Law:

Section:

Section 277 of the Income-tax Act, 1961 - Offences and prosecution - Wilful attempt to evade tax, etc - Whether to sustain prosecution under section 277 prosecution has to establish that not only verification made by accused was false but also that every one of them had made such verification with belief and knowledge that such verification was false or at least that they believed such verification not to be true - Held, yes - Whether mere fact that accused had agreed to additional figure to avoid further trouble would not mean that return or verification of return must be necessarily false - Held, yes - Whether where partner of firm had submitted false return knowing or believing such return to be false, firm would also be liable for offence as such knowledge or belief could be imputed to firm - Held, yes. FACTS The accused No. 1 was a partnership firm and accused Nos. 2 to 9 were partners of firm. For the relevant assessment year accused No. 1 firm filed return of income signed by accused No. 2. In respect of certain items, the ITO found that return was false and same had been submitted by the accused knowing them to be false. He, therefore, added said amounts in the income of the accused No. 1. The accused No. 3 agreed to certain amount being added for the relevant assessment year. The AAC added the said amount to the income derived by the accused firm and started prosecution proceeding under section 277 against all the accused. The accused Nos. 3 to 9 stated that accused No. 2 was directly in charge of the affairs of the firm, that the rest of the partners were only sleeping partners and that they had not been responsible for the incorrect return and documents being filed. In addition, accused No. 3 stated that he gave his consent for adding certain amount solely for the reason that he wanted the long drawn out assessment proceedings to come to a termination. The Chief Presidency Magistrate adquitted the accused Nos. 4 to 9. On appeal, the accused contended that the firm could not be convicted under section 277 as the firm had no mind and it could not be said that the firm had also knowledge that the return was false. It was also contended that a firm is…

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