Kumar Vivek
Special Judge for Trial of Economic Offences Cases Hyderabad
HYD, CBI Court Complex · Hyderabad · Telangana
KUMAR VIVEK, Special Judge for Trial of Economic Offences Cases Hyderabad, is posted at HYD, CBI Court Complex, Hyderabad, Telangana, India. 606 court orders on record since 2019. 20 judgments with full text available. Primarily handles CC, CRL, CRLMP cases.
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Court of Special Judge for Economic Offences, Hyd. 1 of 34 Judgment in C.C.No. 18 of 2017
//Fair Copy//
IN THE COURT OF SPECIAL JUDGE FOR TRIAL OF CASES UNDER ECONOMIC
OFFENCES :: HYDERABAD.
Dated this the 13th day of April, 2026
Present : Smt. J. Maithreyi,
Special Judge for trial of cases under Economic
Offences, Hyderabad.
C.C.No.18 of 2017
Between : The Asst. Commissioner of Income Tax, Central Circle-2(4), 3rd Floor, Posnett Bhavan, Ramkote,
Hyderabad-500 001 ... Complainant
And
1) M/s Dreamland Ventures pvt Ltd., 2nd Floor, No.85,16th Cross 14th Main, HSR Layout, Bangalore-560102 Rep. by its Managing Director, Sri Patan Lal Ahammad Khan S/o Saida Khan, Flat No.B4, Chandrahasa Apartment, Ajith Singh Nagar, Vijayawada - 520015.
2) Mr. Patan Lal Ahammad Khan S/o Saida Khan, aged : 47 years, Occu: Managing Director, R/o: Flat No.B4, Chandrahasa Apartment, Ajith Singh Nagar, Vijayawada-520015.
3) Mr. Avva Venkata Rama Rao S/o Venkata Appa Rao, aged about 55 years, Occ: Director R/o H.No.23-35-39, A S Rao Street Lakshmi Nagar, Satyanarayanapuram Vijayawada-520011.
4) Mr.Chinnappa Srinivasa Reddy S/o Chinnappa Reddy, aged about 50 years, Occu:Director, R/o: No.105/17, 12th Main, BTM Layout, 1st Stage, Bangalore-560029.… Accused Nos. 1 to 4
Special Judge for Economic Offences, Hyd.
Court of Special Judge for Economic Offences, Hyd. 2 of 34 Judgment in C.C.No. 18 of 2017
This case is coming before me on 09.04.2026 for hearing and disposal in the presence of Sri.H.Govind Rao, Special Public Prosecutor for Complainant, Sri K. Rama Srinivas, counsel for accused no.1 and 2, Sri.D.Vijaya Bhaskar, Sri. J. Basava Raju, Sri. TVN Ravikanth and Sri. D.Sai Dheeraj, Counsels for accused no.3 and Sri. D. Raghavendra and Sri. K. Ravi, counsels for accused no.4 and after hearing the arguments and perusing the material on record and after the matter having stood over for consideration till this day, today, this Court delivered the following:
J U D G M E N T
1.The Income Tax Officer, Hyderabad has filed a complaint under Section 190 r/w
Section 200 of Cr.P.C. for the offence punishable under Section 276CC and 278B of the Income Tax Act, 1961 (Hereinafter referred as ‘the Act,’) against the Accused persons.
2.The brief contents of the complaint are as follows :
The Complaint is filed pursuant to the prior sanction of the Commissioner of
Income Tax (Central), Hyderabad vide order u/s 279(1) of the Income Tax Act, 1961 in
F. No. CIT(C)/HYD/PROS/AGRI GOLD FARM/2016-17, dated 23.05.2016 which is enclosed herewith as Document No.1.
3. As per section 136 of the Income Tax Act, 1961, proceedings under the Act are deemed to be the judicial proceedings within the meaning of section 193 to 196 of the I.P.C. That the accused No.1 is the company registered under the Indian
Companies of Act of 1956 and its registered office is situated at 2nd Floor, No.85,16th
Cross, 14th Main, HSR Layout, Bangalore-560102 and is engaged in the business of
Real Estate and Constructions of Apartments.
4.The accused No.1 is the Managing Director and the accused No.2 to 3 are the directors of the company and are in-charge and responsible for the day today affairs of the company for the conduct of its business. In view of the provisions of Section s 2788 of the I.T.Act, 1961 they are liable to be proceeded against.
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Court of Special Judge for Economic Offences, Hyd. 3 of 34 Judgment in C.C.No. 18 of 2017
5.A search u/s.132 of the Income tax Act, 1961 was conducted at the office premises of the accused at 2nd Floor, No.85,16th Cross, 14th Main, HSR Lay out,
Bangalore-560102 on 23-1-2015 and 19.03.2015 evidenced by panchanama dated 23-1-2015 & 19-3-2015. Certified true copies of warrant of authorization u/s 132 of the IT Act, 1961, panchanamas and Sworn Statement are enclosed as Document No.2 to 5.
6.That after search a notice u/s.153A of the Income tax Act, 1961 for the assessment year 2010-11 was issued on 25.8.2015, the accused is required to file the return of income for the afore mentioned assessment year within time allowed in the notice i.e. 30 days from the date on which the notice has been served on him/her.
The relevant notices were served on the accused on 25.08.2015. The due date to file the return of income for the assessment year 2010-11 was 24.09.2015. A copy of the notice u/s.153A dated: 25.08.2015 is enclosed as Document No.6.
7.That the accused, however, failed to furnish the return of income for the assessment year 2010-11 on or before the due date. Therefore, notice u/s 142 (1) of the IT Act, 1961 was issued on 18.01.2016 and the same was received on behalf of the accused. The accused neither complied with the notice nor has given any explanation for non-compliance. A copy of the notice u/s 142(1) dated 18.01.2016 is enclosed and marked as Document No.7.
8.That inspite of the receipt of notices u/s153A and 142(1) of the IT Act, 1961, the accused did not file the return nor responded to the notices. Therefore, a show- cause notice dated 15.02.2016 was issued to the accused on 15.02.2016 to show cause as to why prosecution proceedings u/s 276CC of the Income Tax Act, 1961 should not be initiated for not filing the return of income for the assessment year
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Court of Special Judge for Economic Offences, Hyd. 4 of 34 Judgment in C.C.No. 18 of 2017 2010-11 and posted the matter for hearing was fixed on 29.02.2016. The same served on the accused on 15.02.2016. The accused did not comply. The accused has not provided any explanation in this regard. A copy of the show-cause notice is enclosed as Document No.8.
9.The accused is duty bound to file the return of income for the Assessment Year 2010-11 in response to notice u/s 153A of the Income Tax Act, 1961. In the light of facts and circumstances as narrated above in the preceding paragraphs, it is evident that the accused not filed returns in response to notice u/s 153A of the Income Tax
Act, 1961. Further, the assessee has failed to comply with the notices issued as per the statutory powers vested with the authority of the Income Tax Act, 1961. Despite given sufficient opportunity, the assessee's non responsiveness is a clear and sufficient indication of gross negligence on his part.
10.As per the provisions of section 153A of the Income Tax Act. 1961, the accused is required to file the return of income on or before the date specified in the notice issued under section 153A of the Income Tax Act, 1961. But the accused inspite of giving sufficient opportunities and issuance of notices did not file the return of income. Therefore, the accused has committed an offence punishable under section 276CC of the Income Tax Act, 1961. Since the offence is committed by the Company and its Managing Director and Directors they are liable for punishment U/s 278B of the I.T.Act.
11.On the basis of the allegations contained in the complaint and the documents filed in support of it, this court took cognizance of the offences under Sections 276CC r/w 278B of Income Tax Act, 1961 against the accused issued summons.
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12.Responding to the summons, the accused put up their appearance and thereafter copies of documents as contemplated under Section 207 of Cr.P.C. were furnished to the accused. The evidence was recorded under Section 244 Cr.P.C as it is private complaint.
13.After hearing the prosecution, as well as the accused, taking into consideration of evidence of prosecution witnesses, this court has framed charges under Sections 276CC and 278B of Income Tax Act, 1961 against the accused and the same was read over and explained to accused in his vernacular language, to which they denied the offence, pleaded not guilty and claimed to the tried.
14.To bring home the guilt of the accused for the offences with which they are charged, the complainant examined Pws1 to 3 and got marked Exhibits P1 to P17 and got marked Ex.D1 to D3.
15.After closure of complainant’s side evidence, the accused was examined under
Section 313 Cr.P.C putting incriminating circumstances appearing against the accused in the evidence prosecution witnesses to which he denied the same. On behalf of the accused, no witnesses are examined and no documents are marked.
16.Heard both sides. Perused the record.
17.Now the point for consideration is :
“Whether the complainant is able to prove the guilt of Accused beyond all reasonable doubt ?”
POINT :
18.The offence under Section 276CC and 278B of Income Tax Act,1961.
Before going into the discussion of merits of the case, it is better to go through
the provisions under Section 276CC and 278B of Income Tax Act, 1961.
Special Judge for Economic Offences, Hyd.
Court of Special Judge for Economic Offences, Hyd. 6 of 34 Judgment in C.C.No. 18 of 2017 276CC:Failure to furnish returns of income.—If a person wilfully fails to furnish in due time 1 [the return of fringe benefits which he is required to furnish under sub-section (1) of section 115WD or by notice given under sub-section (2) of the said section or section 115WH or] the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under 2 [clause (i) of sub-section (1) of section 142] or 3 [section 148 or section 153A,] he shall be punishable,— (i) in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds 4 [twenty-five 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 imprisonment for a term which shall not be less than three months but which may extend to 5 [two years] and with fine: Provided that a person shall not be proceeded against under this section for failure to furnish in due time the 6 [return of fringe benefits under sub-section (1) of section 115WD or return of income under sub-section (1) of section 139]— (i) for any assessment year commencing prior to the 1st day of April, 1975; or (ii) for any assessment year commencing on or after the 1st day of April, 1975, if— (a) the return is furnished by him before the expiry of the assessment year; or (b) the 7 [tax payable by such person, not being a company,] on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source, does not exceed three thousand rupees.]] 278B. Offences by companies.—(1) Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. (2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
19.The allegation of prosecution is that the accused persons are duty bound to file the return of income for the AY 2010-11, in response to notice under Section 153A of Income Tax Act, 1961. The accused have not filed returns in response to notice
Special Judge for Economic Offences, Hyd.
Court of Special Judge for Economic Offences, Hyd. 7 of 34 Judgment in C.C.No. 18 of 2017 issued under Section 153A of Income Tax Act, 1961. Further, the assessee has failed to comply with the notice issued as per the statutory powers vested with the authority of income tax act, 1961. Despite giving sufficient opportunity the assessee’s non responsiveness is a clear and sufficient indication of gross negligence on their part thereby the accused persons have committed the offence under Section 276CC of IT Act, 1961 and section 278B of IT Act.
20.The prosecution in order to substantiate their evidence examined Pws 1 to 3.
The evidence of PW1/ Narsingh Kumar Khalko, Director of Finance, shows that Since the role of CBDT is to conduct the search & seizure operation as per central action plan issued by the CBDT, in this regard he received Warrant of Authorization under
Ex.P1 and P2 dated 23.01.2015 and 19-03-2015 from Director of Income Tax ( Investigation), Hyderabad. The above documents are issued directing him to conduct search & seizure operation u/s. 132 of Income Tax Act at the offices and other premises of accused herein. Accordingly, he conducted search along with other authorized officers of the department. During the course of search & seizure operations, certain documents were found and seized which have been incorporated in the panchanama drawn at various premises under Ex.P3 dated 19-03-2015.
Further, the sworn statements of accused were recorded in the premises u/s 132(4) of Income Tax Act, i.e., The attested true copy of Sworn statements of A3 dated 05- 02-2015 marked as Ex P4. The attested true copy of Sworn statements of A3 dated 06-02-2015 is marked as Ex P5. The attested true copy of Sworn statements of A3
dated 26-02-2015 is marked as Ex P6. The attested true copy of Sworn statements of
A3 dated 13-03-2015 is marked as Ex P7. The attested true copy of Sworn statements
Special Judge for Economic Offences, Hyd.
Court of Special Judge for Economic Offences, Hyd. 8 of 34 Judgment in C.C.No. 18 of 2017 of A3 dated 23-03-2015 is marked as Ex P8. The attested true copy of Sworn statements of A3 dated 23-03-2015 is marked as Ex P9.
21.Accused namely Sri Avva Venkata Rama Rao had stated vide his statement recorded on 23-03-2015 that there is an effective additional undisclosed income of
Rs.14,72,62,211/- from Assessment Years 2012-13 to 2014-15.
22.After the conduct of the search PW1 had conducted the search, prepared appraisal report based on the documents seized as per panchanama and had put up for approval of Principal Director of Income Tax (Investigation) Hyderabad through
Additional Director of Income Tax Unit-I, Hyderabad and the same was accorded
approval subsequently. It is pertinent to mention here that further the case was centralized to the o/o PCIT (Central), Hyderabad for scrutiny assessment purposes and appraisal report along with seized material & other documents was forwarded to the jurisdictional assessing officer in the central charge.
23.In the cross examination PW1 stated he has not issued any notice under
Section 132(1) of IT Act before undertaking the search and seizure authorization. He has not received any material on record from the deponents while recording their statements however, the same can be confirmed by seeing the panchanama. As per panchanama, he has seized books of accounts etc from the companies mentioned in respective panchanamas. The books of accounts of other subsidiary companies were also seized. He admits as per company Act, each company is distinct and separate entity. It was maintained on the computer of which back up was taken in the hard drive and seized. On two issued only, it was analyzed, first transfer of shares and the expenses made for land dealings. They made analysis of seized material and made appraisal report and forwarded to the central charge for the scrutiny of the issues,
Special Judge for Economic Offences, Hyd.
Court of Special Judge for Economic Offences, Hyd. 9 of 34 Judgment in C.C.No. 18 of 2017 the complaint was not filed by him so, he is not aware whether such analytical report was filed or not.
24.PW1 further stated they seized sale deeds purchase deeds, agreements, details pertaining to cash payments made to different individuals and share ledger register mentioning the name of shares, year of transfer details of transferees and transferrer etc. they analyzed the balance sheet and profit and loss account fo the companies and found huge expenses in cash, secured loans, share premiums for which they asked specific questions to the directors of the companies for which they expressed inability to submit the supporting documents like voucher and other details and the statement was recorded under Section 132 (4) of IT Act through which directors particularly A.Venkata Rama Rao has confirmed and accepted the undisclosed income on estimation basis which was made the part of appraisal report and forwarded to central charge for scrutiny proceedings. He has not filed satisfaction report. He admits all his findings are set aside by Hobn’ble ITAT under
Ex.D1.
25.The evidence of PW1 is very crucial because he has conducted search. The panchanama was conducted by him. Further he has recorded the statements also. As per his evidence he has seized the books of accounts relating to different companies.
He has prepared appraisal report also. He has seized incriminating materials ie., sale deeds, agreements details relating to cash payment share ledger register etc.
Further, his evidence disclose that as per balance sheet and profit and loss of company they found huge expenses in cash unsecured loans share premiums . The accused have not furnished the documents relating to said expenses shares etc, however, they admitted undisclosed income.
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26.The testimony of PW2/ Nethra Pal, Director of Finance, shows that he was authorized by DIT, Hyderabad to conduct search at Bangalore at A1 company premises. Ex.P10 is the Authorization issued in his favour by K.J. Rao, Addl. Director of
Income Tax (INV), Unit-I, Hyderabad.
27.In pursuance of this authorization letter, the search was conducted and he has drawn panchanama on 23.01.2015. The various documents were seized during such search. The details of seized documents are provided in the annexure appended to the panchanama. Ex.P11 is the panchanama, dated 23.01.2015 along with list of inventory of account books etc., seized under cover of panchanama. Thereafter, he handed over the search proceedings, said panchanama etc., to the Hyderabad Unit.
The remaining process was done by the Hyderabad Unit and Central Unit.
28.In cross-examination PW2 stated that before conducting the search, he was not involved. So he do not know whether any notice was issued u/s 131 and 132 of
Income Tax. It was done by Hyderabad team but not by him. He has only drawn the panchanama on 23.01.2015. Based upon the composite warrant given to him, he conducted panchanama and accordingly drawn a composite panchanama.
29.He admits they have not identified books of accounts of each company as per the warrant wherein the names of the companies were mentioned including the A1.
He admits what ever it is stated in the panchanama that is final for him and beyond that he cannot answer.
30.He denied the suggestion that he has not applied his mind and mechanically drawn the panchanama and that the panchanama is illegal.
31.PW3/ D.Sunil Kumar, worked as Assistant Commissioner of Income tax shows in the case of M/s Agri Gold Constructions Private Ltd., a Search and Seizure
Special Judge for Economic Offences, Hyd.
Court of Special Judge for Economic Offences, Hyd. 11 of 34 Judgment in C.C.No. 18 of 2017 operation was conducted at the office premises on 23-01-2015, 13-03-2015, 14-03- 2015, 15-03-2015 and 23-03-2015 evidenced by the Panchanama dated: 23-01-2015, 13-03-2015, 14-03-2015, 15-03-2015 and 23-03-2015. During the search and seizure operation and post search investigation. the undisclosed income for the assessment year 2009-10 is identified under the head income from other sources and income from the business.
32.After search and seizure operation, the case is centralized to Central Circle- 2(4) on 23-03-2015 by the Principal Commissioner of Income Tax (Central) Hyderabad in order No.CIT(C)/H/Centralization/Agri Gold Group/2014-15 dated: 23-03-2015 for completing the assessment proceedings. Accordingly, a notice U/Sec.153 A under
Ex.P10 was issued for the assessment year 2009-10 and served on the accused on 26-08-2015. The accused is required to file the return of income for the aforementioned assessment year within time allowed in the notice i.e., 30 days from the date on which the notice has been served on them. The relevant notice was served on the accused on 18-01-2016. The due date to file return of income for the assessment year 2009-10 was 26-09-2015. However the accused failed to furnish the return of Income for the assessment year 2009-10 on or before the due date.
33.Therefore notice L/Sec. 142(1) of the IT Act under Ex.P11 was issued on 18-01- 2016 and the same was served on the accused. The accused neither complied with the notice nor has given any explanation for non-compliance of the aforementioned notices.
34.Inspite of receipt of the notice U/Sec. 153A and 142(1) of the IT Act, 1961 the accused did not file the return of income nor responded to the notices. Therefore a show cause notice was issued and served on the accused on 15-02-2016 to show
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Court of Special Judge for Economic Offences, Hyd. 12 of 34 Judgment in C.C.No. 18 of 2017 cause as to why prosecution proceedings U/Sec. 276CC of the Income Tax Act, 1961 shall not be initiated for not filing return of income for the assessment year 2009-10.
The accused did not comply to the show cause notice and the accused has not provided any explanation in this regard.
35.The accused is duty bound to file the return of income for the assessment year in response to the notice u/s 153A of the Income Tax Act, 1961. Despite of giving sufficient opportunity, the accused non-responsiveness is a clear and sufficient indication of gross negligence on their part. Therefore, the accused has committed an offence punishable under section 276 CC of the Income tax Act, 1961. The sanction orders was passed under Ex.P10.
36.In cross-examination PW3 shows that in the case, the search was conducted, after concluding the search proceedings, certain income was identified and as a
Deputy Commissioner of Income Tax working with Central Circle, he has to conclude assessment proceedings, after search the group of cases centralized to PCIT, Central
Circle and accordingly he issued notice under Section 153A of IT Act to conclude the proceedings. he received appraisal report after concluding search proceedings. He has not filed appraisal report before the court. Because the preparatory note which is incidental to commence the search and seizure operation, it is treated an internal document, so he did not file the same before the court. He has prepared satisfactory note before issue of notice under Section 153A of IT Act. He admits that as per
Section 139 of IT Act, the company is regular in filing all the returns including returns in respect of assessment years, 2009-10 to 2014-15. He admits the notice under
Section 153A of IT Act was issued to Prl. Officer of A1 company only. The name of Prl.
Officer of A1 company was not mentioned in the notice. Similarly he issued notice
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Court of Special Judge for Economic Offences, Hyd. 13 of 34 Judgment in C.C.No. 18 of 2017 under Section 142 of IT Act, which is issued to the A1 company only. In both notices he has not mentioned the name of Prl. Officer of A1 company.
37.He has prepared the complaint and file the complaint. In the complaint, he has not mentioned anything about the notice under Section 2 (35) of IT Act. In the complaint he has not referred the appraisal note and also the satisfactory note. He has not mentioned justification upon which he made assessment order. Both appraisal report and satisfactory note are internal documents to issue notice under
Section 153A of IT Act.
38.He admits the notice under Section 153A of IT Act cannot be issued mechanically and he has to apply his independent mind. The basis for issue of notice under Section 153A of IT Act is appraisal report. He admits in the month of
November, 2022 the Honorable ITAT passed orders in respect of all years subject matter herein and set-a-side the assessment order and direction is given to pass fresh assessment order. Ex.D1 is the order copy of ITAT.
39.In the sanction order, the sanctioning authority has not referred Section 153A of IT Act in the sanction orde. He admits in sanction order it is not mentioned about
Section 278E of IT Act. That the order under Section 279(1) of IT Act is not speaking order and it is a cryptic order only for two paragraphs. However when 279(1) of IT Act order is passed after issuing of show-cause notice where the facts are mentioned/discussed. The particulars of incriminating material are not mentioned in the show-cause notice. Before passing order under Section 279(1) of IT Act the show- cause notice was issued to the accused. Ex.P14 is the Copy Show Cause notice which was issued before passing orders under Section 279(1) of IT Act.
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40.Ex.P14 was issued to A1 company only. This notice was issued on 15.02.2016.
The notice was duly served on A1 company. He has not filed the acknowledgment card to show the service of notice to A1 company. By the date of issue of notice the accused was in judicial custody as per the attested copy of certificate issued by Jailor,
District Jail, Eluru in respect of Avva Venkata Rama Rao and Avva Hema Sundara Vara
Prasad.
41.Ex.D2 is the Certificate, dated 25.07.2019 issued in respect of Avva Venkata
Rama Rao by the jail authorities. They will issue notices to the business place of the company and not directly to the directors of the company.
42.He denied suggestion that since the notices are not directly issued to the individual accused, therefore, the present case is not maintainable, there is no material on record to issue notice under Section 153A of IT Act and other notices. He could not recollect whether the assessments in respect of the Assessment years, 2009-10 to 2014-15 filed the returns under section 139(1) of the Act before search operations.
43.The Evidence of PW3 shows that they have conducted search operations thereafter the assessment order was passed. They have issued notices to the accused under section 153A, 142(1) of IT Act even though there was no response from the accused. Further, he stated he has not filed appraisal report before the
Court. Further, the notice was not issued under Section 2(35)of IT Act. Further he admitted at the relevant time the accused persons were in jail. Ex.D2 and Ex.D3 show they are in judicial custody. He also admits the assessment order was set aside by ITAT under Ex.D1.
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44.The evidence of Pws 1 to 3 shows that on search warrant they conducted search operations in the group of companies. The panchanama were conducted and they seized incriminating material, based on the seized documents they came to know that there was undisclosed income. Therefore, the notices were issued under
Section 153C and also under Section 142(1) of IT Act. Even after receiving the notices the accused companies have not filed revised return of income. Therefore, the assessment order was passed against the accused companies. Thereafter, the notice was issued under Ex.P14 thereafter, the complaint is filed. The prosecution contention is that the evidence of Pws 1 to 3 establishes that the accused persons have committed the offence.
45.On the other hand, the defence contention is that there are ordinarily three teams crafted in respect of search and seizure under warrant of authorization based upon preparatory note. For carrying out search and seizure the three conditions enshrined in section 131 (1) of IT Act ought to be satisfied in the form of satisfaction note which divulges the frame work of mind or to arrive at reason to believe as a precursor under section 132(1) of the Act. After completing search and seizure operations, the search team ought to prepare an appraisal note followed by examination note (analytical report) as to whether there is any incriminating material unearthed during the course of search and seizure requiring to invoke section 153A or 153C of Income Tax Act, 1961. If no incriminating material has been unearthed, the question of invoking section 153A proceedings does not arise. If there has been some material collected which warrants action under Section 147 and 148 subject to limitation under Section 149 of IT act, 1961, then the assessment officer will at liberty
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IT Act, 1961.
46.The defence contention is that from the prosecution evidence and material on record there was no excise done to segregate documents seized by the assessee wise, assessment year wise and premises wise, no systematic arrangement or make analysis on the seized documents and sought out the documents having financial relevancy and financially irrelevant. The question of action under Section 153A or alternative would arise after segregating the documents and they have to find out the undisclosed income from the documents. Without any such segregation they came to conclusion that there was undisclosed income. The prosecution has not brought any material to show that the books of accounts, records and other documents were not seized by the CBCID. The so called recording of statements are under tremendous pressure and coercion.
47.This Court has taken into consideration of rival contentions made by both parties. Admittedly, during the cross-examination of PW1, he stated he has not received any material or records from the deponents while recording their statements. As per panchanama he has seized books of accounts etc from the companies mentioned in the panchanama as well as books of accounts from the companies mentioned in the respective panchanamas. He said he has seized sale deeds agreements, share ledger registers etc. Basing on those documents they analyzed the balance sheet and profit and loss account of the companies and found huge expenses in cash. However, the directors have expressed their inability to produce the documents like vouchers etc. The perusal of record shows that the prosecution has not filed any such list of documents which they alleged to have
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Court of Special Judge for Economic Offences, Hyd. 17 of 34 Judgment in C.C.No. 18 of 2017 seized. As per record, they have filed warrant of authorization and panchanamas. The books of accounts, ledger books etc of the accused companies are not filed. The defence contended that in fact APCID raided the accused companies and they have seized the total documents so the so called documents alleged to be seized by the accused persons are not available in the premises of accused companies but the witnesses alleged that they have seized the documents from the premises of accused company and its subsidiary companies. The defence have marked Ex.D2 & Ex.D3 which shows that at the relevant time Avva Hema Sundera Vara Prasad and Avva
Venkat Rama Rao were injail at the relevant time. The prosecution contended that the notices were served on them but when they are in jail there is a question of serving notices to the accused persons herein.
48.At the relevant time, during the assessment proceedings pursuance to the issuance of notice under Section 153 A of the Act, and also during the first appellate proceedings all the Directors of the company responsible for the affairs of the company were in judicial custody. So, it is not possible for the assessee to produce all the relevant books, vouchers etc, before the authorities to prosecute the case diligently. Ex.D2 and Ex.D3 they were in jail at the relevant time. So it is an admitted fact that the accused have not produced any such documents before the concerned authority. It is for the prosecution to explain how they got such documents they failed to explain it.
49.The defence contended that upon perusal of the Statements recorded from the
Accused referred in the respective Statements, even assumed but not admitted that the prosecution has thrown weight on the Statements, the Complaint and PWs evidence failed to show the incriminating material to prove that the notice under
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Section 153A would be required. It is unclear from the Prosecution whether it has relied upon the Statements of Accused or not. Because, the Statements might have contained inculpatory and exculpatory parts. In such a scenario, it is upto the
Prosecution to substantiate that it has relied upon the inculpatory part to the extent as identified by the prosecution and their consideration to the exculpatory part.
Admittedly, the prosecution got marked the statements under Ex.P1 to Ex.P9 through
PW1 however, they have not stated anything about the gist of the statement which is inculpatory and exculpatory. Mere marking of the documents are not sufficient it is for the prosecution to prove the substance of the statements. They have not proved it.
From the evidence, there is is no material to show that, the notice under Section 153A would be required.
50.As rightly pointed out by the defence no valuation or the methodologies of valuation has been divulged. Further, they have not filed examination note / or investigation report so as to convince the Court that the proceedings are conducted in accordance with law. When the department is proceeding under Section 153A and 153C, they have to file appraisal note and satisfaction note before the Court. The department has not filed any such documents before the Court. It is for the prosecution to prove that they have genuinely arrive at the conclusion that Section 153A notice would have to be issued and the manner in which it can be issued relying upon alleged incriminating material if any. No incriminating material has been brought into existence from the statements under Ex.P1 to Ex.P9.
51.The perusal of documents Ex.P3 & P11 panchanamas, it is clear that there is no mention about incriminating material in Ex. P3 & P11. Ex.P-3 i.e., Panchanama
dated 23.01.2015 is related to M/s. Agri Gold Farms Estates India Pvt Ltd, Agri Gold
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Court of Special Judge for Economic Offences, Hyd. 19 of 34 Judgment in C.C.No. 18 of 2017
Constructions Pvt Ltd, Agri Gold Project Ltd(the name of Dreamland is not mentioned). It is drawn by PW-2 (Mr. Nethra Pal) PW1/Narsingh Kumar Khalkho wherein there was no mention about the incriminating material and no details were furnished by identifying the material contained attributes of the incriminating material. To proceed against the accused persons further, it is very just and necessary for the income tax officers to place such incriminating material. Without placing such material they cannot proceed further otherwise it is violative of interest of accused persons only.
52.The prosecution relied upon the statements of A3 recorded on different dates.
The perusal of statement shows several questions were asked to A3. From the statement nothing was elicited from A3 which is incriminatory to prosecute the accused persons.
53.Further, the perusal of document Ex.P12/notice u/s 153A dated 25.08.2015 vide PAN No. AADCA5206A/ CC/2(4)/2015-16 dated 25.08.2015 was issued to the Prl.
Officer of the Dreamland Ventures Pvt Ltd having address at Bangalore, pertaining to
M/s. Dreamland Ventures Private Limited calling upon the addressee to furnish the
Return of Income in respect of Assessment Year within 30 days from the date of receipt of the notice in the prescribed form and verified in prescribed manner and setting forth such other particulars as may apply accordingly as if such return were a return required to be furnished u/s 139 of the IT Act 1961. It is to be noted that as per warrant authorization there was no authorization to conduct panchanama in
Dreamland Ventures Ltd. In Ex.P2 also the name of Dreamland is not mentioned.
However, the panchanama under Ex.P11 shows the panchanama was conducted at
M/s. Dreamland Land Ventures on 23.01.2015. without any authorization the
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Court of Special Judge for Economic Offences, Hyd. 20 of 34 Judgment in C.C.No. 18 of 2017 panchanama was conducted under Ex.P11. Further the notice was issued under
Ex.P12 dated 25.08.2015 to the Principal officer of Dreamland ventures Pvt Ltd to file return of income under Section 139 of IT Act. Further Ex.P13 notice was issued under
Section 142(1) of IT Act, on 18.01.2016, the notice under Ex.P14 dated 15.02.2016 was issued to Dreamland Ventures Pvt Ltd stating that why the prosecution proceedings should not be launched against them. The filing of returns under Section 153A is different and filing of returns under Section 139 of IT Act are different. The defence has filed Ex.D3 return of income for the assessment year 2009-2010. The returns were already filed so again issue of notice under Ex.P12 under Section 139 of
IT Act is not proper.
54.Further, the notice under Ex.P13 was issued under Section 142 (1) of IT Act 1961 vide PAN No. AADCA5206A dated 18.01.2016 to the A-1 Company only at
Bangalore Address. In both the notices under Exs.P12 & 13 there is no mention of seizure of any incriminating material and details if any thereof disclosed in the notices. Even at the time of arguments also the defence counsel has pointed out but no reply was received from the public prosecutor. The documents are mechanically filed and the required information is not giving as per the documents. The main purpose of issue of notice is that the other party should no what was the case against him. The principle of natural justice ie., Audi Alterum partem made it clear that the other party should know all the particulars when the concerned authority is proceedings against the party otherwise there is no opportunity to the party to defend himself it is nothing but violative of fundamental rights of the accused persons.
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55.The prosecution has initiated proceedings against the accused by obtaining the sanction order under Ex.P10. The Sanction Order shows that it is a cryptic order of two pages wherein the Sanction was given for deliberate and wilful default in filing the return of income u/s 139(1) of IT Act 1961 for the A.Y. 2009-2010 to 2014-15. As rightly pointed out defence there is no mention about Section 153 A nor is there any disclosure of any incriminating material or material upon which the Assessing Officer has relied upon, material upon which the search team examined or analyzed and satisfied with and finally the material upon which the processing team had done any exercise to arrive at a logical conclusion and the opportunity of being heard conferred on the Accused during the course of the process, in this circumstances the order is cryptic and suffers from inefficiencies and therefore it is a defect order and cannot be relied upon.
56.A prosecution can be launched only on the basis of sanction of the Principal
Commissioner or appropriate authority. Section 279(1) of the Act is extracted hereunder:
“279. (1) A person shall not be proceeded against for an offence under section-276 or section-277 or section-278 except at the instance of the
Commissioner. (2) The Commissioner may either before or after the institution of proceedings compound any such offence.”
57.The intention of the legislature in introducing requirement of Sanction in
Enactments to be accorded by the competent authority is for the purpose of affording protection from vexations prosecution and to safeguard the interest of the innocent persons. Before granting sanction, the competent authority has to go through all the relevant material placed before it and after assessing the facts of the case and if the
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Court of Special Judge for Economic Offences, Hyd. 22 of 34 Judgment in C.C.No. 18 of 2017 competent authority deems it appropriate to grant sanction, accordingly sanction is given for prosecution.
58.The Hon’ble Supreme Court in several judgments held that the competent authority’s sanction would be valid only when such competent authority applies its mind to the entire facts of the case and accords sanction. In the event of the sanction reflecting non-application of mind or not considering the relevant material or any kind of extraneous reasons, such grant of sanction was found to be invalid.
59.The Hon’ble Supreme Court in the case of Mansukhlal Vithaldas Chauhan v.
State of Gujarat2 held as follows:
Sanction lifts the bar for prosecution. The grant of sanction is not an idle formality or an acrimonious exercise but a solemn and sacrosanct act which affords protection to Government Servants against frivolous prosecutions. ( See: Mohd. Iqbal
Ahmed vs. State of Andhra Pradesh, AIR 1979 SC 677). Sanction is a weapon to ensure discouragement of frivolous and vexatious prosecutions and is a safeguard for the innocent but not a shield for the guilty.
The validity of the sanction would, therefore, depend upon the material placed
before the sanctioning authority and the fact that all the relevant facts, material and
evidence have been considered by the sanctioning authority. Consideration implies application of mind. The order of sanction must ex facie disclose that the sanctioning authority had considered the evidence and other material placed before it. This fact can also be established by extrinsic evidence by placing the relevant files before the
Court to show that all relevant facts were considered by the sanctioning authority.
