M/s. Soffia Software Ltd. v. Mrs. Kalpagam Bhaskaran

IN THE HIGH COURT OF JUDICATURE AT MADRASDated: 21.12.2009CoramThe Honourable Mr. JUSTICE K.MOHAN RAMCrl.O.P.Nos.21624 and 21621 of 2002and Crl.M.P.Nos.8927 and 8929 of 2002M/s. Soffia Software Ltd.,No.168, Eldams Road,Chennai – 18... Petitioner in Crl.O.P.No.21624 of 2002R.Venkata Subramani... Petitioner in Crl.O.P.No.21621 of 2002-Vs.-Mrs. Kalpagam BhaskaranMember – I, Appropriate AuthorityIncome Tax Department121 Nungambakkam High RoadChennai – 34 ... Respondent in both the Crl.O.Ps.Criminal Original Petitions filed under Section 482 of theCriminal Procedure Code to call for the records in E.O.C.C.No.594of 2002 on the file of the Additional Chief MetropolitanMagistrate, (E.O-I) Egmore, Chennai and quash the same.For Petitioner in both the Crl.O.Ps. : Mr. V.Ramachandran, senior counsel, for, M/s. Anitha SumanthFor Respondent in both the Crl.O.Ps. :Mr. K.Ramasamy, Spl.P.P., for Income Tax Cases.C O M M O N O R D E RThe petitioners, who are the first and second accused inE.O.C.C.No.594 of 2002 on the file of the Additional chiefMetropolitan Magistrate (E.O.1), Egmore, Chennai, wherein, theyare facing trial for the alleged offences under sections 276 ABread with 269 UC and 269 UL (2) of the Income Tax Act, 1961(hereinafter referred to as "the Act"), have filed the aboveCriminal Original Petitions seeking to quash all furtherproceedings therein. https://hcservices.ecourts.gov.in/hcservices/

2. A perusal of the complaint filed by the respondent againstthe petitioners and others reveals the following allegations:-a) By two sale deeds, dated 25.01.2001 and 27.03.2001, theproperty situated at Plot No.3093 in Aringnar Anna Nagar Scheme,comprised in Block No.1D, T.S.No.294, R.S.No.26 (Pt.) NaduvankaraiVillage, Anna Nagar measuring an extent of one ground and 1200 sq.ft. with the building thereon having built up area of 3400 sq.ft.bearing Municipal Door No.AH 151, 3rd street, Anna Nagar, Chennai –40, was sold by the first accused to the fourth accused for aconsideration of Rs.20 lakhs each totalling Rs.40 lakhs, withwilful intention to evade the legal obligations to be performed asrequired under Chapter XX-C of the Income Tax Act, 1961 and theyhave subjected the impugned property which is one single unit bytwo sale deeds of absolute sale for a total consideration of Rs.40lakhs.b) The first accused to the fourth accused ought to haveentered into an agreement for the sale of the aforesaid propertythe apparent consideration of which exceeds Rs.25 lakhs and filedForm 37-I as required under Section 269 UC of the Act within thestatutory time limit prescribed thereunder, thereby the accused 1to 4 have contravened the provisions of Section 269 UC of the Actand committed an offence under Section 276 AB of the Act.c) Accused 1 to 4 ought not to have completed the saletransaction without obtaining 'No Objection Certificate' from thecomplainant as required under Section 269 UL (2) of the Act,thereby they committed an offence punishable under Section 267ABof the Act.d) Accused 1 to 4 have prevented the complainant, AppropriateAuthority from exercising its pre-emptive right of purchase of theimpugned property as provided under Section 269 UD of the Act.e) Though there are two sale deeds, the property transferredis one single unit for a consideration of Rs.40 lakhs andtherefore, the provisions of Chapter XX-C of the Act clearlyapplies to the said transaction and the accused have contravenedthe provisions of Section 269 UC and Section 269UL (2) of the Act,which is punishable under Section 276 AB of the Act.3. A complaint was filed after sending a show cause noticeand considering the reply received from the accused, the saidcomplaint was taken on file for the aforesaid offences against theaccused. Being aggrieved by that, the first accused has comebefore this Court.4. Heard the learned counsel on either side.5. Learned senior counsel for the petitioners made thefollowing submissions:(a) that the property was sold by the petitioners under twosale deeds for a consideration of Rs.20 lakhs each, which is belowthe prescribed limit of Rs.25 lakhs as provided under Section 269UC and the property conveyed under each sale deed is not a singleunit property as alleged by the complainant, but it is different https://hcservices.ecourts.gov.in/hcservices/ and separate property and there is no basis or justification forthe Appropriate Authority to club the two distinct and separatetransactions as one to bring such transaction under Section 269UC.(b) that to proceed under Section 276 AB against the accused,the provisions contained in Section 279 of the Act does not conferany power to an individual member of the Appropriate Authority tofile a complaint under Section 276 AB, but it confers power on thewhole body of the Appropriate Authority consisting of threemembers, whereas the above complaint has been filed by a singlemember, which is against law and therefore, on that ground alone,it should be quashed.