Ishwarlal Girdharlal Parekh v. State of Maharashtra and Ors.

Judgment

ISHWARLAL GIRDHARLAL PAREKH STA TE OF MAHARASHTRA AND ORS. May l, 1968 [V. RAMASWAMI AND C. A. VAIDIALINGAM, JJ.] Indian Penal Code, s. 30 a11d s. 420-Cat!sing i11con1~-tax Officer to 111ake under assessn1ent of inco1ne by nu<;representatton lVhether 'cheatin1/-Assess1nent order whether 'property'-Conununication of Such ordel" to assess lvhether 'delivery' of property-Assess111ent orller whether \·aluable security' as defined in .\'. 30 /.P.C. The appellant along with ce1rtain others· \Vas tried for the offence of c.-n.tcring into a conspiracy to cheat the incon1e-tax authorities in respect of the incon1e-tax assessment of a firn1. The prosecution levelled against him a charge. inter alia, of the offence, under s. 420 I.P.C. The appel~ lant raised before the Special Judge an objection to the effect that the terms of s. 420 1.P.C. were not satisfied inasmuch as.

(i) an assessment order was not 'property', (ii) its communication to him was not 'delivery', (iii) an assessment order was also not a 'valuable security'. The Special Judge and the High Court rejected these contentions. The appellant camci to this Court by special leave. HELD : (i) Even if an assessment order is not 'property' in the "llands of the Incon1e-tax Officer, it is 'property' in the hands of the -assessee because it con.tains a computation of his assessable incomei and a determination of his tax liability~ The \vord property occur~ing in s. 420 I.P.C. does not necessarily mean that the thing, of which a delivery is dishonestly desired by the· person who cheats, must have a money value or a market value in the hands of the person cheated. [196 G-197 A] (ii) C·vmmunication or service of an assessment order is part of the procedure itself.

But if the necessary allegations are established, the accused must be held to have dishonestly induced the Income-tax Officer to 'deliver' the, particular property viz. the assessment order. Nor could the contention be accepted that the deception, if at all. is practised not \Vhen the assessment order· is delivered, hut at the stage when the con1- putation of the total income is made bv Jncome-tax Officer, for. the process of 'cheating' employed by an assessee. if successfrd, would have the result of dis-honestlv inducing: the Income-tax Officer to maR:e a wrong assessment order and communicate the same to an assessee. [197 C-DJ (iii) An order of assessment is a 'valuable security' under s. 420 T.P.C. because it creak~s a right in the assessee in the sense that he has a right to pay tax only on the total amount assessed therein and his liability to pav tax is also restric'cd to that extent. f197 F--:--Gl On the abo\·c reasoning, framing of a charge for an offence under s.

420 I .P .C. is correct. CRIMINAL APPELLATE JLiRTSD!CTIOJ\' : Criminal Appeal No. 109 of 1966. Appeal by special leave from the judgment and order dated November 24, 1965 of the Bombay High Court in Criminal Revision Application No. 232 of 1965. I 94 SUPRHlE COURT REPORTS ( 1969] J S.C.R. A. S. R. •Chari, N. C. Maniar P. C. Bhartari and J B Dadaclumji, for the appellant. G. L. Sanghi and S. I'. Nayyar, for respondent No. 1. N. C. Maniar, K. L. llatlzi and Atiqur Rehman for respon- . uen1 .\io. 2. The J ud.~ment of the Court was delivered hy Vaidialingam, J. In this appeal, by special leave, on hehalf .of the appellant, the fifth accused in Special Case No. 9 of 1963, Jn the Cou!"t of the Special Judge for Greater Bombay, Mr. A. S. R. Chan, learned counsel. challenges the order. dated ~ovembcr 24 .•. I 965. passed by the High Court of Bombay, in ·( rurnnal Rev1s1on Application No. 232 of I 965. There are five accused, in Special Case No. 9 of I 963. The appellant, and accused No. 4, arc partners of an industrial concern, known as 'Premier Industries'.