(See also: Jaswant Singh vs. The State of Punjab, 1958 SCR 762 = AIR 1958 SC 12;
State of Bihar & Anr. vs. P.P. Sharma, 1991 Cr.L.J. 1438 (SC)).
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60.Since the validity of "Sanction" depends on the applicability of mind by the sanctioning authority to the facts of the case as also the material and evidence collected during investigation, it necessarily follows, that the sanctioning authority has to apply its own independent mind for the generation of genuie satisfaction whether prosecution has to be sanctioned or not. The mind of the sanctioning authority should not be under pressure from any quarter nor should any external force be acting upon it to take decision one way or the other. Since the discretion to grant or not to grant sanction vests absolutely in the sanctioning authority, its discretion should be shown to have not been affected by any extraneous consideration. If is shown that the sanctioning authority was unable to apply its independent mind for any reason whatsoever or was under an obligation or compulsion or constraint to grant the sanction, the order will be had for the reason that the discretion of the authority "not to sanction" was taken away and it was compelled to act mechanically to sanction the prosecution.”
61.The Hon’ble Supreme Court in the recent judgment in the case of
S.Athilakshmi v. State rep. by the Drug Inspector3 relying on the judgment of
Mansukhlal’s case held as follows:
“The sanction for prosecution given in the present case appears, prima facie, to suffer from vice of non-application of mind. There is no reference to any of the documents, evidence or the submissions submitted by either of the parties, no reasons assigned or even an explanation pertaining to the delay which indicates it has been passed in a mechanical manner.”
62.The Hon’ble Supreme Court in the case of Nanjappa v. State of Karnataka, held as follows:
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Court of Special Judge for Economic Offences, Hyd. 24 of 34 Judgment in C.C.No. 18 of 2017 “23.5. The rationale underlying the provision obviously is that if the trial has proceeded to conclusion and resulted in a finding or sentence, the same should not be lightly interfered with by the appellate or the revisional court simply because there was some omission, error or irregularity in the order sanctioning prosecution under Section 19(1). Failure of justice is, what the appellate or revisional Court would in such cases look for. And while examining whether any such failure had indeed taken place, the Court concerned would also keep in mind whether the objection touching the error, omission or irregularity in the sanction could or should have been raised at an earlier stage of the proceedings meaning thereby whether the same could and should have been raised at the trial stage instead of being urged in appeal or revision.
63.In the case at hand, the Special Court not only entertained the contention urged on behalf of the accused about the invalidity of the order of sanction but found that the authority issuing the said order was incompetent to grant sanction. The trial
Court held that the authority who had issued the sanction was not competent to do so, a fact which has not been disputed before the High Court or before us. The only error which the trial Court, in our opinion, committed was that, having held the sanction to be invalid, it should have discharged the accused rather than recording an order of acquittal on the merit of the case. As observed by this Court in Baij Nath
Prasad Tripathi’s case (supra), the absence of a sanction order implied that the court was not competent to take cognizance or try the accused. Resultantly, the trial by an incompetent Court was bound to be invalid and non-est in law.”
64.The Hon’ble Supreme Court in the case of Mohd. Iqbal Ahmed v. State of
Andhra Pradesh5 held that it is well settled that any case instituted without a proper
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Court of Special Judge for Economic Offences, Hyd. 25 of 34 Judgment in C.C.No. 18 of 2017 sanction must fail because this being a manifest defect in the prosecution, the entire proceedings are rendered void ab initio. Further, the prosecution launched without a valid sanction, it was held that the cognizance taken by the Special Judge was without jurisdiction and proceedings were quashed.
65.In the instant case also, the sanction order does not contain all the material which are alleged to be incriminating to the accused so as to initiate proceedings against the accused persons therefore, the sanction order is not valid.
66.The show cause notice was issued under Ex.P.14 on 15.02.2016 to the A1
Company by which time, as revealed in Ex. D2, the Accused referred therein was in the Judicial Custody and the other Accused was not aware of the Show Cause Notice since the A1 Company premises was seized and documents and properties were attached by the State CBCID Authorities in the month of January 2015. Further the
Show Cause Notice was issued to A1 Company only. As per section 2(35) of companies Act, it is mandatory that the notice should be issued to the Principal officer of the company. No such notice was issued to the principal officer of the company and it is the duty of the department to issue such notice by treating any of the Director as Principal Officer of the Company. The role of each Director and their day to day activities and their responsibilities in the company should be mentioned so as to fix their liability. Admittedly, in the instant case no such notices are served.
67.At this Stage, it is just and proper to pursue Section 2(35) of Income Tax Act which reads as under:
`2(35) “principal officer”, used with reference to a local authority or a company or any other public body or any association of persons or any body of individuals, means—
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(a) the secretary, treasurer, manager or agent of the authority, company, association or body,or
(b) any person connected with the management or administration of the local authority, company, association or body upon whom the 3[Assessing Officer] has served a notice of his intention of treating him as the principal officer thereof;
M.R.Pratap Vs VM. Muthu Ramalingam in which the Hon’ble Court observed that: it is admitted by the department that no such notice as contemplated under
Section 2(35)(b) has been served on the petitioner hence, the petitioners contention that he cannot be proceeded with for the delayed payment of tax amount by the company, is a well founded one.
68.In Greatway (P) Ltd. & Ors. Vs. Asstt. CIT [1993] 199 ITR 391(P&H), Punjab &
Haryana High Court has held that in the absence of appointment of a principal officer by issuing a notice by the AO, the prosecution, if any, could only be launched against the petitioner-company. Similar is the view expressed in ITO Vs. Roshini Cold Storage (P) Ltd. and Ors. (2000) 245 ITR 322 (Mad). In this case Hon’ble Madras High Court held that in case Income Tax Officer sought to prosecute the director along with company for an offence under Section 276- B of the Act then it was incumbent upon him to issue a notice under sub-clause (b) of 2(35) of the Act expressing his intention to treat the director as "principal officer" of the company and in absence thereof, director shall be entitled to the acquittal.
69.In Sushil Suri and Ors. Vs. State & Ors. (2008) 303 ITR 86 (Delhi), the Hon’ble
Court has held that before a prosecution under Section 276-B of the Act can be launched against the director he should have been notified that department/AO has intention of treating him as "principal officer" of the company. In absence of such
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Court of Special Judge for Economic Offences, Hyd. 27 of 34 Judgment in C.C.No. 18 of 2017 notice under Section 2(35)(b) of the Act, prosecution against the director cannot be continued and is bound to fail.
70.In Madhumilan Syntex Ltd. and Others vs. Union of India (2007) 290 ITR 199 (SC), the Supreme Court has held as under:- "To treat the directors of a company as "principal officers" there is no need to issue a separate notice or communication to them that they are to be treated as "principal officers", before the issuance of the show-cause notice under section 276-
B read with Section 278B. It is sufficient that in the show-cause notice under section 276-B read with 278B, it is stated that the directors are to be considered as principal officers of the company under the Act and such a complaint is entertainable by the court provided it is otherwise maintainable."
71.Legal preposition which emerges from the above is that before launching a prosecution under Section 276-B of the Act against the directors of a company,
Assessing Officer has to issue notice under Section 2(35) of the Act expressing his intention to treat such directors of a company as "principal officers". However, it may not be necessary to issue a separate notice or communication to all the directors that they are to be treated as "principal officers". It would be sufficient compliance if in the show cause notice issued to the company it is mentioned that the directors are to be considered as principal officers of the company under the Act
72.In this case neither a notice was issued to A-2 to A-4 under Section 2(35) of the Act the department intended to treat him "principal officer" nor in the show cause notice issued to the company it was mentioned that department is intended to treat the directors of the company as "principal officers", for the purpose of launching prosecution under Section 276-B of the Act.
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73.Admittedly, as per the decision of Hon’ble Courts, the notice under section 2(35) is mandatory. The prosecution has to issue such a notice to the directors of the company intimating their intention to treat them as the principal officers of the company. Further, the Hon’ble Supreme Court held that when the showcause notice is issued to the accused persons, in the notice, the complainant has used specific words intimating to the accused that they are treating a particular director or directors as principal officers of the company then, it is sufficient. But, in the instant case, the contents of the showcase notice shows that no where the complainant has used the words that they are treating A-2 to A-4 as principal officers of A-1 company.
Though, the show cause notices was issued to accused, but in the said notice also, no where they mentioned that A-2 to A-4 are Principal officers of A-1 company.
Therefore, the complainant failed to issue any notice to the accused persons intimating that they are treating any of the accused as principal officers of the company. Further, the decision of Hon’ble Supreme Court made it clear that, apart from issue of notice under Section2(35) of the act, or least by mentioning in the show cause notice that they are treating a particular director as principal officer of the company, in the complaint, if they mention the role of directors and their clear intention that they are responsible for day-to-day activities of the company, then the complainant has complied the conditions laid down under section 2(35) of the Act.
The perusal of the contents of the complaint shows that nowhere in the contents of the complainant mentioned that A-2 to A-4 are principal officers of the company. No doubt, they got it mentioned that they are directors and responsible for day-to-day activities of A-1 company. But, they failed to mention that any of the directors was treated as principal officer of the company. Therefore, A-2 to A-4 should not be
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Court of Special Judge for Economic Offences, Hyd. 29 of 34 Judgment in C.C.No. 18 of 2017 treated as principal officers of the company. Therefore non issue of notice under
Section 2(35) of Act is fatal to the prosecution case.
74.Further it is pertinent to note that in the said notice, the notice was given under Section 153A read with Section 276CC whereas, the Sanction Order (Ex.P10) was issued under Section 139(1) of the Act without any mention about the alleged violation under Section 153A of the Income Tax Act, 1961. It is a defective Sanction and would not be relied upon. It shows there is defect in issue of sanction order as well as in the notice also.
75.Moreover, in the course of said search, it is alleged incriminating material pertaining to the assessee company were found and seized and marked as annexure.
Since the incriminating material according to the assessing officer belong to the assessee company provisions of Section 153C are applicable and accordingly the proceedings under Section 153C were initiated by recording satisfactory note. In response to the notice, under Section 153C issued calling for return of income which was served on the assessee, the assessee did not file return of income. The defence contention is that the so called satisfaction note under section 153C of the Act alleged to be recorded by the assessing officer, is not as per the procedure. The so called satisfaction is not in accordance with law. The satisfaction recorded by the assessing officer has failed to record his satisfaction that the documents so seized belong wit the assessee company ie., other than the searched person therefore, initiation of proceedings under Section 153C without such proper satisfaction are bad in law. The satisfaction of the assessing officer regarding the seized material belonging or relating to some other person should not be arrived at in a casual manner or merely on the basis of the statement made by the person searched. It
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Court of Special Judge for Economic Offences, Hyd. 30 of 34 Judgment in C.C.No. 18 of 2017 should be based upon cogent material and must display the reason or basis for the conclusion that the assessing officer of the person in respect of whom the search was conducted is satisfied that the seized document belong to another person. Nowhere the assessing officer recorded his satisfaction that the material seized belongs to the assessee company therefore such satisfaction itself is invalid.
76.It is to be noted that the defence counsels must have appeared before the commissioner and income tax appellate tribunal appeals so that they are speaking about the satisfactory note. /Unfortunately said document is not filed before theCourt so this Court is not able to say whether these documents do not belongs to the assessee or not. Therefore, the initiation of proceedings under Section 153C are not in accordance with law. This Court is not able to give any finding on this aspect. The witnesses have stated that satisfactory note is confidential note so it will not be filed
in the Court. They have not filed any circular or document to show that it is a
confidential document. Therefore, this Court cannot give any finding on it.
77.The defence contended the initiation of proceedings under Section 153C are not in accordance with law. The provisions of section 153C were amended with effect from 01.06.2015. As per 153C (1)(b) the words any books of accounts or documents seized or requisitioned, pertains to or pertained to or any information contained therein relates to are applicable with effect from 01.06.2015 since the search in the instant case was concluded on 23.01.2015 which was before 01.06.2015 therefore, the initiation of proceedings under Section 153C are not in accordance with law. The satisfaction note is very crucial to decide whether the document so seized belongs to the assessee and to decide whether the provisions of Section 153C is applicable or not. There is no material produced before the Court to show that the seized
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Court of Special Judge for Economic Offences, Hyd. 31 of 34 Judgment in C.C.No. 18 of 2017 documents so found during the course of search belongs to the assessee that is other than the searched person.
78.From the facts and circumstances of this case, this Court feels that, this Court is not able to decide the validity of 153C proceedings and also the assessing proceedings etc. Moreover, from the facts it is clear that the assessment order was passed, basing on which the notice was issued under Ex.P14 for prosecuting the accused. Thereafter, the proceedings are initiated. Admittedly, Ex.D1 is the order copy of ITAT which is the crucial document. The perusal of this document shows that the Hon’ble ITAT has observed that “it could be seen from the order dated 29.11.2022 in the batch cases of Agri Gold constructions Pvt Ltd, the facts are identical and the co-ordinate bench of this tribunal took the view to set aside the impugned order and to restore the issued to the file of learned officer for giving an opportunity to the assessee to dispose of the matter according to the law. It is clear from the certificate dated 26.02.2019, issued by Superintended District jail Eluru and also the letter dated 24.11.2016 addressed by Sri AV.Rama Rao Chairman of the Agri
Gold group to the DCIT Hyderabad that the Chairman, Vice Chairman, Managing
Directors and others were in the custody within the period 12.02.2016 and 23.10.2018 and lodged in District Jail Eluru. The material clearly establishes that from 12.02.2016 to 23.10.2018, all the persons responsible for the affairs of the
Company were in custody and in their absence as claimed by the learned AR, some part of the material was produced before the authorities there is nothing contrary to disbelieve the statement of learned AR that assessee could not prosecute the proceedings before the authorities diligently due to the fact of non – availability of the persons responsible for the affairs of the company. In fact this particular
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Court of Special Judge for Economic Offences, Hyd. 32 of 34 Judgment in C.C.No. 18 of 2017 circumstance is taken note by the co-ordinate benches of the tribunal in the cases of group concerns on earlier occasions as is evidenced by the order dated 29.11.2022.
Having regard to the peculiarity of the facts, we are of the considered opinion that it would be in the interest of justice to set aside the impugned orders and to restore the matters to the file of learned assessing officer to adjudicate the same afresh, after giving an opportunity of being heard to the assessee and also to produce all the relevant material at their custody.” Thereby the Hon’ble ITAT has set aside the assessment order with a direction to pass a fresh order after hearing both sides.
79.From this, it is clear that, the assessing order based on which the present case is filed was already set aside. However, the prosecution has filed the documents vide
Crl MP.No. 2416/2026, as per the documents Ex.P15 is the assessment order dated 30.12.2016, filed basing on which the present case is filed. Thereafter, the notice under Ex.P16 dated 30.12.2016 is filed, the order of ITAT dated 26.02.2018, is filed under Ex.P17, in between Ex.P15 and Ex.P17 one more assessment order is passed as the Hon’ble ITAT set aside the assessment order with a direction to pass a fresh order. After passing fresh assessment order, again the parties approached ITAT under
Ex.P17. As per the order, the appeal of the appellant ie., the A1 company herein was partly allowed. It is to be noted that Ex.P17 is relating to the period after filing of this case. If any fresh assessment order is passed and ITAT order is passed the fresh cause of action arose from that date. The present case is based on Ex.P15 only which was already set aside therefore, the present case is not maintainable. The prosecution contended the fresh assessment order was passed if it is so, the cause of action arose for them to file a fresh case basing on the new assessment order but,
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Court of Special Judge for Economic Offences, Hyd. 33 of 34 Judgment in C.C.No. 18 of 2017 the prosecution basing on the old assessment order is not maintainable. Hence, the accused persons are benefit of doubt.
80.In the result, the the accused Nos.1 to 4 are found not guilty for the offence under Sections 276 CC and 278-B of Income Tax Act. So, they are acquitted for the said offences under Section 248(1) Cr.P.C. The bail bonds of the accused shall stand cancelled after the appeal time is over. The accused are directed to execute personal bond for Rs. 10,000/- each under Section 437A of Cr.P.C.
Directly typed to my dictation by Stenographer Grade-I, corrected and pronounced by me in open court on this the 13th day of April, 2026.
Special Judge for Economic Offences,
Hyderabad.
APPENDIX OF EVIDENCE
Witnesses examined on behalf of prosecution:
PW.1Narsingh Kumar Khalkho PW.2Nethra Pal PW.3B.Sunil Kumar
Witnesses examined on behalf of Defence: NIL
Exhibits Marked on behalf of prosecution:
Ex.P1Attested true copy of Warrant of authorization dated: 23-01-2015 Ex.P2Attested true copy of Warrant of authorization dated: 19.03.2015 Ex.P3Attested true copy of panchanama, dated:19.03.2015. Ex.P4Attested true copy of Sworn statement of A3 dated 05.02.2015 Ex.P5Attested true copy of Sworn statement of A3 dated 06.02.2015 Ex.P6Attested true copy of Sworn statement of A3 dated 26.02.2015 Ex.P7Attested true copy of Sworn statement of A3 dated 13.03.2015 Ex.P8Attested true copy of Sworn statement of A3 dated 23.03.2015 Ex.P9Attested true copy of Sworn statement of A3 dated 23.03.2015 Ex.P10Authorization issued in favour of PW2 by K.J.Rao, Addl. Director of Income
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Tax(INV), Unit-I, Hyderabad Ex.P11Panchanama dated 23.01.2015 Ex.P12Notice U/s. 153A was issued for the assessment year 2009-10 and served on the accused on 25.08.2015. Ex.P13Notice U/Sec. 142(1) of the IT Act was issued on 18.01.2016 Ex.P14Copy of show-cause notice issued before passing orders u/s. 279(1) IT Act. Ex.P15Assessment order dated 30.12.2016 Ex.P16Notice of demand dated 30.12.2016 Ex.P17order of ITAT dated 26.02.2018
Documents marked by Defence:
Ex. D1Order copy of ITAT Ex. D2Certificate, dated 25.07.2019 issued in respect of Avva Venkata Rama Rao. Ex.D3Income Tax Returns acknowledgment for the assessment year 2010-11 (with consent of both parties the documents are marked)
Sd/-
Special Judge for Economic Offences,
Hyderabad.
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Court of Special Judge for Economic Offences, Hyd. 1 of 34 Judgment in C.C.No. 20 of 2017
//Fair Copy//
IN THE COURT OF SPECIAL JUDGE FOR TRIAL OF CASES UNDER ECONOMIC
OFFENCES :: HYDERABAD.
Dated this the 13th day of April, 2026
Present : Smt. J. Maithreyi,
Special Judge for trial of cases under Economic
Offences, Hyderabad.
C.C.No.20 of 2017
Between :
The Asst. Commissioner of Income Tax, Central Circle-2(4), 3rd Floor, Posnett Bhavan, Ramkote,
Hyderabad-500 001 ... Complainant
And
1) M/s Dreamland Ventures pvt Ltd., 2nd Floor, No.85,16th Cross 14th Main, HSR Layout, Bangalore-560102 Rep. by its Managing Director, Sri Patan Lal Ahammad Khan S/o Saida Khan, Flat No.B4, Chandrahasa Apartment, Ajith Singh Nagar, Vijayawada - 520015.
2) Mr. Patan Lal Ahammad Khan S/o Saida Khan, aged : 47 years, Occu: Managing Director, R/o: Flat No.B4, Chandrahasa Apartment, Ajith Singh Nagar, Vijayawada-520015.
3) Mr. Avva Venkata Rama Rao S/o Venkata Appa Rao, aged about 55 years, Occ: Director R/o H.No.23-35-39, A S Rao Street Lakshmi Nagar, Satyanarayanapuram Vijayawada-520011.
4) Mr.Chinnappa Srinivasa Reddy S/o Chinnappa Reddy, aged about 50 years, Occu:Director, R/o: No.105/17, 12th Main, BTM Layout, 1st Stage, Bangalore-560029.… Accused Nos. 1 to 4
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This case is coming before me on 09.04.2026 for hearing and disposal in the presence of Sri.H.Govind Rao, Special Public Prosecutor for Complainant, Sri K. Rama Srinivas, counsel for accused no.1 and 2, Sri.D.Vijaya Bhaskar, Sri. J. Basava Raju, Sri. TVN Ravikanth and Sri. D.Sai Dheeraj, Counsels for accused no.3 and Sri. D. Raghavendra and Sri. K. Ravi, counsels for accused no.4 and after hearing the arguments and perusing the material on record and after the matter having stood over for consideration till this day, today, this Court delivered the following:
J U D G M E N T
1.The Income Tax Officer, Hyderabad has filed a complaint under Section 190 r/w
Section 200 of Cr.P.C. for the offence punishable under Section 276CC and 278B of the Income Tax Act, 1961 (Hereinafter referred as ‘the Act,’) against the Accused persons.
2.The brief contents of the complaint are as follows :
The Complaint is filed pursuant to the prior sanction of the Commissioner of
Income Tax (Central), Hyderabad vide order u/s 279(1) of the Income Tax Act, 1961 in
F. No. CIT(C)/HYD/PROS/AGRI GOLD FARM/2016-17, dated 23.05.2016 which is enclosed herewith as Document No.1. As per section 136 of the Income Tax Act, 1961, proceedings under the Act are deemed to be the judicial proceedings within the meaning of section 193 to 196 of the I.P.C. A.Y 2012-13
3.That the accused No.1 is the company registered under the Indian Companies of Act of 1956 and its registered office is situated at 2nd Floor, No.85,16th Cross, 14th Main, HSR Layout, Bangalore-560102 and is engaged in the business of Real
Estate and Constructions of Apartments. The accused No.1 is the Managing Director and the accused No.2 to 3 are the directors of the company and are in-charge and responsible for the day today affairs of the company for the conduct of its business.
In view of the provisions of Section s 278B of the I.T.Act, 1961 they are liable to be proceeded against.
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4.A search u/s.132 of the Income tax Act, 1961 was conducted at the office premises of the accused at 2nd Floor, No.85,16th Cross, 14th Main, HSR Lay out,
Bangalore-560102 on 23-1-2015 and 19.03.2015 evidenced by panchanama dated 23-1-2015 & 19-3-2015. Certified true copies of warrant of authorization u/s 132 of the IT Act, 1961, panchanamas and Sworn Statement are enclosed as Document No.2 to 5.
5.After search a notice u/s.153A of the Income tax Act, 1961 for the assessment year 2012-13 was issued on 25.8.2015, the accused is required to file the return of income for the afore mentioned assessment year within time allowed in the notice i.e. 30 days from the date on which the notice has been served on him/her. The relevant notices were served on the accused on 25.08.2015. The due date to file the return of income for the assessment year 2012-13 was 24.09.2015.
6.That the accused, however, failed to furnish the return of income for the assessment year 2012-13 on or before the due date. Therefore, notice u/s 142 (1) of the IT Act, 1961 was issued on 18.01.2016 and the same was received on behalf of the accused. The accused neither complied with the notice nor has given any explanation for non-compliance. T
7.That inspite of the receipt of notices u/s153A and 142(1) of the IT Act, 1961, the accused did not file the return nor responded to the notices. Therefore, a show- cause notice dated 15.02.2016 was issued to the accused on 15.02.2016 to show cause as to why prosecution proceedings u/s 276CC of the Income Tax Act, 1961 should not be initiated for not filing the return of income for the assessment year 2012-13 and posted the matter for hearing was fixed on 29.02.2016. The same
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Court of Special Judge for Economic Offences, Hyd. 4 of 34 Judgment in C.C.No. 20 of 2017 served on the accused on 15.02.2016. The accused did not comply. The accused has not provided any explanation in this regard.
8.The accused is duty bound to file the return of income for the Assessment Year 2012-13 in response to notice u/s 153A of the Income Tax Act, 1961. In the light of facts and circumstances as narrated above in the preceding paragraphs, it is evident that the accused not filed returns in response to notice u/s 153A of the Income Tax
Act, 1961. Further, the assessee has failed to comply with the notices issued as per the statutory powers vested with the authority of the Income Tax Act, 1961. Despite given sufficient opportunity, the assessee's non responsiveness is a clear and sufficient indication of gross negligence on his part.
9.As per the provisions of section 153A of the Income Tax Act. 1961, the accused is required to file the return of income on or before the date specified in the notice issued under section 153A of the Income Tax Act, 1961. But the accused inspite of giving sufficient opportunities and issuance of notices did not file the return of income. Therefore, the accused has committed an offence punishable under section 276CC of the Income Tax Act, 1961. Since the offence is committed by the Company and its Managing Director and Directors they are liable for punishment U/s 278B of the I.T.Act.
10.On the basis of the allegations contained in the complaint and the documents filed in support of it, this court took cognizance of the offences under Sections 276CC r/w 278B of Income Tax Act, 1961 against the accused issued summons.
11.Responding to the summons, the accused put up their appearance and thereafter copies of documents as contemplated under Section 207 of Cr.P.C. were
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Court of Special Judge for Economic Offences, Hyd. 5 of 34 Judgment in C.C.No. 20 of 2017 furnished to the accused. The evidence was recorded under Section 244 Cr.P.C as it is private complaint.
12.After hearing the prosecution, as well as the accused, taking into consideration of evidence of prosecution witnesses, this court has framed charges under Sections 276CC and 278B of Income Tax Act, 1961 against the accused and the same was read over and explained to accused in his vernacular language, to which they denied the offence, pleaded not guilty and claimed to the tried.
13.To bring home the guilt of the accused for the offences with which they are charged, the complainant examined Pws1 to 3 and got marked Exhibits P1 to P17 and got marked Ex.D1 to D3.
14.After closure of complainant’s side evidence, the accused was examined under
Section 313 Cr.P.C putting incriminating circumstances appearing against the accused in the evidence prosecution witnesses to which he denied the same. On behalf of the accused, no witnesses are examined and no documents are marked.
15.Heard both sides. Perused the record.
16.Now the point for consideration is :
“Whether the complainant is able to prove the guilt of Accused beyond all reasonable doubt ?”
POINT :
17.The offence under Section 276CC and 278B of Income Tax Act,1961.
Before going into the discussion of merits of the case, it is better to go through
the provisions under Section 276CC and 278B of Income Tax Act, 1961.
276CC:Failure to furnish returns of income.—If a person wilfully fails to furnish in due time 1 [the return of fringe benefits which he is required to furnish under sub-section (1) of section 115WD or by notice given under sub-section (2) of
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Court of Special Judge for Economic Offences, Hyd. 6 of 34 Judgment in C.C.No. 20 of 2017 the said section or section 115WH or] the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under 2 [clause (i) of sub-section (1) of section 142] or 3 [section 148 or section 153A,] he shall be punishable,— (i) in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds 4 [twenty-five 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 imprisonment for a term which shall not be less than three months but which may extend to 5 [two years] and with fine: Provided that a person shall not be proceeded against under this section for failure to furnish in due time the 6 [return of fringe benefits under sub-section (1) of section 115WD or return of income under sub-section (1) of section 139]— (i) for any assessment year commencing prior to the 1st day of April, 1975; or (ii) for any assessment year commencing on or after the 1st day of April, 1975, if— (a) the return is furnished by him before the expiry of the assessment year; or (b) the 7 [tax payable by such person, not being a company,] on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source, does not exceed three thousand rupees.]] 278B. Offences by companies.—(1) Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. (2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
18.The allegation of prosecution is that the accused persons are duty bound to file the return of income for the AY 2012-13, in response to notice under Section 153A of Income Tax Act, 1961. The accused have not filed returns in response to notice issued under Section 153A of Income Tax Act, 1961. Further, the assessee has failed
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Court of Special Judge for Economic Offences, Hyd. 7 of 34 Judgment in C.C.No. 20 of 2017 to comply with the notice issued as per the statutory powers vested with the authority of income tax act, 1961. Despite giving sufficient opportunity the assessee’s non responsiveness is a clear and sufficient indication of gross negligence on their part thereby the accused persons have committed the offence under Section 276CC of IT Act, 1961 and section 278B of IT Act.
19.The prosecution in order to substantiate their evidence examined Pws 1 to 3.
The evidence of PW1/ Narsingh Kumar Khalko, Director of Finance, shows that Since the role of CBDT is to conduct the search & seizure operation as per central action plan issued by the CBDT, in this regard he received Warrant of Authorization under
Ex.P1 and P2 dated 23.01.2015 and 19-03-2015 from Director of Income Tax ( Investigation), Hyderabad. The above documents are issued directing him to conduct search & seizure operation u/s. 132 of Income Tax Act at the offices and other premises of accused herin. Accordingly, he conducted search along with other authorized officers of the department. During the course of search & seizure operations, certain documents were found and seized which have been incorporated in the panchanama drawn at various premises under Ex.P3 dated 19-03-2015.
Further, the sworn statements of accused were recorded in the premises u/s 132(4) of Income Tax Act, i.e., The attested true copy of Sworn statements of A3 dated 05- 02-2015 marked as Ex P4. The attested true copy of Sworn statements of A3 dated 06-02-2015 is marked as Ex P5. The attested true copy of Sworn statements of A3
dated 26-02-2015 is marked as Ex P6. The attested true copy of Sworn statements of
A3 dated 13-03-2015 is marked as Ex P7. The attested true copy of Sworn statements of A3 dated 23-03-2015 is marked as Ex P8. The attested true copy of Sworn statements of A3 dated 23-03-2015 is marked as Ex P9.
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20.Accused namely Sri Avva Venkata Rama Rao had stated vide his statement recorded on 23-03-2015 that there is an effective additional undisclosed income of
Rs.14,72,62,211/- from Assessment Years 2012-13 to 2014-15.
21.After the conduct of the search PW1 had conducted the search, prepared appraisal report based on the documents seized as per panchanama and had put up for approval of Principal Director of Income Tax (Investigation) Hyderabad through
Additional Director of Income Tax Unit-I, Hyderabad and the same was accorded
approval subsequently. It is pertinent to mention here that further the case was centralized to the o/o PCIT (Central), Hyderabad for scrutiny assessment purposes and appraisal report along with seized material & other documents was forwarded to the jurisdictional assessing officer in the central charge.
22.In the cross examination PW1 stated he has not issued any notice under
Section 132(1) of IT Act before undertaking the search and seizure authorization. He has not received any material on record from the deponents while recording their statements however, the same can be confirmed by seeing the panchanama. As per panchanama, he has seized books of accounts etc from the companies mentioned in respective panchanamas. The books of accounts of other subsidiary companies were also seized. He admits as per company Act, each company is distinct and separate entity. It was maintained on the computer of which back up was taken in the hard drive and seized. On two issued only, it was analysed, first transfer of shares and the expenses made for land dealings. They made analysis of seized material and made appraisal report and forwarded to the central charge for the scrutiny of the issues, the complaint was not filed by him so, he is not aware whether such analytical report was filed or not.
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23.PW1 further stated they seized sale deeds purchase deeds, agreements, details pertaining to cash payments made to different individuals and share ledger register mentioning the name of shares, year of transfer details of transferees and transferrer etc. they analyzed the balance sheet and profit and loss account fo the companies and found huge expenses in cash, secured loans, share premiums for which they asked specific questions to the directors of the companies for which they expressed inability to submit the supporting documents like voucher and other details and the statement was recorded under Section 132 (4) of IT Act through which directors particularly A.Venkata Rama Rao has confirmed and accepted the undisclosed income on estimation basis which was made the part of appraisal report and forwarded to central charge for scrutiny proceedings. He has not filed satisfaction report. He admits all his findings are set aside by Hobn’ble ITAT under
Ex.D1.
24.The evidence of PW1 is very crucial because he has conducted search. The panchanama was conducted by him. Further he has recorded the statements also. As per his evidence he has seized the books of accounts relating to different companies.
He has prepared appraisal report also. He has seized incriminating materials ie., sale deeds, agreements details relating to cash payment share ledger register etc.
Further, his evidence disclose that as per balance sheet and profit and loss of company they found huge expenses in cash unsecured loans share premiums . The accused have not furnished the documents relating to said expenses shares etc, however, they admitted undisclosed income.
25.The testimony of PW2/ Nethra Pal, Director of Finance, shows that he was authorized by DIT, Hyderabad to conduct search at Bangalore at A1 company
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Court of Special Judge for Economic Offences, Hyd. 10 of 34 Judgment in C.C.No. 20 of 2017 premises. Ex.P10 is the Authorization issued in his favour by K.J. Rao, Addl. Director of
Income Tax (INV), Unit-I, Hyderabad.
26.In pursuance of this authorization letter, the search was conducted and he has drawn panchanama on 23.01.2015. The various documents were seized during such search. The details of seized documents are provided in the annexure appended to the panchanama. Ex.P11 is the panchanama, dated 23.01.2015 along with list of inventory of account books etc., seized under cover of panchanama. Thereafter, he handed over the search proceedings, said panchanama etc., to the Hyderabad Unit.
The remaining process was done by the Hyderabad Unit and Central Unit.
27.In cross-examination PW2 stated that before conducting the search, he was not involved. So he do not know whether any notice was issued u/s 131 and 132 of
Income Tax. It was done by Hyderabad team but not by him. He has only drawn the panchanama on 23.01.2015. Based upon the composite warrant given to him, he conducted panchanama and accordingly drawn a composite panchanama.
28.He admits they have not identified books of accounts of each company as per the warrant wherein the names of the companies were mentioned including the A1.
He admits what ever it is stated in the panchanama that is final for him and beyond that he cannot answer.
29.He denied the suggestion that he has not applied his mind and mechanically drawn the panchanama and that the panchanama is illegal.
30.PW3/ D.Sunil Kumar, worked as Assistant Commissioner of Income tax shows in the case of M/s Agri Gold Constructions Private Ltd., a Search and Seizure operation was conducted at the office premises on 23-01-2015, 13-03-2015, 14-03- 2015, 15-03-2015 and 23-03-2015 evidenced by the Panchanama dated: 23-01-2015,
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Court of Special Judge for Economic Offences, Hyd. 11 of 34 Judgment in C.C.No. 20 of 2017 13-03-2015, 14-03-2015, 15-03-2015 and 23-03-2015. During the search and seizure operation and post search investigation. the undisclosed income for the assessment year 2009-10 is identified under the head income from other sources and income from the business.
