PREM DASSversusINCOME TAX OFFICER

-1                               PREM DASS                                            A
                                     v.
                             INCOME TAX OFFICER

                                FEBRUARY 9, 1999

                    [G.B. PATTANAIK AND M.B. SHAH, JJ.]                               B

•           Income Tax Act 1961, ss. 276-C, 277 r/w 132 (4A)-Sessions Coult on
     appreciation of evidence reversing conviction awarded by trial coult and ac-
     quitting appellant of offences of filing incorrect returns of income and with-
     holding books of account-High Coult on re-appreciation of evidence and           c
     applying the presumption under s. 132 (4A) reversing the Sessions
     Court-Held, ingredients of offences not established; presumption under s.
     132 (4A) cannot apply.

            Income Tax Act 1961, s 271(1)(c) r/w 279( JA)-Appellant charged with
     offences of filing incorrect returns of income and withholding books of          D
     account-Income Tax Officer levying penalty-Appellate authority finding no
     concealment of income but that there was merely a difference of estimates
     and reducing penalty-High Coult reversing acquittal without considering
     effect of reduction of penalty-Held, High Coult not justified in interfering
     with acquittal; ought to have taken note of legislative intent behind s.
                                                                                      E
     279( JA)-lnterpretation of Statutes.

           The Appellant was convicted under S. 276-C of the Income Tax Act,
     1961 ('Act') by the Chief Judicial Magistrate, Faridabad on a .complaint
     that he had incorrectly made a verification on the income tax return for
     the Assessment Year 1980-81, and sentenced to six months' imprisonment           F
     and pay a fine of Rs. 1,000 in default to further imprisonment of three
     months. He was also convicted under S. 277 of the Act and sentenced to
     six months R.1 and the sentences were ordered to run concurrently. The
     Sessions Judge after appreciating the evidence concluded that the charges
     were not only vague but the evidence was insufficient to infer criminal
     intent of the appellant. The Sessions Judge took note of the fact that the
                                                                                      G
~
     appellate authority had, in an appeal by the appellant set aside the penalty
     imp.osed by the Income Tax Officer. Accordingly, the Sessions Judge
     allowed the appeal and acquitted the appellant.

           The High Court, in allowing the department's appeal, reappraised           H
                                          507
    508                  SUPREME COURT REPORTS                    [1999) 1 S.C.R.

A   the evidence of the Income Tax Officer, applied the presumption under S.
    132(4A) of the Act, and reversed the order of acquittal passed by the
    Sessions Judge.

          Allowing the appeal, this Court

B         HELD : 1.1. The ingredients of the offences under Ss. 276-C and 277
    of the Income Tax Act were not established by the prosecution beyond
    reasonable doubt, and therefore, the appellant could not be convicted of
    the offences under the said Sections. [514-E]


c Sessions
        1.2. The High Court had not considered the reasons advanced by the
            Judge and had merely relied upon the presumption arising out
    of S. 132(4-A) of the Act in reversing the order of acquittal without
    reversing the finding arrived at by the Sessions Judge on the evidence on
    record. (512-C·D]

D         1.3. There was nothing in S. 132(4-A) which would establish the
    ingredients of the offences under Ss. 276-C am! 277 of the Act. (514-E]

           2. Bearing in mind the legislative intent engrafted under S. 279 (1A)
    of the Act, the High Court was not justified in interfering with an acquittal.
E   That the Tribunal had totally set aside the order imposing penalty could
    not have been lost sight of by the High Court while considering the
    question whether the order of acquittal passed by the Sessions Judge had
    to be interfered with or not particularly, when the gravamen of indictment
    related to filing of incorrect return and making wrong verification of the
    statements filed in support of the return, resulting in initiation of penalty
F   proceedings. (514-G-H; 515-A]

          CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
    518 of 1992.

G         From the Judgment and Order dated 23.3.92 of the Punjab &
     Haryana High Court in Cr!. A. No. 99 DBA of 1989.

