IN HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CRM-M-18597-2017 Date of Decision: February 28, 2020 M/s Anubhuti Cold Chains Pvt. Ltd. and others Petitioners Versus Assistant Commissioner of Income-Tax Circle-4, Chandigarh Respondent CORAM: HONBLE MR. JUSTICE HARNARESH SINGH GILL Present: Ms. Radhika Suri, Sr. Advocate, with Mr. M.S. Kanda, Advocate, for petitioners. Ms. Urvashi Dugga, Sr. Standing Counsel, for respondent-Income Tax Department. Harnaresh Singh Gill, J. present petition under Section 482 Cr.P.C. has been filed for quashing of complaint dated 29.03.2017 (Annexure P-1) under Section 276-D read with Section 278-B of Income-Tax Act, 1961 (hereafter referred to as 'Act') for Assessment Year 2014-15, and summoning order dated 30.03.2017 (Annexure P-2) on ground that same does not disclose commission of any offence punishable under aforesaid Sections of Act. As per facts of present case, petitioner No.1 filed its returns of income for Assessment Year 2014-15 on 29.11.2014, declaring income of Rs.99,10,030/- after claiming deduction of Rs.22,97,280/- in Chapter-VI-A, but case of petitioner was selected for scrutiny and notice under Section 143(2) of Act was issued on 24.09.2015. notice under Section 143(2) and another notice under Section 142(1) of Act was issued on 09.11.2016 asking petitioner to produce cash book. Accountant produced same produced on 27.12.2016. It is reflected from noting sheets dated 27.12.2016 that Accountant took back cash book and accordingly, summons were sent to Managing Director to produce cash book on 28.12.2016, which was received by Parveen, servant, as Rajinder Garg was not present and thereafter, Assessing Officer passed ex-parte assessment order on 29.12.2016. It is further case of petitioner that notice under Section 133(6) of Act was issued to furnish cash book on 17.02.2017 and same was submitted on 21.02.2017 under due acknowledgment. Despite assessee s having produced cash book on 27.12.2016 and again on 21.02.2017, show cause notice for prosecution under Section 276-D of Act was issued on 23.02.2017 for non-production of cash book. specific reply was filed by assessee that there was no reason on part of assessee to evade production of cash book. Similar notice was issued to petitioner No.2, Managing Director and petitioner No.3, former Director even though he had resigned in April 2015. As per stand taken by respondent-the Assistant Commissioner of Income-Tax, summons under Section 131 of Act were issued and were served through person working in house and during assessment proceedings under Section 143(3) of Act, notice under Section 142(1) dated 09.11.2016 was issued to assessee and was duly served and assessee was asked to submit cash book. case was fixed for 17.11.2016 and on said date, Authorized Representative (A.R.) of assessee appeared but did not submit cash book and matter was adjourned to 22.11.2016 but on said date also, none had appeared. Authorized Representative of assessee appeared on 23.11.2016 but did not submit cash book. After so many dates, Authorized Representative of assessee and Accountant appeared and produced cash book on 27.12.2016 and it was found that assessee had made several purchases, freight payments etc. of more than Rs.20,000/- in day in cash. assessee was also asked to show whether or not these were covered by exception to Section 40A(3) of Act given in Rule 6 DD. It is further case of Revenue that during proceedings in evening of 27.12.2016, attended by Authorized Representative of assessee, he was informed that cash book had been taken away by them without permission. He was asked to appear on 28.12.2016 with cash book, but nobody appeared. Authorized Representative was telephonically asked to return cash book, but to no avail. Repeated attempts to contact them had failed as their phones were found switched off. Thereafter, summons under Section 131 were issued at 11.00 A.M. on 28.12.2016 to Managing Director and Accountant to attend office at 3.00 P.M. on same day, but Managing Director refused to accept notice and notice was accepted by one Parveen, who works in house of Managing Director. Thus, order under Sections 144/143(3) of Act was passed on 29.12.2016. Even as per Assessment Year 2014-15, there were two Directors of Company, namely, Rajinder Garg and Jai Bansh Khan. Thus, both Directors are liable for acts of commission and omission. I have heard learned Senior Counsel for petitioner, learned Senior Standing Counsel for Revenue and with their able assistance, have gone through case file. Before proceeding further, it would be just and appropriate to extract Section 276-D of Act, as under:- Failure to produce accounts and documents. 