31.After search and seizure operation, the case is centralized to Central Circle- 2(4) on 23-03-2015 by the Principal Commissioner of Income Tax (Central) Hyderabad in order No.CIT(C)/H/Centralization/Agri Gold Group/2014-15 dated: 23-03-2015 for completing the assessment proceedings. Accordingly, a notice U/Sec.153 A under
Ex.P10 was issued for the assessment year 2009-10 and served on the accused on 26-08-2015. The accused is required to file the return of income for the aforementioned assessment year within time allowed in the notice i.e., 30 days from the date on which the notice has been served on them. The relevant notice was served on the accused on 18-01-2016. The due date to file return of income for the assessment year 2009-10 was 26-09-2015. However the accused failed to furnish the return of Income for the assessment year 2009-10 on or before the due date.
32.Therefore notice L/Sec. 142(1) of the IT Act under Ex.P11 was issued on 18-01- 2016 and the same was served on the accused. The accused neither complied with the notice nor has given any explanation for non-compliance of the aforementioned notices.
33.Inspite of receipt of the notice U/Sec. 153A and 142(1) of the IT Act, 1961 the accused did not file the return of income nor responded to the notices. Therefore a show cause notice was issued and served on the accused on 15-02-2016 to show cause as to why prosecution proceedings U/Sec. 276CC of the Income Tax Act, 1961 shall not be initiated for not filing return of income for the assessment year 2009-10.
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The accused did not comply to the show cause notice and the accused has not provided any explanation in this regard.
34.The accused is duty bound to file the return of income for the assessment year in response to the notice u/s 153A of the Income Tax Act, 1961. Despite of giving sufficient opportunity, the accused non-responsiveness is a clear and sufficient indication of gross negligence on their part. Therefore, the accused has committed an offence punishable under section 276 CC of the Income tax Act, 1961. The sanction orders was passed under Ex.P10.
35.In cross-examination PW3 shows that in the case, the search was conducted, after concluding the search proceedings, certain income was identified and as a
Deputy Commissioner of Income Tax working with Central Circle, he has to conclude assessment proceedings, after search the group of cases centralized to PCIT, Central
Circle and accordingly he issued notice under Section 153A of IT Act to conclude the proceedings. he received appraisal report after concluding search proceedings. He has not filed appraisal report before the court. Because the preparatory note which is incidental to commence the search and seizure operation, it is treated an internal document, so he did not file the same before the court. He has prepared satisfactory note before issue of notice under Section 153A of IT Act. He admits that as per
Section 139 of IT Act, the company is regular in filing all the returns including returns in respect of assessment years, 2009-10 to 2014-15. He admits the notice under
Section 153A of IT Act was issued to Prl. Officer of A1 company only. The name of Prl.
Officer of A1 company was not mentioned in the notice. Similarly he issued notice under Section 142 of IT Act, which is issued to the A1 company only. In both notices he has not mentioned the name of Prl. Officer of A1 company.
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36.He has prepared the complaint and file the complaint. In the complaint, he has not mentioned anything about the notice under Section 2 (35) of IT Act. In the complaint he has not referred the appraisal note and also the satisfactory note. He has not mentioned justification upon which he made assessment order. Both appraisal report and satisfactory note are internal documents to issue notice under
Section 153A of IT Act.
37.He admits the notice under Section 153A of IT Act cannot be issued mechanically and he has to apply his independent mind. The basis for issue of notice under Section 153A of IT Act is appraisal report. He admits in the month of
November, 2022 the Honorable ITAT passed orders in respect of all years subject matter herein and set-a-side the assessment order and direction is given to pass fresh assessment order. Ex.D1 is the order copy of ITAT.
38.In the sanction order, the sanctioning authority has not referred Section 153A of IT Act in the sanction orde. He admits in sanction order it is not mentioned about
Section 278E of IT Act. That the order under Section 279(1) of IT Act is not speaking order and it is a cryptic order only for two paragraphs. However when 279(1) of IT Act order is passed after issuing of show-cause notice where the facts are mentioned/discussed. The particulars of incriminating material are not mentioned in the show-cause notice. Before passing order under Section 279(1) of IT Act the show- cause notice was issued to the accused. Ex.P14 is the Copy Show Cause notice which was issued before passing orders under Section 279(1) of IT Act.
39.Ex.P14 was issued to A1 company only. This notice was issued on 15.02.2016.
The notice was duly served on A1 company. He has not filed the acknowledgment card to show the service of notice to A1 company. By the date of issue of notice the
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Court of Special Judge for Economic Offences, Hyd. 14 of 34 Judgment in C.C.No. 20 of 2017 accused was in judicial custody as per the attested copy of certificate issued by Jailor,
District Jail, Eluru in respect of Avva Venkata Rama Rao and Avva Hema Sundara Vara
Prasad.
40.Ex.D2 is the Certificate, dated 25.07.2019 issued in respect of Avva Venkata
Rama Rao by the jail authorities. They will issue notices to the business place of the company and not directly to the directors of the company.
41.He denied suggestion that since the notices are not directly issued to the individual accused, therefore, the present case is not maintainable, there is no material on record to issue notice under Section 153A of IT Act and other notices. He could not recollect whether the assessments in respect of the Assessment years, 2009-10 to 2014-15 filed the returns under section 139(1) of the Act before search operations.
42.The Evidence of PW3 shows that they have conducted search operations thereafter the assessment order was passed. They have issued notices to the accused under section 153A, 142(1) of IT Act even though there was no response from the accused. Further, he stated he has not filed appraisal report before the
Court. Further, the notice was not issued under Section 2(35)of IT Act. Further he admitted at the relevant time the accused persons were in jail. Ex.D2 and Ex.D3 show they are in judicial custody. He also admits the assessment order was set aside by ITAT under Ex.D1.
43.The evidence of Pws 1 to 3 shows that on search warrant they conducted search operations in the group of companies. The panchanama were conducted and they seized incriminating material, based on the seized documents they came to know that there was undisclosed income. Therefore, the notices were issued under
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Section 153C and also under Section 142(1) of IT Act. Even after receiving the notices the accused companies have not filed revised return of income. Therefore, the assessment order was passed against the accused companies. Thereafter, the notice was issued under Ex.P14 thereafter, the complaint is filed. The prosecution contention is that the evidence of Pws 1 to 3 establishes that the accused persons have committed the offence.
44.On the other hand, the defence contention is that there are ordinarily three teams crafted in respect of search and seizure under warrant of authorization based upon preparatory note. For carrying out search and seizure the three conditions enshrined in section 131 (1) of IT Act ought to be satisfied in the form of satisfaction note which divulges the frame work of mind or to arrive at reason to believe as a precursor under section 132(1) of the Act. After completing search and seizure operations, the search team ought to prepare an appraisal note followed by examination note (analytical report) as to whether there is any incriminating material unearthed during the course of search and seizure requiring to invoke section 153A or 153C of Income Tax Act, 1961. If no incriminating material has been unearthed, the question of invoking section 153A proceedings does not arise. If there has been some material collected which warrants action under Section 147 and 148 subject to limitation under Section 149 of IT act, 1961, then the assessment officer will at liberty to issue notice under the respective provisions without invoking section 153A of the
IT Act, 1961.
45.The defence contention is that from the prosecution evidence and material on record there was no excise done to segregate documents seized by the assessee wise, assessment year wise and premises wise, no systematic arrangement or make
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Court of Special Judge for Economic Offences, Hyd. 16 of 34 Judgment in C.C.No. 20 of 2017 analysis on the seized documents and sought out the documents having financial relevancy and financially irrelevant. The question of action under Section 153A or alternative would arise after segregating the documents and they have to find out the undisclosed income from the documents. Without any such segregation they came to conclusion that there was undisclosed income. The prosecution has not brought any material to show that the books of accounts, records and other documents were not seized by the CBCID. The so called recording of statements are under tremendous pressure and coercion.
46.This Court has taken into consideration of rival contentions made by both parties. Admittedly, during the cross-examination of PW1, he stated he has not received any material or records from the deponents while recording their statements. As per panchanama he has seized books of accounts etc from the companies mentioned in the panchanama as well as books of accounts from the companies mentioned in the respective panchanamas. He said he has seized sale deeds agreements, share ledger registers etc. Basing on those documents they analyzed the balance sheet and profit and loss account of the companies and found huge expenses in cash. However, the directors have expressed their inability to produce the documents like vouchers etc. The perusal of record shows that the prosecution has not filed any such list of documents which they alleged to have seized. As per record, they have filed warrant of authorization and panchanamas. The books of accounts, ledger books etc of the accused companies are not filed. The defence contended that in fact APCID raided the accused companies and they have seized the total documents so the so called documents alleged to be seized by the accused persons are not available in the premises of accused companies but the
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Court of Special Judge for Economic Offences, Hyd. 17 of 34 Judgment in C.C.No. 20 of 2017 witnesses alleged that they have seized the documents from the premises of accused company and its subsidiary companies. The defence have marked Ex.D2 & Ex.D3 which shows that at the relevant time Avva Hema Sundera Vara Prasad and Avva
Venkat Rama Rao were injail at the relevant time. The prosecution contended that the notices were served on them but when they are in jail there is a question of serving notices to the accused persons herein.
47.At the relevant time, during the assessment proceedings pursuance to the issuance of notice under Section 153 A of the Act, and also during the first appellate proceedings all the Directors of the company responsible for the affairs of the company were in judicial custody. So, it is not possible for the assessee to produce all the relevant books, vouchers etc, before the authorities to prosecute the case diligently. Ex.D2 and Ex.D3 they were in jail at the relevant time. So it is an admitted fact that the accused have not produced any such documents before the concerned authority. It is for the prosecution to explain how they got such documents they failed to explain it.
48.The defence contended that upon perusal of the Statements recorded from the
Accused referred in the respective Statements, even assumed but not admitted that the prosecution has thrown weight on the Statements, the Complaint and PWs evidence failed to show the incriminating material to prove that the notice under
Section 153A would be required. It is unclear from the Prosecution whether it has relied upon the Statements of Accused or not. Because, the Statements might have contained inculpatory and exculpatory parts. In such a scenario, it is upto the
Prosecution to substantiate that it has relied upon the inculpatory part to the extent as identified by the prosecution and their consideration to the exculpatory part.
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Admittedly, the prosecution got marked the statements under Ex.P1 to Ex.P9 through
PW1 however, they have not stated anything about the gist of the statement which is inculpatory and exculpatory. Mere marking of the documents are not sufficient it is for the prosecution to prove the substance of the statements. They have not proved it.
From the evidence, there is is no material to show that, the notice under Section 153A would be required.
49.As rightly pointed out by the defence no valuation or the methodologies of valuation has been divulged. Further, they have not filed examination note / or investigation report so as to convince the Court that the proceedings are conducted in accordance with law. When the department is proceeding under Section 153A and 153C, they have to file appraisal note and satisfaction note before the Court. The department has not filed any such documents before the Court. It is for the prosecution to prove that they have genuinely arrive at the conclusion that Section 153A notice would have to be issued and the manner in which it can be issued relying upon alleged incriminating material if any. No incriminating material has been brought into existence from the statements under Ex.P1 to Ex.P9.
50.The perusal of documents Ex.P3 & P11 panchanamas, it is clear that there is no mention about incriminating material in Ex. P3 & P11. Ex.P-3 i.e., Panchanama
dated 23.01.2015 is related to M/s. Agri Gold Farms Estates India Pvt Ltd, Agri Gold
Constructions Pvt Ltd, Agri Gold Project Ltd(the name of Dreamland is not mentioned). It is drawn by PW-2 (Mr. Nethra Pal) PW1/Narsingh Kumar Khalkho wherein there was no mention about the incriminating material and no details were furnished by identifying the material contained attributes of the incriminating material. To proceed against the accused persons further, it is very just and
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Court of Special Judge for Economic Offences, Hyd. 19 of 34 Judgment in C.C.No. 20 of 2017 necessary for the income tax officers to place such incriminating material. Without placing such material they cannot proceed further otherwise it is violative of interest of accused persons only.
51.The prosecution relied upon the statements of A3 recorded on different dates.
The perusal of statement shows several questions were asked to A3. From the statement nothing was elicited from A3 which is incriminatory to prosecute the accused persons.
52.Further, the perusal of document Ex.P12/notice u/s 153A dated 25.08.2015 vide PAN No. AADCA5206A/ CC/2(4)/2015-16 dated 25.08.2015 was issued to the Prl.
Officer of the Dreamland Ventures Pvt Ltd having address at Bangalore, pertaining to
M/s. Dreamland Ventures Private Limited calling upon the addressee to furnish the
Return of Income in respect of Assessment Year within 30 days from the date of receipt of the notice in the prescribed form and verified in prescribed manner and setting forth such other particulars as may apply accordingly as if such return were a return required to be furnished u/s 139 of the IT Act 1961. It is to be noted that as per warrant authorization there was no authorization to conduct panchanama in
Dreamland Ventures Ltd. In Ex.P2 also the name of Dreamland is not mentioned.
However, the panchanama under Ex.P11 shows the panchanama was conducted at
M/s. Dreamland Land Ventures on 23.01.2015. without any authorization the panchanama was conducted under Ex.P11. Further the notice was issued under
Ex.P12 dated 25.08.2015 to the Principal officer of Dreamland ventures Pvt Ltd to file return of income under Section 139 of IT Act. Further Ex.P13 notice was issued under
Section 142(1) of IT Act, on 18.01.2016, the notice under Ex.P14 dated 15.02.2016 was issued to Dreamland Ventures Pvt Ltd stating that why the prosecution
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Court of Special Judge for Economic Offences, Hyd. 20 of 34 Judgment in C.C.No. 20 of 2017 proceedings should not be launched against them. The filing of returns under Section 153A is different and filing of returns under Section 139 of IT Act are different. The defence has filed Ex.D3 return of income for the assessment year 2009-2010. The returns were already filed so again issue of notice under Ex.P12 under Section 139 of
IT Act is not proper.
53.Further, the notice under Ex.P13 was issued under Section 142 (1) of IT Act 1961 vide PAN No. AADCA5206A dated 18.01.2016 to the A-1 Company only at
Bangalore Address. In both the notices under Exs.P12 & 13 there is no mention of seizure of any incriminating material and details if any thereof disclosed in the notices. Even at the time of arguments also the defence counsel has pointed out but no reply was received from the public prosecutor. The documents are mechanically filed and the required information is not giving as per the documents. The main purpose of issue of notice is that the other party should no what was the case against him. The principle of natural justice ie., Audi Alterum partem made it clear that the other party should know all the particulars when the concerned authority is proceedings against the party otherwise there is no opportunity to the party to defend himself it is nothing but violative of fundamental rights of the accused persons.
54.The prosecution has initiated proceedings against the accused by obtaining the sanction order under Ex.P10. The Sanction Order shows that it is a cryptic order of two pages wherein the Sanction was given for deliberate and wilful default in filing the return of income u/s 139(1) of IT Act 1961 for the A.Y. 2009-2010 to 2014-15. As rightly pointed out defence there is no mention about Section 153 A nor is there any disclosure of any incriminating material or material upon which the Assessing Officer
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Court of Special Judge for Economic Offences, Hyd. 21 of 34 Judgment in C.C.No. 20 of 2017 has relied upon, material upon which the search team examined or analyzed and satisfied with and finally the material upon which the processing team had done any exercise to arrive at a logical conclusion and the opportunity of being heard conferred on the Accused during the course of the process, in this circumstances the order is cryptic and suffers from inefficiencies and therefore it is a defect order and cannot be relied upon.
55.A prosecution can be launched only on the basis of sanction of the Principal
Commissioner or appropriate authority. Section 279(1) of the Act is extracted hereunder:
“279. (1) A person shall not be proceeded against for an offence under section-276 or section-277 or section-278 except at the instance of the
Commissioner. (2) The Commissioner may either before or after the institution of proceedings compound any such offence.”
56.The intention of the legislature in introducing requirement of Sanction in
Enactments to be accorded by the competent authority is for the purpose of affording protection from vexations prosecution and to safeguard the interest of the innocent persons. Before granting sanction, the competent authority has to go through all the relevant material placed before it and after assessing the facts of the case and if the competent authority deems it appropriate to grant sanction, accordingly sanction is given for prosecution.
57.The Hon’ble Supreme Court in several judgments held that the competent authority’s sanction would be valid only when such competent authority applies its mind to the entire facts of the case and accords sanction. In the event of the sanction
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Court of Special Judge for Economic Offences, Hyd. 22 of 34 Judgment in C.C.No. 20 of 2017 reflecting non-application of mind or not considering the relevant material or any kind of extraneous reasons, such grant of sanction was found to be invalid.
58.The Hon’ble Supreme Court in the case of Mansukhlal Vithaldas Chauhan v.
State of Gujarat2 held as follows:
Sanction lifts the bar for prosecution. The grant of sanction is not an idle formality or an acrimonious exercise but a solemn and sacrosanct act which affords protection to Government Servants against frivolous prosecutions. ( See: Mohd. Iqbal
Ahmed vs. State of Andhra Pradesh, AIR 1979 SC 677). Sanction is a weapon to ensure discouragement of frivolous and vexatious prosecutions and is a safeguard for the innocent but not a shield for the guilty.
The validity of the sanction would, therefore, depend upon the material placed
before the sanctioning authority and the fact that all the relevant facts, material and
evidence have been considered by the sanctioning authority. Consideration implies application of mind. The order of sanction must ex facie disclose that the sanctioning authority had considered the evidence and other material placed before it. This fact can also be established by extrinsic evidence by placing the relevant files before the
Court to show that all relevant facts were considered by the sanctioning authority.
(See also: Jaswant Singh vs. The State of Punjab, 1958 SCR 762 = AIR 1958 SC 12;
State of Bihar & Anr. vs. P.P. Sharma, 1991 Cr.L.J. 1438 (SC)).
59.Since the validity of "Sanction" depends on the applicability of mind by the sanctioning authority to the facts of the case as also the material and evidence collected during investigation, it necessarily follows, that the sanctioning authority has to apply its own independent mind for the generation of genuie satisfaction whether prosecution has to be sanctioned or not. The mind of the sanctioning
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Court of Special Judge for Economic Offences, Hyd. 23 of 34 Judgment in C.C.No. 20 of 2017 authority should not be under pressure from any quarter nor should any external force be acting upon it to take decision one way or the other. Since the discretion to grant or not to grant sanction vests absolutely in the sanctioning authority, its discretion should be shown to have not been affected by any extraneous consideration. If is shown that the sanctioning authority was unable to apply its independent mind for any reason whatsoever or was under an obligation or compulsion or constraint to grant the sanction, the order will be had for the reason that the discretion of the authority "not to sanction" was taken away and it was compelled to act mechanically to sanction the prosecution.”
60.The Hon’ble Supreme Court in the recent judgment in the case of
S.Athilakshmi v. State rep. by the Drug Inspector3 relying on the judgment of
Mansukhlal’s case held as follows:
“The sanction for prosecution given in the present case appears, prima facie, to suffer from vice of non-application of mind. There is no reference to any of the documents, evidence or the submissions submitted by either of the parties, no reasons assigned or even an explanation pertaining to the delay which indicates it has been passed in a mechanical manner.”
61. The Hon’ble Supreme Court in the case of Nanjappa v. State of Karnataka, held as follows:
The rationale underlying the provision obviously is that if the trial has proceeded to conclusion and resulted in a finding or sentence, the same should not be lightly interfered with by the appellate or the revisional court simply because there was some omission, error or irregularity in the order sanctioning prosecution under Section 19(1). Failure of justice is, what the appellate or revisional Court would
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Court of Special Judge for Economic Offences, Hyd. 24 of 34 Judgment in C.C.No. 20 of 2017 in such cases look for. And while examining whether any such failure had indeed taken place, the Court concerned would also keep in mind whether the objection touching the error, omission or irregularity in the sanction could or should have been raised at an earlier stage of the proceedings meaning thereby whether the same could and should have been raised at the trial stage instead of being urged in appeal or revision.
62. In the case at hand, the Special Court not only entertained the contention urged on behalf of the accused about the invalidity of the order of sanction but found that the authority issuing the said order was incompetent to grant sanction. The trial
Court held that the authority who had issued the sanction was not competent to do so, a fact which has not been disputed before the High Court or before us. The only error which the trial Court, in our opinion, committed was that, having held the sanction to be invalid, it should have discharged the accused rather than recording an order of acquittal on the merit of the case. As observed by this Court in Baij Nath
Prasad Tripathi’s case (supra), the absence of a sanction order implied that the court was not competent to take cognizance or try the accused. Resultantly, the trial by an incompetent Court was bound to be invalid and non-est in law.”
63.The Hon’ble Supreme Court in the case of Mohd. Iqbal Ahmed v. State of
Andhra Pradesh5 held that it is well settled that any case instituted without a proper sanction must fail because this being a manifest defect in the prosecution, the entire proceedings are rendered void ab initio. Further, the prosecution launched without a valid sanction, it was held that the cognizance taken by the Special Judge was without jurisdiction and proceedings were quashed.
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64.In the instant case also, the sanction order does not contain all the material which are alleged to be incriminating to the accused so as to initiate proceedings against the accused persons therefore, the sanction order is not valid.
65.The show cause notice was issued under Ex.P.14 on 15.02.2016 to the A1
Company by which time, as revealed in Ex. D2, the Accused referred therein was in the Judicial Custody and the other Accused was not aware of the Show Cause Notice since the A1 Company premises was seized and documents and properties were attached by the State CBCID Authorities in the month of January 2015. Further the
Show Cause Notice was issued to A1 Company only. As per section 2(35) of companies Act, it is mandatory that the notice should be issued to the Principal officer of the company. No such notice was issued to the principal officer of the company and it is the duty of the department to issue such notice by treating any of the Director as Principal Officer of the Company. The role of each Director and their day to day activities and their responsibilities in the company should be mentioned so as to fix their liability. Admittedly, in the instant case no such notices are served.
66.At this Stage, it is just and proper to pursue Section 2(35) of Income Tax Act which reads as under:
2(35) “principal officer”, used with reference to a local authority or a company or any other public body or any association of persons or any body of individuals, means—
(a) the secretary, treasurer, manager or agent of the authority, company, association or body, or
(b) any person connected with the management or administration of the local authority, company, association or body upon whom the 3[Assessing Officer] has served a notice of his intention of treating him as the principal officer thereof;
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67.M.R.Pratap Vs VM. Muthu Ramalingam in which the Hon’ble Court observed that: it is admitted by the department that no such notice as contemplated under
Section 2(35)(b) has been served on the petitioner hence, the petitioners contention that he cannot be proceeded with for the delayed payment of tax amount by the company, is a well founded one.
68.In Greatway (P) Ltd. & Ors. Vs. Asstt. CIT [1993] 199 ITR 391(P&H), Punjab &
Haryana High Court has held that in the absence of appointment of a principal officer by issuing a notice by the AO, the prosecution, if any, could only be launched against the petitioner-company. Similar is the view expressed in ITO Vs. Roshini Cold Storage (P) Ltd. and Ors. (2000) 245 ITR 322 (Mad). In this case Hon’ble Madras High Court held that in case Income Tax Officer sought to prosecute the director along with company for an offence under Section 276- B of the Act then it was incumbent upon him to issue a notice under sub-clause (b) of 2(35) of the Act expressing his intention to treat the director as "principal officer" of the company and in absence thereof, director shall be entitled to the acquittal.
69.In Sushil Suri and Ors. Vs. State & Ors. (2008) 303 ITR 86 (Delhi), the Hon’ble
Court has held that before a prosecution under Section 276-B of the Act can be launched against the director he should have been notified that department/AO has intention of treating him as "principal officer" of the company. In absence of such notice under Section 2(35)(b) of the Act, prosecution against the director cannot be continued and is bound to fail.
70.In Madhumilan Syntex Ltd. and Others vs. Union of India (2007) 290 ITR 199 (SC), the Supreme Court has held as under:-
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71."To treat the directors of a company as "principal officers" there is no need to issue a separate notice or communication to them that they are to be treated as "principal officers", before the issuance of the show-cause notice under section 276-
B read with Section 278B. It is sufficient that in the show-cause notice under section 276-B read with 278B, it is stated that the directors are to be considered as principal officers of the company under the Act and such a complaint is entertainable by the court provided it is otherwise maintainable."
72.Legal preposition which emerges from the above is that before launching a prosecution under Section 276-B of the Act against the directors of a company,
Assessing Officer has to issue notice under Section 2(35) of the Act expressing his intention to treat such directors of a company as "principal officers". However, it may not be necessary to issue a separate notice or communication to all the directors that they are to be treated as "principal officers". It would be sufficient compliance if in the show cause notice issued to the company it is mentioned that the directors are to be considered as principal officers of the company under the Act
73.In this case neither a notice was issued to A-2 to A-4 under Section 2(35) of the Act the department intended to treat him "principal officer" nor in the show cause notice issued to the company it was mentioned that department is intended to treat the directors of the company as "principal officers", for the purpose of launching prosecution under Section 276-B of the Act.
74.Admittedly, as per the decision of Hon’ble Courts, the notice under section 2(35) is mandatory. The prosecution has to issue such a notice to the directors of the company intimating their intention to treat them as the principal officers of the company. Further, the Hon’ble Supreme Court held that when the showcause notice
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Court of Special Judge for Economic Offences, Hyd. 28 of 34 Judgment in C.C.No. 20 of 2017 is issued to the accused persons, in the notice, the complainant has used specific words intimating to the accused that they are treating a particular director or directors as principal officers of the company then, it is sufficient. But, in the instant case, the contents of the showcase notice shows that no where the complainant has used the words that they are treating A-2 to A-4 as principal officers of A-1 company.
Though, the show cause notices was issued to accused, but in the said notice also, no where they mentioned that A-2 to A-4 are Principal officers of A-1 company.
Therefore, the complainant failed to issue any notice to the accused persons intimating that they are treating any of the accused as principal officers of the company. Further, the decision of Hon’ble Supreme Court made it clear that, apart from issue of notice under Section2(35) of the act, or least by mentioning in the show cause notice that they are treating a particular director as principal officer of the company, in the complaint, if they mention the role of directors and their clear intention that they are responsible for day-to-day activities of the company, then the complainant has complied the conditions laid down under section 2(35) of the Act.
The perusal of the contents of the complaint shows that nowhere in the contents of the complainant mentioned that A-2 to A-4 are principal officers of the company. No doubt, they got it mentioned that they are directors and responsible for day-to-day activities of A-1 company. But, they failed to mention that any of the directors was treated as principal officer of the company. Therefore, A-2 to A-4 should not be treated as principal officers of the company. Therefore non issue of notice under
Section 2(35) of Act is fatal to the prosecution case.
75.Further it is pertinent to note that in the said notice, the notice was given under Section 153A read with Section 276CC whereas, the Sanction Order (Ex.P10)
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Court of Special Judge for Economic Offences, Hyd. 29 of 34 Judgment in C.C.No. 20 of 2017 was issued under Section 139(1) of the Act without any mention about the alleged violation under Section 153A of the Income Tax Act, 1961. It is a defective Sanction and would not be relied upon. It shows there is defect in issue of sanction order as well as in the notice also.
76.Moreover, in the course of said search, it is alleged incriminating material pertaining to the assessee company were found and seized and marked as annexure.
Since the incriminating material according to the assessing officer belong to the assessee company provisions of Section 153C are applicable and accordingly the proceedings under Section 153C were initiated by recording satisfactory note. In response to the notice, under Section 153C issued calling for return of income which was served on the assessee, the assessee did not file return of income. The defence contention is that the so called satisfaction note under section 153C of the Act alleged to be recorded by the assessing officer, is not as per the procedure. The so called satisfaction is not in accordance with law. The satisfaction recorded by the assessing officer has failed to record his satisfaction that the documents so seized belong wit the assessee company ie., other than the searched person therefore, initiation of proceedings under Section 153C without such proper satisfaction are bad in law. The satisfaction of the assessing officer regarding the seized material belonging or relating to some other person should not be arrived at in a casual manner or merely on the basis of the statement made by the person searched. It should be based upon cogent material and must display the reason or basis for the conclusion that the assessing officer of the person in respect of whom the search was conducted is satisfied that the seized document belong to another person. Nowhere
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Court of Special Judge for Economic Offences, Hyd. 30 of 34 Judgment in C.C.No. 20 of 2017 the assessing officer recorded his satisfaction that the material seized belongs to the assessee company therefore such satisfaction itself is invalid.
77.It is to be noted that the defence counsels must have appeared before the commissioner and income tax appellate tribunal appeals so that they are speaking about the satisfactory note. /Unfortunately said document is not filed before theCourt so this Court is not able to say whether these documents do not belongs to the assessee or not. Therefore, the initiation of proceedings under Section 153C are not in accordance with law. This Court is not able to give any finding on this aspect. The witnesses have stated that satisfactory note is confidential note so it will not be filed
in the Court. They have not filed any circular or document to show that it is a
confidential document. Therefore, this Court cannot give any finding on it.
78.The defence contended the initiation of proceedings under Section 153C are not in accordance with law. The provisions of section 153C were amended with effect from 01.06.2015. As per 153C (1)(b) the words any books of accounts or documents seized or requisitioned, pertains to or pertained to or any information contained therein relates to are applicable with effect from 01.06.2015 since the search in the instant case was concluded on 23.01.2015 which was before 01.06.2015 therefore, the initiation of proceedings under Section 153C are not in accordance with law. The satisfaction note is very crucial to decide whether the document so seized belongs to the assessee and to decide whether the provisions of Section 153C is applicable or not. There is no material produced before the Court to show that the seized documents so found during the course of search belongs to the assessee that is other than the searched person.
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Court of Special Judge for Economic Offences, Hyd. 31 of 34 Judgment in C.C.No. 20 of 2017
79.From the facts and circumstances of this case, this Court feels that, this Court is not able to decide the validity of 153C proceedings and also the assessing proceedings etc. Moreover, from the facts it is clear that the assessment order was passed, basing on which the notice was issued under Ex.P14 for prosecuting the accused. Thereafter, the proceedings are initiated. Admittedly, Ex.D1 is the order copy of ITAT which is the crucial document. The perusal of this document shows that the Hon’ble ITAT has observed that “it could be seen from the order dated 29.11.2022 in the batch cases of Agri Gold constructions Pvt Ltd, the facts are identical and the co-ordinate bench of this tribunal took the view to set aside the impugned order and to restore the issued to the file of learned officer for giving an opportunity to the assessee to dispose of the matter according to the law. It is clear from the certificate dated 26.02.2019, issued by Superintended District jail Eluru and also the letter dated 24.11.2016 addressed by Sri AV.Rama Rao Chairman of the Agri
Gold group to the DCIT Hyderabad that the Chairman, Vice Chairman, Managing
Directors and others were in the custody within the period 12.02.2016 and 23.10.2018 and lodged in District Jail Eluru. The material clearly establishes that from 12.02.2016 to 23.10.2018, all the persons responsible for the affairs of the
Company were in custody and in their absence as claimed by the learned AR, some part of the material was produced before the authorities there is nothing contrary to disbelieve the statement of learned AR that assessee could not prosecute the proceedings before the authorities diligently due to the fact of non – availability of the persons responsible for the affairs of the company. In fact this particular circumstance is taken note by the co-ordinate benches of the tribunal in the cases of group concerns on earlier occasions as is evidenced by the order dated 29.11.2022.
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Court of Special Judge for Economic Offences, Hyd. 32 of 34 Judgment in C.C.No. 20 of 2017
Having regard to the peculiarity of the facts, we are of the considered opinion that it would be in the interest of justice to set aside the impugned orders and to restore the matters to the file of learned assessing officer to adjudicate the same afresh, after giving an opportunity of being heard to the assessee and also to produce all the relevant material at their custody.” Thereby the Hon’ble ITAT has set aside the assessment order with a direction to pass a fresh order after hearing both sides.
80.From this, it is clear that, the assessing order based on which the present case is filed was already set aside. However, the prosecution has filed the documents vide
Crl MP.No. 2420/2026, as per the documents Ex.P15 is the assessment order dated 30.12.2016, filed basing on which the present case is filed. Thereafter, the notice of demand dated 30.12.2016, is filed under Ex.P16. The order of ITAT dated 26.02.2018, is filed under Ex.P17, in between Ex.P15 and Ex.P17 one more assessment order is passed as the Hon’ble ITAT set aside the assessment order with a direction to pass a fresh order. After passing fresh assessment order, again the parties approached ITAT under Ex.P17. As per the order, the appeal of the appellant ie., the A1 company herein was party allowed. It is to be noted that Ex.P17 is relating to the period after filing of this case. If any fresh assessment order is passed and ITAT order is passed the fresh cause of action arose from that date. The present case is based on Ex.P15 only which was already set aside therefore, the present case is not maintainable. The prosecution contended the fresh assessment order was passed if it is so, the cause of action arose for them to file a fresh case basing on the new assessment order but, the prosecution basing on the old assessment order is not maintainable. Hence, the accused persons are benefit of doubt.
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81.In the result, the the accused Nos.1 to 4 are found not guilty for the offence under Sections 276 CC and 278-B of Income Tax Act. So, they are acquitted for the said offences under Section 248(1) Cr.P.C. The bail bonds of the accused shall stand cancelled after the appeal time is over. The accused are directed to execute personal bond for Rs. 10,000/- each under Section 437A of Cr.P.C.
Directly typed to my dictation by Stenographer Grade-I, corrected and pronounced by me in open court on this the 13th day of April, 2026.
Special Judge for Economic Offences,
Hyderabad.
