Law:

Section:

Section 276C, read with section 277, of the Income-tax Act, 1961 - Offences and prosecution - Wilful attempt to evade tax, etc. - Assessment year 1986-87 - ITO filed a complaint against assessee-firm through its partners alleging that it had wilfully filed wrong return to evade tax - Respondent No. 2 admitted that he had purchased some drafts which were not shown in assessee's books of account - Purchase of drafts was also proved by statement of PW-1 - Whether since respondent No. 3 was not in charge and responsible to firm for conduct of day-to-day business and was, admittedly, a sleeping partner, she was not liable and had been rightly acquitted by trial court - Held, yes - Whether, since it was proved on record that respondent No. 2 had wilfully filed wrong return and had made false verification, knowing it to be false, he was guilty of offences charged with along with firm - Held, yes FACTS The ITO had filed a complaint under sections 276C and 277, read with section 278B alleging that the assessee-firm had filed its return of income verified by its managing partner, respondent No. 2. During the assessment proceeding the ITO found that the firm had purchased certain demand drafts and had not shown the same in its books of account. The ITO added the amount of demand drafts in the declared income of the assessee and also initiated penalty proceedings under section 271(1)(c). The Commissioner (Appeals) dismissed the appeal filed by the respondents. The trial court found that the respondent No. 2 had filed wrong return and committed the offence but he was acquitted in view of his old age. On appeal : HELD There was no evidence on file that the respondent No. 3 was connected with day-to-day working of the firm. She had not signed the return filed for the assessment year 1986-87. There was no evidence on file that she had ever signed any document relating to the business of the firm. The respondent No. 2 had admitted in his statement, regarding the purchase of drafts. Otherwise also, the purchase of drafts was proved from the statement of Branch Manager. He produced vouchers and stated that through those vouchers, the firm had purchased the demand drafts. He…

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