Dismissed

Jai Shankar Singh v. Union of India and 2 Others

Allahabad HC20 Sept 2021A482/10674/2021

Case brief

AI extract

What is this about?

Applicant applied to quash summons and warrants for prosecution under Section 276-CC of the Income Tax Act for belated return filing. Court held that filing under Section 139(4) does not condone non-furnishing within due time. Defendant's culpable mental state presumption stands at trial stage.

What the court decided

AI extract

Jai Shankar Singh Vs Union of India and 2 Others — Quashing and FIR | Allahabad HC (2021)

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Application U/S 482 No. - 10674 of 2021

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[1]

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A.F.R.

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Reserved on:- 27.07.2021 Delivered on:-20.09.2021

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In Chamber.

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Case :- APPLICATION U/S 482 No. - 10674 of 2021

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Applicant :- Jai Shankar Singh Opposite Party :- Union Of India And 2 Others Counsel for Applicant :- Amit Mahajan Counsel for Opposite Party :- G.A.

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Hon'ble Vivek Agarwal,J.

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Sri Amit Mahajan, learned counsel for the applicant and Sri Subham Agarwal, learned counsel for the respondents.

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This application under Section 482 Cr.P.C. has been filed seeking quashing of the summoning order dated 16.01.2018 and non bailable warrants issued on 11.12.2019 against the accused in Complaint Case No.28 of 2018, under Section 276-CC of the Income Tax Act, 1961 (Union of India vs. Jai Shankar Singh), pending in the court of Ld. Special Chief Judicial Magistrate, Varanasi.

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Learned counsel for the applicant submits that applicant is an income tax assessee as defined under Section 2(7) of the Income Tax Act, 1961 (hereinafter referred as ‘Act’) and has been regularly paying income tax. He has been allotted with Pan No. AAHHJ6630A and is karta of M/s Jai Shankar Singh (HUF). It is

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[2]

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Application U/S 482 No. - 10674 of 2021

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submitted that applicant had filed his return of income belatedly on 31.03.2017 for the assessment year 201516 declaring totaling income of Rs.24,12,050/- (twenty four lakhs twelve thousand fifty) and had deposited a sum of Rs.8,28,930/- (eight lakhs twenty eight thousand nine thirty) as self assessment tax on 31.03.2017 alongwith interest payable under Section 234-A and 234-C amounting to Rs.82,892/- (eighty two thousand eight hundred ninety two), though as per the provisions contained in Section 139(1) of the Act, he was required to file his return of income on or before 07.09.2015.

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It is submitted that the Deputy Commissioner of Income Tax, Circle- 3, Varanasi filed a complaint in his official capacity at the instance of the Principal Commissioner of Income Tax, Varanasi on being authorized and granted sanction under Section 279(1) of the Act on 08.01.2018.

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It is mentioned in the sanction order that a show cause notice was sent to the applicant on 30.11.2017 by speed post asking the applicant to appear and file reply on or before 15.12.2017, but despite service of show cause notice on 06.12.2017 and even thereafter applicant did not file any reply nor attended office of the authority. Though, according to the applicant he never received any show cause notice.

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Applicant’s grievance is that since applicant had filed income tax return though belatedly on 31.03.2017

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[3]

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Application U/S 482 No. - 10674 of 2021

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alongwith penalty and interest, thus there being no mens-rea on the part of the applicant, therefore, issuance of show cause notice after applicant had made compliance and deposited the tax did not call for any action. It is submitted that it is not a case of failure to furnish returns of Income Tax so to attact action under Section 276-CC of the Income Tax Act, 1961, merely because assessee had filed his return belatedly by 19 months.

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Applicant has placed reliance on Circular No.24 of 2019 dated 09.09.2019 issued by the Central Board of Direct Taxes, New Delhi, Annexure-5, to the petition to point out that in this circular in Clause-(4), it is mentioned that cases where the amount of tax, which would have been evaded if the failure had not been discovered, is Rs.25 lakhs or below, shall not be processed for prosecution except with the previous administrative approval of the Collagium of 2CCIT/DGIT rank officers as mentioned in para-3. It is submitted that in terms of this circular also, since liability of tax is less than Rs.25 lakhs, no action is warranted on part of the respondents.