APPENDIX OF EVIDENCE
Witnesses examined on behalf of prosecution:
PW.1Narsingh Kumar Khalkho PW.2Nethra Pal PW.3B.Sunil Kumar
Witnesses examined on behalf of Defence: NIL
Exhibits Marked on behalf of prosecution:
Ex.P1Attested true copy of Warrant of authorization dated: 23-01-2015 Ex.P2Attested true copy of Warrant of authorization dated: 19.03.2015 Ex.P3Attested true copy of panchanama, dated:19.03.2015. Ex.P4Attested true copy of Sworn statement of A3 dated 05.02.2015 Ex.P5Attested true copy of Sworn statement of A3 dated 06.02.2015 Ex.P6Attested true copy of Sworn statement of A3 dated 26.02.2015 Ex.P7Attested true copy of Sworn statement of A3 dated 13.03.2015 Ex.P8Attested true copy of Sworn statement of A3 dated 23.03.2015 Ex.P9Attested true copy of Sworn statement of A3 dated 23.03.2015 Ex.P10Authorization issued in favour of PW2 by K.J.Rao, Addl. Director of Income Tax(INV), Unit-I, Hyderabad
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Ex.P11Panchanama dated 23.01.2015 Ex.P12Notice U/s. 153A was issued for the assessment year 2009-10 and served on the accused on 25.08.2015. Ex.P13Notice U/Sec. 142(1) of the IT Act was issued on 18.01.2016 Ex.P14Copy of show-cause notice issued before passing orders u/s. 279(1) IT Act. Ex.P15Assessment order dated 30.12.2016 Ex.P16Notice of demand dated 30.12.2016 Ex.P17order of ITAT dated 26.02.2018
Documents marked by Defence:
Ex. D1Order copy of ITAT Ex. D2Certificate, dated 25.07.2019 issued in respect of Avva Venkata Rama Rao. Ex.D3Income Tax Returns acknowledgment for the assessment year 2012-13 (with consent of both parties the documents are marked)
Sd/-
Special Judge for Economic Offences,
Hyderabad.
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//Fair Copy//
IN THE COURT OF SPECIAL JUDGE FOR TRIAL OF CASES UNDER ECONOMIC
OFFENCES :: HYDERABAD.
Dated this the 13th day of April, 2026
Present : Smt. J. Maithreyi,
Special Judge for trial of cases under Economic
Offences, Hyderabad.
C.C.No.20 of 2017
Between :
The Asst. Commissioner of Income Tax, Central Circle-2(4), 3rd Floor, Posnett Bhavan, Ramkote,
Hyderabad-500 001 ... Complainant
And
1) M/s Dreamland Ventures pvt Ltd., 2nd Floor, No.85,16th Cross 14th Main, HSR Layout, Bangalore-560102 Rep. by its Managing Director, Sri Patan Lal Ahammad Khan S/o Saida Khan, Flat No.B4, Chandrahasa Apartment, Ajith Singh Nagar, Vijayawada - 520015.
2) Mr. Patan Lal Ahammad Khan S/o Saida Khan, aged : 47 years, Occu: Managing Director, R/o: Flat No.B4, Chandrahasa Apartment, Ajith Singh Nagar, Vijayawada-520015.
3) Mr. Avva Venkata Rama Rao S/o Venkata Appa Rao, aged about 55 years, Occ: Director R/o H.No.23-35-39, A S Rao Street Lakshmi Nagar, Satyanarayanapuram Vijayawada-520011.
4) Mr.Chinnappa Srinivasa Reddy S/o Chinnappa Reddy, aged about 50 years, Occu:Director, R/o: No.105/17, 12th Main, BTM Layout, 1st Stage, Bangalore-560029.… Accused Nos. 1 to 4
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This case is coming before me on 09.04.2026 for hearing and disposal in the presence of Sri.H.Govind Rao, Special Public Prosecutor for Complainant, Sri K. Rama Srinivas, counsel for accused no.1 and 2, Sri.D.Vijaya Bhaskar, Sri. J. Basava Raju, Sri. TVN Ravikanth and Sri. D.Sai Dheeraj, Counsels for accused no.3 and Sri. D. Raghavendra and Sri. K. Ravi, counsels for accused no.4 and after hearing the arguments and perusing the material on record and after the matter having stood over for consideration till this day, today, this Court delivered the following:
J U D G M E N T
1.The Income Tax Officer, Hyderabad has filed a complaint under Section 190 r/w
Section 200 of Cr.P.C. for the offence punishable under Section 276CC and 278B of the Income Tax Act, 1961 (Hereinafter referred as ‘the Act,’) against the Accused persons.
2.The brief contents of the complaint are as follows :
The Complaint is filed pursuant to the prior sanction of the Commissioner of
Income Tax (Central), Hyderabad vide order u/s 279(1) of the Income Tax Act, 1961 in
F. No. CIT(C)/HYD/PROS/AGRI GOLD FARM/2016-17, dated 23.05.2016 which is enclosed herewith as Document No.1. As per section 136 of the Income Tax Act, 1961, proceedings under the Act are deemed to be the judicial proceedings within the meaning of section 193 to 196 of the I.P.C. A.Y 2012-13
3.That the accused No.1 is the company registered under the Indian Companies of Act of 1956 and its registered office is situated at 2nd Floor, No.85,16th Cross, 14th Main, HSR Layout, Bangalore-560102 and is engaged in the business of Real
Estate and Constructions of Apartments. The accused No.1 is the Managing Director and the accused No.2 to 3 are the directors of the company and are in-charge and responsible for the day today affairs of the company for the conduct of its business.
In view of the provisions of Section s 278B of the I.T.Act, 1961 they are liable to be proceeded against.
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4.A search u/s.132 of the Income tax Act, 1961 was conducted at the office premises of the accused at 2nd Floor, No.85,16th Cross, 14th Main, HSR Lay out,
Bangalore-560102 on 23-1-2015 and 19.03.2015 evidenced by panchanama dated 23-1-2015 & 19-3-2015. Certified true copies of warrant of authorization u/s 132 of the IT Act, 1961, panchanamas and Sworn Statement are enclosed as Document No.2 to 5.
5.After search a notice u/s.153A of the Income tax Act, 1961 for the assessment year 2012-13 was issued on 25.8.2015, the accused is required to file the return of income for the afore mentioned assessment year within time allowed in the notice i.e. 30 days from the date on which the notice has been served on him/her. The relevant notices were served on the accused on 25.08.2015. The due date to file the return of income for the assessment year 2012-13 was 24.09.2015.
6.That the accused, however, failed to furnish the return of income for the assessment year 2012-13 on or before the due date. Therefore, notice u/s 142 (1) of the IT Act, 1961 was issued on 18.01.2016 and the same was received on behalf of the accused. The accused neither complied with the notice nor has given any explanation for non-compliance. T
7.That inspite of the receipt of notices u/s153A and 142(1) of the IT Act, 1961, the accused did not file the return nor responded to the notices. Therefore, a show- cause notice dated 15.02.2016 was issued to the accused on 15.02.2016 to show cause as to why prosecution proceedings u/s 276CC of the Income Tax Act, 1961 should not be initiated for not filing the return of income for the assessment year 2012-13 and posted the matter for hearing was fixed on 29.02.2016. The same
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Court of Special Judge for Economic Offences, Hyd. 4 of 34 Judgment in C.C.No. 20 of 2017 served on the accused on 15.02.2016. The accused did not comply. The accused has not provided any explanation in this regard.
8.The accused is duty bound to file the return of income for the Assessment Year 2012-13 in response to notice u/s 153A of the Income Tax Act, 1961. In the light of facts and circumstances as narrated above in the preceding paragraphs, it is evident that the accused not filed returns in response to notice u/s 153A of the Income Tax
Act, 1961. Further, the assessee has failed to comply with the notices issued as per the statutory powers vested with the authority of the Income Tax Act, 1961. Despite given sufficient opportunity, the assessee's non responsiveness is a clear and sufficient indication of gross negligence on his part.
9.As per the provisions of section 153A of the Income Tax Act. 1961, the accused is required to file the return of income on or before the date specified in the notice issued under section 153A of the Income Tax Act, 1961. But the accused inspite of giving sufficient opportunities and issuance of notices did not file the return of income. Therefore, the accused has committed an offence punishable under section 276CC of the Income Tax Act, 1961. Since the offence is committed by the Company and its Managing Director and Directors they are liable for punishment U/s 278B of the I.T.Act.
10.On the basis of the allegations contained in the complaint and the documents filed in support of it, this court took cognizance of the offences under Sections 276CC r/w 278B of Income Tax Act, 1961 against the accused issued summons.
11.Responding to the summons, the accused put up their appearance and thereafter copies of documents as contemplated under Section 207 of Cr.P.C. were
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Court of Special Judge for Economic Offences, Hyd. 5 of 34 Judgment in C.C.No. 20 of 2017 furnished to the accused. The evidence was recorded under Section 244 Cr.P.C as it is private complaint.
12.After hearing the prosecution, as well as the accused, taking into consideration of evidence of prosecution witnesses, this court has framed charges under Sections 276CC and 278B of Income Tax Act, 1961 against the accused and the same was read over and explained to accused in his vernacular language, to which they denied the offence, pleaded not guilty and claimed to the tried.
13.To bring home the guilt of the accused for the offences with which they are charged, the complainant examined Pws1 to 3 and got marked Exhibits P1 to P17 and got marked Ex.D1 to D3.
14.After closure of complainant’s side evidence, the accused was examined under
Section 313 Cr.P.C putting incriminating circumstances appearing against the accused in the evidence prosecution witnesses to which he denied the same. On behalf of the accused, no witnesses are examined and no documents are marked.
15.Heard both sides. Perused the record.
16.Now the point for consideration is :
“Whether the complainant is able to prove the guilt of Accused beyond all reasonable doubt ?”
POINT :
17.The offence under Section 276CC and 278B of Income Tax Act,1961.
Before going into the discussion of merits of the case, it is better to go through
the provisions under Section 276CC and 278B of Income Tax Act, 1961.
276CC:Failure to furnish returns of income.—If a person wilfully fails to furnish in due time 1 [the return of fringe benefits which he is required to furnish under sub-section (1) of section 115WD or by notice given under sub-section (2) of
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Court of Special Judge for Economic Offences, Hyd. 6 of 34 Judgment in C.C.No. 20 of 2017 the said section or section 115WH or] the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under 2 [clause (i) of sub-section (1) of section 142] or 3 [section 148 or section 153A,] he shall be punishable,— (i) in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds 4 [twenty-five 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 imprisonment for a term which shall not be less than three months but which may extend to 5 [two years] and with fine: Provided that a person shall not be proceeded against under this section for failure to furnish in due time the 6 [return of fringe benefits under sub-section (1) of section 115WD or return of income under sub-section (1) of section 139]— (i) for any assessment year commencing prior to the 1st day of April, 1975; or (ii) for any assessment year commencing on or after the 1st day of April, 1975, if— (a) the return is furnished by him before the expiry of the assessment year; or (b) the 7 [tax payable by such person, not being a company,] on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source, does not exceed three thousand rupees.]] 278B. Offences by companies.—(1) Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. (2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
18.The allegation of prosecution is that the accused persons are duty bound to file the return of income for the AY 2012-13, in response to notice under Section 153A of Income Tax Act, 1961. The accused have not filed returns in response to notice issued under Section 153A of Income Tax Act, 1961. Further, the assessee has failed
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Court of Special Judge for Economic Offences, Hyd. 7 of 34 Judgment in C.C.No. 20 of 2017 to comply with the notice issued as per the statutory powers vested with the authority of income tax act, 1961. Despite giving sufficient opportunity the assessee’s non responsiveness is a clear and sufficient indication of gross negligence on their part thereby the accused persons have committed the offence under Section 276CC of IT Act, 1961 and section 278B of IT Act.
19.The prosecution in order to substantiate their evidence examined Pws 1 to 3.
The evidence of PW1/ Narsingh Kumar Khalko, Director of Finance, shows that Since the role of CBDT is to conduct the search & seizure operation as per central action plan issued by the CBDT, in this regard he received Warrant of Authorization under
Ex.P1 and P2 dated 23.01.2015 and 19-03-2015 from Director of Income Tax ( Investigation), Hyderabad. The above documents are issued directing him to conduct search & seizure operation u/s. 132 of Income Tax Act at the offices and other premises of accused herin. Accordingly, he conducted search along with other authorized officers of the department. During the course of search & seizure operations, certain documents were found and seized which have been incorporated in the panchanama drawn at various premises under Ex.P3 dated 19-03-2015.
Further, the sworn statements of accused were recorded in the premises u/s 132(4) of Income Tax Act, i.e., The attested true copy of Sworn statements of A3 dated 05- 02-2015 marked as Ex P4. The attested true copy of Sworn statements of A3 dated 06-02-2015 is marked as Ex P5. The attested true copy of Sworn statements of A3
dated 26-02-2015 is marked as Ex P6. The attested true copy of Sworn statements of
A3 dated 13-03-2015 is marked as Ex P7. The attested true copy of Sworn statements of A3 dated 23-03-2015 is marked as Ex P8. The attested true copy of Sworn statements of A3 dated 23-03-2015 is marked as Ex P9.
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20.Accused namely Sri Avva Venkata Rama Rao had stated vide his statement recorded on 23-03-2015 that there is an effective additional undisclosed income of
Rs.14,72,62,211/- from Assessment Years 2012-13 to 2014-15.
21.After the conduct of the search PW1 had conducted the search, prepared appraisal report based on the documents seized as per panchanama and had put up for approval of Principal Director of Income Tax (Investigation) Hyderabad through
Additional Director of Income Tax Unit-I, Hyderabad and the same was accorded
approval subsequently. It is pertinent to mention here that further the case was centralized to the o/o PCIT (Central), Hyderabad for scrutiny assessment purposes and appraisal report along with seized material & other documents was forwarded to the jurisdictional assessing officer in the central charge.
22.In the cross examination PW1 stated he has not issued any notice under
Section 132(1) of IT Act before undertaking the search and seizure authorization. He has not received any material on record from the deponents while recording their statements however, the same can be confirmed by seeing the panchanama. As per panchanama, he has seized books of accounts etc from the companies mentioned in respective panchanamas. The books of accounts of other subsidiary companies were also seized. He admits as per company Act, each company is distinct and separate entity. It was maintained on the computer of which back up was taken in the hard drive and seized. On two issued only, it was analysed, first transfer of shares and the expenses made for land dealings. They made analysis of seized material and made appraisal report and forwarded to the central charge for the scrutiny of the issues, the complaint was not filed by him so, he is not aware whether such analytical report was filed or not.
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23.PW1 further stated they seized sale deeds purchase deeds, agreements, details pertaining to cash payments made to different individuals and share ledger register mentioning the name of shares, year of transfer details of transferees and transferrer etc. they analyzed the balance sheet and profit and loss account fo the companies and found huge expenses in cash, secured loans, share premiums for which they asked specific questions to the directors of the companies for which they expressed inability to submit the supporting documents like voucher and other details and the statement was recorded under Section 132 (4) of IT Act through which directors particularly A.Venkata Rama Rao has confirmed and accepted the undisclosed income on estimation basis which was made the part of appraisal report and forwarded to central charge for scrutiny proceedings. He has not filed satisfaction report. He admits all his findings are set aside by Hobn’ble ITAT under
Ex.D1.
24.The evidence of PW1 is very crucial because he has conducted search. The panchanama was conducted by him. Further he has recorded the statements also. As per his evidence he has seized the books of accounts relating to different companies.
He has prepared appraisal report also. He has seized incriminating materials ie., sale deeds, agreements details relating to cash payment share ledger register etc.
Further, his evidence disclose that as per balance sheet and profit and loss of company they found huge expenses in cash unsecured loans share premiums . The accused have not furnished the documents relating to said expenses shares etc, however, they admitted undisclosed income.
25.The testimony of PW2/ Nethra Pal, Director of Finance, shows that he was authorized by DIT, Hyderabad to conduct search at Bangalore at A1 company
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Court of Special Judge for Economic Offences, Hyd. 10 of 34 Judgment in C.C.No. 20 of 2017 premises. Ex.P10 is the Authorization issued in his favour by K.J. Rao, Addl. Director of
Income Tax (INV), Unit-I, Hyderabad.
26.In pursuance of this authorization letter, the search was conducted and he has drawn panchanama on 23.01.2015. The various documents were seized during such search. The details of seized documents are provided in the annexure appended to the panchanama. Ex.P11 is the panchanama, dated 23.01.2015 along with list of inventory of account books etc., seized under cover of panchanama. Thereafter, he handed over the search proceedings, said panchanama etc., to the Hyderabad Unit.
The remaining process was done by the Hyderabad Unit and Central Unit.
27.In cross-examination PW2 stated that before conducting the search, he was not involved. So he do not know whether any notice was issued u/s 131 and 132 of
Income Tax. It was done by Hyderabad team but not by him. He has only drawn the panchanama on 23.01.2015. Based upon the composite warrant given to him, he conducted panchanama and accordingly drawn a composite panchanama.
28.He admits they have not identified books of accounts of each company as per the warrant wherein the names of the companies were mentioned including the A1.
He admits what ever it is stated in the panchanama that is final for him and beyond that he cannot answer.
29.He denied the suggestion that he has not applied his mind and mechanically drawn the panchanama and that the panchanama is illegal.
30.PW3/ D.Sunil Kumar, worked as Assistant Commissioner of Income tax shows in the case of M/s Agri Gold Constructions Private Ltd., a Search and Seizure operation was conducted at the office premises on 23-01-2015, 13-03-2015, 14-03- 2015, 15-03-2015 and 23-03-2015 evidenced by the Panchanama dated: 23-01-2015,
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Court of Special Judge for Economic Offences, Hyd. 11 of 34 Judgment in C.C.No. 20 of 2017 13-03-2015, 14-03-2015, 15-03-2015 and 23-03-2015. During the search and seizure operation and post search investigation. the undisclosed income for the assessment year 2009-10 is identified under the head income from other sources and income from the business.
31.After search and seizure operation, the case is centralized to Central Circle- 2(4) on 23-03-2015 by the Principal Commissioner of Income Tax (Central) Hyderabad in order No.CIT(C)/H/Centralization/Agri Gold Group/2014-15 dated: 23-03-2015 for completing the assessment proceedings. Accordingly, a notice U/Sec.153 A under
Ex.P10 was issued for the assessment year 2009-10 and served on the accused on 26-08-2015. The accused is required to file the return of income for the aforementioned assessment year within time allowed in the notice i.e., 30 days from the date on which the notice has been served on them. The relevant notice was served on the accused on 18-01-2016. The due date to file return of income for the assessment year 2009-10 was 26-09-2015. However the accused failed to furnish the return of Income for the assessment year 2009-10 on or before the due date.
32.Therefore notice L/Sec. 142(1) of the IT Act under Ex.P11 was issued on 18-01- 2016 and the same was served on the accused. The accused neither complied with the notice nor has given any explanation for non-compliance of the aforementioned notices.
33.Inspite of receipt of the notice U/Sec. 153A and 142(1) of the IT Act, 1961 the accused did not file the return of income nor responded to the notices. Therefore a show cause notice was issued and served on the accused on 15-02-2016 to show cause as to why prosecution proceedings U/Sec. 276CC of the Income Tax Act, 1961 shall not be initiated for not filing return of income for the assessment year 2009-10.
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The accused did not comply to the show cause notice and the accused has not provided any explanation in this regard.
34.The accused is duty bound to file the return of income for the assessment year in response to the notice u/s 153A of the Income Tax Act, 1961. Despite of giving sufficient opportunity, the accused non-responsiveness is a clear and sufficient indication of gross negligence on their part. Therefore, the accused has committed an offence punishable under section 276 CC of the Income tax Act, 1961. The sanction orders was passed under Ex.P10.
35.In cross-examination PW3 shows that in the case, the search was conducted, after concluding the search proceedings, certain income was identified and as a
Deputy Commissioner of Income Tax working with Central Circle, he has to conclude assessment proceedings, after search the group of cases centralized to PCIT, Central
Circle and accordingly he issued notice under Section 153A of IT Act to conclude the proceedings. he received appraisal report after concluding search proceedings. He has not filed appraisal report before the court. Because the preparatory note which is incidental to commence the search and seizure operation, it is treated an internal document, so he did not file the same before the court. He has prepared satisfactory note before issue of notice under Section 153A of IT Act. He admits that as per
Section 139 of IT Act, the company is regular in filing all the returns including returns in respect of assessment years, 2009-10 to 2014-15. He admits the notice under
Section 153A of IT Act was issued to Prl. Officer of A1 company only. The name of Prl.
Officer of A1 company was not mentioned in the notice. Similarly he issued notice under Section 142 of IT Act, which is issued to the A1 company only. In both notices he has not mentioned the name of Prl. Officer of A1 company.
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36.He has prepared the complaint and file the complaint. In the complaint, he has not mentioned anything about the notice under Section 2 (35) of IT Act. In the complaint he has not referred the appraisal note and also the satisfactory note. He has not mentioned justification upon which he made assessment order. Both appraisal report and satisfactory note are internal documents to issue notice under
Section 153A of IT Act.
37.He admits the notice under Section 153A of IT Act cannot be issued mechanically and he has to apply his independent mind. The basis for issue of notice under Section 153A of IT Act is appraisal report. He admits in the month of
November, 2022 the Honorable ITAT passed orders in respect of all years subject matter herein and set-a-side the assessment order and direction is given to pass fresh assessment order. Ex.D1 is the order copy of ITAT.
38.In the sanction order, the sanctioning authority has not referred Section 153A of IT Act in the sanction orde. He admits in sanction order it is not mentioned about
Section 278E of IT Act. That the order under Section 279(1) of IT Act is not speaking order and it is a cryptic order only for two paragraphs. However when 279(1) of IT Act order is passed after issuing of show-cause notice where the facts are mentioned/discussed. The particulars of incriminating material are not mentioned in the show-cause notice. Before passing order under Section 279(1) of IT Act the show- cause notice was issued to the accused. Ex.P14 is the Copy Show Cause notice which was issued before passing orders under Section 279(1) of IT Act.
39.Ex.P14 was issued to A1 company only. This notice was issued on 15.02.2016.
The notice was duly served on A1 company. He has not filed the acknowledgment card to show the service of notice to A1 company. By the date of issue of notice the
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Court of Special Judge for Economic Offences, Hyd. 14 of 34 Judgment in C.C.No. 20 of 2017 accused was in judicial custody as per the attested copy of certificate issued by Jailor,
District Jail, Eluru in respect of Avva Venkata Rama Rao and Avva Hema Sundara Vara
Prasad.
40.Ex.D2 is the Certificate, dated 25.07.2019 issued in respect of Avva Venkata
Rama Rao by the jail authorities. They will issue notices to the business place of the company and not directly to the directors of the company.
41.He denied suggestion that since the notices are not directly issued to the individual accused, therefore, the present case is not maintainable, there is no material on record to issue notice under Section 153A of IT Act and other notices. He could not recollect whether the assessments in respect of the Assessment years, 2009-10 to 2014-15 filed the returns under section 139(1) of the Act before search operations.
42.The Evidence of PW3 shows that they have conducted search operations thereafter the assessment order was passed. They have issued notices to the accused under section 153A, 142(1) of IT Act even though there was no response from the accused. Further, he stated he has not filed appraisal report before the
Court. Further, the notice was not issued under Section 2(35)of IT Act. Further he admitted at the relevant time the accused persons were in jail. Ex.D2 and Ex.D3 show they are in judicial custody. He also admits the assessment order was set aside by ITAT under Ex.D1.
43.The evidence of Pws 1 to 3 shows that on search warrant they conducted search operations in the group of companies. The panchanama were conducted and they seized incriminating material, based on the seized documents they came to know that there was undisclosed income. Therefore, the notices were issued under
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Section 153C and also under Section 142(1) of IT Act. Even after receiving the notices the accused companies have not filed revised return of income. Therefore, the assessment order was passed against the accused companies. Thereafter, the notice was issued under Ex.P14 thereafter, the complaint is filed. The prosecution contention is that the evidence of Pws 1 to 3 establishes that the accused persons have committed the offence.
44.On the other hand, the defence contention is that there are ordinarily three teams crafted in respect of search and seizure under warrant of authorization based upon preparatory note. For carrying out search and seizure the three conditions enshrined in section 131 (1) of IT Act ought to be satisfied in the form of satisfaction note which divulges the frame work of mind or to arrive at reason to believe as a precursor under section 132(1) of the Act. After completing search and seizure operations, the search team ought to prepare an appraisal note followed by examination note (analytical report) as to whether there is any incriminating material unearthed during the course of search and seizure requiring to invoke section 153A or 153C of Income Tax Act, 1961. If no incriminating material has been unearthed, the question of invoking section 153A proceedings does not arise. If there has been some material collected which warrants action under Section 147 and 148 subject to limitation under Section 149 of IT act, 1961, then the assessment officer will at liberty to issue notice under the respective provisions without invoking section 153A of the
IT Act, 1961.
45.The defence contention is that from the prosecution evidence and material on record there was no excise done to segregate documents seized by the assessee wise, assessment year wise and premises wise, no systematic arrangement or make
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Court of Special Judge for Economic Offences, Hyd. 16 of 34 Judgment in C.C.No. 20 of 2017 analysis on the seized documents and sought out the documents having financial relevancy and financially irrelevant. The question of action under Section 153A or alternative would arise after segregating the documents and they have to find out the undisclosed income from the documents. Without any such segregation they came to conclusion that there was undisclosed income. The prosecution has not brought any material to show that the books of accounts, records and other documents were not seized by the CBCID. The so called recording of statements are under tremendous pressure and coercion.
46.This Court has taken into consideration of rival contentions made by both parties. Admittedly, during the cross-examination of PW1, he stated he has not received any material or records from the deponents while recording their statements. As per panchanama he has seized books of accounts etc from the companies mentioned in the panchanama as well as books of accounts from the companies mentioned in the respective panchanamas. He said he has seized sale deeds agreements, share ledger registers etc. Basing on those documents they analyzed the balance sheet and profit and loss account of the companies and found huge expenses in cash. However, the directors have expressed their inability to produce the documents like vouchers etc. The perusal of record shows that the prosecution has not filed any such list of documents which they alleged to have seized. As per record, they have filed warrant of authorization and panchanamas. The books of accounts, ledger books etc of the accused companies are not filed. The defence contended that in fact APCID raided the accused companies and they have seized the total documents so the so called documents alleged to be seized by the accused persons are not available in the premises of accused companies but the
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Court of Special Judge for Economic Offences, Hyd. 17 of 34 Judgment in C.C.No. 20 of 2017 witnesses alleged that they have seized the documents from the premises of accused company and its subsidiary companies. The defence have marked Ex.D2 & Ex.D3 which shows that at the relevant time Avva Hema Sundera Vara Prasad and Avva
Venkat Rama Rao were injail at the relevant time. The prosecution contended that the notices were served on them but when they are in jail there is a question of serving notices to the accused persons herein.
47.At the relevant time, during the assessment proceedings pursuance to the issuance of notice under Section 153 A of the Act, and also during the first appellate proceedings all the Directors of the company responsible for the affairs of the company were in judicial custody. So, it is not possible for the assessee to produce all the relevant books, vouchers etc, before the authorities to prosecute the case diligently. Ex.D2 and Ex.D3 they were in jail at the relevant time. So it is an admitted fact that the accused have not produced any such documents before the concerned authority. It is for the prosecution to explain how they got such documents they failed to explain it.
48.The defence contended that upon perusal of the Statements recorded from the
Accused referred in the respective Statements, even assumed but not admitted that the prosecution has thrown weight on the Statements, the Complaint and PWs evidence failed to show the incriminating material to prove that the notice under
Section 153A would be required. It is unclear from the Prosecution whether it has relied upon the Statements of Accused or not. Because, the Statements might have contained inculpatory and exculpatory parts. In such a scenario, it is upto the
Prosecution to substantiate that it has relied upon the inculpatory part to the extent as identified by the prosecution and their consideration to the exculpatory part.
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Admittedly, the prosecution got marked the statements under Ex.P1 to Ex.P9 through
PW1 however, they have not stated anything about the gist of the statement which is inculpatory and exculpatory. Mere marking of the documents are not sufficient it is for the prosecution to prove the substance of the statements. They have not proved it.
From the evidence, there is is no material to show that, the notice under Section 153A would be required.
49.As rightly pointed out by the defence no valuation or the methodologies of valuation has been divulged. Further, they have not filed examination note / or investigation report so as to convince the Court that the proceedings are conducted in accordance with law. When the department is proceeding under Section 153A and 153C, they have to file appraisal note and satisfaction note before the Court. The department has not filed any such documents before the Court. It is for the prosecution to prove that they have genuinely arrive at the conclusion that Section 153A notice would have to be issued and the manner in which it can be issued relying upon alleged incriminating material if any. No incriminating material has been brought into existence from the statements under Ex.P1 to Ex.P9.
50.The perusal of documents Ex.P3 & P11 panchanamas, it is clear that there is no mention about incriminating material in Ex. P3 & P11. Ex.P-3 i.e., Panchanama
dated 23.01.2015 is related to M/s. Agri Gold Farms Estates India Pvt Ltd, Agri Gold
Constructions Pvt Ltd, Agri Gold Project Ltd(the name of Dreamland is not mentioned). It is drawn by PW-2 (Mr. Nethra Pal) PW1/Narsingh Kumar Khalkho wherein there was no mention about the incriminating material and no details were furnished by identifying the material contained attributes of the incriminating material. To proceed against the accused persons further, it is very just and
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Court of Special Judge for Economic Offences, Hyd. 19 of 34 Judgment in C.C.No. 20 of 2017 necessary for the income tax officers to place such incriminating material. Without placing such material they cannot proceed further otherwise it is violative of interest of accused persons only.
51.The prosecution relied upon the statements of A3 recorded on different dates.
The perusal of statement shows several questions were asked to A3. From the statement nothing was elicited from A3 which is incriminatory to prosecute the accused persons.
52.Further, the perusal of document Ex.P12/notice u/s 153A dated 25.08.2015 vide PAN No. AADCA5206A/ CC/2(4)/2015-16 dated 25.08.2015 was issued to the Prl.
Officer of the Dreamland Ventures Pvt Ltd having address at Bangalore, pertaining to
M/s. Dreamland Ventures Private Limited calling upon the addressee to furnish the
Return of Income in respect of Assessment Year within 30 days from the date of receipt of the notice in the prescribed form and verified in prescribed manner and setting forth such other particulars as may apply accordingly as if such return were a return required to be furnished u/s 139 of the IT Act 1961. It is to be noted that as per warrant authorization there was no authorization to conduct panchanama in
Dreamland Ventures Ltd. In Ex.P2 also the name of Dreamland is not mentioned.
However, the panchanama under Ex.P11 shows the panchanama was conducted at
M/s. Dreamland Land Ventures on 23.01.2015. without any authorization the panchanama was conducted under Ex.P11. Further the notice was issued under
Ex.P12 dated 25.08.2015 to the Principal officer of Dreamland ventures Pvt Ltd to file return of income under Section 139 of IT Act. Further Ex.P13 notice was issued under
Section 142(1) of IT Act, on 18.01.2016, the notice under Ex.P14 dated 15.02.2016 was issued to Dreamland Ventures Pvt Ltd stating that why the prosecution
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Court of Special Judge for Economic Offences, Hyd. 20 of 34 Judgment in C.C.No. 20 of 2017 proceedings should not be launched against them. The filing of returns under Section 153A is different and filing of returns under Section 139 of IT Act are different. The defence has filed Ex.D3 return of income for the assessment year 2009-2010. The returns were already filed so again issue of notice under Ex.P12 under Section 139 of
IT Act is not proper.
53.Further, the notice under Ex.P13 was issued under Section 142 (1) of IT Act 1961 vide PAN No. AADCA5206A dated 18.01.2016 to the A-1 Company only at
Bangalore Address. In both the notices under Exs.P12 & 13 there is no mention of seizure of any incriminating material and details if any thereof disclosed in the notices. Even at the time of arguments also the defence counsel has pointed out but no reply was received from the public prosecutor. The documents are mechanically filed and the required information is not giving as per the documents. The main purpose of issue of notice is that the other party should no what was the case against him. The principle of natural justice ie., Audi Alterum partem made it clear that the other party should know all the particulars when the concerned authority is proceedings against the party otherwise there is no opportunity to the party to defend himself it is nothing but violative of fundamental rights of the accused persons.
54.The prosecution has initiated proceedings against the accused by obtaining the sanction order under Ex.P10. The Sanction Order shows that it is a cryptic order of two pages wherein the Sanction was given for deliberate and wilful default in filing the return of income u/s 139(1) of IT Act 1961 for the A.Y. 2009-2010 to 2014-15. As rightly pointed out defence there is no mention about Section 153 A nor is there any disclosure of any incriminating material or material upon which the Assessing Officer
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Court of Special Judge for Economic Offences, Hyd. 21 of 34 Judgment in C.C.No. 20 of 2017 has relied upon, material upon which the search team examined or analyzed and satisfied with and finally the material upon which the processing team had done any exercise to arrive at a logical conclusion and the opportunity of being heard conferred on the Accused during the course of the process, in this circumstances the order is cryptic and suffers from inefficiencies and therefore it is a defect order and cannot be relied upon.
55.A prosecution can be launched only on the basis of sanction of the Principal
Commissioner or appropriate authority. Section 279(1) of the Act is extracted hereunder:
“279. (1) A person shall not be proceeded against for an offence under section-276 or section-277 or section-278 except at the instance of the
Commissioner. (2) The Commissioner may either before or after the institution of proceedings compound any such offence.”
56.The intention of the legislature in introducing requirement of Sanction in
Enactments to be accorded by the competent authority is for the purpose of affording protection from vexations prosecution and to safeguard the interest of the innocent persons. Before granting sanction, the competent authority has to go through all the relevant material placed before it and after assessing the facts of the case and if the competent authority deems it appropriate to grant sanction, accordingly sanction is given for prosecution.
57.The Hon’ble Supreme Court in several judgments held that the competent authority’s sanction would be valid only when such competent authority applies its mind to the entire facts of the case and accords sanction. In the event of the sanction
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Court of Special Judge for Economic Offences, Hyd. 22 of 34 Judgment in C.C.No. 20 of 2017 reflecting non-application of mind or not considering the relevant material or any kind of extraneous reasons, such grant of sanction was found to be invalid.
58.The Hon’ble Supreme Court in the case of Mansukhlal Vithaldas Chauhan v.
State of Gujarat2 held as follows:
Sanction lifts the bar for prosecution. The grant of sanction is not an idle formality or an acrimonious exercise but a solemn and sacrosanct act which affords protection to Government Servants against frivolous prosecutions. ( See: Mohd. Iqbal
Ahmed vs. State of Andhra Pradesh, AIR 1979 SC 677). Sanction is a weapon to ensure discouragement of frivolous and vexatious prosecutions and is a safeguard for the innocent but not a shield for the guilty.