276D. If person willfully fails to produce, or cause to be produced, on or before date specified in any notice served on him under sub-section (1) of section 142, such accounts and documents as are referred to in notice or wilfully fails to comply with direction issued to him under sub-section (2A) of that section, he shall be punishable with rigorous imprisonment for term which may extend to one year and with fine. provisions entailing offence under Section 276-D would come into force if person willfully fails to produce accounts and documents. As per record and order dated 27.12.2016, cash book was produced and it was noted that Accountant had inadvertently taken it back and again cash book was received by officer on 21.02.2017, whereas show cause notice under Section 276-D of Act was issued on 23.02.2017. As far as petitioner No.3 Jai Bansh Khan is concerned, he had resigned as Director in April, 2015 and had not been involved in day to day affairs of Company. Form DIR-12 indicates that Jai Bansh Khan had not been associated with Company w.e.f. 10.04.2015. Section 131 of Act is reproduced as under:- Power regarding discovery, production of evidence, etc. 131. (1) Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner, Commissioner (Appeals), Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner and Dispute Resolution Panel referred to in clause (a) of sub-section (15) of section 144C shall, for purposes of this Act, have same powers as are vested in court under Code of Civil Procedure, 1908 (5 of 1908), when trying suit in respect of following matters, namely : (a) discovery and inspection; (b) enforcing attendance of any person, including any officer of banking company and examining him on oath; (c) compelling production of books of account and other documents; and (d) issuing commissions. (1A) If Principal Director General or Director General or Principal Director or Director or Joint Director or Assistant Director or Deputy Director, or authorised officer referred to in sub-section (1) of section 132 before he takes action under clauses (i) to (v) of that sub-section, has reason to suspect that any income has been concealed, or is likely to be concealed, by any person or class of persons, within his jurisdiction, then, for purposes of making any enquiry or investigation relating thereto, it shall be competent for him to exercise powers conferred under sub-section (1) on income-tax authorities referred to in that sub-section, notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other income-tax authority. (2) For purpose of making inquiry or investigation in respect of any person or class of persons in relation to agreement referred to in Section 90 or Section 90A, it shall be competent for any income-tax authority not below rank of Assistant Commissioner of Income-tax, as may be notified by Board in this behalf, to exercise powers conferred under sub- section (1) on income-tax authorities referred to in that sub-section, notwithstanding that no proceedings with respect to such person or class of persons are pending before it or any other income-tax authority. (3) Subject to any rules made in this behalf, any authority referred to in sub-section (1) or sub-section (1A) or sub-section (2) may impound and retain in its custody for such period as it thinks fit any books of account or other documents produced before it in any proceeding under this Act : Provided that Assessing Officer or Assistant Director or Deputy Director shall not (a) impound any books of account or other documents without recording his reasons for so doing, or (b) retain in his custody any such books or documents for period exceeding fifteen days (exclusive of holidays) without obtaining approval of Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner or Principal Director or Director therefor, as case may be. Learned Senior Counsel appearing for petitioners contends that in instant case, facts on record do not decipher that any order was passed or direction given for retention of cash book. Thus, once there was no willful failure to produce books of accounts, impugned proceedings initiated are not tenable in eyes of law. It is further stated that as per settled law, when facts on record do not disclose commission of any offence, proceedings are liable to be quashed by this Hon ble Court under its inherent criminal jurisdiction under Section 482 