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Reliance is placed on the judgment of Supreme Court of India in case of Suchitra Components Ltd. Vs. Commissioner of Central Excise, Guntur; 2007 (208) ELT 321 (SC), wherein, relying on the judgment of Supreme Court in case of Commissioner of Central

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[4]

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Application U/S 482 No. - 10674 of 2021

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Excise, Bangalore Vs. Mysore Electricals Industries Ltd; 2006 (204) ELT 517 (SC) , it is held that a beneficial circular has to be applied retrospectively while oppressive circular has to be applied prospectively. Thus, when the circular is against the asssessee, they have right to claim enforcement of the same prospectively. Placing reliance on this decision of Supreme Court, it is submitted that Circular No.24 of 2019 shall apply retrospectively and its benefit can be given to the applicant.

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Similarly, reliance is placed on the judgment of Supreme Court in case of Director of Income Tax Circle 26 (1), New Delhi Vs. S.R.M.B. Dairy Farming (P) Ltd.; [2018 (400) ITR 9], wherein, it is held that whether Circular No.3 of 2011 dated 09.02.2011 issued as a measure for reducing litigation by revising monitory limits for filing of appeals by department before Appellate Authorities would apply even to pending matters, but subject to two caveats that this circular would not be applied by the High Courts Ipso facto, when matter had a cascading effect and where common principles may be involved in a subsequent group of matters or a large number of matters.

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Reliance is also placed on the judgment of Supreme Court in case of S.C. Naregal Vs. Commissioner of Income Tax and others; [2019 (418) ITR 455 (SC)] , wherein again, it is held that

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[5]

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Application U/S 482 No. - 10674 of 2021

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instructions of C.B.D.T. No.05 of 2008 dated 15.05.2008 revising monitory limit to file appeal would apply even to pending matters when, there was no possibility of cascading effect, nor issue was involved in group of matters, it has been answered in affirmative in favour of the assessee.

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Reliance is also placed on order of co-ordinate Benches in Application under Section 482 No.2736 of 2003 (Chhotey Lal Vs. Union of India and another) and Application under Section 482 No.2730 of 2003 (Chhotey Lal Vs. Union of India and another) dated 09.01.2017, wherein, on concession by the learned counsel for the opposite party no.2 that there is Circular of C.B.D.T. to the effect that in case of the prosecution, the proceeding would be dropped against the assessee, who is above the age of 70 years, Application U/S 482 was disposed off.

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Reliance is also placed on the provisions contained in Section 278-E of the Income Tax Act, which deals with presumption as to the culpable mind and reads as under:-

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“ 278-E.(1) In any prosecution for any offence under this Act which requires a culpable mental state on the part of the accused, the court shall presume the existence of such mental state, but it shall be a defense for the accused to prove the fact that he had no such mental state with respect to the Act charged as an offence in the prosecution.

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Application U/S 482 No. - 10674 of 2021

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Explanation:- In this sub-Section “culpable mental state” includes intention, motive or knowledge of a fact or belief in, or reason to believe, a fact.

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(2) For the purposes of this Section, a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability.”

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Reliance is also placed on the judgment of Supreme Court in case of Rakapalli Raja Rama Gopala Rao vs Naragani Govinda Sehararao & another; AIR 1989 SC 2185 , wherein, it is held that an act is said to be wilful, if it is intentional, conscious and deliberate.