          V. Shekhar for the Appellant.

          K. N. Shukla, Rajiv Nanda, B.K. Prasad and P. Parmeswaran for the
H    Respondent.
                         PREM DASS v. l.T.O. [PATTANAIK, J.]                    509
 ~           The Judgment of the Court was delivered by                               A

              PATIANAIK, J. The appellant was convicted under Section 276C
       of the Income Tax Act, on a complaint being filed that he had incorrectly
       made a verification on the income tax return for the Assessment Year
       1980-81. For his such conviction, the learned Chief Judicial Magistrate,
                                                                                        B
       Faridabad, sentenced him to undergo imprisonment for six months and to
       pay a fine of Rs.1000/-, in default, to further undergo imprisonment for a
       period of three months. He was also convicted under Section 277 of the
       Income Tax Act and sentenced to undergo R.I. for six months but the
       sentences awarded had been ordered to run concurrently. The appellant
       preferred an appeal to the Sessions Judge, who by Judgment dated 7th of c
       October, 1988, came to the conclusion that the accused-appellant is en-
       titled to benefit of doubt and accordingly he acquitted him of the charges
       levelled against him. The department moved the High Court against the
       aforesaid acquittal passed by the learned Sessions Judge and the High
       Court by the impugned Judgment, allowed the appeal and set aside the D
       Judgment of acquittal passed by the learned Sessions Judge and affirmed
       the conviction and sentence of the appellant passed by the learned Chief
       Judicial Magistrate. Learned Sessions Judge, after analysing· the charges
       and evidence led by the prosecution in support of the said charges, came
       to the conclusion that the gravamen of indictment against the accused lay
       in the fact that he had filed an incorrect returns of income from his E
       transportation business and intentionally withheld books of account seized
       during search made under Section 132 of the Income Tax Act and had
       made wrong verification of the statements filed in support of the return.
       But, according to the learned Sessions Judge, the charges were not only
       vague but also the prosecution evidence was totally insufficient to infer the F
       criminal intent of the accused- assessee and, there was nothing on record
       to pinpoint the identity, veraciry or falsity of entries in the books of account
       on which the entire prosecution case was sought to be founded upon. The
       learned Sessions Judge also came to the conclusion that no evidence
       whatsoever had been examined by the prosecution to lend support to the
       opinion formed by the Income Tax Officer in the assessment proceedings. G
       The Sessions Judge also took into account the fact that the appeal filed by
..,,   the accused-assessee in respect of the relevant assessment year was partly
       allowed by the Commissioner of Income Tax (Appeal), Chandigarh by
       Order dated 12.3.1987 and the said appellate authority had recorded that
       the income estimated by the Income Tax Officer was not based on H
    510                    SUPREME COURT REPORTS                    [1999] 1 S.C.R.
A reasonable data and, therefore a direction was issued to the said Income
    Tax Officer to work out the commission at 8 per cent for all assessment
    years instead of 10 per cent estimated by him and on account of such order
                                                                                        -
    of the appellate authority, the tax liability of the assessee stood substantially
    reduced and this itself demonstrates that no criminal liability could be
B   fastened on the assessee. With these findings the Sessions Judge came to
    the conclusion that the prosecution is held to have failed to bring the guilt
    home to the accused beyond reasonable manner of doubt. The High Court
    however, ·in the impugned judgment re-appraised the evidence of Income
    Tax Officer PW3 and in view of presumption available under Section
    132(4A) of the Income Tax Act, reversed the order of acquittal on a finding
C   that the learned Sessions Judge was in error to hold that the prosecution
    case has not been established beyond reasonable doubt.

         Mr. Salve, learned Senior Counsel, appearing for the appellant con-
  tended that though the powers of the High Court while hearing an appeal
D against the acquittal are as wide and comprehensive as in an appeal against
  a conviction, but the High Court is required under the law to examine the
  reasons on which the order of acquittal was based and would be justified
  in interfering with an order of acquittal, after being satisfied that the view
  taken by the acquitting Judge was clearly unreasonable. According to Mr.
  Salve, if on the evidence two views are possible, one, supporting an order
E of acquittal and the other indicating conviction, the High Court would not
  be justified in interfering with an order of acquittal merely because it feels
  that it would, sitting as a Trial Court, have taken the other view. In the case
  in hand, not only the High Court has not considered the reasons given by
  the Sessions Judge in acquitting the accused-appellant but also the order
F of acquittal has been revt?rsed merely by reference to the presumption
  arising out of Section 132(4A) of the Income Tax Act and in this view of
  the matter the conclusion is inescapable that the High Court committed
  serious error in interfering with an order of acquittal passed by the Sessions
  Judge. Mr. Salve further contended that the penalty proceeding in question
  having ended in favour of the assessee-accused on a conclusion that the
G additions made in the assessment was purely on the basis of a difference
  of opinipn as to the estimate made by the assessee and the estimate made
  by the deP,;irtment and, therefore, there has not been a case of concealment
  of income or furnishing of inaccurate particulars of income, the High Court
  committed serious error in interfering with an order of acquittal. It is in
H this connection, Mr. Salve brought to the notice of the Court the legislative
                  PR.EM DASS v. I.T.O. [PATTANAIK, J.]                   511
mandate engrafted in Section 279(1A) of the Income Tax Act. He also             A
pointed out to us the earlier order of this court dated 28th of August, 1997,
where-under this Court had called upon the Income Tax Officer to tell
whether the prosecution launched against the appellant and which has led
to his conviction can independently be sustained when penalty proceedings
have culminated in favour of the appellant but there has been no response
from the said Income Tax Officer.
                                                                                B