Cr.P.C. In support of her assertions, learned Senior counsel for petitioners has relied upon judgment of Supreme Court in Rajeshwar Tiwari & Others Vs. Nanda Kishore Roy, Criminal Appeal No. 779 of 2007 decided on 19.8.2010; Alpic Finance Ltd. Vs. P. Sadasivan and another, (2001)3 SCC 513; Pepsi Foods Ltd. and another Vs. Special Judicial Magistrate and others, (1998)5 SCC 749 and Som Mittal Vs. Government of Karnataka, JT 2008(2) SC 41 and judgment of Delhi High Court in Shravan Gupta Vs. Assistant Commissioner of Income Tax (ACIT), Manu/DE/1079/2015. On other hand, learned Senior standing counsel for respondent argues that facts on record clearly point out apparent willful failure on part of petitioners in not producing cash book. It is further argued that even though cash book had been produced on given day, same had been taken back by Accountant of petitioners without any authority or consent of officials/officers of respondent. It is thus, contended that there is not only non compliance of Section 142(1) of Act, but there is huge contradictions in stands taken by petitioners at different level. It is further argued that recast and reprinted cash book given under Section 133(6) of Act on 21.02.2017 was not in compliance with provisions of Section 142(1) of Act. In support of her contentions, learned counsel for respondent has relied upon judgment of Supreme Court in P.Jayappan Versus S.K. Perumal, 1984 AIR SC 1963-149 ITR 696; judgments of this Court in M/s Telu Ram Versus ITO, 145 ITR 111 (P&H) and Surjit Engineering Works & Others and Versus ITO,2010 ITR 547 (P&H) and judgment of Madhya Pradesh High Court in R.G. Aggarwal and others Versus Union of India, 210 ITR 617. In Pepsi Foods Ltd. s case (supra) while relying upon its previous decisions in other judgments referred to above, Hon ble Supreme Court while setting aside order passed by High Court held that if there is no substance in allegations in complaint, then High Court would be well within its right to quash proceedings. observations made by High Court that at stage of taking cognizance by Magistrate, it cannot be said that allegations in complaint are so absurd and inherently improbable on basis of which no prudent man can ever reach just conclusion that there exists no sufficient ground for proceedings against accused, were set aside. It is settled law that when in face of facts on record, no offence is made out, continuing with criminal proceedings, is nothing but abuse of process of law. In instant case, when cash-book was produced on 27.12.2016, no order or direction was given for its retention under Section 131(3) of Act. Moreover, prosecutions under Section 276-D can only be launched on willful failure to produce books of accounts. In this case, same were produced on 27.12.2016 and on 21.02.2017 with due acknowledgment. Thus, there was no violation under Section 131 of Act which entails penalty proceedings under Section 272-A of Act. Notice under Section 142(1) of Act stands complied. petitioners were issued warning notice in summons under Section 131 of Act with stipulation that non compliance will entail penalty. Clause (d) of Section 272A(1) of Act, which came into effect w.e.f. 1.4.2017, reads as under:- S.272A(1). If any person, - (a) to (c) (d) fails to comply with notice under sub-section (1) of Section 142 or sub-section (2) of Section 143 or fails to comply with direction issued under sub- section (2A) of Section 142. case in hand did does not fall within ambit of Section 272A(1)(d) of Act as there is no willful non production of cash books. Admittedly, cash book had been produced on 27.12.2016 and 21.02.2017, whereas show cause notice was issued to petitioners on 23.02.2017. Thus, even before said show cause notice, cash book had been produced. issue that cash book produced subsequently was worth reliance or not is to be seen in assessment proceedings, but same cannot be made basis for initiating criminal prosecution against petitioners. judgments relied upon by learned counsel for respondent are not applicable to facts of present case. Thus, in view of totality of facts and circumstances of present case coupled with law laid down by Hon ble Supreme Court in Pepsi Foods Ltd. s case(supra), impugned complaint and summoning order dated 30.03.2017, are hereby quashed. Allowed in above terms. February 28, 2020 (HARNARESH SINGH GILL) ds JUDGE Whether Speaking/ Reasoned: Yes/ No Whether Reportable: Yes/ No Anubhuti Cold Chains Pvt. Ltd. and Others v. Assistant Commissioner of Income-tax Circle-4, Chandigarh