Accused .\lo. 1 is an Incometax Consultant, and accused Nos. 2 and 3, arc clerks. in the l ncomc-tax Department. The substance of the prosecution case. against "ll1ese five accused, is that they formed a wnspiraey, to ·cheat the income-tax authorities. in respect of the income-tax assessments, of the Premier Industries, for the assessment year 1960-61. and. in pursuance of the said conspiracy, commi-tted offences. under s. 420 IPC., and s. 5 (I) ( d) read with s. 5 (2). of the Prevention of Corruption Act. 1947 (Act II of 19471. (hereinafter called the Act). They have also been charged with an offence. under s. 468 !PC., alleged to have been committed, by them. in furtherance of the said conspiracy. The allegations, relating to the conunission of the offence, under s. 420 !PC., is comprised in charge No. 2. That charge ends up by saying that. by the various acts, mentioned therein. the appellant, along wi·th accused No. I. who is the Income-tax Practitioner, and accused No. 4, dishonestly or fraudulently induced the income-tax authorities and obtained assessment order for less income-tax than due by accused Nos. 4 and 5, and that. all the three of them. have committed an offence. under s.

420. !PC. lt is not necessary to refer to the other charges. The appellant raised an objection, to the framing of a charge. under s. 420 !PC. Accordinp: to him, the charge should really have been framed under s. 417. on the ground that the assessment order, in this case. is not 'property'. He also raised an objection, that the assessment order, is not 'valuable security'. The Special Judge, by his order. dated Februarv 3, 1965, rejected the preliminary objections, raised by the appe!lant. He held that the assessment order was 'property', and that It was also <valuable security'. Therefore. he held that the charge, framed !SHWARLAL v. STATE (Vaidialingam, J.) under s. 420 IPC., was correct. There were certain other objections, raised by the appellant, viz., 1hat sanction had not ~een obtained, under s.

196A, Cr.P.C., that where the offence itself was alleged to have been committed, in pursuance of the conspiracy, and was the subject matter of charge, no charge of co~sp1- racy could still be maintained, and that the period of c?nsp1racy had been artificially fixed, in the charge. These objectlons have also been overruled, by the Special Judge. The appellant carried the ma~ter, in revision, before the High Court of Bombay. The learned Judge, by his order, dated November 24, 1965, which is under attack; has confirmed the order of the Special Judge. Here again, the High Court has taken the view that •the assessment order is 'property' and it is also 'valuable security', under s. 30, IPC. The High Court is further of the view that the allegations, contained in the material ch3:fge, do prima facie disclose an offence, under s. 420 IPC. Certam other objections, raised before the High Court, were also negatived. Mr. A. S. R. Chari, learned counsel for the appellant, has again reiterated the same objections.

Except for the question, relating to the charge framed under s. 4 20 IPC., we make it clear that we are oat expressing any opinion, regarding the other points, raised by Mr. Chari. If any other objections are available to the appellant, or any other accused, he or they, will be perfectly" entitled to raise the same, during the course of 1he trial. The argument, regarding the invalidity of the charge,. framed under s. 420, runs as follows. The essential ingredient of an offence, under s. 420 IPC., is that the person cheating, mus1 thereby, dishonestly induce, the person deceived, to deliver any property, or to make the whole or any part of a valuable security. We are not referring to the other matters, contained in s. 420 IPC.

The issue or delivery of an order of assessment, by an I11:come-tax Officer is not in consequence of the cheating, comlilltted by a party, though it may be that the computation of income, as found in the assessment order, may be the result of cheating, practised by the accused. Therefore, the accused cannot be considered to have, by creating, dishonestly induced the Income-tax Officer, to deliver the assessment order because that is issued, to a party, as a matter of routine. Th'e assessment ?rder, cannot also be considered to be 'property', within the meanmg of s. 420 IPC. It cannot also be stated, that the accused, by cheating have dishonestly induced the Income-tax Officer to make a valuable securify, because an assessment order, can, in no sense, be considered to be a valuable security. No legal right is created by an assessment order. The liability to payment of income-tax is created by the charging section, s. 3, of the Indian I 9 fi SUPRLi\"11-: cot:RT REPORTS I 1969] 1 S.CR.

