Offences and prosecution — False verification in return — Since the signature on return was not disputed at the time of assessment and penalty proceedings, it amounted to admission and the accused could not have been acquitted for the reason that prosecution was not able to prove the signature of the accused.

M/s.
Mangat Ram Norata Ram is a partnership firm carrying on the business of
sale and purchase of machinery, iron pipes and spare parts. One Mr. Hem
Raj happened to be one of its partners. M/s. Mangat Ram Norata Ram
(hereinafter referred to as ‘the firm’) filed its income-tax return for
the A.Y. 1988-89 on July 14, 1988 through its counsel, which was signed
and verified by Hem Raj, its partner. The income-tax return showed the
income of the firm Rs.1,02,800. Return was accompanied by statement of
income, trading accounts, profit and loss account, partnership account
and balance sheet for the A.Y. 1988-89. The assessment was completed by
the then Income-tax Officer u/s.143(3) of the Income-tax Act for
Rs.1,47,370.

The books of account of the firm were taken into
possession by the Sales Tax Department, which were obtained by the
Income-tax Department and on its perusal, discrepancies relating to
entries of income, sale and purchase, bank account, etc., were noticed
and accordingly a notice u/s.148 of the Income-tax Act, 1961
(hereinafter referred to as ‘the Act’) was issued requiring the
respondents to furnish a revised return within 30 days. The respondents
did not comply with the notice and thereafter notice u/s.142(1) of the
Act was issued and the assessee-firm ultimately filed its incometax
return declaring its income of Rs.1,47,870. This return was said to be
duly signed and furnished by the accused Hem Raj, which was accompanied
by a revised statement of income, trading account and profit and loss
account. All these documents were also signed by the accused Hem Raj. On
consideration of the same, the Assistant Commissioner of Income-tax
made addition of Rs.1,28,000 with the trading account, Rs.1,10,000 in
the bank account and Rs.19,710 as additional income and assessed the
total income to Rs.3,68,200 and directed for initiating penalty
proceedings.

Ultimately, the minimum penalty of Rs.1,24,950 was
imposed u/s.271(1)(c) of the Act and further a sum of Rs.7,890 and
Rs.12,680 u/s.271(1)(a) of the Act. The respondent firm filed appeal
against the imposition of penalty which was dismissed by the
Commissioner of Income-tax (Appeals). The respondents had paid the
penalty inflicted on the firm.

A complaint was also lodged for
prosecution of the respondents u/s.276C(1), 277 and 278 of the Act. The
Trial Court on appraisal of the evidence held both the respondents
guilty and awarded a fine of Rs.1,000 each u/s.276C(1), 277 and 278 of
the Act to the firm, whereas, Hem Raj was sentenced to undergo rigorous
imprisonment for one year and to pay a fine Rs.1,000 on each count and
in default to suffer simple imprisonment for three months.

The
firm and Hem Raj aggrieved by their conviction and sentence preferred
appeal and the Appellate Court set aside the conviction and sentence on
the ground that sanction for prosecution was not valid. The Appellate
Court further held that the prosecution has not been able to prove the
signature of Hem Raj in the return filed, and hence, the conviction is
bad on that ground also. The Income-tax Officer aggrieved by the
acquittal of the accused preferred an appeal and the High Court by its
impugned judgment upheld the order of the acquittal and while doing so
observed that the sanction is valid but maintained the order of
acquittal on the ground that the prosecution has not been able to prove
that the return was signed/verified by Hem Raj.

On further
appeal, the Supreme Court observed that the prosecution had led evidence
to prove that the revised return was filed by the firm under the name
of the accused Hem Raj and on that basis assessment was made by the
assessing authority. There is further evidence to show that aggrieved by
the order of assessing authority, an appeal was preferred before the
Appellate Authority under the signature of the accused Hem Raj, which
was dismissed and the penalty was paid. At no point of time the accused
Hem Raj made any objection that the return did not bear his signature
and was not filed by him. It is trite that admission is the best
evidence against the maker and it can be inferred from the conduct of
the party. Admission implied by conduct is strong evidence against the
maker, but he is at liberty to prove that such admission was mistaken or
untrue. By proving conduct of the accused Hem Raj in not raising any
dispute at any point of time and paying the penalty, the prosecution has
proved his admission of filing and signing the return. Once the
prosecution has proved that, it was for the accused Hem Raj to
demonstrate that he did not sign the return. There is no statutory
requirement that signature on the return has to be made in the presence
of the income-tax authority. Nothing has been brought in evidence by the
accused Hem Raj that the signature did not belong to him on the return
and the penalty was paid mistakenly. The Supreme Court was of the view
that the Appellate Court had misdirected itself in not considering the
evidence in a right perspective and acquitting the accused, so also the
High Court which failed to correct the apparent error.

Accordingly,
the Supreme Court allowed the appeal and the impugned orders were set
aside and the judgment of conviction passed by the Chief Judicial
Magistrate was restored. However, the Supreme Court reduced the
substantive sentence from one year to six months on each count and they
were directed to run concurrently.