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Similarly, reliance is placed on the judgment of Supreme Court in case of State of Orissa & Others Vs. Mohd. Illiyas; (2006) 1 SCC 275 , wherein the Supreme Court has considered the true import of the word ‘wilful’ and placing reliance on the judgment of Rakapalli Raja Rama Gopala Rao vs Naragani Govinda Sehararao & another (supra) has held that an act is said to be ‘wilful’, if it is intentional, conscious and deliberate. It is further held that the expression ‘wilful’ excludes casual, accidental, bona fide or unintentional acts or genuine inability. It is to be noted that a wilful act does not encompass, accidental, involuntary, or negligence. It must be intentional, deliberate calculated and conscious wilful knowledge of legal consequences flowing therefrom. The expression ‘wilful’ means an act done with a bad purpose, with an evil motive.

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[7]

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Application U/S 482 No. - 10674 of 2021

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Reliance is placed on the judgment of High Court of Andhra Pradesh in case of Income-Tax Officer Vs. Autofil and others; [1990 (184) ITR 47], wherein, it is held that in terms of the provisions contained in Section 276-CC of the Income Tax Act, 1961, there is failure to furnish returns of income and they were filed late for relevant assessment years for reasons that due to indisposition of its clerk, day-to-day accounts could not be finalized and that partners were not conversant with preparation of profit and loss account and balance-sheet, however, assessee had paid not only advance tax but also penal interest and penalty for late filing of returns. It is held that in absence of presence of mens-rea or bad motive and guilty mind on the part of the assessee, its partner could not be prosecuted under Section 276-CC.

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Reliance is also placed on judgment of High Court of Madhya Pradesh in case of Narayan Vs. Union of India; [1994 (208) ITR 82 (M.P.)] wherein, the ratio is that, it is not merely failure to file return in time which constitutes offence under Section 276-CC of the Income Tax Act, 1961, but failure to file return in time must be proved by clear, cogent and reliable evidence to be wilful and there should be no plausible doubt of its being wilful. It is held that ingredients of delay being wilful being not proved beyond reasonable doubt by prosecution, therefore, petitioner was to be acquitted of offence under Section 276-CC.

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[8]

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Application U/S 482 No. - 10674 of 2021

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Reliance is also placed on the judgment of Madras High Court in case of Rajkumar Thiyagarajan Vs. Income Tax Department, Ward II, Theni; [2021 (277) Taxman 437 (Madras)] , wherein, it is held that if assessee failed to file return in time and files it later on, then revenue’s complaint against assessee under Section 276-C(1)(i) and Section 276-CC is nothing but clear abuse of process of law and it cannot be substantiated.

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Reliance is also placed on the judgment of Supreme Court in case of Suresh Sholapurmath Vs. Income Tax Department; (2017) 397 ITR 147, wherein, it is held that in view of the fact that total amount involved was below Rs.25,000/- and same had already been paid with interest long ago, proceeding under Section 276-C/277 initiated against assessee were quashed in favour of the assessee.

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Reliance is also placed on the judgment of High Court of Kerala in case of Forzza Projects (P) Ltd. and others Vs. Principal, Commissioner of Income Tax, Kochi and others; [2021 (2) KLJ 473], wherein, it is held that if there was only a failure on part of the assessee to pay tax in time, which was later on paid after availing installment facilities with interest, then mere failure to pay income tax based on self assessment would not constitute offence under Section 276-C(2).

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Learned counsel for the respondent-Department, in

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[9]

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Application U/S 482 No. - 10674 of 2021

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his turn, places reliance on the judgment of Supreme Court in case of M/S. Jai Fibres Ltd. Vs. Commissioner of Central Excise, Mumbai-III; (2008) 1 SCC 434 wherein, Supreme Court has held that words “henceforth” used by the Board must lead to the conclusion that only prospective effect thereto could be given and not a retrospective effect. Drawing attention to the Circular No.24 of 2019 dated 09.09.2019, it is submitted that in paragraph-5 of the Circular itself, it is mentioned that this circular shall come into effect immediately and shall apply to all the pending cases, where complaint is yet to be filed. It is submitted that this circular has no retrospective application, inasmuch as, complaint was, admittedly, filed on 16.01.2018, Annexure-4, to the Application, before the court of Special C.J.M., Varanasi and once complaint was filed Circular No.24 of 2019 will not be of any help to the applicant.