The validity of the sanction would, therefore, depend upon the material placed
before the sanctioning authority and the fact that all the relevant facts, material and
evidence have been considered by the sanctioning authority. Consideration implies application of mind. The order of sanction must ex facie disclose that the sanctioning authority had considered the evidence and other material placed before it. This fact can also be established by extrinsic evidence by placing the relevant files before the
Court to show that all relevant facts were considered by the sanctioning authority.
(See also: Jaswant Singh vs. The State of Punjab, 1958 SCR 762 = AIR 1958 SC 12;
State of Bihar & Anr. vs. P.P. Sharma, 1991 Cr.L.J. 1438 (SC)).
59.Since the validity of "Sanction" depends on the applicability of mind by the sanctioning authority to the facts of the case as also the material and evidence collected during investigation, it necessarily follows, that the sanctioning authority has to apply its own independent mind for the generation of genuie satisfaction whether prosecution has to be sanctioned or not. The mind of the sanctioning
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Court of Special Judge for Economic Offences, Hyd. 23 of 34 Judgment in C.C.No. 20 of 2017 authority should not be under pressure from any quarter nor should any external force be acting upon it to take decision one way or the other. Since the discretion to grant or not to grant sanction vests absolutely in the sanctioning authority, its discretion should be shown to have not been affected by any extraneous consideration. If is shown that the sanctioning authority was unable to apply its independent mind for any reason whatsoever or was under an obligation or compulsion or constraint to grant the sanction, the order will be had for the reason that the discretion of the authority "not to sanction" was taken away and it was compelled to act mechanically to sanction the prosecution.”
60.The Hon’ble Supreme Court in the recent judgment in the case of
S.Athilakshmi v. State rep. by the Drug Inspector3 relying on the judgment of
Mansukhlal’s case held as follows:
“The sanction for prosecution given in the present case appears, prima facie, to suffer from vice of non-application of mind. There is no reference to any of the documents, evidence or the submissions submitted by either of the parties, no reasons assigned or even an explanation pertaining to the delay which indicates it has been passed in a mechanical manner.”
61. The Hon’ble Supreme Court in the case of Nanjappa v. State of Karnataka, held as follows:
The rationale underlying the provision obviously is that if the trial has proceeded to conclusion and resulted in a finding or sentence, the same should not be lightly interfered with by the appellate or the revisional court simply because there was some omission, error or irregularity in the order sanctioning prosecution under Section 19(1). Failure of justice is, what the appellate or revisional Court would
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Court of Special Judge for Economic Offences, Hyd. 24 of 34 Judgment in C.C.No. 20 of 2017 in such cases look for. And while examining whether any such failure had indeed taken place, the Court concerned would also keep in mind whether the objection touching the error, omission or irregularity in the sanction could or should have been raised at an earlier stage of the proceedings meaning thereby whether the same could and should have been raised at the trial stage instead of being urged in appeal or revision.
62. In the case at hand, the Special Court not only entertained the contention urged on behalf of the accused about the invalidity of the order of sanction but found that the authority issuing the said order was incompetent to grant sanction. The trial
Court held that the authority who had issued the sanction was not competent to do so, a fact which has not been disputed before the High Court or before us. The only error which the trial Court, in our opinion, committed was that, having held the sanction to be invalid, it should have discharged the accused rather than recording an order of acquittal on the merit of the case. As observed by this Court in Baij Nath
Prasad Tripathi’s case (supra), the absence of a sanction order implied that the court was not competent to take cognizance or try the accused. Resultantly, the trial by an incompetent Court was bound to be invalid and non-est in law.”
63.The Hon’ble Supreme Court in the case of Mohd. Iqbal Ahmed v. State of
Andhra Pradesh5 held that it is well settled that any case instituted without a proper sanction must fail because this being a manifest defect in the prosecution, the entire proceedings are rendered void ab initio. Further, the prosecution launched without a valid sanction, it was held that the cognizance taken by the Special Judge was without jurisdiction and proceedings were quashed.
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64.In the instant case also, the sanction order does not contain all the material which are alleged to be incriminating to the accused so as to initiate proceedings against the accused persons therefore, the sanction order is not valid.
65.The show cause notice was issued under Ex.P.14 on 15.02.2016 to the A1
Company by which time, as revealed in Ex. D2, the Accused referred therein was in the Judicial Custody and the other Accused was not aware of the Show Cause Notice since the A1 Company premises was seized and documents and properties were attached by the State CBCID Authorities in the month of January 2015. Further the
Show Cause Notice was issued to A1 Company only. As per section 2(35) of companies Act, it is mandatory that the notice should be issued to the Principal officer of the company. No such notice was issued to the principal officer of the company and it is the duty of the department to issue such notice by treating any of the Director as Principal Officer of the Company. The role of each Director and their day to day activities and their responsibilities in the company should be mentioned so as to fix their liability. Admittedly, in the instant case no such notices are served.
66.At this Stage, it is just and proper to pursue Section 2(35) of Income Tax Act which reads as under:
2(35) “principal officer”, used with reference to a local authority or a company or any other public body or any association of persons or any body of individuals, means—
(a) the secretary, treasurer, manager or agent of the authority, company, association or body, or
(b) any person connected with the management or administration of the local authority, company, association or body upon whom the 3[Assessing Officer] has served a notice of his intention of treating him as the principal officer thereof;
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67.M.R.Pratap Vs VM. Muthu Ramalingam in which the Hon’ble Court observed that: it is admitted by the department that no such notice as contemplated under
Section 2(35)(b) has been served on the petitioner hence, the petitioners contention that he cannot be proceeded with for the delayed payment of tax amount by the company, is a well founded one.
68.In Greatway (P) Ltd. & Ors. Vs. Asstt. CIT [1993] 199 ITR 391(P&H), Punjab &
Haryana High Court has held that in the absence of appointment of a principal officer by issuing a notice by the AO, the prosecution, if any, could only be launched against the petitioner-company. Similar is the view expressed in ITO Vs. Roshini Cold Storage (P) Ltd. and Ors. (2000) 245 ITR 322 (Mad). In this case Hon’ble Madras High Court held that in case Income Tax Officer sought to prosecute the director along with company for an offence under Section 276- B of the Act then it was incumbent upon him to issue a notice under sub-clause (b) of 2(35) of the Act expressing his intention to treat the director as "principal officer" of the company and in absence thereof, director shall be entitled to the acquittal.
69.In Sushil Suri and Ors. Vs. State & Ors. (2008) 303 ITR 86 (Delhi), the Hon’ble
Court has held that before a prosecution under Section 276-B of the Act can be launched against the director he should have been notified that department/AO has intention of treating him as "principal officer" of the company. In absence of such notice under Section 2(35)(b) of the Act, prosecution against the director cannot be continued and is bound to fail.
70.In Madhumilan Syntex Ltd. and Others vs. Union of India (2007) 290 ITR 199 (SC), the Supreme Court has held as under:-
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71."To treat the directors of a company as "principal officers" there is no need to issue a separate notice or communication to them that they are to be treated as "principal officers", before the issuance of the show-cause notice under section 276-
B read with Section 278B. It is sufficient that in the show-cause notice under section 276-B read with 278B, it is stated that the directors are to be considered as principal officers of the company under the Act and such a complaint is entertainable by the court provided it is otherwise maintainable."
72.Legal preposition which emerges from the above is that before launching a prosecution under Section 276-B of the Act against the directors of a company,
Assessing Officer has to issue notice under Section 2(35) of the Act expressing his intention to treat such directors of a company as "principal officers". However, it may not be necessary to issue a separate notice or communication to all the directors that they are to be treated as "principal officers". It would be sufficient compliance if in the show cause notice issued to the company it is mentioned that the directors are to be considered as principal officers of the company under the Act
73.In this case neither a notice was issued to A-2 to A-4 under Section 2(35) of the Act the department intended to treat him "principal officer" nor in the show cause notice issued to the company it was mentioned that department is intended to treat the directors of the company as "principal officers", for the purpose of launching prosecution under Section 276-B of the Act.
74.Admittedly, as per the decision of Hon’ble Courts, the notice under section 2(35) is mandatory. The prosecution has to issue such a notice to the directors of the company intimating their intention to treat them as the principal officers of the company. Further, the Hon’ble Supreme Court held that when the showcause notice
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Court of Special Judge for Economic Offences, Hyd. 28 of 34 Judgment in C.C.No. 20 of 2017 is issued to the accused persons, in the notice, the complainant has used specific words intimating to the accused that they are treating a particular director or directors as principal officers of the company then, it is sufficient. But, in the instant case, the contents of the showcase notice shows that no where the complainant has used the words that they are treating A-2 to A-4 as principal officers of A-1 company.
Though, the show cause notices was issued to accused, but in the said notice also, no where they mentioned that A-2 to A-4 are Principal officers of A-1 company.
Therefore, the complainant failed to issue any notice to the accused persons intimating that they are treating any of the accused as principal officers of the company. Further, the decision of Hon’ble Supreme Court made it clear that, apart from issue of notice under Section2(35) of the act, or least by mentioning in the show cause notice that they are treating a particular director as principal officer of the company, in the complaint, if they mention the role of directors and their clear intention that they are responsible for day-to-day activities of the company, then the complainant has complied the conditions laid down under section 2(35) of the Act.
The perusal of the contents of the complaint shows that nowhere in the contents of the complainant mentioned that A-2 to A-4 are principal officers of the company. No doubt, they got it mentioned that they are directors and responsible for day-to-day activities of A-1 company. But, they failed to mention that any of the directors was treated as principal officer of the company. Therefore, A-2 to A-4 should not be treated as principal officers of the company. Therefore non issue of notice under
Section 2(35) of Act is fatal to the prosecution case.
75.Further it is pertinent to note that in the said notice, the notice was given under Section 153A read with Section 276CC whereas, the Sanction Order (Ex.P10)
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Court of Special Judge for Economic Offences, Hyd. 29 of 34 Judgment in C.C.No. 20 of 2017 was issued under Section 139(1) of the Act without any mention about the alleged violation under Section 153A of the Income Tax Act, 1961. It is a defective Sanction and would not be relied upon. It shows there is defect in issue of sanction order as well as in the notice also.
76.Moreover, in the course of said search, it is alleged incriminating material pertaining to the assessee company were found and seized and marked as annexure.
Since the incriminating material according to the assessing officer belong to the assessee company provisions of Section 153C are applicable and accordingly the proceedings under Section 153C were initiated by recording satisfactory note. In response to the notice, under Section 153C issued calling for return of income which was served on the assessee, the assessee did not file return of income. The defence contention is that the so called satisfaction note under section 153C of the Act alleged to be recorded by the assessing officer, is not as per the procedure. The so called satisfaction is not in accordance with law. The satisfaction recorded by the assessing officer has failed to record his satisfaction that the documents so seized belong wit the assessee company ie., other than the searched person therefore, initiation of proceedings under Section 153C without such proper satisfaction are bad in law. The satisfaction of the assessing officer regarding the seized material belonging or relating to some other person should not be arrived at in a casual manner or merely on the basis of the statement made by the person searched. It should be based upon cogent material and must display the reason or basis for the conclusion that the assessing officer of the person in respect of whom the search was conducted is satisfied that the seized document belong to another person. Nowhere
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Court of Special Judge for Economic Offences, Hyd. 30 of 34 Judgment in C.C.No. 20 of 2017 the assessing officer recorded his satisfaction that the material seized belongs to the assessee company therefore such satisfaction itself is invalid.
77.It is to be noted that the defence counsels must have appeared before the commissioner and income tax appellate tribunal appeals so that they are speaking about the satisfactory note. /Unfortunately said document is not filed before theCourt so this Court is not able to say whether these documents do not belongs to the assessee or not. Therefore, the initiation of proceedings under Section 153C are not in accordance with law. This Court is not able to give any finding on this aspect. The witnesses have stated that satisfactory note is confidential note so it will not be filed
in the Court. They have not filed any circular or document to show that it is a
confidential document. Therefore, this Court cannot give any finding on it.
78.The defence contended the initiation of proceedings under Section 153C are not in accordance with law. The provisions of section 153C were amended with effect from 01.06.2015. As per 153C (1)(b) the words any books of accounts or documents seized or requisitioned, pertains to or pertained to or any information contained therein relates to are applicable with effect from 01.06.2015 since the search in the instant case was concluded on 23.01.2015 which was before 01.06.2015 therefore, the initiation of proceedings under Section 153C are not in accordance with law. The satisfaction note is very crucial to decide whether the document so seized belongs to the assessee and to decide whether the provisions of Section 153C is applicable or not. There is no material produced before the Court to show that the seized documents so found during the course of search belongs to the assessee that is other than the searched person.
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79.From the facts and circumstances of this case, this Court feels that, this Court is not able to decide the validity of 153C proceedings and also the assessing proceedings etc. Moreover, from the facts it is clear that the assessment order was passed, basing on which the notice was issued under Ex.P14 for prosecuting the accused. Thereafter, the proceedings are initiated. Admittedly, Ex.D1 is the order copy of ITAT which is the crucial document. The perusal of this document shows that the Hon’ble ITAT has observed that “it could be seen from the order dated 29.11.2022 in the batch cases of Agri Gold constructions Pvt Ltd, the facts are identical and the co-ordinate bench of this tribunal took the view to set aside the impugned order and to restore the issued to the file of learned officer for giving an opportunity to the assessee to dispose of the matter according to the law. It is clear from the certificate dated 26.02.2019, issued by Superintended District jail Eluru and also the letter dated 24.11.2016 addressed by Sri AV.Rama Rao Chairman of the Agri
Gold group to the DCIT Hyderabad that the Chairman, Vice Chairman, Managing
Directors and others were in the custody within the period 12.02.2016 and 23.10.2018 and lodged in District Jail Eluru. The material clearly establishes that from 12.02.2016 to 23.10.2018, all the persons responsible for the affairs of the
Company were in custody and in their absence as claimed by the learned AR, some part of the material was produced before the authorities there is nothing contrary to disbelieve the statement of learned AR that assessee could not prosecute the proceedings before the authorities diligently due to the fact of non – availability of the persons responsible for the affairs of the company. In fact this particular circumstance is taken note by the co-ordinate benches of the tribunal in the cases of group concerns on earlier occasions as is evidenced by the order dated 29.11.2022.
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Having regard to the peculiarity of the facts, we are of the considered opinion that it would be in the interest of justice to set aside the impugned orders and to restore the matters to the file of learned assessing officer to adjudicate the same afresh, after giving an opportunity of being heard to the assessee and also to produce all the relevant material at their custody.” Thereby the Hon’ble ITAT has set aside the assessment order with a direction to pass a fresh order after hearing both sides.
80.From this, it is clear that, the assessing order based on which the present case is filed was already set aside. However, the prosecution has filed the documents vide
Crl MP.No. 2420/2026, as per the documents Ex.P15 is the assessment order dated 30.12.2016, filed basing on which the present case is filed. Thereafter, the notice of demand dated 30.12.2016, is filed under Ex.P16. The order of ITAT dated 26.02.2018, is filed under Ex.P17, in between Ex.P15 and Ex.P17 one more assessment order is passed as the Hon’ble ITAT set aside the assessment order with a direction to pass a fresh order. After passing fresh assessment order, again the parties approached ITAT under Ex.P17. As per the order, the appeal of the appellant ie., the A1 company herein was party allowed. It is to be noted that Ex.P17 is relating to the period after filing of this case. If any fresh assessment order is passed and ITAT order is passed the fresh cause of action arose from that date. The present case is based on Ex.P15 only which was already set aside therefore, the present case is not maintainable. The prosecution contended the fresh assessment order was passed if it is so, the cause of action arose for them to file a fresh case basing on the new assessment order but, the prosecution basing on the old assessment order is not maintainable. Hence, the accused persons are benefit of doubt.
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81.In the result, the the accused Nos.1 to 4 are found not guilty for the offence under Sections 276 CC and 278-B of Income Tax Act. So, they are acquitted for the said offences under Section 248(1) Cr.P.C. The bail bonds of the accused shall stand cancelled after the appeal time is over. The accused are directed to execute personal bond for Rs. 10,000/- each under Section 437A of Cr.P.C.
Directly typed to my dictation by Stenographer Grade-I, corrected and pronounced by me in open court on this the 13th day of April, 2026.
Special Judge for Economic Offences,
Hyderabad.
APPENDIX OF EVIDENCE
Witnesses examined on behalf of prosecution:
PW.1Narsingh Kumar Khalkho PW.2Nethra Pal PW.3B.Sunil Kumar
Witnesses examined on behalf of Defence: NIL
Exhibits Marked on behalf of prosecution:
Ex.P1Attested true copy of Warrant of authorization dated: 23-01-2015 Ex.P2Attested true copy of Warrant of authorization dated: 19.03.2015 Ex.P3Attested true copy of panchanama, dated:19.03.2015. Ex.P4Attested true copy of Sworn statement of A3 dated 05.02.2015 Ex.P5Attested true copy of Sworn statement of A3 dated 06.02.2015 Ex.P6Attested true copy of Sworn statement of A3 dated 26.02.2015 Ex.P7Attested true copy of Sworn statement of A3 dated 13.03.2015 Ex.P8Attested true copy of Sworn statement of A3 dated 23.03.2015 Ex.P9Attested true copy of Sworn statement of A3 dated 23.03.2015 Ex.P10Authorization issued in favour of PW2 by K.J.Rao, Addl. Director of Income Tax(INV), Unit-I, Hyderabad
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Ex.P11Panchanama dated 23.01.2015 Ex.P12Notice U/s. 153A was issued for the assessment year 2009-10 and served on the accused on 25.08.2015. Ex.P13Notice U/Sec. 142(1) of the IT Act was issued on 18.01.2016 Ex.P14Copy of show-cause notice issued before passing orders u/s. 279(1) IT Act. Ex.P15Assessment order dated 30.12.2016 Ex.P16Notice of demand dated 30.12.2016 Ex.P17order of ITAT dated 26.02.2018
Documents marked by Defence:
Ex. D1Order copy of ITAT Ex. D2Certificate, dated 25.07.2019 issued in respect of Avva Venkata Rama Rao. Ex.D3Income Tax Returns acknowledgment for the assessment year 2012-13 (with consent of both parties the documents are marked)
Sd/-
Special Judge for Economic Offences,
Hyderabad.
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//Fair Copy//
IN THE COURT OF SPECIAL JUDGE FOR TRIAL OF CASES UNDER ECONOMIC
OFFENCES :: HYDERABAD.
Dated this the 13th day of April, 2026
Present : Smt. J. Maithreyi,
Special Judge for trial of cases under Economic
Offences, Hyderabad.
C.C.No.20 of 2017
Between :
The Asst. Commissioner of Income Tax, Central Circle-2(4), 3rd Floor, Posnett Bhavan, Ramkote,
Hyderabad-500 001 ... Complainant
And
1) M/s Dreamland Ventures pvt Ltd., 2nd Floor, No.85,16th Cross 14th Main, HSR Layout, Bangalore-560102 Rep. by its Managing Director, Sri Patan Lal Ahammad Khan S/o Saida Khan, Flat No.B4, Chandrahasa Apartment, Ajith Singh Nagar, Vijayawada - 520015.
2) Mr. Patan Lal Ahammad Khan S/o Saida Khan, aged : 47 years, Occu: Managing Director, R/o: Flat No.B4, Chandrahasa Apartment, Ajith Singh Nagar, Vijayawada-520015.
3) Mr. Avva Venkata Rama Rao S/o Venkata Appa Rao, aged about 55 years, Occ: Director R/o H.No.23-35-39, A S Rao Street Lakshmi Nagar, Satyanarayanapuram Vijayawada-520011.
4) Mr.Chinnappa Srinivasa Reddy S/o Chinnappa Reddy, aged about 50 years, Occu:Director, R/o: No.105/17, 12th Main, BTM Layout, 1st Stage, Bangalore-560029.… Accused Nos. 1 to 4
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This case is coming before me on 09.04.2026 for hearing and disposal in the presence of Sri.H.Govind Rao, Special Public Prosecutor for Complainant, Sri K. Rama Srinivas, counsel for accused no.1 and 2, Sri.D.Vijaya Bhaskar, Sri. J. Basava Raju, Sri. TVN Ravikanth and Sri. D.Sai Dheeraj, Counsels for accused no.3 and Sri. D. Raghavendra and Sri. K. Ravi, counsels for accused no.4 and after hearing the arguments and perusing the material on record and after the matter having stood over for consideration till this day, today, this Court delivered the following:
J U D G M E N T
1.The Income Tax Officer, Hyderabad has filed a complaint under Section 190 r/w
Section 200 of Cr.P.C. for the offence punishable under Section 276CC and 278B of the Income Tax Act, 1961 (Hereinafter referred as ‘the Act,’) against the Accused persons.
2.The brief contents of the complaint are as follows :
The Complaint is filed pursuant to the prior sanction of the Commissioner of
Income Tax (Central), Hyderabad vide order u/s 279(1) of the Income Tax Act, 1961 in
F. No. CIT(C)/HYD/PROS/AGRI GOLD FARM/2016-17, dated 23.05.2016 which is enclosed herewith as Document No.1. As per section 136 of the Income Tax Act, 1961, proceedings under the Act are deemed to be the judicial proceedings within the meaning of section 193 to 196 of the I.P.C. A.Y 2012-13
3.That the accused No.1 is the company registered under the Indian Companies of Act of 1956 and its registered office is situated at 2nd Floor, No.85,16th Cross, 14th Main, HSR Layout, Bangalore-560102 and is engaged in the business of Real
Estate and Constructions of Apartments. The accused No.1 is the Managing Director and the accused No.2 to 3 are the directors of the company and are in-charge and responsible for the day today affairs of the company for the conduct of its business.
In view of the provisions of Section s 278B of the I.T.Act, 1961 they are liable to be proceeded against.
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4.A search u/s.132 of the Income tax Act, 1961 was conducted at the office premises of the accused at 2nd Floor, No.85,16th Cross, 14th Main, HSR Lay out,
Bangalore-560102 on 23-1-2015 and 19.03.2015 evidenced by panchanama dated 23-1-2015 & 19-3-2015. Certified true copies of warrant of authorization u/s 132 of the IT Act, 1961, panchanamas and Sworn Statement are enclosed as Document No.2 to 5.
5.After search a notice u/s.153A of the Income tax Act, 1961 for the assessment year 2012-13 was issued on 25.8.2015, the accused is required to file the return of income for the afore mentioned assessment year within time allowed in the notice i.e. 30 days from the date on which the notice has been served on him/her. The relevant notices were served on the accused on 25.08.2015. The due date to file the return of income for the assessment year 2012-13 was 24.09.2015.
6.That the accused, however, failed to furnish the return of income for the assessment year 2012-13 on or before the due date. Therefore, notice u/s 142 (1) of the IT Act, 1961 was issued on 18.01.2016 and the same was received on behalf of the accused. The accused neither complied with the notice nor has given any explanation for non-compliance. T
7.That inspite of the receipt of notices u/s153A and 142(1) of the IT Act, 1961, the accused did not file the return nor responded to the notices. Therefore, a show- cause notice dated 15.02.2016 was issued to the accused on 15.02.2016 to show cause as to why prosecution proceedings u/s 276CC of the Income Tax Act, 1961 should not be initiated for not filing the return of income for the assessment year 2012-13 and posted the matter for hearing was fixed on 29.02.2016. The same
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Court of Special Judge for Economic Offences, Hyd. 4 of 34 Judgment in C.C.No. 20 of 2017 served on the accused on 15.02.2016. The accused did not comply. The accused has not provided any explanation in this regard.
8.The accused is duty bound to file the return of income for the Assessment Year 2012-13 in response to notice u/s 153A of the Income Tax Act, 1961. In the light of facts and circumstances as narrated above in the preceding paragraphs, it is evident that the accused not filed returns in response to notice u/s 153A of the Income Tax
Act, 1961. Further, the assessee has failed to comply with the notices issued as per the statutory powers vested with the authority of the Income Tax Act, 1961. Despite given sufficient opportunity, the assessee's non responsiveness is a clear and sufficient indication of gross negligence on his part.
9.As per the provisions of section 153A of the Income Tax Act. 1961, the accused is required to file the return of income on or before the date specified in the notice issued under section 153A of the Income Tax Act, 1961. But the accused inspite of giving sufficient opportunities and issuance of notices did not file the return of income. Therefore, the accused has committed an offence punishable under section 276CC of the Income Tax Act, 1961. Since the offence is committed by the Company and its Managing Director and Directors they are liable for punishment U/s 278B of the I.T.Act.
10.On the basis of the allegations contained in the complaint and the documents filed in support of it, this court took cognizance of the offences under Sections 276CC r/w 278B of Income Tax Act, 1961 against the accused issued summons.
11.Responding to the summons, the accused put up their appearance and thereafter copies of documents as contemplated under Section 207 of Cr.P.C. were
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Court of Special Judge for Economic Offences, Hyd. 5 of 34 Judgment in C.C.No. 20 of 2017 furnished to the accused. The evidence was recorded under Section 244 Cr.P.C as it is private complaint.
12.After hearing the prosecution, as well as the accused, taking into consideration of evidence of prosecution witnesses, this court has framed charges under Sections 276CC and 278B of Income Tax Act, 1961 against the accused and the same was read over and explained to accused in his vernacular language, to which they denied the offence, pleaded not guilty and claimed to the tried.
13.To bring home the guilt of the accused for the offences with which they are charged, the complainant examined Pws1 to 3 and got marked Exhibits P1 to P17 and got marked Ex.D1 to D3.
14.After closure of complainant’s side evidence, the accused was examined under
Section 313 Cr.P.C putting incriminating circumstances appearing against the accused in the evidence prosecution witnesses to which he denied the same. On behalf of the accused, no witnesses are examined and no documents are marked.
15.Heard both sides. Perused the record.
16.Now the point for consideration is :
“Whether the complainant is able to prove the guilt of Accused beyond all reasonable doubt ?”
POINT :
17.The offence under Section 276CC and 278B of Income Tax Act,1961.
Before going into the discussion of merits of the case, it is better to go through
the provisions under Section 276CC and 278B of Income Tax Act, 1961.
276CC:Failure to furnish returns of income.—If a person wilfully fails to furnish in due time 1 [the return of fringe benefits which he is required to furnish under sub-section (1) of section 115WD or by notice given under sub-section (2) of
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Court of Special Judge for Economic Offences, Hyd. 6 of 34 Judgment in C.C.No. 20 of 2017 the said section or section 115WH or] the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under 2 [clause (i) of sub-section (1) of section 142] or 3 [section 148 or section 153A,] he shall be punishable,— (i) in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds 4 [twenty-five 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 imprisonment for a term which shall not be less than three months but which may extend to 5 [two years] and with fine: Provided that a person shall not be proceeded against under this section for failure to furnish in due time the 6 [return of fringe benefits under sub-section (1) of section 115WD or return of income under sub-section (1) of section 139]— (i) for any assessment year commencing prior to the 1st day of April, 1975; or (ii) for any assessment year commencing on or after the 1st day of April, 1975, if— (a) the return is furnished by him before the expiry of the assessment year; or (b) the 7 [tax payable by such person, not being a company,] on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source, does not exceed three thousand rupees.]] 278B. Offences by companies.—(1) Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. (2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
18.The allegation of prosecution is that the accused persons are duty bound to file the return of income for the AY 2012-13, in response to notice under Section 153A of Income Tax Act, 1961. The accused have not filed returns in response to notice issued under Section 153A of Income Tax Act, 1961. Further, the assessee has failed
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Court of Special Judge for Economic Offences, Hyd. 7 of 34 Judgment in C.C.No. 20 of 2017 to comply with the notice issued as per the statutory powers vested with the authority of income tax act, 1961. Despite giving sufficient opportunity the assessee’s non responsiveness is a clear and sufficient indication of gross negligence on their part thereby the accused persons have committed the offence under Section 276CC of IT Act, 1961 and section 278B of IT Act.
19.The prosecution in order to substantiate their evidence examined Pws 1 to 3.
The evidence of PW1/ Narsingh Kumar Khalko, Director of Finance, shows that Since the role of CBDT is to conduct the search & seizure operation as per central action plan issued by the CBDT, in this regard he received Warrant of Authorization under
Ex.P1 and P2 dated 23.01.2015 and 19-03-2015 from Director of Income Tax ( Investigation), Hyderabad. The above documents are issued directing him to conduct search & seizure operation u/s. 132 of Income Tax Act at the offices and other premises of accused herin. Accordingly, he conducted search along with other authorized officers of the department. During the course of search & seizure operations, certain documents were found and seized which have been incorporated in the panchanama drawn at various premises under Ex.P3 dated 19-03-2015.
Further, the sworn statements of accused were recorded in the premises u/s 132(4) of Income Tax Act, i.e., The attested true copy of Sworn statements of A3 dated 05- 02-2015 marked as Ex P4. The attested true copy of Sworn statements of A3 dated 06-02-2015 is marked as Ex P5. The attested true copy of Sworn statements of A3
dated 26-02-2015 is marked as Ex P6. The attested true copy of Sworn statements of
A3 dated 13-03-2015 is marked as Ex P7. The attested true copy of Sworn statements of A3 dated 23-03-2015 is marked as Ex P8. The attested true copy of Sworn statements of A3 dated 23-03-2015 is marked as Ex P9.
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20.Accused namely Sri Avva Venkata Rama Rao had stated vide his statement recorded on 23-03-2015 that there is an effective additional undisclosed income of
Rs.14,72,62,211/- from Assessment Years 2012-13 to 2014-15.
21.After the conduct of the search PW1 had conducted the search, prepared appraisal report based on the documents seized as per panchanama and had put up for approval of Principal Director of Income Tax (Investigation) Hyderabad through
Additional Director of Income Tax Unit-I, Hyderabad and the same was accorded
approval subsequently. It is pertinent to mention here that further the case was centralized to the o/o PCIT (Central), Hyderabad for scrutiny assessment purposes and appraisal report along with seized material & other documents was forwarded to the jurisdictional assessing officer in the central charge.
22.In the cross examination PW1 stated he has not issued any notice under
Section 132(1) of IT Act before undertaking the search and seizure authorization. He has not received any material on record from the deponents while recording their statements however, the same can be confirmed by seeing the panchanama. As per panchanama, he has seized books of accounts etc from the companies mentioned in respective panchanamas. The books of accounts of other subsidiary companies were also seized. He admits as per company Act, each company is distinct and separate entity. It was maintained on the computer of which back up was taken in the hard drive and seized. On two issued only, it was analysed, first transfer of shares and the expenses made for land dealings. They made analysis of seized material and made appraisal report and forwarded to the central charge for the scrutiny of the issues, the complaint was not filed by him so, he is not aware whether such analytical report was filed or not.
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23.PW1 further stated they seized sale deeds purchase deeds, agreements, details pertaining to cash payments made to different individuals and share ledger register mentioning the name of shares, year of transfer details of transferees and transferrer etc. they analyzed the balance sheet and profit and loss account fo the companies and found huge expenses in cash, secured loans, share premiums for which they asked specific questions to the directors of the companies for which they expressed inability to submit the supporting documents like voucher and other details and the statement was recorded under Section 132 (4) of IT Act through which directors particularly A.Venkata Rama Rao has confirmed and accepted the undisclosed income on estimation basis which was made the part of appraisal report and forwarded to central charge for scrutiny proceedings. He has not filed satisfaction report. He admits all his findings are set aside by Hobn’ble ITAT under
Ex.D1.
24.The evidence of PW1 is very crucial because he has conducted search. The panchanama was conducted by him. Further he has recorded the statements also. As per his evidence he has seized the books of accounts relating to different companies.
He has prepared appraisal report also. He has seized incriminating materials ie., sale deeds, agreements details relating to cash payment share ledger register etc.
Further, his evidence disclose that as per balance sheet and profit and loss of company they found huge expenses in cash unsecured loans share premiums . The accused have not furnished the documents relating to said expenses shares etc, however, they admitted undisclosed income.
25.The testimony of PW2/ Nethra Pal, Director of Finance, shows that he was authorized by DIT, Hyderabad to conduct search at Bangalore at A1 company
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Court of Special Judge for Economic Offences, Hyd. 10 of 34 Judgment in C.C.No. 20 of 2017 premises. Ex.P10 is the Authorization issued in his favour by K.J. Rao, Addl. Director of
Income Tax (INV), Unit-I, Hyderabad.
26.In pursuance of this authorization letter, the search was conducted and he has drawn panchanama on 23.01.2015. The various documents were seized during such search. The details of seized documents are provided in the annexure appended to the panchanama. Ex.P11 is the panchanama, dated 23.01.2015 along with list of inventory of account books etc., seized under cover of panchanama. Thereafter, he handed over the search proceedings, said panchanama etc., to the Hyderabad Unit.
The remaining process was done by the Hyderabad Unit and Central Unit.
27.In cross-examination PW2 stated that before conducting the search, he was not involved. So he do not know whether any notice was issued u/s 131 and 132 of
Income Tax. It was done by Hyderabad team but not by him. He has only drawn the panchanama on 23.01.2015. Based upon the composite warrant given to him, he conducted panchanama and accordingly drawn a composite panchanama.
28.He admits they have not identified books of accounts of each company as per the warrant wherein the names of the companies were mentioned including the A1.
He admits what ever it is stated in the panchanama that is final for him and beyond that he cannot answer.
29.He denied the suggestion that he has not applied his mind and mechanically drawn the panchanama and that the panchanama is illegal.
30.PW3/ D.Sunil Kumar, worked as Assistant Commissioner of Income tax shows in the case of M/s Agri Gold Constructions Private Ltd., a Search and Seizure operation was conducted at the office premises on 23-01-2015, 13-03-2015, 14-03- 2015, 15-03-2015 and 23-03-2015 evidenced by the Panchanama dated: 23-01-2015,
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Court of Special Judge for Economic Offences, Hyd. 11 of 34 Judgment in C.C.No. 20 of 2017 13-03-2015, 14-03-2015, 15-03-2015 and 23-03-2015. During the search and seizure operation and post search investigation. the undisclosed income for the assessment year 2009-10 is identified under the head income from other sources and income from the business.