      Mr. Shukla, the learned Senior Counsel, appearing for the respon-
dent on the other hand submitted that the criminal proceeding is wholly
independent of the penalty proceedings under the Income Tax Act and,
therefore, a conviction in a criminal proceeding cannot be interfered with      C
on the basis of findings of the appellate authority or the tribunal in a
penalty proceeding. With reference to Section 279(1A) of the Income Tax
Act and its effect on the pending prosecution, Mr. Shukla submitted that
the said provision has no application as the Commissioner or the Chief
Commissioner has not reduced or waived penalty and it is only the Income        D
Tax Appellate Tribunal which has cancelled the penalty in question and by
way of written information, Mr. Shukla has intimated the court that against
the order of the appellate tribunal cancelling the penalty, an application
under Section 256(1) of the I.T. Act for making a reference has been filed
and is still pending before the tribunal.
                                                                                E
      In view of the rival submissions at the bar, the first question that
requires consideration is whether the impugned order of the High Court
can be held to be in accordance with the parameters fixed for interference
with an order of acquittal. There cannot be any dispute with the proposi-
tion that the plentitude of power available to the court hearing an appeal F
against the acquittal is the same as that available to a court hearing an
appeal against an order of conviction. But at the same time it is well settled
by a catena of decisions of this court that the court will not interfere with
an order of acquittal solely because different plausible view may arise on
the evidence and the court thinks that the view taken by the trial court of
the evidence is not correct. In other words, the court must come to the G
conclusion that the view taken by the trial Judge while acquitting cannot
be the view of a reasonable man on the materials on record. It is also well
settled that the court of appeal must examine the reasons on which an
order of acquittal is based and must reach the conclusion that the view
taken by the acquitting Judge was clearly unreasonable. It has also been H
    SU                   SUPREME COURT REPORTS                  [1999] l S.C.R.
A held by this court that if the evaluation of the evidence made by the courts
   below while recording an order of acquittal does not suffer from any·
   illegality or manifest error and the grounds on which the said order of
   acquittal is based unreasonable, then the High Court should not disturb
   the said order of acquittal. Bearing in mind the aforesaid principles and
B on examining the Judgment of the learned Sessions Judge and the grounds
    on which the said learned Sessions Judge recorded an order of acquittal,
    as reflected in paragraphs 9, 10 and 11 of the appellate judgment, and the
    impugned Judgment of the High Court interfering with the said judgment
    of the Sessions Judge, we have no hesitation to come to the conclusion that
    the High Court has not considered the reasons and grounds advanced by
C the learned Sessions Judge while recording an order of acquittal and by
    merely relying upon the presumption arising out of Section 132(4A) of
    Income Tax Act, reversed the order of acquittal without reversing the
    findings arrived at by the Sessions Judge on the evidence on record. The
    conclusion of the learned Sessions Judge after appreciating the evidence
D ' led by the prosecution and after perusing the appellate order of the
    Commissioner of Income Tax (Appeals) dated 12.3.87, have not been given
    due consideration by the High Court and the High Court has merely gone
    by the statutory presumption arising out of Section 132(4A) of the Act. To
    attract the provisions of Section 276C of the Income Tax Act the prosecu-
E tion has to establish that the accused willfully attempted in My manner to
    evade any tax, penalty or interest chargeable or imposable under the Act.

           To attract the provisions of Section 277 the prosecution is required
     to establish that the accused made a statement in any verification under
     the Act which he either knows or believes to be false, or does not believe
F    to be true. The relevant part of Sections 276C and 277 are extracted
     hereunder for better appreciation of the point in issue:

             "276 C. (1) If a person willfuJly 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
G            imposable on him under any other provision of this Act, be punish-
             able, - ................"