Income-tax Act, 1922, and ihe demand, for payment of tax is made, on the basis of a notice of demand. issued by the Incometax Ofhcer, concerned. At the most. the accused will be guilty of 'chcat.ing', '.IS defined under S. 415, ('PC, inasmuch aS they may have mtentlOnaliy induced the Income-tax Otlicer who is deceived, to do or omi1 to do. anythin~ which he would 'ool do or omit. if he were not so deceived, and ihcy will be liable for p~ishmellt: uadcr s. 417. IPC. ~r. G. L. Sanghi. learned counsel for the State, has supported the views, expressed by the Hi~h Court. We arc not inclined to accept the conkntions or Mr. Chari, that there is any error, or illegality. in framin['. a charge, under s. 420 IPC. As to whether the rrosecution is able 10 make 0ut its case, or not. is a different point. We are only concerned, at this staµ,c, to consider as to whether. under the c·1rc11mstances a charge. under s. 420, could have been fr"111ed.

It is well-known, that. under the Indian Income-tax Act, liability to pay income-tax arises on the accrual of 1he income, and not from the computation, made by the taxing authorities, io the course of assessment rroceedings. and tha1 it arises. at a point of time, not later than the close of the vear of account. It has also heen laid down. by this Court. that 'assessments particularise the total income of an assessee and the amount of tax, payable. Rut it is not as if that lhc assessment order is valueless, as is sought to be made out. The question. _that arises for consideration, in this case, is whether there is any 'delivery of property', or, at any ra1c. whether the Tncome-tax Officer hns been induced 'to make a valuable security'. 'Movable property' is defined. in "· 22, TPC; 'Document' and 'valuable security' arc defined in ss. 29 and 30. !PC, respectively.

Under the schcn1c of the Income-tax Act, it is clear that the assessment order dctcnnines lhe total income of the asscssee, and the tax payable, on the basis of such assessment. The assessment order ha< to be served, on the assessee. The tax is demanded. by the issue of a nolice. under s. 29: hut the tax demanded, is on •h~ hasis of the assessment order. communicated to an assessec. The communicated order of assessment, received by an asscssce, is in our opinion, 'property', since it is of great importance, to an asscsscc, as containing a computation. of his total assess~i,Je income and, as a detcm1ination, of his tax liability. Tn our v1c;v. the word 'property', occurring in s. 420, TPC._ docs not nec~ssanly mean that the thing. of which a delivery is dishonestly desired by the nerson who cheats, must have a money value or a market value. in the hand of the person cheated. Even if the thing ha.s no money value. in lhc hand of the person cheated. but become;; ISHWARLAL V. STATE ( Vaidialingam, J.) a thing of value, in the hand of the person, who may get possession of it, as a result of the cheating practised by him, it would still fall within the connotation of •the term 'property', in s.

420, IPC. Once the assessment order is held to be 'property', the question arises as to whether there is a 'delivery', of the same, to the assessee, by the Income-tax Officer. It is argued that the order is co111111unicated, in the usual course, and that irrespective of any 'cheating', the officer is bound to serve the assessment order. This argument, though attractive, has no merit. Communication, or service of an assessment order. is part of the procedure of the assessment itself. But it can be held tha!t, if the necessary allegations are established, the accused have dishonestly induced the Income-tax Officer, to deliver the particular property, viz., the assessment order, as passed by him, in and by which a considernbly low amount has been determined, as the total income of the assessee, on the basis of which the amount of tax, has been fixed .

Nor are we impressed with the contention, that the deception, if at all, is practised, not when the assessment order is delivered, but at the stage, when the computation, of the total income, is made, by the Income-'lax Officer. The process of 'cheating', employed by an assessee, if successful, would have the result of dishonestly inducing the Income-tax Officer to make a wrong assessment order and communicate the same to an assessee. An offence under s. 420, lPC, will also be made out, if it is established thirt the accused have cheated and, thereby, dishon~tly induced the Income-tax Officer to make a 'valuable security'. This takes us to the question : "Is the assessment order, 'valuable security'?" We have already referred to s. 30, JPC, defining 'valuable security'. The assessment order is certainly a 'document', under s. 29, TPC.

The order of assessment does create a right, in the assessee, in the sense that he has a right to pay tax only on the total amount assessed therein and his liability to pay tax is also restricted to that extent. Therefore an 'order of assessment' is a 'valuable security', under s. 420, lPC. Therefore, if the cheating, employed by the accused, resulted in inducing the Income-tax Officer to make a wrong assessment order, it would amount to inducing the Income-tax Officer, to make a 'valuable security'. Considering the question, from either point of view, as indicated above, it follows that the framing of a charge, for an offence. under s. 420 IPC. is correct. The appeal, accordingly, fails. and is dismissed. G.C. Appeal dismissed.