31.After search and seizure operation, the case is centralized to Central Circle- 2(4) on 23-03-2015 by the Principal Commissioner of Income Tax (Central) Hyderabad in order No.CIT(C)/H/Centralization/Agri Gold Group/2014-15 dated: 23-03-2015 for completing the assessment proceedings. Accordingly, a notice U/Sec.153 A under
Ex.P10 was issued for the assessment year 2009-10 and served on the accused on 26-08-2015. The accused is required to file the return of income for the aforementioned assessment year within time allowed in the notice i.e., 30 days from the date on which the notice has been served on them. The relevant notice was served on the accused on 18-01-2016. The due date to file return of income for the assessment year 2009-10 was 26-09-2015. However the accused failed to furnish the return of Income for the assessment year 2009-10 on or before the due date.
32.Therefore notice L/Sec. 142(1) of the IT Act under Ex.P11 was issued on 18-01- 2016 and the same was served on the accused. The accused neither complied with the notice nor has given any explanation for non-compliance of the aforementioned notices.
33.Inspite of receipt of the notice U/Sec. 153A and 142(1) of the IT Act, 1961 the accused did not file the return of income nor responded to the notices. Therefore a show cause notice was issued and served on the accused on 15-02-2016 to show cause as to why prosecution proceedings U/Sec. 276CC of the Income Tax Act, 1961 shall not be initiated for not filing return of income for the assessment year 2009-10.
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The accused did not comply to the show cause notice and the accused has not provided any explanation in this regard.
34.The accused is duty bound to file the return of income for the assessment year in response to the notice u/s 153A of the Income Tax Act, 1961. Despite of giving sufficient opportunity, the accused non-responsiveness is a clear and sufficient indication of gross negligence on their part. Therefore, the accused has committed an offence punishable under section 276 CC of the Income tax Act, 1961. The sanction orders was passed under Ex.P10.
35.In cross-examination PW3 shows that in the case, the search was conducted, after concluding the search proceedings, certain income was identified and as a
Deputy Commissioner of Income Tax working with Central Circle, he has to conclude assessment proceedings, after search the group of cases centralized to PCIT, Central
Circle and accordingly he issued notice under Section 153A of IT Act to conclude the proceedings. he received appraisal report after concluding search proceedings. He has not filed appraisal report before the court. Because the preparatory note which is incidental to commence the search and seizure operation, it is treated an internal document, so he did not file the same before the court. He has prepared satisfactory note before issue of notice under Section 153A of IT Act. He admits that as per
Section 139 of IT Act, the company is regular in filing all the returns including returns in respect of assessment years, 2009-10 to 2014-15. He admits the notice under
Section 153A of IT Act was issued to Prl. Officer of A1 company only. The name of Prl.
Officer of A1 company was not mentioned in the notice. Similarly he issued notice under Section 142 of IT Act, which is issued to the A1 company only. In both notices he has not mentioned the name of Prl. Officer of A1 company.
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36.He has prepared the complaint and file the complaint. In the complaint, he has not mentioned anything about the notice under Section 2 (35) of IT Act. In the complaint he has not referred the appraisal note and also the satisfactory note. He has not mentioned justification upon which he made assessment order. Both appraisal report and satisfactory note are internal documents to issue notice under
Section 153A of IT Act.
37.He admits the notice under Section 153A of IT Act cannot be issued mechanically and he has to apply his independent mind. The basis for issue of notice under Section 153A of IT Act is appraisal report. He admits in the month of
November, 2022 the Honorable ITAT passed orders in respect of all years subject matter herein and set-a-side the assessment order and direction is given to pass fresh assessment order. Ex.D1 is the order copy of ITAT.
38.In the sanction order, the sanctioning authority has not referred Section 153A of IT Act in the sanction orde. He admits in sanction order it is not mentioned about
Section 278E of IT Act. That the order under Section 279(1) of IT Act is not speaking order and it is a cryptic order only for two paragraphs. However when 279(1) of IT Act order is passed after issuing of show-cause notice where the facts are mentioned/discussed. The particulars of incriminating material are not mentioned in the show-cause notice. Before passing order under Section 279(1) of IT Act the show- cause notice was issued to the accused. Ex.P14 is the Copy Show Cause notice which was issued before passing orders under Section 279(1) of IT Act.
39.Ex.P14 was issued to A1 company only. This notice was issued on 15.02.2016.
The notice was duly served on A1 company. He has not filed the acknowledgment card to show the service of notice to A1 company. By the date of issue of notice the
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Court of Special Judge for Economic Offences, Hyd. 14 of 34 Judgment in C.C.No. 20 of 2017 accused was in judicial custody as per the attested copy of certificate issued by Jailor,
District Jail, Eluru in respect of Avva Venkata Rama Rao and Avva Hema Sundara Vara
Prasad.
40.Ex.D2 is the Certificate, dated 25.07.2019 issued in respect of Avva Venkata
Rama Rao by the jail authorities. They will issue notices to the business place of the company and not directly to the directors of the company.
41.He denied suggestion that since the notices are not directly issued to the individual accused, therefore, the present case is not maintainable, there is no material on record to issue notice under Section 153A of IT Act and other notices. He could not recollect whether the assessments in respect of the Assessment years, 2009-10 to 2014-15 filed the returns under section 139(1) of the Act before search operations.
42.The Evidence of PW3 shows that they have conducted search operations thereafter the assessment order was passed. They have issued notices to the accused under section 153A, 142(1) of IT Act even though there was no response from the accused. Further, he stated he has not filed appraisal report before the
Court. Further, the notice was not issued under Section 2(35)of IT Act. Further he admitted at the relevant time the accused persons were in jail. Ex.D2 and Ex.D3 show they are in judicial custody. He also admits the assessment order was set aside by ITAT under Ex.D1.
43.The evidence of Pws 1 to 3 shows that on search warrant they conducted search operations in the group of companies. The panchanama were conducted and they seized incriminating material, based on the seized documents they came to know that there was undisclosed income. Therefore, the notices were issued under
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Section 153C and also under Section 142(1) of IT Act. Even after receiving the notices the accused companies have not filed revised return of income. Therefore, the assessment order was passed against the accused companies. Thereafter, the notice was issued under Ex.P14 thereafter, the complaint is filed. The prosecution contention is that the evidence of Pws 1 to 3 establishes that the accused persons have committed the offence.
44.On the other hand, the defence contention is that there are ordinarily three teams crafted in respect of search and seizure under warrant of authorization based upon preparatory note. For carrying out search and seizure the three conditions enshrined in section 131 (1) of IT Act ought to be satisfied in the form of satisfaction note which divulges the frame work of mind or to arrive at reason to believe as a precursor under section 132(1) of the Act. After completing search and seizure operations, the search team ought to prepare an appraisal note followed by examination note (analytical report) as to whether there is any incriminating material unearthed during the course of search and seizure requiring to invoke section 153A or 153C of Income Tax Act, 1961. If no incriminating material has been unearthed, the question of invoking section 153A proceedings does not arise. If there has been some material collected which warrants action under Section 147 and 148 subject to limitation under Section 149 of IT act, 1961, then the assessment officer will at liberty to issue notice under the respective provisions without invoking section 153A of the
IT Act, 1961.
45.The defence contention is that from the prosecution evidence and material on record there was no excise done to segregate documents seized by the assessee wise, assessment year wise and premises wise, no systematic arrangement or make
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Court of Special Judge for Economic Offences, Hyd. 16 of 34 Judgment in C.C.No. 20 of 2017 analysis on the seized documents and sought out the documents having financial relevancy and financially irrelevant. The question of action under Section 153A or alternative would arise after segregating the documents and they have to find out the undisclosed income from the documents. Without any such segregation they came to conclusion that there was undisclosed income. The prosecution has not brought any material to show that the books of accounts, records and other documents were not seized by the CBCID. The so called recording of statements are under tremendous pressure and coercion.
46.This Court has taken into consideration of rival contentions made by both parties. Admittedly, during the cross-examination of PW1, he stated he has not received any material or records from the deponents while recording their statements. As per panchanama he has seized books of accounts etc from the companies mentioned in the panchanama as well as books of accounts from the companies mentioned in the respective panchanamas. He said he has seized sale deeds agreements, share ledger registers etc. Basing on those documents they analyzed the balance sheet and profit and loss account of the companies and found huge expenses in cash. However, the directors have expressed their inability to produce the documents like vouchers etc. The perusal of record shows that the prosecution has not filed any such list of documents which they alleged to have seized. As per record, they have filed warrant of authorization and panchanamas. The books of accounts, ledger books etc of the accused companies are not filed. The defence contended that in fact APCID raided the accused companies and they have seized the total documents so the so called documents alleged to be seized by the accused persons are not available in the premises of accused companies but the
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Court of Special Judge for Economic Offences, Hyd. 17 of 34 Judgment in C.C.No. 20 of 2017 witnesses alleged that they have seized the documents from the premises of accused company and its subsidiary companies. The defence have marked Ex.D2 & Ex.D3 which shows that at the relevant time Avva Hema Sundera Vara Prasad and Avva
Venkat Rama Rao were injail at the relevant time. The prosecution contended that the notices were served on them but when they are in jail there is a question of serving notices to the accused persons herein.
47.At the relevant time, during the assessment proceedings pursuance to the issuance of notice under Section 153 A of the Act, and also during the first appellate proceedings all the Directors of the company responsible for the affairs of the company were in judicial custody. So, it is not possible for the assessee to produce all the relevant books, vouchers etc, before the authorities to prosecute the case diligently. Ex.D2 and Ex.D3 they were in jail at the relevant time. So it is an admitted fact that the accused have not produced any such documents before the concerned authority. It is for the prosecution to explain how they got such documents they failed to explain it.
48.The defence contended that upon perusal of the Statements recorded from the
Accused referred in the respective Statements, even assumed but not admitted that the prosecution has thrown weight on the Statements, the Complaint and PWs evidence failed to show the incriminating material to prove that the notice under
Section 153A would be required. It is unclear from the Prosecution whether it has relied upon the Statements of Accused or not. Because, the Statements might have contained inculpatory and exculpatory parts. In such a scenario, it is upto the
Prosecution to substantiate that it has relied upon the inculpatory part to the extent as identified by the prosecution and their consideration to the exculpatory part.
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Admittedly, the prosecution got marked the statements under Ex.P1 to Ex.P9 through
PW1 however, they have not stated anything about the gist of the statement which is inculpatory and exculpatory. Mere marking of the documents are not sufficient it is for the prosecution to prove the substance of the statements. They have not proved it.
From the evidence, there is is no material to show that, the notice under Section 153A would be required.
49.As rightly pointed out by the defence no valuation or the methodologies of valuation has been divulged. Further, they have not filed examination note / or investigation report so as to convince the Court that the proceedings are conducted in accordance with law. When the department is proceeding under Section 153A and 153C, they have to file appraisal note and satisfaction note before the Court. The department has not filed any such documents before the Court. It is for the prosecution to prove that they have genuinely arrive at the conclusion that Section 153A notice would have to be issued and the manner in which it can be issued relying upon alleged incriminating material if any. No incriminating material has been brought into existence from the statements under Ex.P1 to Ex.P9.
50.The perusal of documents Ex.P3 & P11 panchanamas, it is clear that there is no mention about incriminating material in Ex. P3 & P11. Ex.P-3 i.e., Panchanama
dated 23.01.2015 is related to M/s. Agri Gold Farms Estates India Pvt Ltd, Agri Gold
Constructions Pvt Ltd, Agri Gold Project Ltd(the name of Dreamland is not mentioned). It is drawn by PW-2 (Mr. Nethra Pal) PW1/Narsingh Kumar Khalkho wherein there was no mention about the incriminating material and no details were furnished by identifying the material contained attributes of the incriminating material. To proceed against the accused persons further, it is very just and
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Court of Special Judge for Economic Offences, Hyd. 19 of 34 Judgment in C.C.No. 20 of 2017 necessary for the income tax officers to place such incriminating material. Without placing such material they cannot proceed further otherwise it is violative of interest of accused persons only.
51.The prosecution relied upon the statements of A3 recorded on different dates.
The perusal of statement shows several questions were asked to A3. From the statement nothing was elicited from A3 which is incriminatory to prosecute the accused persons.
52.Further, the perusal of document Ex.P12/notice u/s 153A dated 25.08.2015 vide PAN No. AADCA5206A/ CC/2(4)/2015-16 dated 25.08.2015 was issued to the Prl.
Officer of the Dreamland Ventures Pvt Ltd having address at Bangalore, pertaining to
M/s. Dreamland Ventures Private Limited calling upon the addressee to furnish the
Return of Income in respect of Assessment Year within 30 days from the date of receipt of the notice in the prescribed form and verified in prescribed manner and setting forth such other particulars as may apply accordingly as if such return were a return required to be furnished u/s 139 of the IT Act 1961. It is to be noted that as per warrant authorization there was no authorization to conduct panchanama in
Dreamland Ventures Ltd. In Ex.P2 also the name of Dreamland is not mentioned.
However, the panchanama under Ex.P11 shows the panchanama was conducted at
M/s. Dreamland Land Ventures on 23.01.2015. without any authorization the panchanama was conducted under Ex.P11. Further the notice was issued under
Ex.P12 dated 25.08.2015 to the Principal officer of Dreamland ventures Pvt Ltd to file return of income under Section 139 of IT Act. Further Ex.P13 notice was issued under
Section 142(1) of IT Act, on 18.01.2016, the notice under Ex.P14 dated 15.02.2016 was issued to Dreamland Ventures Pvt Ltd stating that why the prosecution
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Court of Special Judge for Economic Offences, Hyd. 20 of 34 Judgment in C.C.No. 20 of 2017 proceedings should not be launched against them. The filing of returns under Section 153A is different and filing of returns under Section 139 of IT Act are different. The defence has filed Ex.D3 return of income for the assessment year 2009-2010. The returns were already filed so again issue of notice under Ex.P12 under Section 139 of
IT Act is not proper.
53.Further, the notice under Ex.P13 was issued under Section 142 (1) of IT Act 1961 vide PAN No. AADCA5206A dated 18.01.2016 to the A-1 Company only at
Bangalore Address. In both the notices under Exs.P12 & 13 there is no mention of seizure of any incriminating material and details if any thereof disclosed in the notices. Even at the time of arguments also the defence counsel has pointed out but no reply was received from the public prosecutor. The documents are mechanically filed and the required information is not giving as per the documents. The main purpose of issue of notice is that the other party should no what was the case against him. The principle of natural justice ie., Audi Alterum partem made it clear that the other party should know all the particulars when the concerned authority is proceedings against the party otherwise there is no opportunity to the party to defend himself it is nothing but violative of fundamental rights of the accused persons.
54.The prosecution has initiated proceedings against the accused by obtaining the sanction order under Ex.P10. The Sanction Order shows that it is a cryptic order of two pages wherein the Sanction was given for deliberate and wilful default in filing the return of income u/s 139(1) of IT Act 1961 for the A.Y. 2009-2010 to 2014-15. As rightly pointed out defence there is no mention about Section 153 A nor is there any disclosure of any incriminating material or material upon which the Assessing Officer
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Court of Special Judge for Economic Offences, Hyd. 21 of 34 Judgment in C.C.No. 20 of 2017 has relied upon, material upon which the search team examined or analyzed and satisfied with and finally the material upon which the processing team had done any exercise to arrive at a logical conclusion and the opportunity of being heard conferred on the Accused during the course of the process, in this circumstances the order is cryptic and suffers from inefficiencies and therefore it is a defect order and cannot be relied upon.
55.A prosecution can be launched only on the basis of sanction of the Principal
Commissioner or appropriate authority. Section 279(1) of the Act is extracted hereunder:
“279. (1) A person shall not be proceeded against for an offence under section-276 or section-277 or section-278 except at the instance of the
Commissioner. (2) The Commissioner may either before or after the institution of proceedings compound any such offence.”
56.The intention of the legislature in introducing requirement of Sanction in
Enactments to be accorded by the competent authority is for the purpose of affording protection from vexations prosecution and to safeguard the interest of the innocent persons. Before granting sanction, the competent authority has to go through all the relevant material placed before it and after assessing the facts of the case and if the competent authority deems it appropriate to grant sanction, accordingly sanction is given for prosecution.
57.The Hon’ble Supreme Court in several judgments held that the competent authority’s sanction would be valid only when such competent authority applies its mind to the entire facts of the case and accords sanction. In the event of the sanction
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Court of Special Judge for Economic Offences, Hyd. 22 of 34 Judgment in C.C.No. 20 of 2017 reflecting non-application of mind or not considering the relevant material or any kind of extraneous reasons, such grant of sanction was found to be invalid.
58.The Hon’ble Supreme Court in the case of Mansukhlal Vithaldas Chauhan v.
State of Gujarat2 held as follows:
Sanction lifts the bar for prosecution. The grant of sanction is not an idle formality or an acrimonious exercise but a solemn and sacrosanct act which affords protection to Government Servants against frivolous prosecutions. ( See: Mohd. Iqbal
Ahmed vs. State of Andhra Pradesh, AIR 1979 SC 677). Sanction is a weapon to ensure discouragement of frivolous and vexatious prosecutions and is a safeguard for the innocent but not a shield for the guilty.
The validity of the sanction would, therefore, depend upon the material placed
before the sanctioning authority and the fact that all the relevant facts, material and
evidence have been considered by the sanctioning authority. Consideration implies application of mind. The order of sanction must ex facie disclose that the sanctioning authority had considered the evidence and other material placed before it. This fact can also be established by extrinsic evidence by placing the relevant files before the
Court to show that all relevant facts were considered by the sanctioning authority.
(See also: Jaswant Singh vs. The State of Punjab, 1958 SCR 762 = AIR 1958 SC 12;
State of Bihar & Anr. vs. P.P. Sharma, 1991 Cr.L.J. 1438 (SC)).
59.Since the validity of "Sanction" depends on the applicability of mind by the sanctioning authority to the facts of the case as also the material and evidence collected during investigation, it necessarily follows, that the sanctioning authority has to apply its own independent mind for the generation of genuie satisfaction whether prosecution has to be sanctioned or not. The mind of the sanctioning
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Court of Special Judge for Economic Offences, Hyd. 23 of 34 Judgment in C.C.No. 20 of 2017 authority should not be under pressure from any quarter nor should any external force be acting upon it to take decision one way or the other. Since the discretion to grant or not to grant sanction vests absolutely in the sanctioning authority, its discretion should be shown to have not been affected by any extraneous consideration. If is shown that the sanctioning authority was unable to apply its independent mind for any reason whatsoever or was under an obligation or compulsion or constraint to grant the sanction, the order will be had for the reason that the discretion of the authority "not to sanction" was taken away and it was compelled to act mechanically to sanction the prosecution.”
60.The Hon’ble Supreme Court in the recent judgment in the case of
S.Athilakshmi v. State rep. by the Drug Inspector3 relying on the judgment of
Mansukhlal’s case held as follows:
“The sanction for prosecution given in the present case appears, prima facie, to suffer from vice of non-application of mind. There is no reference to any of the documents, evidence or the submissions submitted by either of the parties, no reasons assigned or even an explanation pertaining to the delay which indicates it has been passed in a mechanical manner.”
61. The Hon’ble Supreme Court in the case of Nanjappa v. State of Karnataka, held as follows:
The rationale underlying the provision obviously is that if the trial has proceeded to conclusion and resulted in a finding or sentence, the same should not be lightly interfered with by the appellate or the revisional court simply because there was some omission, error or irregularity in the order sanctioning prosecution under Section 19(1). Failure of justice is, what the appellate or revisional Court would
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Court of Special Judge for Economic Offences, Hyd. 24 of 34 Judgment in C.C.No. 20 of 2017 in such cases look for. And while examining whether any such failure had indeed taken place, the Court concerned would also keep in mind whether the objection touching the error, omission or irregularity in the sanction could or should have been raised at an earlier stage of the proceedings meaning thereby whether the same could and should have been raised at the trial stage instead of being urged in appeal or revision.
62. In the case at hand, the Special Court not only entertained the contention urged on behalf of the accused about the invalidity of the order of sanction but found that the authority issuing the said order was incompetent to grant sanction. The trial
Court held that the authority who had issued the sanction was not competent to do so, a fact which has not been disputed before the High Court or before us. The only error which the trial Court, in our opinion, committed was that, having held the sanction to be invalid, it should have discharged the accused rather than recording an order of acquittal on the merit of the case. As observed by this Court in Baij Nath
Prasad Tripathi’s case (supra), the absence of a sanction order implied that the court was not competent to take cognizance or try the accused. Resultantly, the trial by an incompetent Court was bound to be invalid and non-est in law.”
63.The Hon’ble Supreme Court in the case of Mohd. Iqbal Ahmed v. State of
Andhra Pradesh5 held that it is well settled that any case instituted without a proper sanction must fail because this being a manifest defect in the prosecution, the entire proceedings are rendered void ab initio. Further, the prosecution launched without a valid sanction, it was held that the cognizance taken by the Special Judge was without jurisdiction and proceedings were quashed.
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64.In the instant case also, the sanction order does not contain all the material which are alleged to be incriminating to the accused so as to initiate proceedings against the accused persons therefore, the sanction order is not valid.
65.The show cause notice was issued under Ex.P.14 on 15.02.2016 to the A1
Company by which time, as revealed in Ex. D2, the Accused referred therein was in the Judicial Custody and the other Accused was not aware of the Show Cause Notice since the A1 Company premises was seized and documents and properties were attached by the State CBCID Authorities in the month of January 2015. Further the
Show Cause Notice was issued to A1 Company only. As per section 2(35) of companies Act, it is mandatory that the notice should be issued to the Principal officer of the company. No such notice was issued to the principal officer of the company and it is the duty of the department to issue such notice by treating any of the Director as Principal Officer of the Company. The role of each Director and their day to day activities and their responsibilities in the company should be mentioned so as to fix their liability. Admittedly, in the instant case no such notices are served.
66.At this Stage, it is just and proper to pursue Section 2(35) of Income Tax Act which reads as under:
2(35) “principal officer”, used with reference to a local authority or a company or any other public body or any association of persons or any body of individuals, means—
(a) the secretary, treasurer, manager or agent of the authority, company, association or body, or
(b) any person connected with the management or administration of the local authority, company, association or body upon whom the 3[Assessing Officer] has served a notice of his intention of treating him as the principal officer thereof;
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67.M.R.Pratap Vs VM. Muthu Ramalingam in which the Hon’ble Court observed that: it is admitted by the department that no such notice as contemplated under
Section 2(35)(b) has been served on the petitioner hence, the petitioners contention that he cannot be proceeded with for the delayed payment of tax amount by the company, is a well founded one.
68.In Greatway (P) Ltd. & Ors. Vs. Asstt. CIT [1993] 199 ITR 391(P&H), Punjab &
Haryana High Court has held that in the absence of appointment of a principal officer by issuing a notice by the AO, the prosecution, if any, could only be launched against the petitioner-company. Similar is the view expressed in ITO Vs. Roshini Cold Storage (P) Ltd. and Ors. (2000) 245 ITR 322 (Mad). In this case Hon’ble Madras High Court held that in case Income Tax Officer sought to prosecute the director along with company for an offence under Section 276- B of the Act then it was incumbent upon him to issue a notice under sub-clause (b) of 2(35) of the Act expressing his intention to treat the director as "principal officer" of the company and in absence thereof, director shall be entitled to the acquittal.
69.In Sushil Suri and Ors. Vs. State & Ors. (2008) 303 ITR 86 (Delhi), the Hon’ble
Court has held that before a prosecution under Section 276-B of the Act can be launched against the director he should have been notified that department/AO has intention of treating him as "principal officer" of the company. In absence of such notice under Section 2(35)(b) of the Act, prosecution against the director cannot be continued and is bound to fail.
70.In Madhumilan Syntex Ltd. and Others vs. Union of India (2007) 290 ITR 199 (SC), the Supreme Court has held as under:-
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71."To treat the directors of a company as "principal officers" there is no need to issue a separate notice or communication to them that they are to be treated as "principal officers", before the issuance of the show-cause notice under section 276-
B read with Section 278B. It is sufficient that in the show-cause notice under section 276-B read with 278B, it is stated that the directors are to be considered as principal officers of the company under the Act and such a complaint is entertainable by the court provided it is otherwise maintainable."
72.Legal preposition which emerges from the above is that before launching a prosecution under Section 276-B of the Act against the directors of a company,
Assessing Officer has to issue notice under Section 2(35) of the Act expressing his intention to treat such directors of a company as "principal officers". However, it may not be necessary to issue a separate notice or communication to all the directors that they are to be treated as "principal officers". It would be sufficient compliance if in the show cause notice issued to the company it is mentioned that the directors are to be considered as principal officers of the company under the Act
73.In this case neither a notice was issued to A-2 to A-4 under Section 2(35) of the Act the department intended to treat him "principal officer" nor in the show cause notice issued to the company it was mentioned that department is intended to treat the directors of the company as "principal officers", for the purpose of launching prosecution under Section 276-B of the Act.
74.Admittedly, as per the decision of Hon’ble Courts, the notice under section 2(35) is mandatory. The prosecution has to issue such a notice to the directors of the company intimating their intention to treat them as the principal officers of the company. Further, the Hon’ble Supreme Court held that when the showcause notice
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Court of Special Judge for Economic Offences, Hyd. 28 of 34 Judgment in C.C.No. 20 of 2017 is issued to the accused persons, in the notice, the complainant has used specific words intimating to the accused that they are treating a particular director or directors as principal officers of the company then, it is sufficient. But, in the instant case, the contents of the showcase notice shows that no where the complainant has used the words that they are treating A-2 to A-4 as principal officers of A-1 company.
Though, the show cause notices was issued to accused, but in the said notice also, no where they mentioned that A-2 to A-4 are Principal officers of A-1 company.
Therefore, the complainant failed to issue any notice to the accused persons intimating that they are treating any of the accused as principal officers of the company. Further, the decision of Hon’ble Supreme Court made it clear that, apart from issue of notice under Section2(35) of the act, or least by mentioning in the show cause notice that they are treating a particular director as principal officer of the company, in the complaint, if they mention the role of directors and their clear intention that they are responsible for day-to-day activities of the company, then the complainant has complied the conditions laid down under section 2(35) of the Act.
The perusal of the contents of the complaint shows that nowhere in the contents of the complainant mentioned that A-2 to A-4 are principal officers of the company. No doubt, they got it mentioned that they are directors and responsible for day-to-day activities of A-1 company. But, they failed to mention that any of the directors was treated as principal officer of the company. Therefore, A-2 to A-4 should not be treated as principal officers of the company. Therefore non issue of notice under
Section 2(35) of Act is fatal to the prosecution case.
75.Further it is pertinent to note that in the said notice, the notice was given under Section 153A read with Section 276CC whereas, the Sanction Order (Ex.P10)
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76.Moreover, in the course of said search, it is alleged incriminating material pertaining to the assessee company were found and seized and marked as annexure.
Since the incriminating material according to the assessing officer belong to the assessee company provisions of Section 153C are applicable and accordingly the proceedings under Section 153C were initiated by recording satisfactory note. In response to the notice, under Section 153C issued calling for return of income which was served on the assessee, the assessee did not file return of income. The defence contention is that the so called satisfaction note under section 153C of the Act alleged to be recorded by the assessing officer, is not as per the procedure. The so called satisfaction is not in accordance with law. The satisfaction recorded by the assessing officer has failed to record his satisfaction that the documents so seized belong wit the assessee company ie., other than the searched person therefore, initiation of proceedings under Section 153C without such proper satisfaction are bad in law. The satisfaction of the assessing officer regarding the seized material belonging or relating to some other person should not be arrived at in a casual manner or merely on the basis of the statement made by the person searched. It should be based upon cogent material and must display the reason or basis for the conclusion that the assessing officer of the person in respect of whom the search was conducted is satisfied that the seized document belong to another person. Nowhere
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Court of Special Judge for Economic Offences, Hyd. 30 of 34 Judgment in C.C.No. 20 of 2017 the assessing officer recorded his satisfaction that the material seized belongs to the assessee company therefore such satisfaction itself is invalid.
77.It is to be noted that the defence counsels must have appeared before the commissioner and income tax appellate tribunal appeals so that they are speaking about the satisfactory note. /Unfortunately said document is not filed before theCourt so this Court is not able to say whether these documents do not belongs to the assessee or not. Therefore, the initiation of proceedings under Section 153C are not in accordance with law. This Court is not able to give any finding on this aspect. The witnesses have stated that satisfactory note is confidential note so it will not be filed
in the Court. They have not filed any circular or document to show that it is a
confidential document. Therefore, this Court cannot give any finding on it.
78.The defence contended the initiation of proceedings under Section 153C are not in accordance with law. The provisions of section 153C were amended with effect from 01.06.2015. As per 153C (1)(b) the words any books of accounts or documents seized or requisitioned, pertains to or pertained to or any information contained therein relates to are applicable with effect from 01.06.2015 since the search in the instant case was concluded on 23.01.2015 which was before 01.06.2015 therefore, the initiation of proceedings under Section 153C are not in accordance with law. The satisfaction note is very crucial to decide whether the document so seized belongs to the assessee and to decide whether the provisions of Section 153C is applicable or not. There is no material produced before the Court to show that the seized documents so found during the course of search belongs to the assessee that is other than the searched person.
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79.From the facts and circumstances of this case, this Court feels that, this Court is not able to decide the validity of 153C proceedings and also the assessing proceedings etc. Moreover, from the facts it is clear that the assessment order was passed, basing on which the notice was issued under Ex.P14 for prosecuting the accused. Thereafter, the proceedings are initiated. Admittedly, Ex.D1 is the order copy of ITAT which is the crucial document. The perusal of this document shows that the Hon’ble ITAT has observed that “it could be seen from the order dated 29.11.2022 in the batch cases of Agri Gold constructions Pvt Ltd, the facts are identical and the co-ordinate bench of this tribunal took the view to set aside the impugned order and to restore the issued to the file of learned officer for giving an opportunity to the assessee to dispose of the matter according to the law. It is clear from the certificate dated 26.02.2019, issued by Superintended District jail Eluru and also the letter dated 24.11.2016 addressed by Sri AV.Rama Rao Chairman of the Agri
Gold group to the DCIT Hyderabad that the Chairman, Vice Chairman, Managing
Directors and others were in the custody within the period 12.02.2016 and 23.10.2018 and lodged in District Jail Eluru. The material clearly establishes that from 12.02.2016 to 23.10.2018, all the persons responsible for the affairs of the
Company were in custody and in their absence as claimed by the learned AR, some part of the material was produced before the authorities there is nothing contrary to disbelieve the statement of learned AR that assessee could not prosecute the proceedings before the authorities diligently due to the fact of non – availability of the persons responsible for the affairs of the company. In fact this particular circumstance is taken note by the co-ordinate benches of the tribunal in the cases of group concerns on earlier occasions as is evidenced by the order dated 29.11.2022.
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Having regard to the peculiarity of the facts, we are of the considered opinion that it would be in the interest of justice to set aside the impugned orders and to restore the matters to the file of learned assessing officer to adjudicate the same afresh, after giving an opportunity of being heard to the assessee and also to produce all the relevant material at their custody.” Thereby the Hon’ble ITAT has set aside the assessment order with a direction to pass a fresh order after hearing both sides.
80.From this, it is clear that, the assessing order based on which the present case is filed was already set aside. However, the prosecution has filed the documents vide
Crl MP.No. 2420/2026, as per the documents Ex.P15 is the assessment order dated 30.12.2016, filed basing on which the present case is filed. Thereafter, the notice of demand dated 30.12.2016, is filed under Ex.P16. The order of ITAT dated 26.02.2018, is filed under Ex.P17, in between Ex.P15 and Ex.P17 one more assessment order is passed as the Hon’ble ITAT set aside the assessment order with a direction to pass a fresh order. After passing fresh assessment order, again the parties approached ITAT under Ex.P17. As per the order, the appeal of the appellant ie., the A1 company herein was party allowed. It is to be noted that Ex.P17 is relating to the period after filing of this case. If any fresh assessment order is passed and ITAT order is passed the fresh cause of action arose from that date. The present case is based on Ex.P15 only which was already set aside therefore, the present case is not maintainable. The prosecution contended the fresh assessment order was passed if it is so, the cause of action arose for them to file a fresh case basing on the new assessment order but, the prosecution basing on the old assessment order is not maintainable. Hence, the accused persons are benefit of doubt.
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81.In the result, the the accused Nos.1 to 4 are found not guilty for the offence under Sections 276 CC and 278-B of Income Tax Act. So, they are acquitted for the said offences under Section 248(1) Cr.P.C. The bail bonds of the accused shall stand cancelled after the appeal time is over. The accused are directed to execute personal bond for Rs. 10,000/- each under Section 437A of Cr.P.C.
Directly typed to my dictation by Stenographer Grade-I, corrected and pronounced by me in open court on this the 13th day of April, 2026.
Special Judge for Economic Offences,
Hyderabad.
APPENDIX OF EVIDENCE
Witnesses examined on behalf of prosecution:
PW.1Narsingh Kumar Khalkho PW.2Nethra Pal PW.3B.Sunil Kumar
Witnesses examined on behalf of Defence: NIL
Exhibits Marked on behalf of prosecution:
Ex.P1Attested true copy of Warrant of authorization dated: 23-01-2015 Ex.P2Attested true copy of Warrant of authorization dated: 19.03.2015 Ex.P3Attested true copy of panchanama, dated:19.03.2015. Ex.P4Attested true copy of Sworn statement of A3 dated 05.02.2015 Ex.P5Attested true copy of Sworn statement of A3 dated 06.02.2015 Ex.P6Attested true copy of Sworn statement of A3 dated 26.02.2015 Ex.P7Attested true copy of Sworn statement of A3 dated 13.03.2015 Ex.P8Attested true copy of Sworn statement of A3 dated 23.03.2015 Ex.P9Attested true copy of Sworn statement of A3 dated 23.03.2015 Ex.P10Authorization issued in favour of PW2 by K.J.Rao, Addl. Director of Income Tax(INV), Unit-I, Hyderabad
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Ex.P11Panchanama dated 23.01.2015 Ex.P12Notice U/s. 153A was issued for the assessment year 2009-10 and served on the accused on 25.08.2015. Ex.P13Notice U/Sec. 142(1) of the IT Act was issued on 18.01.2016 Ex.P14Copy of show-cause notice issued before passing orders u/s. 279(1) IT Act. Ex.P15Assessment order dated 30.12.2016 Ex.P16Notice of demand dated 30.12.2016 Ex.P17order of ITAT dated 26.02.2018
Documents marked by Defence:
Ex. D1Order copy of ITAT Ex. D2Certificate, dated 25.07.2019 issued in respect of Avva Venkata Rama Rao. Ex.D3Income Tax Returns acknowledgment for the assessment year 2012-13 (with consent of both parties the documents are marked)
Sd/-
Special Judge for Economic Offences,
Hyderabad.