             "277. If a person makes a statement in any verification under this
             Act or under any rule made thereunder, or delivers an account or
H            statement which is false, and which he either knows or believes to
                  PREM DASS v. l.T.O. [PATIANAIK,J.] ·                    513
        be false, or does not believe to be true, he shall be punishable, -      A


      Section 132 of the Income Tax Act deals with Search and Seizure
and Sub-section (4)(A) thereof stipulates that where any books of account,
other documents, money, bullion, jewellery or other valuable article or
thing are or is found to be in the possession or control of any person in        B
the course of a search, then it may be presumed that such books of account
or other documents belongs .to such person and that the contents of such
books of account are true and that the signature and every other part of
such books of account and other documents which purport to be in the
handwriting of any particular person are in that person' handwriting. The        C
aforesaid provision is extracted hereunder in extenso:-

        "132(4)(A) Where any books of account, other documents, money,
        bullion, jewellery or other valuable article or thing are or is found
        in the possession or control of any person in the course of a search,
        it may be presumed -                                                     D
        (i)   that such books of account, other documents, money, bullion,
              jewellery or other valuable article or thing belong or belongs
              to such person;

        (ii) that the contents of such books of account and other docu-          E
             ments are true; and

        (iii) that the signature and every other part of such books of
              account and other documents which purport to be in the
              handwriting of any particular person or which may reasonably
              be assumed to have been signed by, or to be in the handwrit-       F
              ing of, any particular person, are in that person's handwriting,
              and in the case of a document stamped, executed or attested,
              that it was duly stamped and executed or attested by the
              person by whom it purports to have been so executed or
              attested."                                                         G
     We fail to appreciate how applying the presumption under Section
132(4)(A) the ingredients of the offence under Sections 276C and 277 can
be held to have been established as has been held by the High Court.

     Willful attempt to evade any tax, penalty or interest chargeable or         H
    514                  SUPREME COURT REPORTS                  [1999] l S.C.R.    c
A imposable under the Act under Section 276C is a positive act on the part
    of the accused which is required to be proved to bring home the charge
    against the accused. Similarly a statement made by a person in any verifica-
    tion under the Act can be an offence under Section 277 if the person
    making the same either knew or believe the same to be false ,~r does not
    believe to be true. Necessary mensrea, therefore, is required to be estab-
B   lished by the prosecution to attract the provisions of Section 277. We see
    nothing in Section 132 (4)(A) which would establish the ingredients of
    aforesaid two criminal offence contemplated under Sections 276C and 277
    of the Indian Income Tax Act. It may be noticed at this point of time that
    the Tribunal while interfering with the penalty imposed under Section 271
C    (l)(C) of the Act came to a positive finding that there is no act of
    concealment on the part of the assessee and he had returned the income
    on estimate basis. The Tribunal, further found that it is a case purely on
    difference of opinion as to the estimates and not a case of concealment of
    income or even furnishing of inaccurate particulars of income.
D
           In the aforesaid premises, the High Court was totally in error in
    interfering with the order of acquittal passed by the learned Sessions Judge
    by an elaborate and well reasoned judgment. We have no hesitation to
    come to the conclusion that the ingredients of offence under Sections 276C
    and 277 of the Income Tax Act have not been established by the prosecu-
E   tion beyond reasonable doubt, and therefore, the appellant cannot be
    convicted of the offence under the said Sections.

         We also find sufficient force in the contention of Mr. Salve that the
  legislative mandate in Section 279(1A) of the Income Tax Act has not been
p borne in mind by the High Court while interfering with an order of
  acquittal. Mr. Shukla, no doubt has indicated that the said provision will
  have no application as the penalty imposed has not been reduced or waived
  by an order under Section 273A. We do not agree with the aforesaid literal
  interpretation of the provisions of Section 279(1A) of the Act, when we
  find that the Commissioner of Income Tax(Appeal) has reduced the penal-
G ty. Further the Tribunal has totally set aside the order, imposing penalty
  could not have been lost sight of by the High Court while considering the
  question whether the order of acquittal pas5ed by the Sessions Judge has
  to be interfered with or not, particularly, when the gravamen of indictment
  relates to filing of incorrect return and making wrong verification of the
H statements filed in support of the return, resulting in initiation of penalty
                  PREM DASS v. l.T.0. (PATTANAIK,J.]                     515
proceedings. Bearing in mind the legislative intent engrafted under Section     A
279(1A) of the Income Tax Act and the conclusion of the learned Sessions
Judge, on appreciation of evidence not having been reversed by the High
Court and the grounds of acquittal passed by the Sessions Judge not having
been examined by the High Court, we have no hesitation to come to the
conclusion that the High Court was not justified in interfering with an order
of acquittal.          ·
                                                                                B

       In the aforesaid circumstances, we set aside the impugned order of
the High Court and acquit the appellant of the charges levelled against
him. The order of acquittal passed by the Sessions Judge is affirmed and
this criminal appeal is allowed. The bail bond furnished by the appellant       C
stands cancelled.

S.M.                                                        Appeal allowed.