(c) that in the complaint it is stated that accused 1 to 4executed two different sale deeds in respect of two differentproperties with a view to avoid legal obligation under Chapter XX-C of the Act, which is untenable for the reason that the propertytransferred under each deed of sale was less than Rs.25 lakhs,which would not amount to violation of section 269 UC as theSection comes into play when a single unit of property was soldfor Rs.25 lakhs, whereas the facts in this case is otherwise andtherefore, the complaint has to be quashed.(d) Section 269 UC requires that no transfer of immovableproperty of specific value shall be effected except in accordancewith the said section; immovable property is defined underSection 269 UA to include any land and building including anyright therein; hence any right, title or interest in theimmovable property is also included within the definition ofimmovable property; hence undivided interest in the immovableproperty is recognised as immovable property for the purpose ofsection 269 UC; any specific undivided interest in a property byany document which is legally executed and which has been acceptedfor registration by the registering authority would constituteimmovable property; the Registering Authority who is aware of theprovisions of Chapter XX-C and is an authority appointed by theGovernment has accepted the transaction and registered thetransaction of sale; consequently it is not open to thecomplainant to take the stand that there is a contravention ofSection 269 UC; such an act would be violative of the stand takenby another authority of Government which is competent to act inthe matter; the complaint is hence totally malafide and isintended only to harass the petitioners.(e) the complaint is based on the averment that the twotransactions of sale under two different documents of saleexecuted on 25th January 2001 and 27th March 2001 should be deemedto be a single transaction and combined value of the twoproperties sold under two documents of sale should be taken forthe purpose of Section 269 UC; this stand is totally untenable inlaw and is in fact opposed to law; the two documents are legaldocuments accepted and registered by the Appropriate Authorityunder law; each document conveys a different property thereunder;hence it is against law to assume that two different documentsconstitute a single document. https://hcservices.ecourts.gov.in/hcservices/ (f) the two documents of sale have been registered by theRegistering Authority who has accepted the transactions as legallyvalid, just and proper; if there is a contravention of Section269 UC, the Registering Authority is equally responsible for thesame; the very fact that the complaint has not arrayed theRegistering Authority among the accused clearly shows that thecomplaint is filed with malafide intention, with a view to harassthe accused named in the complaint.(g) the complaint is filed on 29th June 2002, while ChapterXX-C itself has been deleted by the Finance Act of 2002 witheffect from 01.07.2002; hence the complaint has been filed in ahaste and with a view to beat time and harass the accused; thisalso vitiates the complaint.(h) the object of Chapter XX-C is to prevent the evasion oftax; there is no averment that there is under-valuation of theproperty with a view to evade tax; even after the issue of thenotice under section 269 UC, an order of purchase has not beenmade by the complainant; this establishes that there is no under-valuation of the property; in these circumstances, the complaintis wholly untenable. (i) that the show cause notice issued to accused 1 to 3relates to some other property and not related to the propertymentioned in the complaint and on that ground the complaint is notsustainable.6. On the aforesaid submissions, the learned Special PublicProsecutor for the Income Tax Cases was heard.7. Learned Special Public Prosecutor submitted that theproperty sold by the accused is a single unit property and toavoid the legal obligation, the accused sold the same by splittingthe same into two units under two different sale deeds in order todefeat the provisions contained in Section 269 UC of the Act andto avoid filing Form 37-I. He submitted that the contention ofthe learned senior counsel for the petitioners that the complaintfor the alleged offence under Section 276 AB of the Act could befiled only by the Appropriate Authority and the same cannot befiled by one of the members of the Appropriate Authority is notsustainable. He submitted that in the sanction order issued underSection 279 (1) of the Act by the Appropriate Authority whileaccorded sanction to file a criminal complaint, the AppropriateAuthority has authorised the First Member, I.Kalpagam Bhaskaran,Appropriate