Court upholds acquittal due to lack of liability, sets aside others for Income-tax Act violations. Omission of penal provisions doesn't invalidate prosecutions. No retrial due to time lapse and technicality.

The court upheld the acquittal of the second accused due to lack of liability but set aside other acquittals for violations of sections 269T and 269SS of the Income-tax Act. The court found that the omission of penal provisions did not retroactively invalidate prosecutions initiated while those sections were in force. Despite the applicability of a provision providing immunity for reasonable cause for non-compliance, the court chose not to remit the cases for retrial due to the passage of time and technical nature of the offenses.

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Issues Involved:
1. Violation of section 269T of the Income-tax Act by repayment of loans otherwise than by an account payee cheque.
2. Violation of section 269SS of the Income-tax Act by accepting deposits of Rs. 10,000 or more otherwise than by an account payee cheque.
3. Applicability of section 6 of the General Clauses Act to the omission of penal provisions (sections 276E and 276DD) from the Income-tax Act.
4. Liability of the second accused who joined the company after the alleged violations occurred.
5. Whether the trial court's acquittal based on the deletion of penal provisions was valid.
6. Consideration of reasonable cause for failure to comply with sections 269T and 269SS.

Detailed Analysis:

1. Violation of Section 269T:
The appellant contended that the first accused company violated section 269T by repaying loans otherwise than by an account payee cheque. The trial court acknowledged the violation but acquitted the accused, citing the deletion of section 276E, which provided penal provisions for such violations, effective from April 1, 1989.

2. Violation of Section 269SS:
The second batch of appeals involved the accusation that the first accused company accepted deposits of Rs. 10,000 or more in cash, violating section 269SS. The trial court similarly acquitted the accused, referencing the omission of section 276DD, which penalized such actions, effective from April 1, 1989.

3. Applicability of Section 6 of the General Clauses Act:
The appellant argued that the repeal or omission of sections 276E and 276DD should not affect ongoing proceedings, invoking section 6 of the General Clauses Act. The court agreed, stating that section 6 ensures that the repeal does not affect any legal proceeding or remedy in respect of any right, privilege, obligation, liability, penalty, forfeiture, or punishment acquired under the repealed enactment.

4. Liability of the Second Accused:
The trial court found that the second accused, who joined the company on September 14, 1987, could not be held liable for violations that occurred before his tenure. This finding was upheld, as it was undisputed that the second accused was not involved in the company's activities during the period of the alleged violations.

5. Validity of the Trial Court's Acquittal:
The trial court's acquittal based on the deletion of penal provisions was found to be erroneous. The court held that the omission of sections 276E and 276DD did not retroactively invalidate prosecutions initiated while these sections were still in force. The trial court's reliance on Rayala Corporation (P.) Ltd. v. Director of Enforcement, AIR 1970 SC 494, was deemed misplaced, as the facts of that case differed significantly.

6. Reasonable Cause for Non-Compliance:
The accused argued that there was reasonable cause for not issuing account payee cheques, citing operational practices and customer accommodation. The trial court did not adequately address this defense. Section 278AA of the Income-tax Act, which provides immunity from prosecution if reasonable cause is proven, was applicable at the time of the alleged violations. However, the court decided not to remit the case for further consideration due to the passage of time and the technical nature of the offense.

Conclusion:
The court concluded that the omission of sections 276E and 276DD did not affect pending prosecutions. The trial court's acquittal in cases involving the second accused (C.A. Nos. 279 to 288 of 1990) was upheld due to the lack of liability. However, the acquittal in other cases (C.A. Nos. 249 to 277 of 1990) was set aside, although the court chose not to remit these cases for retrial due to the significant time lapse and technical nature of the offenses. All criminal appeals were disposed of accordingly.

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