BANGALORE: A sessions court has suspended the sentence of two years rigorous imprisonment awarded by a lower court to industrialist and Lok Sabha member D.K. Audikeshavalu and granted him bail in a case relating to evasion of income tax.

The Special Court for Economic Offences had taken cognisance of a complaint by the Income Tax Department and found Mr. Audikeshavalu guilty of tax evasion and sentenced him to two years rigorous imprisonment and imposed a fine of Rs. 50,000 and in default to undergo simple imprisonment for six months for offences punishable under the Income Tax Act.

Fine

The Special Court also sentenced Arun Towers Private Limited (No. 2 Vittal Mallya Road, St. Joseph's High School compound, Bangalore), which houses the Mallya Hospital, of which Mr. Audikeshavalu is the Managing Director to pay a fine of Rs. 50,000. If the company failed to pay the fine, the court said Mr. Audikeshavalu would have to undergo simple imprisonment for two more years.

The complaint by the Income Tax Department was that Mr. Audikeshavalu and Arun Towers Private Limited had violated several provisions of the Income Tax Act, which were punishable under Sections 276-C (1) and 277 of the IT Act of 1961.

It said Arun Towers was a private company and Mr. Audikeshavalu its Managing Director and Principal Officer. He was in charge of the day-to-day affairs, business and administration of the company. On February 25, 1982, the company took on lease property bearing No. 23 on Grant Road, Bangalore, for commercial exploitation.

Rent

During the construction of the building, the assessee entered into a lease on August 13, 1988 with Bangalore Hospitals on a monthly rent of Rs. 4.2 lakhs with a 10 per cent enhancement of monthly rents once in three years. The assessee was to receive an advance of Rs. 42 lakhs. The department said for the assessment years 1989-90 to 1995-96, the assessee declared losses in return of income. The income by way of rent from Bangalore Hospitals was not offered for taxation.

Mr. Audikeshavalu appealed in the sessions court against the verdict of the special court. In his appeal, Mr. Audikeshavalu challenged the legality of the sentence and the order of the Income Tax Department. He said he had paid all the income tax dues and that he had not indulged in tax evasion as was being made out by the department.

Appearing for Mr. Audikeshavalu, C.V. Nagesh said it was not true that his client had indulged in tax evasion.

He said there was no question of false declaration as his client, as per the income tax records, had not mentioned the rental from the building. Thus, there could not be any charge of false declaration.

The Sessions Court suspended the sentence with a rider that Mr. Audikeshavalu would have to pay 25 per cent of the fine amount. It also called for the records.

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