Authority, Chennai, to file the complaint andtherefore, the complaint filed by the Appropriate Authority,Represented by one of its Member is maintainable. In support ofthe said contention, the learned Special Public Prosecutor reliedupon a decision of the Apex Court reported in (1969) 72 I.T.R. 787(T.S.BALIAH v. T.S.RANGACHARI, INC. - TAX OFFICER (S.C.)). In thesaid decision, it has been laid down as under:-".... It is not disputed in the present case that therespondent has filed complaint petitions on theauthority of the Inspecting Assistant Commissioner. https://hcservices.ecourts.gov.in/hcservices/ There is no statutory requirement that the complaintpetition itself must be filed by the InspectingAssistant Commissioner. The clause "at his instance"in section 53 of the 1922 Act only means "on hisauthority" and it is, therefore, sufficient complianceof the statutory requirement if the complaint petitionis filed by the respondent on being authorised by theInspecting Assistant Commissioner."Basing reliance on the said decision, the learned Special PublicProsecutor submitted that the Appropriate Authority under the Acthas accorded sanction to file the complaint and is also authorisedto file the complaint by the First Member of the AppropriateAuthority and as such the complaint has been filed at the instanceof the Appropriate Authority only, represented by its First Memberand therefore the complaint is maintainable.8. Learned Special Public Prosecutor further submitted thatthe contention of the learned senior counsel for the petitionersthat since immovable property is defined under Section 269 UA toinclude any land and building including any right therein andhence any right, title or interest in the immovable property isalso included within the definition of immovable property andtherefore undivided interest in the immovable property isrecognised as immovable property for the purpose of section 269 UCand therefore such undivided is capable of being transfer andtherefore there is no violation of Section 269 UC is untenable.He also submitted that simply because the Registering Authorityhas accepted the two sale deeds and registered the same, it doesnot mean that the accused have not contravened Section 269 UC ofthe Act; similarly, he submitted that simply because theRegistering Authority has not been prosecuted, it does not meanthat the accused cannot be prosecuted. He further submitted thatthere is no provision under the Act to prosecute the RegisteringAuthority under Section 276 AB of the Act. If the contention ofthe learned senior counsel for the petitioners is to be accepted,then, everybody can spilt up a single unit of immovable propertyinto several undivided shares and transfer the same underdifferent sale deeds and defeat the very purpose and object ofSection 269 UC of the Act and therefore submitted that splitting asingle unit into several units is not permissible under the Act.In support of the said contention, the learned Special PublicProsecutor relied upon a decision of the Apex Court reported in(2001) 248 ITR 342 (APPROPRIATE AUTHORITY v. SMT. V. BHARATBHAISHAH (S.C.)). In the said decision, the Apex Court has laid downas under:-"What, in our opinion, therefore, has to be seen forthe purposes of attracting Chapter XX-C is : what isthe property which is the subject-matter of transferand what is the apparent consideration for suchtransfer. This has to be seen in a real light with dueregard to the object of the Chapter and not in anartificial or technical manner. If the apparent https://hcservices.ecourts.gov.in/hcservices/ consideration for the transfer is more than the limitprescribed for the relevant area under rule 48 K, whathas then to be seen is whether the apparentconsideration for the property is less than the marketvalue thereof by 15 per cent or more. If so, thenotice for pre-emptive purchase can be issued and it isthen for the parties to the transaction to satisfy theappropriate authority that the apparent considerationis the real consideration for the transfer.Now, in the present case, the said agreement is for thesale of the said immovable property. That the equalshares of the second and third respondents therein areto be transferred to the first respondent is anecessary incident of such sale. The parties to thetransaction filed Form No.37-I with the appropriateauthority and correctly stated that what was being soldwas the said immovable property and not the one-halfshares of the second and third respondents therein. Italso stated, correctly, that the total apparentconsideration for the transfer of the said immovableproperty was Rs.47 lakhs. This leaves us in no doubtat all that what was to be transferred was the saidimmovable property and that the consideration for suchtransfer was the sum of Rs.47 lakhs. It is of noconsequence that the second and third respondents ownedthe said immovable property