Protective assessment cannot sustain tax evasion charges, but false declarations in income-tax proceedings can support cheating and false evidence convictions.

A protective income-tax assessment did not support convictions for wilful tax evasion and false statement because the later assessment attributed only part of the investment to the assessee and the remainder to her sister; the tax offences under the Income-tax Act were therefore set aside. By contrast, a knowingly false declaration in an application for a statutory certificate, made to show a lower sale consideration, was treated as a false statement in deemed judicial proceedings and as an attempt to induce official action on a false premise; the convictions for cheating and for giving false evidence were sustained.

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Issues: (i) Whether the conviction for offences under section 276C(1) and section 277 of the Income-tax Act, 1961 was sustainable when the assessment against the assessee was only protective and the later assessment apportioned the investment between the assessee and her sister. (ii) Whether the conviction for cheating and for giving false evidence in a judicial proceeding, under section 420 read with section 511 of the Indian Penal Code and section 193 of the Indian Penal Code read with section 136 of the Income-tax Act, 1961, was sustainable on the basis of the false declaration made in the application for certificate under section 230A(1) of the Income-tax Act, 1961.

Issue (i): Whether the conviction for offences under section 276C(1) and section 277 of the Income-tax Act, 1961 was sustainable when the assessment against the assessee was only protective and the later assessment apportioned the investment between the assessee and her sister.

Analysis: The material showed that the proceedings against the assessee had been initiated when her assessment was only on a protective basis. The later assessment order accepted that only part of the investment in the property was attributable to the assessee and the balance was attributable to her sister. In that situation, the element of wilful attempt to evade tax, penalty, or interest on the whole transaction was not made out. On the reasoning applied, prosecution for tax evasion and the related false-statement count under the Income-tax Act could not stand on a mere protective assessment footing.

Conclusion: The conviction under section 276C(1) and section 277 of the Income-tax Act, 1961 was not sustainable and was set aside.

Issue (ii): Whether the conviction for cheating and for giving false evidence in a judicial proceeding, under section 420 read with section 511 of the Indian Penal Code and section 193 of the Indian Penal Code read with section 136 of the Income-tax Act, 1961, was sustainable on the basis of the false declaration made in the application for certificate under section 230A(1) of the Income-tax Act, 1961.

Analysis: The application for the certificate under section 230A(1) contained a declaration and verified statement showing a lower sale consideration than the amount found on the evidence. Proceedings before an income-tax authority are deemed to be judicial proceedings for the purposes of sections 193 and 228 of the Penal Code, and the false statement made to obtain the certificate was capable of amounting to false evidence. The use of a false declaration to secure a certificate also disclosed an attempt to cheat by inducing the authority to act on a false premise.

Conclusion: The convictions under section 420 read with section 511 of the Indian Penal Code and section 193 of the Indian Penal Code read with section 136 of the Income-tax Act, 1961 were sustained.

Final Conclusion: The revision succeeded only to the extent of the income-tax offences, while the convictions for cheating and for giving false evidence in a judicial proceeding were maintained.

Ratio Decidendi: Prosecution for tax evasion cannot rest on a merely protective assessment where the later assessment shows only a limited taxable liability, but a knowingly false declaration made in income-tax proceedings to obtain a statutory certificate can sustain convictions for cheating and for false evidence because such proceedings are deemed to be judicial proceedings.

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