return filed for the assessment year 1974-75 for earning wrongful gain to itself by avoiding liability to pay income-tax had been reversed by the appellate authority ort January 21, 1980. Feeling aggrieved thereby, the complainant-Income-tax Officer has filed Criminal Appeal No.428-DBA of 1983 in this Court.

We have heard Shri A.K. Mittal, Advocate, with Mr. S.G.Sandhawalia, Advocate, for the appellant, Shri Raj Mohan Singh, Advocate, for the respondents and have carefully perused the relevant records.

Referring to the observations made in P Jayappan v. S.K.Perumal, First ITO (1984) 149 ITR 696 (SC) and Sant Parkash v. CIT (1991) 188 ITR 732 (P & H) learned counsel for the appellant urged that the result of proceedings before the Income-tax Tribunal was not binding on the Criminal Court and that the learned trial Court ought to have judged the case independently on the evidence adduced before it. The argument is wholly without merit and the authorities cited do not support it. The matter arising for consideration before the Hon'ble High Court in both the cases cited on behalf of the appellant pertains to quashing of the complaint filed earlier to the decision of the Income-tax Department and the orders summoning the respondents arrayed as accused in the complaint had been passed by the learned trial Court before it. It was under these circumstances that the Hon'ble High Court held that giving relief by the Income-tax Department thereafter did not render the complaint an abuse of the process of the Criminal Court. Otherwise the Hon'ble High Court, in both the cases aforesaid, observed, "In a criminal case, all the ingredients of the offence in question have to be established in order to secure the conviction of the accused. The Criminal Court no doubt has to give due regard to the result of any proceedings under the Act having a bearing on the question in issue and, in an appropriate case, it may drop the proceedings in the light of an order passed under the Act."

Relevant sections 277 and 278 of the Income-tax Act, 1961, read: --

"277. False statement in verifications, 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 true, 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.

278. Abetment of false return, etc: --If a person abets or induces in any manner another person to make and deliver an account or a statement or declaration relating to any income chargeable to tax which is false and which he either knows to be false or does not believe to be true or to commit an offence under subsection (1) of section 276C, he shall be punishable--

(i)in a case where the amount of tax, penalty or interest which would have been evaded, if the declaration, account or statement had been accepted as true or which is wilfully attempted 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;

(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."

It is argued that the signing and verification of the return containing false figures by itself should be enough to raise a presumption of dishonesty. For appreciating this argument, reference will have to be made to section 277 of the Act which says that, if g person makes a statement in any verification under the Act, or delivers an account or statement which is false he maybe punished with the penalties as prescribed in the said section. However, the section contains some crucial words in regard to the mens rea of the assessee, these words being "and which he either knows or believes to be false, or does not believe to be true." The intention of the Legislature in incorporating these words is quite obvious that a prosecution would not follow in every case where a wrong statement is made and it will have to be judged as to whether the assessee harboured the required mens rea or not.

That mens rea is an essential ingredient of an offence under section 277 of the Act is clear from the section itself.

Even otherwise, it has been held by this Court in Parkash Chand v. ITO (1982) 134 ITR 8 (headnote): "Prosecution was launched against the assessee for offences under section 277 of the Income Tax Act, 1961, and sections 193 and 471 of the I.P.C. on the basis of false returns, false accounts and inflated items of purchases. Pending the criminal proceedings, in penalty proceedings for concealment of income, the Tribunal examined the material and arrived at the finding that none of the income-tax authorities established clearly that particular items of purchases were inflated and as such there was no proof that the assessee had concealed income or furnished inaccurate particulars and cancelled the penalty. Thereupon, the assessee filed a writ petition to quash the criminal proceedings.

Held, that, in view of the findings of the Tribunal that there was no concealment and no inaccurate accounts were filed by the petitioners, the criminal proceedings against the assessee could not continue and were liable to be quashed."

Another aspect of the matter is that the occurrence is of the year 1974-75. Acquittal judgment was rendered by the learned trial Court on January 3, 1983. Criminal Appeal No.428-DBA of 1983 against it was filed on April 29, 1983. Leave to appeal was granted therein on May, 25, 1983. In S. Guin v. Grindlays Bank Ltd., AIR 1986 SC 289, their Lordships of the Supreme Court observed that inordinate delay of nearly six years that had ensued after the judgment of acquittal would justify the termination of the criminal proceedings. In the present case, the delay is of seventeen years from the date of occurrence and more than eight years from the date of judgment of acquittal. Termination of criminal proceedings ordered by the learned trial Court was, therefore, the safest order in terms of the Supreme Court guidelines aforesaid and we see no reason to disturb it in the present appeal. Dismissed.

M.B.A./1938/T Appeal dismissed.