as tenants-in-common orthat this is how they had shown their ownership intheir income-tax returns. We are, therefore, of theopinion that the High Court was in error in concludingthat what had been sold by the second and thirdrespondents to the first respondent was their equalshare in the said immovable property, that the apparentconsideration, was, therefore, less than Rs.25 lakhsand that, therefore, the provisions of Chapter XX-Cwould not apply.We should add that even if the agreement of transferhad been so drawn as to show the transfer of the equalshares of the second and third respondents in the saidimmovable property, our conclusion would have been thesame for, looked at realistically, it was the saidimmovable property which was the subject of thetransfer."9. Learned Special Public Prosecutor by referring to thecontention of the petitioners that the complaint has been filed ina haste on 29.06.2002 while Chapter XX-C itself has been deletedby the Finance Act of 2002 with effect from 01.07.2002, submittedthat even if the complaint had been filed after the repealing ofthe said chapter in respect of the offences committed while theAct was in force, prosecution can be launched even after therepealing of the Act and therefore there is no substance in thecontention that the complaint has been filed in a haste. He https://hcservices.ecourts.gov.in/hcservices/ further submitted that for prosecuting a person for violation ofthe provisions contained in Section 269 UC under Section 276 AB ofthe Act, there need not be under-valuation of the property in thesale deeds concerned; the prosecution is only for violation ofSection 269 UC namely that for not obtaining No ObjectionCertificate by filing Form 37-I; the contention of thepetitioners that since the show cause notice contains incorrectdetails relating to the immovable property and therefore thecomplaint is not maintainable is also not sustainable for thereason that before prosecuting a person for violation of theprovisions contained under Section 269 UC, there is no requirementin any of the provisions of the Act to issue a show cause noticebefore actually filing the complaint.10. I have considered the submissions made by the learnedcounsel on either side, perused the materials available on recordand the allegations contained in the complaint.11. Section 269 UA of the Act defines certain terms for thepurposes of Chapter XX-C which deals with the purchase by theCentral Government of immovable properties in certain cases oftransfer. An 'agreement for transfer" is defined by clause (a)thereof to mean an agreement for the transfer of any property."Property" is defined by clause (d) to mean any land or anybuilding or part of a building and any rights in or with respectto any land or any building or a part of a building. "Transfer"in relation to any property means, by reason of clause (f), thetransfer of such property by way of sale or exchange or lease fora term of not less than twelve years. "Apparent consideration" isdefined by clause (b) to mean, if the immovable property is to betransferred by way of sale, the consideration for such transfer asspecified in the agreement of transfer. Section 269 UC placesrestrictions on the transfer of immovable property. Therefore,for the purpose of attracting of Chapter XX-C of the Act, it hasto be seen as to what is the property which is the subject matterof transfer and what is apparent consideration for such transfer.It has to be seen in a real light with due regard to the object ofthe Chapter and not in an artificial or technical manner.12. In this case, there is no dispute that the immovableproperty in question was owned as a single unit by M/s.SoffiaSoftware Ltd., and the same has been dealt with under two saledeeds dated 25.01.2001 and 27.03.2001 and whereby two undividedshares have been transferred to the third accused for aconsideration of Rs.20 lakhs each. If the test laid down in(2001) 248 ITR 342 (referred to supra) by the Apex Court isapplied to the facts of this case, it could be seen that theimmovable property, which is subjected for sale, is the entireproperty belonging to the first accused. To circumvent theprovisions of Chapter XX-C, the said immovable property has beendivided into two equal undivided shares and each such undividedshare has been transferred under the aforesaid two sale deeds https://hcservices.ecourts.gov.in/hcservices/ dated 25.01.2001 and 27.03.2001 respectively. This is preciselywhat is sought to be prevented by Chapter XX-C of the Act. If theimmovable property as a single unit had been transferred by thefirst accused to the third accused, then automatically Chapter XX-C of the Act is attracted and since the apparent saleconsideration will exceed the limit prescribed and automaticallythe vendor and the vendee ought to have filed Form 37-I and soughtfor No Objection Certificate from the