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//Fair Copy//
IN THE COURT OF SPECIAL JUDGE FOR TRIAL OF CASES UNDER ECONOMIC
OFFENCES :: HYDERABAD.
Dated this the 13th day of April, 2026
Present : Smt. J. Maithreyi,
Special Judge for trial of cases under Economic
Offences, Hyderabad.
C.C.No. 17 of 2017 Between :
The Asst. Commissioner of Income-tax, Central Circle - 2(4), 3rd Floor, Posnett Bhavan,
Ramkote, Hyderabad - 500 001.…...Complainant
AND
1. M/s Dreamland Ventures Pvt. Ltd. 2nd Floor No. 85, 16th Cross, 14th Main, HSR Layout, Banglore – 560102. Rep. by its Managing Director, Sri Patan Lal Ahammad Khan, S/o. Saida Khan, aged:47 years, Occ: Managing Director, R/o. Flat No. B4, Chandrahasa Apartment, Ajith Singh Nagar, Vijayawada-520015.
2. Mr. Patan Lal Ahammad Khan S/o. Saida Khan, aged:47 years, Occ: Managing Director, R/o. Flat No. B4, Chandrahasa Apartment, Ajith Singh Nagar, Vijayawada-520015.
3. Mr. Avva Venkata Rama Rao, S/o. Venkata Appa Rao, aged about 55 years, Occ: Director, R/o. H.No. 23-35-39, A S Rao Street, Lakshmi Nagar, Satyanarayanapuram, Vijayawada-520011.
4. Mr. Chinnappa Srinivasa Reddy, S/o. Chinnappa Reddy, aged about 50 years, Occ: Director, R/o. No. 105/17, 12th Mian, BTM Layout, 1st Stage, Banglore-560029. … Accused No.1 to 4
This case is coming before me on 09.04.2026 for hearing and disposal in the presence of Sri.H.Govind Rao, Special Public Prosecutor for Complainant, Sri K. Rama Srinivas, counsel for accused no.1 and 2, Sri.D.Vijaya Bhaskar, Sri. J. Basava Raju, Sri. TVN Ravikanth and Sri. D.Sai Dheeraj, Counsels for accused no.3 and Sri. D. Raghavendra and Sri. K. Ravi, counsels for accused no.4 and after hearing the arguments and perusing the material on record and after the matter having stood over for consideration till this day, today, this Court delivered the following:
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J U D G M E N T
1.The Income Tax Officer, Hyderabad has filed a complaint under Section 190 r/w
Section 200 of Cr.P.C. for the offence punishable under Section 276CC and 278B of the Income Tax Act, 1961 (Hereinafter referred as ‘the Act,’) against the Accused persons.
2.The brief contents of the complaint are as follows :
The complaint is filed pursuant to the prior sanction of the Commissioner of
Income Tax (Central), Hyderabad vide order u/s 279(1) of the Income Tax Act, 1961 in
F.No. CIT(C)/HYD/PROS/AGRI GOLD FARM/2016-17, dated 23.05.2016 which is enclosed herewith as Document No.1.
3.As per section 136 of the Income Tax Act, 1961 proceedings under the Act are deemed to be the judicial proceedings within the meaning of section 193 to 196 of the I.P.C. The accused No.1 is the company registered under the Indian Companies of
Act of 1956 and its registered office is situated at 2nd Floor, No.85, 16th Cross, 14th
Main, HSR Layout, Bangalore-560102 and is engaged in the business of Real Estate and Constructions of Apartments.
4.A search u/s. 132 of the Income tax Act, 1961 was conducted at the office premises of the accused at 2nd Floor, No.85,16th Cross, 14th Main, HSR Lay out,
Bangalore-560102 on 23-1-2015 and 19.03.2015 evidenced by panchanama dated 23-1-2015 & 19-3-2015. Certified true copies of warrant of authorization u/s 132 of the IT Act, 1961, panchanamas and Sworn Statement are enclosed as Document No.2 to 5.
5.That after search a notice u/s.153A of the Income tax Act, 1961 for the assessment year 2009-10 was issued on 25.8.2015, the accused is required to file the
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Court of Special Judge for Economic Offences, Hyd. 3 of 34 Judgment in C.C.No. 17 of 2017 return of income for the afore mentioned assessment year within time allowed in the notice i.e. 30 days from the date on which the notice has been served on him/her.
The relevant notices were served on the accused on 25.08.2015. The due date to file the return of income for the assessment year 2009-10 was 24.09.2015.
6.That the accused, however, failed to furnish the return of income for the assessment year 2009-10 on or before the due date. Therefore, notice u/s 142 (1) of the IT Act, 1961 was issued on 18.01.2016 and the same was received on behalf of the accused. The accused neither complied with the notice nor has given any explanation for non-compliance.
7.That inspite of the receipt of notices u/s153A and 142(1) of the IT Act, 1961, the accused did not file the return nor responded to the notices. Therefore, a show- cause notice dated 15.02.2016 was issued to the accused on 15.02.2016 to show cause as to why prosecution proceedings u/s 276CC of the Income Tax Act, 1961 should not be initiated for not filing the return of income for the assessment year 2009-10 and posted the matter for hearing was fixed on 29.02.2016. The same served on the accused on 15.02.2016. The accused did not comply. The accused has not provided any explanation in this regard.
8.The accused is duty bound to file the return of income for the Assessment Year 2009-10 in response to notice u/s 153A of the Income Tax Act, 1961. In the light of facts and circumstances as narrated above in the preceding paragraphs, it is evident that the accused not filed returns in response to notice u/s 153A of the Income Tax
Act, 1961. Further, the assessee has failed to comply with the notices issued as per the statutory powers vested with the authority of the Income Tax Act, 1961. Despite
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Court of Special Judge for Economic Offences, Hyd. 4 of 34 Judgment in C.C.No. 17 of 2017 given sufficient opportunity, the assessee's non responsiveness is a clear and sufficient indication of gross negligence on his part.
9.That as per the provisions of section 153A of the Income Tax Act. 1961, the accused is required to file the return of income on or before the date specified in the notice issued under section 153A of the Income Tax Act, 1961. But the accused inspite of giving sufficient opportunities and issuance of notices did not file the return of income. Therefore, the accused has committed an offence punishable under section 276CC of the Income Tax Act, 1961. Since the offence is committed by the
Company and its Managing Director and Directors they are liable for punishment U/s 278B of the I.T.Act.
10.On the basis of the allegations contained in the complaint and the documents filed in support of it, this court took cognizance of the offences under Sections 276CC r/w 278B of Income Tax Act, 1961 against the accused issued summons.
11.Responding to the summons, the accused put up their appearance and thereafter copies of documents as contemplated under Section 207 of Cr.P.C. were furnished to the accused. The evidence was recorded under Section 244 Cr.P.C as it is private complaint.
12.After hearing the prosecution, as well as the accused, taking into consideration of evidence of prosecution witnesses, this court has framed charges under Sections 276CC and 278B of Income Tax Act, 1961 against the accused and the same was read over and explained to accused in his vernacular language, to which they denied the offence, pleaded not guilty and claimed to the tried.
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13.To bring home the guilt of the accused for the offences with which they are charged, the complainant examined Pws1 to 3 and got marked Exhibits P1 to P17 and got marked Ex.D1 to D3.
14.After closure of complainant’s side evidence, the accused was examined under
Section 313 Cr.P.C putting incriminating circumstances appearing against the accused in the evidence prosecution witnesses to which he denied the same. On behalf of the accused, no witnesses are examined and no documents are marked.
15.Heard both sides. Perused the record.
16.Now the point for consideration is :
“Whether the complainant is able to prove the guilt of Accused beyond all reasonable doubt ?”
POINT :
17.The offence under Section 276CC and 278B of Income Tax Act,1961.
Before going into the discussion of merits of the case, it is better to go through
the provisions under Section 276CC and 278B of Income Tax Act, 1961.
276CC:Failure to furnish returns of income.—If a person wilfully fails to furnish in due time 1 [the return of fringe benefits which he is required to furnish under sub-section (1) of section 115WD or by notice given under sub-section (2) of the said section or section 115WH or] the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under 2 [clause (i) of sub-section (1) of section 142] or 3 [section 148 or section 153A,] he shall be punishable,— (i) in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds 4 [twenty-five 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 imprisonment for a term which shall not be less than three months but which may extend to 5 [two years] and with fine: Provided that a person shall not be proceeded against under this section for failure to furnish in due time the 6 [return of fringe benefits under sub-section (1) of section 115WD or return of income under sub-section (1) of section 139]— (i) for any assessment year commencing prior to the
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Court of Special Judge for Economic Offences, Hyd. 6 of 34 Judgment in C.C.No. 17 of 2017 1st day of April, 1975; or (ii) for any assessment year commencing on or after the 1st day of April, 1975, if— (a) the return is furnished by him before the expiry of the assessment year; or (b) the 7 [tax payable by such person, not being a company,] on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source, does not exceed three thousand rupees.]] 278B. Offences by companies.—(1) Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. (2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
18.The allegation of prosecution is that the accused persons are duty bound to file the return of income for the AY 2009-10, in response to notice under Section 153A of Income Tax Act, 1961. The accused have not filed returns in response to notice issued under Section 153A of Income Tax Act, 1961. Further, the assessee has failed to comply with the notice issued as per the statutory powers vested with the authority of income tax act, 1961. Despite giving sufficient opportunity the assessee’s non responsiveness is a clear and sufficient indication of gross negligence on their part thereby the accused persons have committed the offence under Section 276CC of IT Act, 1961 and section 278B of IT Act.
19.The prosecution in order to substantiate their evidence examined Pws 1 to 3.
The evidence of PW1/ Narsingh Kumar Khalko, Director of Finance, shows that Since
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Court of Special Judge for Economic Offences, Hyd. 7 of 34 Judgment in C.C.No. 17 of 2017 the role of CBDT is to conduct the search & seizure operation as per central action plan issued by the CBDT, in this regard he received Warrant of Authorization under
Ex.P1 and P2 dated 23.01.2015 and 19-03-2015 from Director of Income Tax (Investigation), Hyderabad. The above documents are issued directing him to conduct search & seizure operation u/s. 132 of Income Tax Act at the offices and other premises of accused herin. Accordingly, he conducted search along with other authorized officers of the department. During the course of search & seizure operations, certain documents were found and seized which have been incorporated in the panchanama drawn at various premises under Ex.P3 dated 19-03-2015.
Further, the sworn statements of accused were recorded in the premises u/s 132(4) of Income Tax Act, i.e., The attested true copy of Sworn statements of A3 dated 05- 02-2015 marked as Ex P4. The attested true copy of Sworn statements of A3 dated 06-02-2015 is marked as Ex P5. The attested true copy of Sworn statements of A3
dated 26-02-2015 is marked as Ex P6. The attested true copy of Sworn statements of
A3 dated 13-03-2015 is marked as Ex P7. The attested true copy of Sworn statements of A3 dated 23-03-2015 is marked as Ex P8. The attested true copy of Sworn statements of A3 dated 23-03-2015 is marked as Ex P9.
20.Accused namely Sri Avva Venkata Rama Rao had stated vide his statement recorded on 23-03-2015 that there is an effective additional undisclosed income of
Rs.14,72,62,211/- from Assessment Years 2012-13 to 2014-15.
21.After the conduct of the search PW1 had conducted the search, prepared appraisal report based on the documents seized as per panchanama and had put up for approval of Principal Director of Income Tax (Investigation) Hyderabad through
Additional Director of Income Tax Unit-I, Hyderabad and the same was accorded
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Court of Special Judge for Economic Offences, Hyd. 8 of 34 Judgment in C.C.No. 17 of 2017 approval subsequently. It is pertinent to mention here that further the case was centralized to the o/o PCIT (Central), Hyderabad for scrutiny assessment purposes and appraisal report along with seized material & other documents was forwarded to the jurisdictional assessing officer in the central charge.
22.In the cross examination PW1 stated he has not issued any notice under
Section 132(1) of IT Act before undertaking the search and seizure authorization. He has not received any material on record from the deponents while recording their statements however, the same can be confirmed by seeing the panchanama. As per panchanama, he has seized books of accounts etc from the companies mentioned in respective panchanamas. The books of accounts of other subsidiary companies were also seized. He admits as per company Act, each company is distinct and separate entity. It was maintained on the computer of which back up was taken in the hard drive and seized. On two issued only, it was analysed, first transfer of shares and the expenses made for land dealings. They made analysis of seized material and made appraisal report and forwarded to the central charge for the scrutiny of the issues, the complaint was not filed by him so, he is not aware whether such analytical report was filed or not.
23.PW1 further stated they seized sale deeds purchase deeds, agreements, details pertaining to cash payments made to different individuals and share ledger register mentioning the name of shares, year of transfer details of transferees and transferrer etc. they analyzed the balance sheet and profit and loss account fo the companies and found huge expenses in cash, secured loans, share premiums for which they asked specific questions to the directors of the companies for which they expressed inability to submit the supporting documents like voucher and other
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Court of Special Judge for Economic Offences, Hyd. 9 of 34 Judgment in C.C.No. 17 of 2017 details and the statement was recorded under Section 132 (4) of IT Act through which directors particularly A.Venkata Rama Rao has confirmed and accepted the undisclosed income on estimation basis which was made the part of appraisal report and forwarded to central charge for scrutiny proceedings. He has not filed satisfaction report. He admits all his findings are set aside by Hobn’ble ITAT under
Ex.D1.
24.The evidence of PW1 is very crucial because he has conducted search. The panchanama was conducted by him. Further he has recorded the statements also. As per his evidence he has seized the books of accounts relating to different companies.
He has prepared appraisal report also. He has seized incriminating materials ie., sale deeds, agreements details relating to cash payment share ledger register etc.
Further, his evidence disclose that as per balance sheet and profit and loss of company they found huge expenses in cash unsecured loans share premiums . The accused have not furnished the documents relating to said expenses shares etc, however, they admitted undisclosed income.
25.The testimony of PW2/ Nethra Pal, Director of Finance, shows that he was authorized by DIT, Hyderabad to conduct search at Bangalore at A1 company premises. Ex.P10 is the Authorization issued in his favour by K.J. Rao, Addl. Director of
Income Tax (INV), Unit-I, Hyderabad.
26.In pursuance of this authorization letter, the search was conducted and he has drawn panchanama on 23.01.2015. The various documents were seized during such search. The details of seized documents are provided in the annexure appended to the panchanama. Ex.P11 is the panchanama, dated 23.01.2015 along with list of inventory of account books etc., seized under cover of panchanama. Thereafter, he
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Court of Special Judge for Economic Offences, Hyd. 10 of 34 Judgment in C.C.No. 17 of 2017 handed over the search proceedings, said panchanama etc., to the Hyderabad Unit.
The remaining process was done by the Hyderabad Unit and Central Unit.
27.In cross-examination PW2 stated that before conducting the search, he was not involved. So he do not know whether any notice was issued u/s 131 and 132 of
Income Tax. It was done by Hyderabad team but not by him. He has only drawn the panchanama on 23.01.2015. Based upon the composite warrant given to him, he conducted panchanama and accordingly drawn a composite panchanama.
28.He admits they have not identified books of accounts of each company as per the warrant wherein the names of the companies were mentioned including the A1.
He admits what ever it is stated in the panchanama that is final for him and beyond that he cannot answer.
29.He denied the suggestion that he has not applied his mind and mechanically drawn the panchanama and that the panchanama is illegal.
30.PW3/ D.Sunil Kumar, worked as Assistant Commissioner of Income tax shows in the case of M/s Agri Gold Constructions Private Ltd., a Search and Seizure operation was conducted at the office premises on 23-01-2015, 13-03-2015, 14-03- 2015, 15-03-2015 and 23-03-2015 evidenced by the Panchanama dated: 23-01-2015, 13-03-2015, 14-03-2015, 15-03-2015 and 23-03-2015. During the search and seizure operation and post search investigation. the undisclosed income for the assessment year 2009-10 is identified under the head income from other sources and income from the business.
31.After search and seizure operation, the case is centralized to Central Circle- 2(4) on 23-03-2015 by the Principal Commissioner of Income Tax (Central) Hyderabad in order No.CIT(C)/H/Centralization/Agri Gold Group/2014-15 dated: 23-03-2015 for
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Court of Special Judge for Economic Offences, Hyd. 11 of 34 Judgment in C.C.No. 17 of 2017 completing the assessment proceedings. Accordingly, a notice U/Sec.153 A under
Ex.P10 was issued for the assessment year 2009-10 and served on the accused on 26-08-2015. The accused is required to file the return of income for the aforementioned assessment year within time allowed in the notice i.e., 30 days from the date on which the notice has been served on them. The relevant notice was served on the accused on 18-01-2016. The due date to file return of income for the assessment year 2009-10 was 26-09-2015. However the accused failed to furnish the return of Income for the assessment year 2009-10 on or before the due date.
32.Therefore notice L/Sec. 142(1) of the IT Act under Ex.P11 was issued on 18-01- 2016 and the same was served on the accused. The accused neither complied with the notice nor has given any explanation for non-compliance of the aforementioned notices.
33.Inspite of receipt of the notice U/Sec. 153A and 142(1) of the IT Act, 1961 the accused did not file the return of income nor responded to the notices. Therefore a show cause notice was issued and served on the accused on 15-02-2016 to show cause as to why prosecution proceedings U/Sec. 276CC of the Income Tax Act, 1961 shall not be initiated for not filing return of income for the assessment year 2009-10.
The accused did not comply to the show cause notice and the accused has not provided any explanation in this regard.
34.The accused is duty bound to file the return of income for the assessment year in response to the notice u/s 153A of the Income Tax Act, 1961. Despite of giving sufficient opportunity, the accused non-responsiveness is a clear and sufficient indication of gross negligence on their part. Therefore, the accused has committed an
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Court of Special Judge for Economic Offences, Hyd. 12 of 34 Judgment in C.C.No. 17 of 2017 offence punishable under section 276 CC of the Income tax Act, 1961. The sanction orders was passed under Ex.P10.
35.In cross-examination PW3 shows that in the case, the search was conducted, after concluding the search proceedings, certain income was identified and as a
Deputy Commissioner of Income Tax working with Central Circle, he has to conclude assessment proceedings, after search the group of cases centralized to PCIT, Central
Circle and accordingly he issued notice under Section 153A of IT Act to conclude the proceedings. he received appraisal report after concluding search proceedings. He has not filed appraisal report before the court. Because the preparatory note which is incidental to commence the search and seizure operation, it is treated an internal document, so he did not file the same before the court. He has prepared satisfactory note before issue of notice under Section 153A of IT Act. He admits that as per
Section 139 of IT Act, the company is regular in filing all the returns including returns in respect of assessment years, 2009-10 to 2014-15. He admits the notice under
Section 153A of IT Act was issued to Prl. Officer of A1 company only. The name of Prl.
Officer of A1 company was not mentioned in the notice. Similarly he issued notice under Section 142 of IT Act, which is issued to the A1 company only. In both notices he has not mentioned the name of Prl. Officer of A1 company.
36.He has prepared the complaint and file the complaint. In the complaint, he has not mentioned anything about the notice under Section 2 (35) of IT Act. In the complaint he has not referred the appraisal note and also the satisfactory note. He has not mentioned justification upon which he made assessment order. Both appraisal report and satisfactory note are internal documents to issue notice under
Section 153A of IT Act.
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37.He admits the notice under Section 153A of IT Act cannot be issued mechanically and he has to apply his independent mind. The basis for issue of notice under Section 153A of IT Act is appraisal report. He admits in the month of
November, 2022 the Honorable ITAT passed orders in respect of all years subject matter herein and set-a-side the assessment order and direction is given to pass fresh assessment order. Ex.D1 is the order copy of ITAT.
38.In the sanction order, the sanctioning authority has not referred Section 153A of IT Act in the sanction orde. He admits in sanction order it is not mentioned about
Section 278E of IT Act. That the order under Section 279(1) of IT Act is not speaking order and it is a cryptic order only for two paragraphs. However when 279(1) of IT Act order is passed after issuing of show-cause notice where the facts are mentioned/discussed. The particulars of incriminating material are not mentioned in the show-cause notice. Before passing order under Section 279(1) of IT Act the show- cause notice was issued to the accused. Ex.P14 is the Copy Show Cause notice which was issued before passing orders under Section 279(1) of IT Act.
39.Ex.P14 was issued to A1 company only. This notice was issued on 15.02.2016.
The notice was duly served on A1 company. He has not filed the acknowledgment card to show the service of notice to A1 company. By the date of issue of notice the accused was in judicial custody as per the attested copy of certificate issued by Jailor,
District Jail, Eluru in respect of Avva Venkata Rama Rao and Avva Hema Sundara Vara
Prasad.
40.Ex.D2 is the Certificate, dated 25.07.2019 issued in respect of Avva Venkata
Rama Rao by the jail authorities. They will issue notices to the business place of the company and not directly to the directors of the company.
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41.He denied suggestion that since the notices are not directly issued to the individual accused, therefore, the present case is not maintainable, there is no material on record to issue notice under Section 153A of IT Act and other notices. He could not recollect whether the assessments in respect of the Assessment years, 2009-10 to 2014-15 filed the returns under section 139(1) of the Act before search operations.
42.The Evidence of PW3 shows that they have conducted search operations thereafter the assessment order was passed. They have issued notices to the accused under section 153A, 142(1) of IT Act even though there was no response from the accused. Further, he stated he has not filed appraisal report before the
Court. Further, the notice was not issued under Section 2(35)of IT Act. Further he admitted at the relevant time the accused persons were in jail. Ex.D2 and Ex.D3 show they are in judicial custody. He also admits the assessment order was set aside by ITAT under Ex.D1.
43.The evidence of Pws 1 to 3 shows that on search warrant they conducted search operations in the group of companies. The panchanama were conducted and they seized incriminating material, based on the seized documents they came to know that there was undisclosed income. Therefore, the notices were issued under
Section 153C and also under Section 142(1) of IT Act. Even after receiving the notices the accused companies have not filed revised return of income. Therefore, the assessment order was passed against the accused companies. Thereafter, the notice was issued under Ex.P14 thereafter, the complaint is filed. The prosecution contention is that the evidence of Pws 1 to 3 establishes that the accused persons have committed the offence.
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44.On the other hand, the defence contention is that there are ordinarily three teams crafted in respect of search and seizure under warrant of authorization based upon preparatory note. For carrying out search and seizure the three conditions enshrined in section 131 (1) of IT Act ought to be satisfied in the form of satisfaction note which divulges the frame work of mind or to arrive at reason to believe as a precursor under section 132(1) of the Act. After completing search and seizure operations, the search team ought to prepare an appraisal note followed by examination note (analytical report) as to whether there is any incriminating material unearthed during the course of search and seizure requiring to invoke section 153A or 153C of Income Tax Act, 1961. If no incriminating material has been unearthed, the question of invoking section 153A proceedings does not arise. If there has been some material collected which warrants action under Section 147 and 148 subject to limitation under Section 149 of IT act, 1961, then the assessment officer will at liberty to issue notice under the respective provisions without invoking section 153A of the
IT Act, 1961.
45.The defence contention is that from the prosecution evidence and material on record there was no excise done to segregate documents seized by the assessee wise, assessment year wise and premises wise, no systematic arrangement or make analysis on the seized documents and sought out the documents having financial relevancy and financially irrelevant. The question of action under Section 153A or alternative would arise after segregating the documents and they have to find out the undisclosed income from the documents. Without any such segregation they came to conclusion that there was undisclosed income. The prosecution has not brought any material to show that the books of accounts, records and other
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Court of Special Judge for Economic Offences, Hyd. 16 of 34 Judgment in C.C.No. 17 of 2017 documents were not seized by the CBCID. The so called recording of statements are under tremendous pressure and coercion.
46.This Court has taken into consideration of rival contentions made by both parties. Admittedly, during the cross-examination of PW1, he stated he has not received any material or records from the deponents while recording their statements. As per panchanama he has seized books of accounts etc from the companies mentioned in the panchanama as well as books of accounts from the companies mentioned in the respective panchanamas. He said he has seized sale deeds agreements, share ledger registers etc. Basing on those documents they analyzed the balance sheet and profit and loss account of the companies and found huge expenses in cash. However, the directors have expressed their inability to produce the documents like vouchers etc. The perusal of record shows that the prosecution has not filed any such list of documents which they alleged to have seized. As per record, they have filed warrant of authorization and panchanamas. The books of accounts, ledger books etc of the accused companies are not filed. The defence contended that in fact APCID raided the accused companies and they have seized the total documents so the so called documents alleged to be seized by the accused persons are not available in the premises of accused companies but the witnesses alleged that they have seized the documents from the premises of accused company and its subsidiary companies. The defence have marked Ex.D2 & Ex.D3 which shows that at the relevant time Avva Hema Sundera Vara Prasad and Avva
Venkat Rama Rao were injail at the relevant time. The prosecution contended that the notices were served on them but when they are in jail there is a question of serving notices to the accused persons herein.
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47.At the relevant time, during the assessment proceedings pursuance to the issuance of notice under Section 153 A of the Act, and also during the first appellate proceedings all the Directors of the company responsible for the affairs of the company were in judicial custody. So, it is not possible for the assessee to produce all the relevant books, vouchers etc, before the authorities to prosecute the case diligently. Ex.D2 and Ex.D3 they were in jail at the relevant time. So it is an admitted fact that the accused have not produced any such documents before the concerned authority. It is for the prosecution to explain how they got such documents they failed to explain it.
48.The defence contended that upon perusal of the Statements recorded from the
Accused referred in the respective Statements, even assumed but not admitted that the prosecution has thrown weight on the Statements, the Complaint and PWs evidence failed to show the incriminating material to prove that the notice under
Section 153A would be required. It is unclear from the Prosecution whether it has relied upon the Statements of Accused or not. Because, the Statements might have contained inculpatory and exculpatory parts. In such a scenario, it is upto the
Prosecution to substantiate that it has relied upon the inculpatory part to the extent as identified by the prosecution and their consideration to the exculpatory part.
Admittedly, the prosecution got marked the statements under Ex.P1 to Ex.P9 through
PW1 however, they have not stated anything about the gist of the statement which is inculpatory and exculpatory. Mere marking of the documents are not sufficient it is for the prosecution to prove the substance of the statements. They have not proved it.
From the evidence, there is is no material to show that, the notice under Section 153A would be required.
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49.As rightly pointed out by the defence no valuation or the methodologies of valuation has been divulged. Further, they have not filed examination note / or investigation report so as to convince the Court that the proceedings are conducted in accordance with law. When the department is proceeding under Section 153A and 153C, they have to file appraisal note and satisfaction note before the Court. The department has not filed any such documents before the Court. It is for the prosecution to prove that they have genuinely arrive at the conclusion that Section 153A notice would have to be issued and the manner in which it can be issued relying upon alleged incriminating material if any. No incriminating material has been brought into existence from the statements under Ex.P1 to Ex.P9.
50.The perusal of documents Ex.P3 & P11 panchanamas, it is clear that there is no mention about incriminating material in Ex. P3 & P11. Ex.P-3 i.e., Panchanama
dated 23.01.2015 is related to M/s. Agri Gold Farms Estates India Pvt Ltd, Agri Gold
Constructions Pvt Ltd, Agri Gold Project Ltd(the name of Dreamland is not mentioned). It is drawn by PW-2 (Mr. Nethra Pal) PW1/Narsingh Kumar Khalkho wherein there was no mention about the incriminating material and no details were furnished by identifying the material contained attributes of the incriminating material. To proceed against the accused persons further, it is very just and necessary for the income tax officers to place such incriminating material. Without placing such material they cannot proceed further otherwise it is violative of interest of accused persons only.
51.The prosecution relied upon the statements of A3 recorded on different dates.
The perusal of statement shows several questions were asked to A3. From the
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Court of Special Judge for Economic Offences, Hyd. 19 of 34 Judgment in C.C.No. 17 of 2017 statement nothing was elicited from A3 which is incriminatory to prosecute the accused persons.
52.Further, the perusal of document Ex.P12/notice u/s 153A dated 25.08.2015 vide PAN No. AADCA5206A/ CC/2(4)/2015-16 dated 25.08.2015 was issued to the Prl.
Officer of the Dreamland Ventures Pvt Ltd having address at Bangalore, pertaining to
M/s. Dreamland Ventures Private Limited calling upon the addressee to furnish the
Return of Income in respect of Assessment Year within 30 days from the date of receipt of the notice in the prescribed form and verified in prescribed manner and setting forth such other particulars as may apply accordingly as if such return were a return required to be furnished u/s 139 of the IT Act 1961. It is to be noted that as per warrant authorization there was no authorization to conduct panchanama in
Dreamland Ventures Ltd. In Ex.P2 also the name of Dreamland is not mentioned.
However, the panchanama under Ex.P11 shows the panchanama was conducted at
M/s. Dreamland Land Ventures on 23.01.2015. without any authorization the panchanama was conducted under Ex.P11. Further the notice was issued under
Ex.P12 dated 25.08.2015 to the Principal officer of Dreamland ventures Pvt Ltd to file return of income under Section 139 of IT Act. Further Ex.P13 notice was issued under
Section 142(1) of IT Act, on 18.01.2016, the notice under Ex.P14 dated 15.02.2016 was issued to Dreamland Ventures Pvt Ltd stating that why the prosecution proceedings should not be launched against them. The filing of returns under Section 153A is different and filing of returns under Section 139 of IT Act are different. The defence has filed Ex.D3 return of income for the assessment year 2009-2010. The returns were already filed so again issue of notice under Ex.P12 under Section 139 of
IT Act is not proper.
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53.Further, the notice under Ex.P13 was issued under Section 142 (1) of IT Act 1961 vide PAN No. AADCA5206A dated 18.01.2016 to the A-1 Company only at
Bangalore Address. In both the notices under Exs.P12 & 13 there is no mention of seizure of any incriminating material and details if any thereof disclosed in the notices. Even at the time of arguments also the defence counsel has pointed out but no reply was received from the public prosecutor. The documents are mechanically filed and the required information is not giving as per the documents. The main purpose of issue of notice is that the other party should no what was the case against him. The principle of natural justice ie., Audi Alterum partem made it clear that the other party should know all the particulars when the concerned authority is proceedings against the party otherwise there is no opportunity to the party to defend himself it is nothing but violative of fundamental rights of the accused persons.
54.The prosecution has initiated proceedings against the accused by obtaining the sanction order under Ex.P10. The Sanction Order shows that it is a cryptic order of two pages wherein the Sanction was given for deliberate and wilful default in filing the return of income u/s 139(1) of IT Act 1961 for the A.Y. 2009-2010 to 2014-15. As rightly pointed out defence there is no mention about Section 153 A nor is there any disclosure of any incriminating material or material upon which the Assessing Officer has relied upon, material upon which the search team examined or analyzed and satisfied with and finally the material upon which the processing team had done any exercise to arrive at a logical conclusion and the opportunity of being heard conferred on the Accused during the course of the process, in this circumstances the
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Court of Special Judge for Economic Offences, Hyd. 21 of 34 Judgment in C.C.No. 17 of 2017 order is cryptic and suffers from inefficiencies and therefore it is a defect order and cannot be relied upon.
55.A prosecution can be launched only on the basis of sanction of the Principal
Commissioner or appropriate authority. Section 279(1) of the Act is extracted hereunder:
“279. (1) A person shall not be proceeded against for an offence under section-276 or section-277 or section-278 except at the instance of the
Commissioner. (2) The Commissioner may either before or after the institution of proceedings compound any such offence.”
56.The intention of the legislature in introducing requirement of Sanction in
Enactments to be accorded by the competent authority is for the purpose of affording protection from vexations prosecution and to safeguard the interest of the innocent persons. Before granting sanction, the competent authority has to go through all the relevant material placed before it and after assessing the facts of the case and if the competent authority deems it appropriate to grant sanction, accordingly sanction is given for prosecution.
57.The Hon’ble Supreme Court in several judgments held that the competent authority’s sanction would be valid only when such competent authority applies its mind to the entire facts of the case and accords sanction. In the event of the sanction reflecting non-application of mind or not considering the relevant material or any kind of extraneous reasons, such grant of sanction was found to be invalid.
58.The Hon’ble Supreme Court in the case of Mansukhlal Vithaldas Chauhan v.
State of Gujarat2 held as follows:
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Sanction lifts the bar for prosecution. The grant of sanction is not an idle formality or an acrimonious exercise but a solemn and sacrosanct act which affords protection to Government Servants against frivolous prosecutions. ( See: Mohd. Iqbal
Ahmed vs. State of Andhra Pradesh, AIR 1979 SC 677). Sanction is a weapon to ensure discouragement of frivolous and vexatious prosecutions and is a safeguard for the innocent but not a shield for the guilty.
The validity of the sanction would, therefore, depend upon the material placed
before the sanctioning authority and the fact that all the relevant facts, material and
evidence have been considered by the sanctioning authority. Consideration implies application of mind. The order of sanction must ex facie disclose that the sanctioning authority had considered the evidence and other material placed before it. This fact can also be established by extrinsic evidence by placing the relevant files before the
Court to show that all relevant facts were considered by the sanctioning authority.
(See also: Jaswant Singh vs. The State of Punjab, 1958 SCR 762 = AIR 1958 SC 12;
State of Bihar & Anr. vs. P.P. Sharma, 1991 Cr.L.J. 1438 (SC)).
59.Since the validity of "Sanction" depends on the applicability of mind by the sanctioning authority to the facts of the case as also the material and evidence collected during investigation, it necessarily follows, that the sanctioning authority has to apply its own independent mind for the generation of genuie satisfaction whether prosecution has to be sanctioned or not. The mind of the sanctioning authority should not be under pressure from any quarter nor should any external force be acting upon it to take decision one way or the other. Since the discretion to grant or not to grant sanction vests absolutely in the sanctioning authority, its discretion should be shown to have not been affected by any extraneous
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Court of Special Judge for Economic Offences, Hyd. 23 of 34 Judgment in C.C.No. 17 of 2017 consideration. If is shown that the sanctioning authority was unable to apply its independent mind for any reason whatsoever or was under an obligation or compulsion or constraint to grant the sanction, the order will be had for the reason that the discretion of the authority "not to sanction" was taken away and it was compelled to act mechanically to sanction the prosecution.”
