1997 (2) TMI 82 - HC - Income Tax

Acquittal upheld in income tax evasion case due to lack of wilful intent, emphasizing importance of mens rea

Income-Tax Officer Versus KA Siddique

The respondent-accused was acquitted as the court found no wilful attempt to evade income tax or false verification of the income tax return for the ... Assessment Proceedings, Criminal Proceedings, Offences And Prosecution, Power To Admit Additional Evidence, Wilful Attempt To Evade Tax Issues Involved:1. Whether the respondent-accused wilfully attempted to evade payment of income tax.2. Whether the respondent-accused falsely verified the income tax return for the assessment year 1985-86.3. Admissibility of additional evidence in the appeal.4. Impact of the findings of the Income-tax Appellate Authority on criminal proceedings.Detailed Analysis:1. Wilful Attempt to Evade Payment of Income Tax:The appellant-complainant alleged that the respondent-accused, who carried on business under Siddique Associates, did not file the income tax return for the assessment year 1985-86 within the prescribed time. The return was filed only after a notice under section 142(1) of the Income-tax Act, declaring an income of Rs. 7,606. The professional receipts included Rs. 50,000 from Dillu Cine Enterprises (P.) Ltd., where he was the managing director. During assessment, it was found that Rs. 1,00,000 was paid to the respondent-accused, but only Rs. 50,000 was declared. The respondent-accused explained that he demanded his fees of Rs. 1,00,000 at the time of changing management, with Rs. 50,000 paid in cash and Rs. 50,000 credited to his account. He filed a revised statement showing the additional Rs. 50,000. The trial court found no wilful default in suppressing the income and acquitted him.2. False Verification of Income Tax Return:The charges under sections 276C(1) and 277 of the Income-tax Act were framed against the respondent-accused, who denied the guilt. The trial court, after assessing the evidence, concluded that the complainant failed to prove wilful suppression of income. The respondent-accused's explanation about the timing and receipt of advice regarding the Rs. 50,000 was accepted. The court noted that the revised statement of income was submitted and accepted by the assessing authority, negating the claim of false verification.3. Admissibility of Additional Evidence:The respondent-accused filed a petition for taking additional evidence on record, which included orders passed by the Commissioner of Income-tax (Appeals) and other relevant documents. The court cited the case of Rajeswar Prasad Misra v. State of West Bengal, emphasizing that additional evidence must be necessary to avoid a failure of justice. The court admitted certified copies of public documents as additional evidence but rejected private documents requiring oral proof. The application for additional evidence was partly allowed.4. Impact of Findings of Income-tax Appellate Authority:The appellant argued that the result of proceedings under the Income-tax Act does not bind the criminal court, which must judge the case independently. However, the court noted that findings of fact by the ultimate income-tax authority are conclusive and binding on the criminal court. The Commissioner of Income-tax (Appeals) had set aside the penalty imposed, indicating no wilful suppression of income. The court referenced several cases, including P. Jayappan v. S. K. Perumal and G. L. Didwania v. ITO, supporting the principle that criminal courts must give due regard to findings under the Income-tax Act but must independently establish mens rea.Conclusion:The court concluded that the respondent-accused did not wilfully attempt to evade tax or falsely verify the income tax return for the assessment year 1985-86. The judgment of acquittal by the trial court was upheld, and the appeal against acquittal was dismissed. The court emphasized that the prosecution failed to establish the necessary mens rea, and the findings of the income-tax authorities supported the respondent-accused's defense.