Appropriate Authority. Onthe other hand, if certain unit is divided into two undividedhalfs and the same is sold under two different sale deeds, thenthe apparent consideration will fall within the prescribed limitand the need for obtaining No Objection Certificate would notarise and therefore, in the considered view of this Court, theaccused have split the single unit of immovable property into twoundivided halfs and the first accused has executed two sale deedsin favour of the third accused just to evade compliance of Section269 UC of the Act. Therefore the contention of the learned seniorcounsel for the petitioners cannot be countenanced.13. As far as the contention of the learned senior counselfor the petitioners that since the complaint has not been filed bythe Appropriate Authority but the same has been filed by one ofits Members and therefore the complaint is not maintainable isconcerned, it has to be pointed out that in the sanction order,the Appropriate Authority while sanctioning the prosecutionagainst the accused had specifically authorised one of its membersnamely the First Member, Mrs.I. Kalpagam Bhaskaran, to file thecomplaint. As rightly contended by the learned Special PublicProsecutor the complaint has been filed at the instance of theAppropriate Authority and represented by one of its members andtherefore as laid down in the decision reported in (1969) 72I.T.R. 787 (referred to supra) the complaint is maintainable.14. As far as the contention of the learned senior counselfor the petitioners that since the Registering Authority hasaccepted the documents and registered the same and therefore thereis no violation of the Act and when the Registering Authority hasnot been prosecuted, the prosecution of the accused alone istainted with mala fides is concerned, it has to be pointed outthat there is no provision in the Act to prosecute the RegisteringAuthority for the violation of the provisions contained underSection 269 UC of the Act by the owners of the immovableproperties subjected for transfer. Therefore, the said contentionof the learned senior counsel for the petitioners cannot becountenanced.15. Learned senior counsel for the petitioners submitted thatsince the show cause notice issued by the Appropriate Authority isdefective in respect of the description of the immovable propertyand therefore the prosecution is bad in law is concerned, it hasto be pointed out that there is no requirement as per Section 276AB of the Act to issue a show cause notice prior to the https://hcservices.ecourts.gov.in/hcservices/ prosecution. The show cause notice is issued by the AppropriateAuthority for exercising its option to purchase the property andnot for prosecuting the person for violating Section 269 UC of theAct. 16. A reading of Section 276 AB of the Act does not show thatthere is any need to issue any show cause notice before filing thecomplaint. Similarly, Section 279 of the Act also does notcontemplate the issue of any show cause notice. A reading ofSection 269 UD (1A), which reads as follows:-269 UD. Order by appropriate authority for purchase byCentral Government of immovable property. - (1) .....(1A) Before making an order under sub-section (1), theappropriate authority shall give a reasonableopportunity of being heard to the transferor, theperson in occupation of the immovable property if thetransferor is not in occupation of the property, thetransferee and to every other person whom theappropriate authority knows to be interested in theproperty. ...."shows that before making an order under sub-section (1) of Section269 UD of the Act by the Appropriate Authority for purchase of theimmovable property, an opportunity of hearing should be accordedto the transferor etc., which includes a show cause notice. Butno such requirement is contemplated in the Penal Provisions forprosecuting a person for violation of Section 269 UC of the Act.Therefore, the contention of the learned senior counsel for thepetitioners cannot be countenanced.17. For the aforesaid reasons, the above Criminal OriginalPetitions fail and the same are dismissed. Since E.O.C.C.No.594of 2002 is pending from the year 2002, the learned AdditionalChief Metropolitan Magistrate, Egmore, Chennai, is hereby directedto dispose of the same within a period of six months from the dateof receipt of a copy of this order. Consequently, the connectedCrl.M.Ps are closed. Sd/- Asst.Registrar. /true copy/ Sub Asst.Registrar.rnb / srk https://hcservices.ecourts.gov.in/hcservices/ To1. The Additional Chief Metropolitan Magistrate, (E.O.I)Egmore, Chennai2. The Memberoffice of the Appropriate AuthorityIncome Tax DepartmentII Floor, 121 Nungambakkam High RoadChennai – 34 3. The Special Public ProsecutorHigh Court, Madras.2 ccs to Dr. Anita Sumanth, Advocate, SR. 70152Crl.O.P.Nos.21624 and 21621 of 2002& Crl.M.P.Nos.8927 and 8929 of 2002 PA (CO)kk 4/1