1998 (3) TMI 37 - HC - Income Tax

Appellate Court Upholds Trial Acquittals, Complainant Fails to Prove Cash Deposits

The appellate court dismissed all criminal appeals, confirming the trial court's acquittal orders. The complainant failed to prove the accused accepted ... Offences And Prosecution, Law Applicable Issues Involved:1. Violation of Section 269SS of the Income-tax Act.2. Applicability of Section 276DD.3. Burden of proof regarding reasonable cause or excuse.4. Omission of Section 276DD and applicability of Section 271D.5. Requirements under Section 278B for prosecution of company officers.6. Production of affidavits by the complainant.7. Appellate court's interference with trial court's order of acquittal.Issue-wise Detailed Analysis:1. Violation of Section 269SS of the Income-tax Act:The complainant, the Assistant Commissioner of Income-tax, alleged that the accused, a private limited company and its principal officers, accepted deposits in cash exceeding Rs. 10,000 in violation of Section 269SS. This section mandates that any loan or deposit of Rs. 10,000 or more must be accepted only through an account payee cheque or bank draft.2. Applicability of Section 276DD:Section 276DD, which was in force at the time of the alleged offenses, provided for punishment by imprisonment for up to two years and a fine equal to the amount of the loan or deposit for contravention of Section 269SS. The trial court acquitted the accused, holding that the prosecution failed to prove that the accused accepted the deposits without reasonable cause or excuse.3. Burden of Proof Regarding Reasonable Cause or Excuse:The trial court held that the prosecution must prove the absence of reasonable cause or excuse for accepting the deposits in cash. The accused had provided explanations, such as the need for urgent cash for business expenses and the depositors' lack of bank accounts. The complainant failed to disprove these explanations.4. Omission of Section 276DD and Applicability of Section 271D:Section 276DD was omitted with effect from April 1, 1989, and replaced by Section 271D, which imposes a penalty equal to the amount of the loan or deposit without imprisonment. The court held that since the offenses were committed before the omission of Section 276DD, the old section was applicable, and the prosecution under the old section was maintainable.5. Requirements under Section 278B for Prosecution of Company Officers:Section 278B states that when an offense is committed by a company, every person in charge and responsible for the conduct of the business at the time of the offense is also liable. The court noted that the complaint did not specifically allege which officers were responsible for the day-to-day affairs of the company, which was necessary to bring the case within the ambit of Section 278B.6. Production of Affidavits by the Complainant:The trial court acquitted the accused on the ground that the complainant failed to produce affidavits from the depositors, which were in the possession of the complainant, to disprove the accused's explanations. The court held that the party in possession of the best evidence must produce it and cannot rely on the abstract doctrine of the burden of proof.7. Appellate Court's Interference with Trial Court's Order of Acquittal:The appellate court held that it would not normally interfere with an order of acquittal unless the view taken by the trial court was wholly unreasonable or erroneous. The appellate court found that the trial court's reasons for acquitting the accused were sustainable and confirmed the order of acquittal.Conclusion:The appellate court dismissed all the criminal appeals filed by the complainant and confirmed the trial court's orders of acquittal. The complainant failed to prove that the accused accepted the deposits in cash without reasonable cause or excuse and did not produce the necessary affidavits to disprove the accused's explanations. The court also held that the complaint did not meet the requirements of Section 278B regarding the prosecution of company officers.