60.The Hon’ble Supreme Court in the recent judgment in the case of
S.Athilakshmi v. State rep. by the Drug Inspector3 relying on the judgment of
Mansukhlal’s case held as follows:
“The sanction for prosecution given in the present case appears, prima facie, to suffer from vice of non-application of mind. There is no reference to any of the documents, evidence or the submissions submitted by either of the parties, no reasons assigned or even an explanation pertaining to the delay which indicates it has been passed in a mechanical manner.”
61. The Hon’ble Supreme Court in the case of Nanjappa v. State of Karnataka, held as follows:
The rationale underlying the provision obviously is that if the trial has proceeded to conclusion and resulted in a finding or sentence, the same should not be lightly interfered with by the appellate or the revisional court simply because there was some omission, error or irregularity in the order sanctioning prosecution under Section 19(1). Failure of justice is, what the appellate or revisional Court would in such cases look for. And while examining whether any such failure had indeed taken place, the Court concerned would also keep in mind whether the objection touching the error, omission or irregularity in the sanction could or should have been raised at an earlier stage of the proceedings meaning thereby whether the same
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62.In the case at hand, the Special Court not only entertained the contention urged on behalf of the accused about the invalidity of the order of sanction but found that the authority issuing the said order was incompetent to grant sanction. The trial
Court held that the authority who had issued the sanction was not competent to do so, a fact which has not been disputed before the High Court or before us. The only error which the trial Court, in our opinion, committed was that, having held the sanction to be invalid, it should have discharged the accused rather than recording an order of acquittal on the merit of the case. As observed by this Court in Baij Nath
Prasad Tripathi’s case (supra), the absence of a sanction order implied that the court was not competent to take cognizance or try the accused. Resultantly, the trial by an incompetent Court was bound to be invalid and non-est in law.”
63.The Hon’ble Supreme Court in the case of Mohd. Iqbal Ahmed v. State of
Andhra Pradesh5 held that it is well settled that any case instituted without a proper sanction must fail because this being a manifest defect in the prosecution, the entire proceedings are rendered void ab initio. Further, the prosecution launched without a valid sanction, it was held that the cognizance taken by the Special Judge was without jurisdiction and proceedings were quashed.
64.In the instant case also, the sanction order does not contain all the material which are alleged to be incriminating to the accused so as to initiate proceedings against the accused persons therefore, the sanction order is not valid.
65.The show cause notice was issued under Ex.P.14 on 15.02.2016 to the A1
Company by which time, as revealed in Ex. D2, the Accused referred therein was in
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Court of Special Judge for Economic Offences, Hyd. 25 of 34 Judgment in C.C.No. 17 of 2017 the Judicial Custody and the other Accused was not aware of the Show Cause Notice since the A1 Company premises was seized and documents and properties were attached by the State CBCID Authorities in the month of January 2015. Further the
Show Cause Notice was issued to A1 Company only. As per section 2(35) of companies Act, it is mandatory that the notice should be issued to the Principal officer of the company. No such notice was issued to the principal officer of the company and it is the duty of the department to issue such notice by treating any of the Director as Principal Officer of the Company. The role of each Director and their day to day activities and their responsibilities in the company should be mentioned so as to fix their liability. Admittedly, in the instant case no such notices are served.
66.At this Stage, it is just and proper to pursue Section 2(35) of Income Tax Act which reads as under:
2(35) “principal officer”, used with reference to a local authority or a company or any other public body or any association of persons or any body of individuals, means—
(a) the secretary, treasurer, manager or agent of the authority, company, association or body, or
(b) any person connected with the management or administration of the local authority, company, association or body upon whom the 3[Assessing Officer] has served a notice of his intention of treating him as the principal officer thereof;
M.R.Pratap Vs VM. Muthu Ramalingam in which the Hon’ble Court observed that: it is admitted by the department that no such notice as contemplated under
Section 2(35)(b) has been served on the petitioner hence, the petitioners contention that he cannot be proceeded with for the delayed payment of tax amount by the company, is a well founded one.
Special Judge for Economic Offences, Hyd.
Court of Special Judge for Economic Offences, Hyd. 26 of 34 Judgment in C.C.No. 17 of 2017
67.In Greatway (P) Ltd. & Ors. Vs. Asstt. CIT [1993] 199 ITR 391(P&H), Punjab &
Haryana High Court has held that in the absence of appointment of a principal officer by issuing a notice by the AO, the prosecution, if any, could only be launched against the petitioner-company. Similar is the view expressed in ITO Vs. Roshini Cold Storage (P) Ltd. and Ors. (2000) 245 ITR 322 (Mad). In this case Hon’ble Madras High Court held that in case Income Tax Officer sought to prosecute the director along with company for an offence under Section 276- B of the Act then it was incumbent upon him to issue a notice under sub-clause (b) of 2(35) of the Act expressing his intention to treat the director as "principal officer" of the company and in absence thereof, director shall be entitled to the acquittal.
68.In Sushil Suri and Ors. Vs. State & Ors. (2008) 303 ITR 86 (Delhi), the Hon’ble
Court has held that before a prosecution under Section 276-B of the Act can be launched against the director he should have been notified that department/AO has intention of treating him as "principal officer" of the company. In absence of such notice under Section 2(35)(b) of the Act, prosecution against the director cannot be continued and is bound to fail.
69.In Madhumilan Syntex Ltd. and Others vs. Union of India (2007) 290 ITR 199 (SC), the Supreme Court has held as under:- "To treat the directors of a company as "principal officers" there is no need to issue a separate notice or communication to them that they are to be treated as "principal officers", before the issuance of the show-cause notice under section 276-
B read with Section 278B. It is sufficient that in the show-cause notice under section 276-B read with 278B, it is stated that the directors are to be considered as principal
Special Judge for Economic Offences, Hyd.
Court of Special Judge for Economic Offences, Hyd. 27 of 34 Judgment in C.C.No. 17 of 2017 officers of the company under the Act and such a complaint is entertainable by the court provided it is otherwise maintainable."
70.Legal preposition which emerges from the above is that before launching a prosecution under Section 276-B of the Act against the directors of a company,
Assessing Officer has to issue notice under Section 2(35) of the Act expressing his intention to treat such directors of a company as "principal officers". However, it may not be necessary to issue a separate notice or communication to all the directors that they are to be treated as "principal officers". It would be sufficient compliance if in the show cause notice issued to the company it is mentioned that the directors are to be considered as principal officers of the company under the Act
71.In this case neither a notice was issued to A-2 to A-4 under Section 2(35) of the Act the department intended to treat him "principal officer" nor in the show cause notice issued to the company it was mentioned that department is intended to treat the directors of the company as "principal officers", for the purpose of launching prosecution under Section 276-B of the Act.
72.Admittedly, as per the decision of Hon’ble Courts, the notice under section 2(35) is mandatory. The prosecution has to issue such a notice to the directors of the company intimating their intention to treat them as the principal officers of the company. Further, the Hon’ble Supreme Court held that when the showcause notice is issued to the accused persons, in the notice, the complainant has used specific words intimating to the accused that they are treating a particular director or directors as principal officers of the company then, it is sufficient. But, in the instant case, the contents of the showcase notice shows that no where the complainant has used the words that they are treating A-2 to A-4 as principal officers of A-1 company.
Special Judge for Economic Offences, Hyd.
Court of Special Judge for Economic Offences, Hyd. 28 of 34 Judgment in C.C.No. 17 of 2017
Though, the show cause notices was issued to accused, but in the said notice also, no where they mentioned that A-2 to A-4 are Principal officers of A-1 company.
Therefore, the complainant failed to issue any notice to the accused persons intimating that they are treating any of the accused as principal officers of the company. Further, the decision of Hon’ble Supreme Court made it clear that, apart from issue of notice under Section2(35) of the act, or least by mentioning in the show cause notice that they are treating a particular director as principal officer of the company, in the complaint, if they mention the role of directors and their clear intention that they are responsible for day-to-day activities of the company, then the complainant has complied the conditions laid down under section 2(35) of the Act.
The perusal of the contents of the complaint shows that nowhere in the contents of the complainant mentioned that A-2 to A-4 are principal officers of the company. No doubt, they got it mentioned that they are directors and responsible for day-to-day activities of A-1 company. But, they failed to mention that any of the directors was treated as principal officer of the company. Therefore, A-2 to A-4 should not be treated as principal officers of the company. Therefore non issue of notice under
Section 2(35) of Act is fatal to the prosecution case.
73Further it is pertinent to note that in the said notice, the notice was given under Section 153A read with Section 276CC whereas, the Sanction Order (Ex.P10) was issued under Section 139(1) of the Act without any mention about the alleged violation under Section 153A of the Income Tax Act, 1961. It is a defective Sanction and would not be relied upon. It shows there is defect in issue of sanction order as well as in the notice also.
Special Judge for Economic Offences, Hyd.
Court of Special Judge for Economic Offences, Hyd. 29 of 34 Judgment in C.C.No. 17 of 2017
74.Moreover, in the course of said search, it is alleged incriminating material pertaining to the assessee company were found and seized and marked as annexure.
Since the incriminating material according to the assessing officer belong to the assessee company provisions of Section 153C are applicable and accordingly the proceedings under Section 153C were initiated by recording satisfactory note. In response to the notice, under Section 153C issued calling for return of income which was served on the assessee, the assessee did not file return of income. The defence contention is that the so called satisfaction note under section 153C of the Act alleged to be recorded by the assessing officer, is not as per the procedure. The so called satisfaction is not in accordance with law. The satisfaction recorded by the assessing officer has failed to record his satisfaction that the documents so seized belong wit the assessee company ie., other than the searched person therefore, initiation of proceedings under Section 153C without such proper satisfaction are bad in law. The satisfaction of the assessing officer regarding the seized material belonging or relating to some other person should not be arrived at in a casual manner or merely on the basis of the statement made by the person searched. It should be based upon cogent material and must display the reason or basis for the conclusion that the assessing officer of the person in respect of whom the search was conducted is satisfied that the seized document belong to another person. Nowhere the assessing officer recorded his satisfaction that the material seized belongs to the assessee company therefore such satisfaction itself is invalid.
75.It is to be noted that the defence counsels must have appeared before the commissioner and income tax appellate tribunal appeals so that they are speaking about the satisfactory note. /Unfortunately said document is not filed before theCourt
Special Judge for Economic Offences, Hyd.
Court of Special Judge for Economic Offences, Hyd. 30 of 34 Judgment in C.C.No. 17 of 2017 so this Court is not able to say whether these documents do not belongs to the assessee or not. Therefore, the initiation of proceedings under Section 153C are not in accordance with law. This Court is not able to give any finding on this aspect. The witnesses have stated that satisfactory note is confidential note so it will not be filed
in the Court. They have not filed any circular or document to show that it is a
confidential document. Therefore, this Court cannot give any finding on it.
76.The defence contended the initiation of proceedings under Section 153C are not in accordance with law. The provisions of section 153C were amended with effect from 01.06.2015. As per 153C (1)(b) the words any books of accounts or documents seized or requisitioned, pertains to or pertained to or any information contained therein relates to are applicable with effect from 01.06.2015 since the search in the instant case was concluded on 23.01.2015 which was before 01.06.2015 therefore, the initiation of proceedings under Section 153C are not in accordance with law. The satisfaction note is very crucial to decide whether the document so seized belongs to the assessee and to decide whether the provisions of Section 153C is applicable or not. There is no material produced before the Court to show that the seized documents so found during the course of search belongs to the assessee that is other than the searched person.
77.From the facts and circumstances of this case, this Court feels that, this Court is not able to decide the validity of 153C proceedings and also the assessing proceedings etc. Moreover, from the facts it is clear that the assessment order was passed, basing on which the notice was issued under Ex.P14 for prosecuting the accused. Thereafter, the proceedings are initiated. Admittedly, Ex.D1 is the order copy of ITAT which is the crucial document. The perusal of this document shows that
Special Judge for Economic Offences, Hyd.
Court of Special Judge for Economic Offences, Hyd. 31 of 34 Judgment in C.C.No. 17 of 2017 the Hon’ble ITAT has observed that “it could be seen from the order dated 29.11.2022 in the batch cases of Agri Gold constructions Pvt Ltd, the facts are identical and the co-ordinate bench of this tribunal took the view to set aside the impugned order and to restore the issued to the file of learned officer for giving an opportunity to the assessee to dispose of the matter according to the law. It is clear from the certificate dated 26.02.2019, issued by Superintended District jail Eluru and also the letter dated 24.11.2016 addressed by Sri AV.Rama Rao Chairman of the Agri
Gold group to the DCIT Hyderabad that the Chairman, Vice Chairman, Managing
Directors and others were in the custody within the period 12.02.2016 and 23.10.2018 and lodged in District Jail Eluru. The material clearly establishes that from 12.02.2016 to 23.10.2018, all the persons responsible for the affairs of the
Company were in custody and in their absence as claimed by the learned AR, some part of the material was produced before the authorities there is nothing contrary to disbelieve the statement of learned AR that assessee could not prosecute the proceedings before the authorities diligently due to the fact of non – availability of the persons responsible for the affairs of the company. In fact this particular circumstance is taken note by the co-ordinate benches of the tribunal in the cases of group concerns on earlier occasions as is evidenced by the order dated 29.11.2022.
Having regard to the peculiarity of the facts, we are of the considered opinion that it would be in the interest of justice to set aside the impugned orders and to restore the matters to the file of learned assessing officer to adjudicate the same afresh, after giving an opportunity of being heard to the assessee and also to produce all the relevant material at their custody.” Thereby the Hon’ble ITAT has set aside the assessment order with a direction to pass a fresh order after hearing both sides.
Special Judge for Economic Offences, Hyd.
Court of Special Judge for Economic Offences, Hyd. 32 of 34 Judgment in C.C.No. 17 of 2017
78.From this, it is clear that, the assessing order based on which the present case is filed was already set aside. However, the prosecution has filed the documents vide
Crl MP.No. 2413/2026, as per the documents Ex.P15 is the assessment order dated 30.12.2016, filed basing on which the present case is filed. Thereafter, the notice of demand dated 30.12.2016, is filed under Ex.P16. The order of ITAT dated 26.02.2018, is filed under Ex.P17, in between Ex.P15 and Ex.P17 one more assessment order is passed as the Hon’ble ITAT set aside the assessment order with a direction to pass a fresh order. After passing fresh assessment order, again the parties approached ITAT under Ex.P17. As per the order, the appeal of the appellant ie., the A1 company herein was party allowed. It is to be noted that Ex.P17 is relating to the period after filing of this case. If any fresh assessment order is passed and ITAT order is passed the fresh cause of action arose from that date. The present case is based on Ex.P15 only which was already set aside therefore, the present case is not maintainable. The prosecution contended the fresh assessment order was passed if it is so, the cause of action arose for them to file a fresh case basing on the new assessment order but, the prosecution basing on the old assessment order is not maintainable. Hence, the accused persons are benefit of doubt.
79.In the result, the the accused Nos.1 to 4 are found not guilty for the offence under Sections 276 CC and 278-B of Income Tax Act. So, they are acquitted for the said offences under Section 248(1) Cr.P.C. The bail bonds of the accused shall stand cancelled after the appeal time is over.
Special Judge for Economic Offences, Hyd.
Court of Special Judge for Economic Offences, Hyd. 33 of 34 Judgment in C.C.No. 17 of 2017
The accused are directed to execute personal bond for Rs. 10,000/- each under
Section 437A of Cr.P.C.
Directly typed to my dictation by Stenographer Grade-I, corrected and pronounced by me in open court on this the 13th day of April, 2026.
Special Judge for Economic Offences,
Hyderabad.
APPENDIX OF EVIDENCE
Witnesses examined on behalf of prosecution:
PW.1Narsingh Kumar Khalkho PW.2Nethra Pal PW.3B.Sunil Kumar
Witnesses examined on behalf of Defence: NIL
Exhibits Marked on behalf of prosecution:
Ex.P1Attested true copy of Warrant of authorization dated: 23-01-2015 Ex.P2Attested true copy of Warrant of authorization dated: 19.03.2015 Ex.P3Attested true copy of panchanama, dated:19.03.2015. Ex.P4Attested true copy of Sworn statement of A3 dated 05.02.2015 Ex.P5Attested true copy of Sworn statement of A3 dated 06.02.2015 Ex.P6Attested true copy of Sworn statement of A3 dated 26.02.2015 Ex.P7Attested true copy of Sworn statement of A3 dated 13.03.2015 Ex.P8Attested true copy of Sworn statement of A3 dated 23.03.2015 Ex.P9Attested true copy of Sworn statement of A3 dated 23.03.2015 Ex.P10Authorization issued in favour of PW2 by K.J.Rao, Addl. Director of Income Tax(INV), Unit-I, Hyderabad Ex.P11Panchanama dated 23.01.2015 Ex.P12Notice U/s. 153A was issued for the assessment year 2009-10 and served on the accused on 25.08.2015. Ex.P13Notice U/Sec. 142(1) of the IT Act was issued on 18.01.2016 Ex.P14Copy of show-cause notice issued before passing orders u/s. 279(1) IT Act. Ex.P15assessment order dated 30.12.2016
Special Judge for Economic Offences, Hyd.
Court of Special Judge for Economic Offences, Hyd. 34 of 34 Judgment in C.C.No. 17 of 2017
Ex.P16notice of demand dated 30.12.2016 Ex.P17Order of ITAT
Documents marked by Defence:
Ex. D1Order copy of ITAT Ex. D2Certificate, dated 25.07.2019 issued in respect of Avva Venkata Rama Rao. Ex.D3Income Tax Returns verification form for the assessment year 2009-10 (with consent of both parties the documents are marked)
Sd/-
Special Judge for Economic Offences,
Hyderabad.
Special Judge for Economic Offences, Hyd.
Order Record 575 total
| Case No. | Parties | Date | Type | Outcome |
|---|---|---|---|---|
| CRL.MP/132/2026 | CIU-Central Investigation Unit vs Kontham Srinivasulu | 19 May 2026 | Orders | — |
| CRLMP.BAIL/82/2026 | RANGA REDDY RANGE vs Mididoddi Sarath Kumar | 19 May 2026 | Orders | — |
| CRLMP.BAIL/84/2026 | MAHABUBNAGAR RANGE vs Pathlavath. Ramchander | 19 May 2026 | Orders | — |
| CRL.MP/603/2017 | M.Balaji Naik(CC.NO 16/2015) vs State Of ACB Nalgonda | 18 May 2026 | Orders | — |
| CRL.MP/126/2026 | CIU-Central Investigation Unit vs Kandadi Madhusudhan Reddy | 15 May 2026 | Orders | — |
| CRL.MP/188/2026 | CIU-Central Investigation Unit vs Kuchana Bhaskar | 15 May 2026 | Orders | — |
| CRL.MP/189/2026 | CIU-Central Investigation Unit vs Kuchana Bhaskar | 15 May 2026 | Orders | — |
| CRL.MP/123/2026 | RANGA REDDY RANGE vs Kandadi Anji Reddy | 15 May 2026 | Orders | — |
| CRL.MP/564/2025 | Chowla Srinath Yadav vs RANGA REDDY RANGE | 15 May 2026 | Orders | — |
| CRL.MP/565/2025 | Chowla Srinath Yadav vs RANGA REDDY RANGE | 15 May 2026 | Orders | — |
| CRL.MP/566/2025 | Sri Satya Developers rep by Chowla Srinath Yadav vs RANGA REDDY RANGE | 15 May 2026 | Orders | — |
| CRL.MP/567/2025 | Rama Devi Chowla vs RANGA REDDY RANGE | 15 May 2026 | Orders | — |
| CRL.MP/568/2025 | Sri Satya Developers rep by Chowla Srinath Yadav vs RANGA REDDY RANGE | 15 May 2026 | Orders | — |
| CRL.MP/569/2025 | Kandadi Anji Reddy vs RANGA REDDY RANGE | 15 May 2026 | Orders | — |
| CRL.MP/570/2025 | Chowla Srinath Yadav vs RANGA REDDY RANGE | 15 May 2026 | Orders | — |
| CRL.MP/577/2025 | Kandadi Anji Reddy vs RANGA REDDY RANGE | 15 May 2026 | Orders | — |
| CRL.MP/131/2026 | Karnati Vijetha Reddy vs NALGONADA RANGE | 14 May 2026 | Orders | — |
| CRL.MP/106/2026 | CIU-Central Investigation Unit vs Smt.Sujatha Kancharla | 13 May 2026 | Orders | — |
| CRL.MP/179/2026 | CITY RANGE-1 vs Munagala Sudhakar Reddy | 13 May 2026 | Orders | — |
| CRL.MP/180/2026 | CITY RANGE-1 vs Munagala Sudhakar Reddy | 13 May 2026 | Orders | — |
| CRL.MP/128/2026 | CITY RANGE-1 vs D.Shiva Kumar | 12 May 2026 | Orders | — |
| CRL.MP/534/2025 | CIU-Central Investigation Unit vs Amgoth Sambaiah Nayak(AO) | 12 May 2026 | Orders | — |
| CRL.MP/154/2026 | Daravath Krishna vs RANGA REDDY RANGE | 12 May 2026 | Orders | — |
| CRL.MP/199/2026 | RANGA REDDY RANGE vs Aakula praveen Kumar | 12 May 2026 | Orders | — |
| CC/68/2024 | State Of ACB Nalgonda vs Sarikonda Narsa Raju | 11 May 2026 | Other | — |
| CRLMP.BAIL/73/2026 | P. Ramchander vs MAHABUBNAGAR RANGE | 11 May 2026 | Orders | — |
| CRL.MP/153/2026 | G.Chinna Mallaiah vs RANGA REDDY RANGE | 11 May 2026 | Orders | — |
| CRL.MP/314/2024 | State Of ACB Nalgonda vs Sarikonda Narsa Raju | 11 May 2026 | Other | — |
| CRL.MP/743/2024 | ACB RANGAREDDY RANGE vs BODDUPALLI SAIDULU | 11 May 2026 | Orders | — |
| CRL.MP/172/2026 | CIU-Central Investigation Unit vs Katta Purushottam Reddy | 08 May 2026 | Orders | — |
| CRLMP.BAIL/79/2026 | RANGA REDDY RANGE vs Kondabathini Murali | 08 May 2026 | Orders | — |
| CRL.MP/148/2026 | RANGA REDDY RANGE vs Swathi | 08 May 2026 | Orders | — |
| CRL.MP/684/2023 | State Of ACB Mahabubnagar (Cr.04/RCT-MBNR/23) vs M.Pandu Rangaiah | 08 May 2026 | Orders | — |
| CRL.MP/757/2024 | MAHABUBNAGAR RANGE vs Kandikatla Adisheshu | 08 May 2026 | Orders | — |
| CRL.MP/758/2024 | NALGONADA RANGE vs Dr. Gotham Joseph Paul | 08 May 2026 | Orders | — |
| CRL.MP/129/2026 | CIU-Central Investigation Unit vs Yerubandi Venkateswara Rao | 07 May 2026 | Orders | — |
| CRL.MP/130/2026 | CIU-Central Investigation Unit vs A.Surender Raj | 07 May 2026 | Orders | — |
| CRL.MP/627/2024 | State Of ACB Nalgonda vs Thakoor Roopender Singh(Cr10/RCT-NLG/24) | 07 May 2026 | Orders | — |
| CRLMP.BAIL/75/2026 | CITY RANGE-2 vs Mupparapu Aravind Kumar | 06 May 2026 | Orders | — |
| CRLMP.BAIL/76/2026 | CITY RANGE-2 vs Katapaga Ramesh | 06 May 2026 | Orders | — |
| CRLMP.BAIL/77/2026 | RANGA REDDY RANGE vs U. Siddeshwar | 06 May 2026 | Orders | — |
| CRLMP.BAIL/78/2026 | RANGA REDDY RANGE vs Sampathi Kanakaiah | 06 May 2026 | Orders | — |
| CRL.MP/123/2025 | NALGONADA RANGE vs Lavudi Ravi | 06 May 2026 | Orders | — |
| CRLMP.BAIL/70/2026 | MAHABUBNAGAR RANGE vs Chalamalla Hari Prasad Reddy | 05 May 2026 | Orders | — |
| CRL.MP/707/2024 | State Of ACB Mahabubnagar vs Sri Dinne Venkateshwar Reddy | 05 May 2026 | Orders | — |
| CRL.MP/21/2026 | CIU-Central Investigation Unit vs Smt. K.Satyavathi | 04 May 2026 | Orders | — |
| CRL.MP/22/2026 | CIU-Central Investigation Unit vs Smt. K.Satyavathi | 04 May 2026 | Orders | — |
| CRL.MP/23/2026 | CIU-Central Investigation Unit vs K.Hari Prasad Babu | 04 May 2026 | Orders | — |
| CRL.MP/24/2026 | CIU-Central Investigation Unit vs K.Hari Prasad Babu | 04 May 2026 | Orders | — |
| CRL.MP/2/2026 | RANGA REDDY RANGE vs P.Anil Kumar kishan | 04 May 2026 | Orders | — |
| CRLMP.BAIL/74/2026 | CITY RANGE-2 vs Poosala.Balaiah | 01 May 2026 | Orders | — |
| CRL.MP/75/2026 | CIU-Central Investigation Unit vs M/s. Vasudha Food Processing Industries, Kontham Thanmayee | 01 May 2026 | Orders | — |
| CRL.MP/156/2026 | CID- CENTRAL INVESTIGATION UNIT vs Govindula Venkata Ramana | 01 May 2026 | Orders | — |
| CRL.MP/177/2026 | CIU-Central Investigation Unit vs Rudra Udayasimha | 01 May 2026 | Orders | — |
| CRL.MP/178/2026 | CIU-Central Investigation Unit vs Rudra Udayasimha | 01 May 2026 | Orders | — |
| CRLMP.BAIL/69/2026 | NALGONDA RANGE vs S. Saidulu | 01 May 2026 | Orders | — |
| CRLMP.BAIL/71/2026 | RANGA REDDY RANGE vs Kondabathini Murali | 01 May 2026 | Orders | — |
| CRL.MP/175/2026 | B.Yadaiah vs NALGONADA RANGE | 01 May 2026 | Other | — |
| CRL.MP/176/2026 | Kore Shekhar vs NALGONADA RANGE | 01 May 2026 | Other | — |
| CRL.MP/111/2026 | Gadela Balasubramanyam vs MAHABUBNAGAR RANGE | 30 Apr 2026 | Orders | — |
| CRL.MP/100/2026 | CITY RANGE-1 vs Smt.V.Thirupatamma | 29 Apr 2026 | Orders | — |
| CRL.MP/158/2026 | CITY RANGE-1 vs Bhookya Hariram | 29 Apr 2026 | Orders | — |
| CRL.MP/94/2026 | MAHABUBNAGAR RANGE vs Gadela Balasubramanyam | 29 Apr 2026 | Orders | — |
| CRL.MP/120/2026 | CITY RANGE-1 vs Ishtiaq Hussain | 28 Apr 2026 | Orders | — |
| CRL.MP/32/2026 | MAHABUBNAGAR RANGE vs Smt. Vangoor Hari Priya | 28 Apr 2026 | Orders | — |
| CRL.MP/36/2026 | Talakanit Chandra Shekar Reddy vs MAHABUBNAGAR RANGE | 28 Apr 2026 | Orders | — |
| CRLMP.BAIL/67/2026 | CITY RANGE-2 vs M. Govardhan | 27 Apr 2026 | Orders | — |
| CRL.MP/68/2026 | CITY RANGE-2 vs Bommala Srinivasa Raju | 27 Apr 2026 | Orders | — |
| CRL.MP/527/2025 | CITY RANGE-2 vs Bommala Devi Sriya | 27 Apr 2026 | Orders | — |
| CRL.MP/528/2025 | CITY RANGE-2 vs Bommala Dheeraj | 27 Apr 2026 | Orders | — |
| CRL.MP/529/2025 | CITY RANGE-2 vs Bommala Savithri | 27 Apr 2026 | Orders | — |
| CRL.MP/24/2025 | NALGONADA RANGE vs Nenavath Shyam Naik | 27 Apr 2026 | Orders | — |
| CRL.MP/516/2025 | Smt Dubbudu Chandana Reddy vs RANGA REDDY RANGE | 27 Apr 2026 | Orders | — |
| CRLMP.BAIL/65/2026 | Sampathi Kanakaiah vs RANGA REDDY RANGE | 24 Apr 2026 | Orders | — |
| CRLMP.BAIL/66/2026 | RANGA REDDY RANGE vs Uppununtala Siddeshwar | 24 Apr 2026 | Orders | — |
| CRLMP.BAIL/72/2026 | NALGONADA RANGE vs Mohd. Khadeer | 24 Apr 2026 | Orders | — |
| CRL.MP/159/2026 | CITY RANGE-1 vs Mohd. Jahangir | 23 Apr 2026 | Orders | — |
| CRLMP.BAIL/68/2026 | RANGA REDDY RANGE vs Mukthipudi Richard Simon | 23 Apr 2026 | Orders | — |
| CRL.MP/320/2023 | P.Swathi vs The State of Telangana, ACB, HR District Ranga Reddy. | 23 Apr 2026 | Other | — |
| CRL.MP/63/2026 | NALGONADA RANGE vs Karnti Vijetha Reddy | 22 Apr 2026 | Orders | — |
| CRLMP.BAIL/59/2026 | CITY RANGE-2 vs Mupparapu Aravind Kumar | 20 Apr 2026 | Orders | — |
| CRLMP.BAIL/60/2026 | CITY RANGE-2 vs Katapaga Ramesh | 20 Apr 2026 | Orders | — |
| CRLMP.BAIL/61/2026 | CITY RANGE-1 vs Poosala Balaiah | 20 Apr 2026 | Orders | — |
| CRL.MP/97/2026 | RANGA REDDY RANGE vs K.Ramesh | 20 Apr 2026 | Orders | — |
| CRL.MP/87/2026 | CITY RANGE-2 vs Uppu Srikanth | 17 Apr 2026 | Orders | — |
| CRLMP.BAIL/54/2026 | NALGONDA RANGE vs Mohd. khadeer | 17 Apr 2026 | Orders | — |
| CRLMP.BAIL/55/2026 | Chalamalla Hari Prasad Reddy vs MAHABUBNAGAR RANGE | 17 Apr 2026 | Orders | — |
| CRLMP.BAIL/63/2026 | Kondabathini Murali vs RANGA REDDY RANGE | 17 Apr 2026 | Orders | — |
| CRL.MP/224/2026 | Mohammed Azmath Ali (FN DRI No.15 of 2026) vs The Senior Intelligence Officer | 17 Apr 2026 | Order | — |
| CRL.MP/117/2026 | CITY RANGE-2 vs Bhumireddy Sudhakar Reddy | 16 Apr 2026 | Orders | — |
| CRLMP.BAIL/58/2026 | MAHABUBNAGAR RANGE vs Boya Ranganna | 16 Apr 2026 | Orders | — |
| CRLMP.BAIL/64/2026 | Sundari Kiran Kumar vs MAHABUBNAGAR RANGE | 16 Apr 2026 | Orders | — |
| CRL.MP/29/2026 | RANGA REDDY RANGE vs T.Ram Mohan | 15 Apr 2026 | Orders | — |
| CRLMP.BAIL/56/2026 | CITY RANGE-2 vs Margone Pramod Goud | 13 Apr 2026 | Orders | — |
| CRLMP.BAIL/57/2026 | CITY RANGE-2 vs Jatavath Babu | 13 Apr 2026 | Orders | — |
| CRLMP.BAIL/62/2026 | CITY RANGE-2 vs Suryavansh Santosh Kumar | 13 Apr 2026 | Orders | — |
| CC/900017/2017 | Income Tax vs M/s. Dreamland Ventures pvt Ltd. Rep by Patan Lal Ahammad Khan | 13 Apr 2026 | Judgment | Acquitted |
| CC/900018/2017 | Income Tax vs M/s. Dreamland Ventures pvt Ltd. Rep by Patan Lal Ahammad Khan | 13 Apr 2026 | Judgment | Acquitted |
| CC/900019/2017 | Income Tax vs M/s. Dreamland Ventures pvt Ltd. Rep by Patan Lal Ahammad Khan | 13 Apr 2026 | Judgment | Acquitted |
| CC/900020/2017 | Income Tax vs M/s. Dreamland Ventures pvt Ltd. Rep by Patan Lal Ahammad Khan | 13 Apr 2026 | Judgment | Acquitted |
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Frequently Asked Questions
How many cases has KUMAR VIVEK handled?
KUMAR VIVEK has handled 606 court orders since 2019 at HYD, CBI Court Complex. The average disposal rate is 7 orders per month.
What types of cases does KUMAR VIVEK hear?
Based on available records, KUMAR VIVEK primarily handles Criminal matters (Criminal Cases, CRL) at HYD, CBI Court Complex.
Where is KUMAR VIVEK currently posted?
KUMAR VIVEK is posted as Special Judge for Trial of Economic Offences Cases Hyderabad at HYD, CBI Court Complex, Hyderabad, Telangana.
Are judgments by KUMAR VIVEK available online?
Yes. 20 judgments by KUMAR VIVEK are available on Legistro with full text, outcome, and sections cited.
How fast does KUMAR VIVEK dispose cases?
KUMAR VIVEK disposes approximately 7 cases per month, based on 606 orders handled over their tenure at HYD, CBI Court Complex.
Since when is KUMAR VIVEK serving?
KUMAR VIVEK has been serving at HYD, CBI Court Complex since 2019.
Case Types
Posting History
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Apr 2026 — Apr 2026Special Judge for Trial of Economic Offences Cases Hyderabad · 29 orders
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Apr 2026 — Apr 2026Spl. Judge for Social Welfare Scam Court
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Dec 2025 — PresentPRINCIPAL SPE AND ACB CASES CUM IV ACJ · 138 orders
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Dec 2025 — PresentADDITIONAL SPE AND ACB CASES CUM V ACJ · 168 orders
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Feb 2019 — Mar 2019VIII Addl. Chief Metropolitan Magistrate
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Jan 2019 — Nov 2020IV Addl. Chief Metropolitan Magistrate · 271 orders
Outcomes on Record
Other Judges at this Court