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Reliance is also placed on the decision of Supreme Court in case of Jay Mahakali Rolling Mills Vs. Union of India and others; (2007) 12 SCC 198 , wherein words ‘now’, used in circulars and clarifications on excise and customs circulars dated 31.03.1987 has been interpreted and it is held that the effect of the word “now” is that it is to operate henceforth. If the intention was to give retrospective effect, it would have been stated to be so specifically.

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In para-9, it is held that "Retrospective" means looking

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[10]

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Application U/S 482 No. - 10674 of 2021

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backward, contemplating what is past, having reference to a statute or things existing before the Statute in question. Retrospective law means a law which looks backward or contemplates the past; one, which is made to affect acts or facts occurring, or rights occurring, before it comes into force. Retroactive statute means a statute, which creates a new obligation on transactions or considerations or destroys or impairs vested rights.

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Reliance is also placed on the judgment of Supreme Court in Prakash Nath Khanna and others Vs. Commissioner of Income Tax and others; [2004 (266) ITR 1 (SC)] , wherein it is held that one of the significant terms used in Section 276-CC is ‘in due time’. The time within which the return is to be furnished is indicated only in sub-Section (1) of Section 139 and not in sub-Section (4) of Section 139, that being so, even if a return is filed in terms of the subSection 4 of Section 139, that would not dilute the infraction in not furnishing the return in due time as prescribed under sub-Section (1) of Section 139. Otherwise, the use of expression “in due time” would lose its relevance and it cannot be said that the said expression was used without any purpose. Before substitution of expression “Clause (1) of sub-Section (1) of Section 142’ by Direct Tax Laws (Amendment) Act, 1987, w.e.f. 01.04.1989, the expression used was “subSection (2) of Section 139”. At the relevant point of time, the assessing officer was empowered to issue a notice requiring furnishing of a return within the time indicated therein. That means the infractions which are covered by Section 276-CC relate to non-furnishing of

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Application U/S 482 No. - 10674 of 2021

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return within the time in terms of sub-Section (1) or indicated in the notice given under sub-Section (2) of Section 139. There is no condonation of said infraction, even if a return is filed in terms of sub-Section (4). Accepting such a plea would mean that a person who has not filed a return within the due time as Prescribed under sub-Section (1) or (2) of Section 139 would get benefit by filing the return under Section 139 (4) much later. This cannot certainly be the legislative intent. It is further held that the term of imprisonment is higher when the amount of tax would have been evaded, but for the discovery of the failure to furnish the return exceeds Rs.1,00,000/-(one lakh). If the plea of the applicant is accepted, it would mean that in a given case where there is infraction and where a return has not been furnished in terms of sub-Section (1) of Section 139 or even in response to a notice issued in terms of sub-Section (2), the consequences flowing from non-furnishing of return would get obliterated. At the relevant point of time, Section 139(4)(a) permitted filing of return, where, return has not been filed within subSection (1) and sub-Section (2). The time limit was provided in Clause (b). Section 276-CC refers to “due time” in relation to sub-Sections (1) and (2) of Section 139 and not to sub-Section (4). Had the legislature intended to cover sub-Section (4) also, use of expression “Section 139” alone would have sufficed. It cannot be said that legislature without any purpose or intent specified only the sub-Sections (1) and (2) and the

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Application U/S 482 No. - 10674 of 2021

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conspicuous omission of sub-Section (4) has no meaning or purpose behind it. Sub-Section (4) of Section 139 cannot by any stretch of imagination control operation of sub-Section (1), wherein, a fixed period for furnishing the return is stipulated. The mere fact that for purposes of assessment and carrying forward and to set-off losses, it is treated as one filed within subSections (1) or (2) cannot be pressed into service to claim it to be actually one such, though, it is factually and really not by extending it beyond its legitimate purpose.

