K.S. Tiwana, J. - (1.) VIDYA Sagar and his brother, Anand Sagar, were partners of firm M/s. Shahzada Hosiery Mills Ltd., Ludhiana. For the assessment year of 1963-64. (accounting year 1962-63), the respondent-firm filed a return with the ITO, Ludhiana, on February 18, 1964. Trading account, profit and loss account, balance-sheet, etc., for this assessment year were attached with this return. It may be noticed here that the return was not signed by anyone, but the documents in the form of statement of accounts, which were attached with the return, were signed by VIDYA Sagar, respondent. A declaration under Section 184(7) of the I.T. Act, 1961, hereinafter referred to as " the Act", that VIDYA Sagar and Anand Sagar were the partners of the firm at the time of filing the return, (...?...) duly signed by both (sic) these partners was also attached to the return. In this return, the respondent declared Rs. 62,102 only as income and understated the profit by Rs. one lakh. The correct gross profit amounted to Rs. 2,38,579, but it was declared as Rs. 1,38,579,
(2.) SHRI B.D. Gupta, P.W. 1, ITO, Ludhiana, who was seized of the tax matter, asked Vidya Sagar, respondent, on June 20, 1967, to explain the discrepancy in the profit, but he could not reconcile the difference, even with the help of his counsel and accountant. SHRI B. D. Gupta then recorded the statement of Vidya Sagar, respondent, on June 20, 1967, as exhibit P. E. on solemn affirmation, which is : " I hereby state on solemn affirmation that I am a partner of M/s. Shahzada Hosiery Mills, Ludhiana, having 1/2 share. The other partner is my brother, namely, Anand Sagar. Today I have produced account books for the financial year 1962-63, relevant to the assessment year 1963-64, made up into two ledgers, two cash books (Pacci), one Kachi cash book, one purchase register, one sale book, two copies of sale vouchers. These account books were written by my ex-accountant Sh. Sat Sarup, who is no more in my service. He left my service about four years back. I have submitted account statement consisting of profit and loss account, trading account, balance-sheet and copies of personal accounts. As pointed out by the Income-tax Officer, my present accountant, Sh. Brij Lal, and my counsel, SHRI Jagdish Singh, have checked the totals of the balance-sheet. The total of the liabilities side is in excess by Rs. 1,00,000. The correct total of the liabilities side is Rs. 3,34,763 instead of Rs. 4,34,763. But the total of the "asset side amounting to Rs. 4,34,763 is correct. In this way, the assets exceed the liabilities by Rs. 1,00,000. I am unable to explain this discrepancy of Rs. 1,00,000 at this time without thoroughly examining my account books. Any how I have got checked by my accountant the detailes.of closing stock amounting to Rs. 1,25,370 and sundry creditors 1,59,570, which are correct. Their details duly signed by me have been furnished today. " As Vidya Sagar, respondent, his counsel, SHRI Jagdish Singh and Brij Lal, accountant, could not explain the difference, SHRI B. D. Gupta on the same day impounded the records produced before him, vide his orders, Ex. P. F. Vidya Sagar also made his statement, Ex. P. F./2, on June 20, 1967, at the foot of Ex. P.P. to the effect that the account books of the Shahzada Hosiery Mills, pertaining to the financial year 1962-63, relating to the year 1963-64, and impounded on that date belonged to that firm. 2. When the matter was pending before the IAC, Ludhiana, Vidya Sagar, respondent, filed an application Ex. P.H. on March 12, 1968. In para. 7 of Ex. P.H. he stated; " The assessee, under some wrong advice, deflated the net profit for that year (assessment year 1963-64), by Rs. 1 lakh and inflated the profit for the current year (assessment year 1964-65), by the same amount, i.e., Rs. one lakh, through the device of wrong totals in the trading account of both the years. It is declared that there are no other wrong totals from beginning till to-date. Thus, on the whole there was no concealment of income. The assesses being afraid of calculation of profits (25% on exports) was tempted to adopt this method," On March 26, 1968, this firm through Vidya Sagar, respondent, filed another return, which was treated by the department as " revised return ", adding the concealed profit of Rs. one lakh for the assessment year 1963-64, in it. As the respondent had filed a false return on February 18, 1964, by deliberately concealing the profits of Rs. one lakh and also submitted false accounts with it to deflate the profit, the ITO, after sanction and authorisation from the Commissioner, Patiala, filed the present complaint. Shri B. D. Gupta, appearing as P.W. 1 in support of the prosecution case, testified to the facts narrated above. Shri P. N. Malik had filed the complaint under the authorisation from the Commissioner, Patiala. P.W. 3, Shri Sat Sarup, ex-accountant of the respondent, did not identify the signatures of Vidya Sagar, respondent, on Ex. P.H. and other documents. After the recording of the statement of Shri B.D. Gupta, the learned Magistrate charged the respondent and Anand Sagar under Section 277 of the I.T. Act, to which they pleaded not guilty. The respondent and his co-accused further cross-examined Shri B. D. Gupta, after the charge. At the close of the prosecution case, when examined, Vidya Sagar, respondent, denied the case against him. He denied having made any statement to Shri B. D. Gupta, ITO, or the filing of Ex. P.H. He also disclaimed his signatures on these two documents and Ex. P.C. and P.D., the statement of accounts and the balance-sheet. He also denied if the second return filed by the firm was a " revised return ". His co-accused, Anand Sagar, also denied the case against him.
(3.) THE learned trial Magistrate formed the view that it was not proved from evidence that Ex. P.H. was made by Vidya Sagar, respondent, or was signed by him. Shri B.D. Gupta, ITO, before whom Vidya Sagar, respondent, had signed only on 2 or 3 occasions could not have the sufficient proficiency to identify his signatures on Ex. P.H. Taking Ex. P.H. to be the only evidence to connect the respondent with the commission of the offence, which according to the learned trial Magistrate was not proved to have been signed by Vidya Sagar, he acquitted both of them. THE ITO has filed this appeal contesting the judgment of acquittal passed by the learned trial Magistrate. During the pendency of this appeal, Anand Sagar, respondent, has died. The appeal against him has, therefore, abated. The powers of the appellate court and the approach to evidence for assessment and appraisal in appeal against acquittal were examined by the Supreme Court in Labh Singh v. State of Punjab, AIR 1976 SC 83, at p. 86 ; " In some earlier judgments of this court, it was said that the High Court should not reverse an order of acquittal unless there are ' substantial and compelling' reasons to 'do so. In order to dispel doubts, it was clarified in subsequent decisions that the use of such phrases was neither intended to lay down a formula to be rigidly applied in every case, nor to curtail the powers of the High Court in appeal over an order of acquittal. It is now well settled that the powers of the High Court under Sections 417, 418 and 423 of the Code of Criminal Procedure, 1898 (or for that matter under the corresponding provisions of the new Code of 1973) while hearing an appeal against an acquittal are as wide and comprehensive as in an appeal against a conviction. It has full power to reappraise the entire evidence upon which the order of acquittal was based and to reach its own conclusion. But before reversing an order of acquittal it should endeavour to displace or dispel in a general or specific way the primary reasoning of the trial court upon which the acquittal is founded, paying due regard and consideration to such matters as (1) the views of the trial judge as to the credibility of the witnesses and the value of their evidence; (2) the initial presumption of innocence in favour of the accused, a presumption certainly not weakened by his acquittal at the trial; (3) the right of the accused to the benefit of any doubt; and (4) the slowness of an appellate court in disturbing a finding of fact arrived at by a judge who had the advantage of seeing the witnesses." With these principles in the background of our mind, we have gone through the record of the case and have heard the counsel for the parties. ;