1996 (3) TMI 113 - HC - Income Tax

Petition to Quash Complaint Dismissed; Allegations Supported by Evidence; Trial Court to Proceed

The petition to quash the complaint was dismissed. The court held that the complaint disclosed a prima facie offence under sections 276C and 277 of the ... High Court, Wilful Attempt To Evade Tax Issues Involved:1. Whether the complaint prima facie discloses contravention of any provision of the Income-tax Act.2. Whether the petitioners were responsible for the conduct of the business of the firm under section 278B of the Income-tax Act.3. Whether the complaint was filed in a mechanical manner without any application of mind.Issue-wise Detailed Analysis:1. Prima Facie Contravention of the Income-tax Act:The petitioners argued that the complaint did not prima facie disclose any contravention of the Income-tax Act. The court examined the complaint, which alleged that the accused wilfully attempted to evade tax, penalty, and interest, and made false statements in the income-tax returns. Specific instances were provided for the assessment year 1984-85, where discrepancies were found in the books of account. The complaint included documentary evidence supporting these allegations. The court held that the complaint contained specific allegations based on facts and figures, and thus, it disclosed the commission of an offence under sections 276C and 277 of the Act. The court emphasized that the complainant has the right to prove his case during the trial, and denying this opportunity at this stage would be unfair and an infringement of the complainant's rights. The court referenced the case of Pratibha Rani v. Suraj Kumar to support its view.2. Responsibility for Conduct of Business under Section 278B:The petitioners contended that they were not responsible for the conduct of the business of the firm and thus could not be prosecuted under section 278B of the Act. The court noted that the complaint specifically alleged that the petitioners were partners of the firm during the relevant period and were in charge of and responsible for the conduct of its business. The court highlighted that under section 278B, the primary burden at this stage is to show that the person was in charge of and responsible for the business of the company. The court referred to the Indian Partnership Act, which states that every partner is liable for all acts of the firm done while he was a partner. The court found that the complaint contained sufficient allegations to justify the prosecution of the petitioners under section 278B. The court cited various judgments, including State of Karnataka v. Pratap Chand and M. S. M. Company (Paints) v. T. Govindarajan, ITO, to support its view that the petitioners could be held liable if they were in overall control of the business.3. Mechanical Filing of Complaint:The petitioners argued that the complaint was filed mechanically without any application of mind. The court rejected this contention, noting that the order of assessment, which formed the basis of the complaint, had been upheld by the appellate authority. Show-cause notices had also been given to the petitioners. The court found that the complaint was not a case of no pleading or no application of mind, as it contained specific allegations and supporting documents. The court referenced the judgment in Amrit Lal and Co. v. ITO, where it was held that the question of whether partners were responsible for the conduct of the business is to be determined after evidence is led. The court concluded that the complaint was not filed mechanically and that the Department had made specific allegations that needed to be proved during the trial.Conclusion:The petition to quash the complaint was dismissed. The court held that the complaint disclosed a prima facie offence under sections 276C and 277 of the Income-tax Act, and the petitioners could be prosecuted under section 278B as they were alleged to be responsible for the conduct of the business. The court emphasized that the allegations in the complaint were specific and supported by documentary evidence, and it was not a case of mechanical filing without application of mind. The trial court was directed to deal with the case expeditiously.