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It is further held that whether there was wilful failure to furnish the return is a matter which is to be adjudicated factually by the court, which deals with the prosecution case. It is held that there is a statutory presumption prescribed in Section 278-E. The Court has to presume the existence of culpable mental state, and absence of such mental state can be pleaded by an accused as a defense in respect to the act charged as an offence in the prosecution. Therefore, the factual aspects highlighted by the applicants were rightly not dealt by the High Court. This is a matter of trial. It is certainly open to the applicants to plead absence of culpable mental state when the matter is taken up for trial and on such appreciation, appeals were dismissed.

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After hearing learned counsel for the parties and going through the material produced by them certain

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Application U/S 482 No. - 10674 of 2021

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facts needs to be answered namely, Circular No.24 of 2019 dated 09.09.2019 has no retrospective application as is evident from the law laid down in case of M/s. Jay Mahakali Rolling Mills Vs. Union of India and others (supra) and law laid down in case of Director of Income Tax Circle 26 (1), New Delhi Vs. S.R.M.B. Dairy Farming (P) Ltd. (supra) will not be applicable looking to the language of the circular itself as is used in para5 of the circular specifically providing that it shall be applicable only to all pending cases, where complaint is yet to be filed, when, admittedly, complaint was filed prior to coming into force of this circular.

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Similarly, law laid down in case of S.C. Naregal Vs. Commissioner of Income Tax, Hubli (supra) will also not be applicable and on its own facts, these judgments are distinguishable and will not apply to the facts and circumstances of the present case.

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Similarly, reliance is placed on Circular dated 24.04.2008 to demonstrate that for offences under Section 278, it provides that in case of an individual, he shall not ordinarily be proceeded for launching prosecution for any offence, if the individual concerned has attained age of 70 years at the time of the commission of offence will also not be applicable as has been applied by a co-ordinate Bench in case of Chhotey Lal Vs. Union of India and another (supra) , because if this proviso is applied, then it will frustrate the ratio of

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Application U/S 482 No. - 10674 of 2021

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the law laid down by the Supreme Court in case of Prakash Nath Khanna and another Vs. Commissioner of Income Tax and another (supra) .

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Same is the situation in regard to the judgments cited by the applicant in case of Rakapalli Raja Rama Gopala Rao vs Naragani Govinda Sehararao & another (supra), which is not a judgment on tax statute but a judgment in regard to the Buildings (Lease, Rent And Eviction) Control Act, 1960, and cannot be given same interpretation as is to be given to a fiscal statute which require strict interpretation in terms of the law laid down by Supreme Court in case of Vodafone International Holdings B.V. Vs. Union of India (UOI) and others; (2012) 6 SCC 613.

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Judgment in case of State of Orissa and others Vs. Mohd. Illiyas (supra) is also in relation to the interpretation of the provisions of Orissa Gram Panchayat Act and will again be not covered by the law laid down by Supreme Court in regard to interpretation to the fiscal laws.

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Judgments given by various High Courts of Andhra Pradesh in case of Income Tax Officer Vs. Autofil (supra) , High Court of Madhya Pradesh in case of Narayan Vs. Union of India (supra), High Court of Madras in case of Rajkumar Thiyagarajan Vs. Income Tax Department, Madurai (supra) turn on to their own facts. In fact, High Court of Madras has not taken into

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Application U/S 482 No. - 10674 of 2021

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consideration law laid down by Supreme Court in case of Prakash Nath Khanna and another Vs. Commissioner of Income Tax and another (supra) , where judgment was delivered on 16.02.2004.

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Judgment in case of Suresh Sholapurmath Vs. Income Tax Department (supra) is also distinguishable on its own facts, inasmuch as, Supreme Court quashed the proceedings as the amount involved was meagre and below Rs.25,000/- and was already paid with interest long ago. Thus, it held that amount involved was small and had already been paid with interest long ago, the Circular dated 07.02.1992 squarely applied and, therefore, no proceedings should have been filed as the amount was below Rs.25,000/- There is no mention of a clause like Clause (5) in C.B.D.T. Circular No.24 of 2019, specifying conditions as to the date and time of applicability.

