Satish Chandra, C.J. - (1.) ON November 28, 1979, the Income-tax Officer, Central Circle III, Meerut, filed two complaints under Sections 277 and 278 of the I.T. Act, 1961, against nine persons, the ninth of which was M/s. Modi Industries Ltd., Modinagar, through its chairman, Sri K.N. Modi. ONe complaint related to the assessment year 1965-66, while the other related to the year 1966-67. It was alleged that M/s. Modi Industries Ltd., accused No. 9, filed returns of its income for the aforesaid assessment years wherein deliberately excessive expenditure was claimed in the form of payment of agency commission to several firms. The assessments were completed on March 24, 1970, for the assessment year 1965-66, and on March 26, 1971, for the year 1966-67. For both the years the excessive claim was disallowed on the finding that the firms to whom the agency commission was alleged to have been paid were bogus and non-existing firms to the knowledge of the concerned persons. In para. 30 of the complaint, it was stated that accused No. 1 in collusion with other accused at serial numbers 2, 3, 4, 5 and 8 had fabricated false evidence in supporting the false accounts to avoid payment of rightful taxes. In para. 41 of the complaint, it was alleged that accused No. 1 in collusion with accused No. 7 had fabricated false evidence in supporting these false accounts. In para. 42 of the complaint, it was stated that the accused persons mentioned above have committed offence punishable under Sections 277/278 of the I.T. Act. It was prayed that the accused be punished according to law.
(2.) IN due course, the Chief Judicial Magistrate, Meerut, summoned the accused. Thereupon, M/s. Modi INdustries Ltd., Modinagar, through its chairman, Sri K.N. Modi, came to this court under Section 482, Cr. P. C. for quashing the proceedings pending against the petitioner-company. The grounds urged in support of the petition were that according to law, as it stood at the relevant time, offences under Sections 277 and 278 of the I.T. Act were punishable with minimum imprisonment of six months only. A company which is a juristic person cannot be punished with imprisonment and hence cannot be prosecuted for breach of Sections 277 and 278 of the I.T. Act. When these cases came up for hearing, reliance was placed upon a single judge, decision in Criminal Misc. Case No. 2529 of 1979, J.K. Synthetics v. CIT, decided on March 27, 1980. In that case, it was held that a company being a juristic person cannot be given corporal punishment and consequently prosecution under Sections 277 and 278 of the I.T. Act was not maintainable against the company. Hon'ble Bakshi J., before whom these petitions came up for hearing, felt unable to agree with this opinion. He was inclined to agree with the decision of the Madras High Court in A.D. Jayaveerapandia Nadar andamp; Co. v. ITO [1975] 101 ITR 390. He accordingly referred the matter to a larger Bench. That is how the matter has come before this Bench. :
(3.) WE may at the threshold clear up a preliminary matter. Sections 211 and 278 of the I.T. Act have been subjected to amendment mote than once. The present section states :-- " 277. If a person makes a statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable,-- (i) in a case where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine; (ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine. " The present section was substituted for the following with effect from October 1, 1975, " 277. False statement in declaration.--If a person makes a statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true he shall be punishable with rigorous imprisonment for a term which may extend to two years : Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for less than six months," ;