False return liability under section 277 depends on knowledge of falsity; firm and signatory partner remained liable, third partner acquitted.

False returns and supporting invoices were held to attract liability under section 277 where the particulars were bogus or inflated and the signer knew or believed them to be false. The partner who verified and submitted the return was convicted because his knowledge and responsibility for the return's contents were established, and that state of mind was imputable to the firm through him. By contrast, the third partner was not shown to have signed, verified, or knowingly ated in the fabrication of documents or false verification, so the evidence was insufficient to sustain conspiracy or false-document charges against him. The HC therefore sustained conviction of the firm and signatory partner, but acquitted the third partner for want of proof beyond reasonable doubt.

---

---

Issues: (i) Whether the returns and supporting invoices relating to the betelnut purchases were false within the meaning of section 277 of the Income-tax Act, and whether the firm and the partner who signed the return were liable for the offence. (ii) Whether the third partner was shown to have knowledge of or participation in the false verification and fabricated documents so as to sustain his conviction, including on the conspiracy and false-document charges.

Issue (i): Whether the returns and supporting invoices relating to the betelnut purchases were false within the meaning of section 277 of the Income-tax Act, and whether the firm and the partner who signed the return were liable for the offence.

Analysis: The evidence disclosed that several invoices relied upon in the returns were bogus or inflated, and in some instances the named suppliers were fictitious or had sold the goods to third parties. The false particulars were not confined to a mere accounting discrepancy but went to the correctness of the verification made in support of the return. The statutory offence required proof that the statement or verification was false and that the maker knew or believed it to be false or not true. As the partner who signed and verified the returns was directly responsible for their contents, his knowledge or belief could be attributed to him. In the case of the firm, the acts and state of mind of the responsible partner, acting within the scope of authority in submitting the return, were imputable to the firm for the purpose of prosecution under the Act.

Conclusion: The returns were false; the conviction of the firm and of the partner who signed and verified the returns was sustained.

Issue (ii): Whether the third partner was shown to have knowledge of or participation in the false verification and fabricated documents so as to sustain his conviction, including on the conspiracy and false-document charges.

Analysis: The material did not establish that the third partner had signed the returns, delivered the impugned documents, or otherwise taken part in the verification with knowledge of their falsity. Mere participation in the partnership business or a more active role in general affairs was insufficient without proof connecting him to the false return or fabricated invoices. On the conspiracy and document-related charges also, the evidence did not show beyond reasonable doubt that he knowingly joined in the fabrication or use of false documents. He was therefore entitled to the benefit of doubt.

Conclusion: The conviction of the third partner was set aside and he was acquitted.

Final Conclusion: The false-return and fabricated-document findings were affirmed against the firm and the signatory partner, but the third partner was relieved of criminal liability for want of proof of knowledge or participation.

Ratio Decidendi: For an offence under section 277 of the Income-tax Act, liability attaches only where the false return or verification is made with knowledge or belief of its falsity, and such knowledge or belief may be imputed to a firm through the responsible partner who submits and verifies the return.

---