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Judgment in case of Forzza Projects (P) Ltd. Vs. Principal Commissioner of Income Tax (supra) is a case under Section 276-C of Income Tax Act, 1961 and not under the provisions of Section 276-CC, therefore, has no application to the facts of the present case.

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Thus, when facts of the present case are examined in the light of the law laid down by Supreme Court in case of Prakash Nath Khanna and another Vs. Commissioner of Income Tax and another (surpa) , then it is evident that use of words ‘in due time’ is a

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Application U/S 482 No. - 10674 of 2021

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significant term used in Section 276-CC and relates to non-furnishing of return within the time in terms of sub-Section (1) or indicated in the notice given under sub-Section (2) of Section 139. There is no provision for condonation of the said infraction, even if, a return is filed in terms of sub-Sections (4) of Section 139 because due time as prescribed under sub-Section (1) or (2) of Section 139 will not get diluted by filing return under Section 139(4) much later as it is against the legislative intent.

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Contention of applicant’s counsel that return was filed prior to issuance of any notice by the department is to be examined in terms of the use of word ‘or’ under sub-Sections (1) or (2) of Section 139. Word ‘or’ is normally disjunctive and ‘and’ is normally conjunctive as has been held in case of Hyderabad Asbestos Cement Products and others vs. Union of India and others; (2000) 1 SCC 426 , wherein, it is held that ‘or’ in its natural sense denotes an ‘alternative’ and is not read as ‘substitutive’.

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In case of Nasiruddin Vs. State Transport Appellate Tribunal; AIR 1976 SC 331 P.338 quoting Scrutton L.J. in Green v. Premier Glynrhonwy Slate Co. (1928) 1 KB 561, 568 it is held that “You do sometimes read ‘or’ as ‘and’ in a statute. But you do not do it unless you are obliged because ‘or’ does not generally mean ‘and’ and ‘and’ does not generally

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Application U/S 482 No. - 10674 of 2021

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mean ‘or’.

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Lord Halsbury in case of Mersey Docks and Harbour Board v. V. Henderson Brothers; (1888) 13 AC 595, P.603 and Supreme Court in case of Pooran Singh and others Vs. State of M.P.; AIR 1965 SC 1583 (para-5) has held that the reading of ‘or’ as ‘and’ is not to be resorted to, “unless some other part of the same statute has the clear intention of it requires that to be done.

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In case of Union of India (UOI) and Ors. vs. IndSwift Laboratories Ltd. (2011) 4 SCC 635 , In Para-18, it is held that where provision is clear and unambigous the word ‘or’ cannot be read as ‘and’ by applying the principle of reading down.

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Thus, when examined in light of said legal position, then the argument that applicant had already furnished his return in terms of Section 139 (4) will not take away the liability of filing the return ‘in due time’ as mentioned in Section 276-CC, merely because no notice was issued prior to filing of the return.

¶95

Law laid down in case of State of Orissa and others Vs. Mohd. Illiyas (supra) deals with situation, which are bona fide or unintentional or genuine inability. Applicant was, if acting bonafidely was obliged to explain his acts to be bonafide or unintentional or genuine inability by furnishing his

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Application U/S 482 No. - 10674 of 2021

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explanation, which is not on record accept a bald assertion that notice under Section 139(2) was not received.

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Thus, in the light of the law laid down by Supreme Court in case of Prakash Nath Khanna and another Vs. Commissioner of Income Tax and another (supra) , the ratio being that, though, plea of lack of culpable mental state may be evoked by an accused in defense, but that cannot be seen at the time of filing of the complaint or at the stage of taking of the cognizance in terms of the provisions contained in Section 278-E(1) of the Income Tax Act, 1961, which deals with presumption of existence of such mental state being a matter of trial and, therefore, the petition/Application deserves to be dismissed and is dismissed.

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Order Date :- 20.09.2021 Ashutosh

Jai Shankar Singh v. Union of India and 2 Others

Case brief

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Jai Shankar Singh v. Union of India and 2 Others

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