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Managing Director
Director
versus
CC No.: 519490/2016 u/s 276CC r/w 278B of Income Tax Act, 1961.
JUDGMENT
Vide this order I shall dispose off an appeal filed against the judgment dt.
24.06.2017 and order on sentence dt. 24.07.2017passed by the court of Ld.
2. Facts relevant for the decision of the present appeal are that a complaint
was filed before the Ld. ACMM by Dy. Commissioner of Income Tax, Central
Circle-11, New Delhi with the allegations against the appellants inter alia that a
search under the provisions of Income Tax Act was conducted on 06.01.2011
against the appellant no. 1 M/s Shiv Vani Oil & Gas Exploration Services Ltd.
and other companies by the Investigation Wing of the Income Tax Department,
New Delhi of which the appellant no. 2 & 3 were informed to be persons
responsible and Incharge of day to day affairs of the appellant no. 1 company.
The case of the appellant was centralized vide order u/s 127 of Income Tax Act.
It has been mentioned in the complaint that as per provisions of Section 139(1)
of the Income Tax Act, the appellant was under obligation to file the return of
income on or before 30.09.2011 and the appellant failed to fulfill this
obligation. A notice u/s 142 (1) of Income Tax Act dt. 25.04.2012 was issued to
the appellant calling them to file the return of income on or before 03.05.2012
for assessment year 2011-2012. The appellants did not file the return of
income within the stipulated period. Another notice u/s 142(1) Income Tax Act
dt. 05.09.2012 was issued and served upon the appellants to file the return of
income by 13.09.2012 but no return was filed by them. Thereafter, another
notice u/s 142(1) Income Tax Act dt. 08.10.2012 was issued and served to the
appellants to file the return on or before 18.10.2012. The grudge of the
respondents/complainant i.e. the Income Tax Department was that no return
was filed by the appellant willfully despite being granted repeated
opportunities/notices.
3. It has been averred in the complaint that finally appellants filed the return of
income on 17.12.2012 declaring the income to be as 69926040/-(INR) in the
prescribed format digitally signed by appellant no. 3 Padam Singhee relevant
to the assessment year 2011- 2012 and the balance sheet, profit and loss
account etc. were signed by appellant no. 2 & 3. Thereafter, appellant filed
revised return for the assessment year 2011-12 on 15.3.2013 duly signed and
verified by appellant no. 3, declaring income to be as 109926040/-(INR).
4. It was highlighted in the complaint that the assessment done by the Income
Tax Department u/s 143(3) of Income Tax Act for assessment year 2011-12
could assess a total income of the appellants to be as 1250228894/-(INR) and
5. The prosecution of the appellants was sought for the offences u/s 276-CC
r/w Section 278B of the Income Tax Act for the assessment year 2011-2012 on
the grounds that the appellants had willfully not filed the return of the income
for the assessment year 2011-2012 on or before the due date and further that
appellants even had not filed the return of income in response to various
notices issued by Income Tax Department as detailed down above u/s 142(1)
of IT Act.
6. The Ld. ACMM was pleased to frame charges for the offences u/s 276-CC
r/w Section 278B & 278E of Income Tax Act. The evidence was led by the
parties. The respondent examined PW-1 A.L. Prashad who was the
complainant. The appellants also examined DW-1 Kailash Jogani.
The PW-1 A.L. Prasad proved the complaint Ex.PW1/1 besides the sanction
granted for the prosecution Ex.PW1/2. He reiterated the contents of the
original complaint in his testimony on oath before the court during pre-charge
evidence. The appellants/accused had reserved their right to cross-
examination while the pre-charge evidence was being recorded and they could
cross-examine this witness at the post charge stage.
The DW-1 Kailash Jogani was the Chartered Accountant of the appellants
wherein he brought to light before this court the factum regarding imposition
of penalty u/s 271F of Income Tax Act by the Assessing Officer. It was
submitted on oath before the court by DW-1 that against the very order of
penalty u/s 271F of the Income Tax Act, the appellants preferred an appeal
before CIT(A) and CIT(A)-24 who by his order dt. 23.05.2015 set aside the
penalty order passed by Assessing Officer, holding that there was no willful
default on the part of accused company and thus there was no contravention.
He proved the copy of the order Ex.DW1/1 i.e. the order of the Commissioner
of Income Tax (Appeals)-24.
7. Vide the impugned judgment, the Ld. ACMM convicted the appellants for
the offences u/s 276-CC r/w Section 278B of IT Act and vide impugned
sentence he sentenced the appellant no. 1 to pay fine of Rs. Ten lacs, and the
remaining appellant no. 2 Prem Singhee and appellant no. 3 Padam Singhee to
undergo RI for three years and further sentenced each to pay fine of Rs. Five
10. The arguments carried on by ld. Counsels for appellant no. 1 and that of
appellants no. 2 & 3 were almost common.
11. The arguments of the ld. Counsels for the appellants in the appeal were
based on the grounds taken in this appeal. The focus of the Ld. Counsels for
the appellant was not much on the evidence led by the parties but their
arguments were confined to the legal position of law as laid down by Hon'ble
Supreme Court of India and Hon'ble High Court of Delhi. They reiterated that
the impugned judgment and impugned order on sentence passed by Ld.
ACMM is not sustainable in the eyes of law. They elaborated during arguments
that the present complaint was filed by the respondent on 01.08.2014 before
the court of Ld. ACMM and prior to that the assessing officer vide his order dt.
28.02.2014 had already imposed a penalty of Rs. 5000/- on appellant no. 1 for
its failure of filing of return of income of the relevant assessment year on the
grounds that the assessee filed the return beyond the period prescribed. It was
12. The Ld. Counsel for the appellants no. 2 & 3 further argued that as on the
date of filing of complaint, the assessment has not attained finality and hence
the complaint became premature and hence no offence had taken place as the
provisions of section 276 of the Act was not satisfied. Ld. Counsel pointed out
that unless and until it is shown that failure to file the return was 'willful' or
'deliberate', no prosecution under section 276CC Income Tax Act could be
initiated and that whether the appellants had committed an offence or not
was to depend upon the final assessment of income and tax liability
determined by appropriate authority and not on the basis of assessment made
by Assessing Officer. He stated that could be the only interpretation that could
be given to section 276CC of Income Tax Act.
13. Ld. Counsel for the appellants no. 2 & 3 had also drawn the attention of
this court towards the word 'willful' as contained in provisions of Section 276-
CC Income-Tax Act explaining that the non filing of the return either u/s 139
Income Tax Act or subsequent thereto after issuance of notice u/s 142 Income
Tax Act by the appellants was neither intentional and nor it was for the
purpose of evading income-tax by the appellants. He argued that the ld.
ACMM jumped to the conclusion by mentioning in the impugned judgment
that since the income of the appellant was assessed to be 1250228894/- on
14. Upon being quizzed by this court, the Ld. Counsel for the appellants stated
that the matter regarding the actual assessment of the income pertaining to
the year in dispute is still pending before the Assessment Commissioner-
Income Tax and hence the complaint was not maintainable. The Ld. Counsels
further refuted that ld. ACMM has committed an error in coming to conclusion
that the return was not filed for the purposes of evading the tax, this is
because the issue herein was not as to how much the assessee was to be
assessed for income-tax but issue was confined merely to the late filing of the
return.
15. Ld. Counsel for appellants more particularly for appellants no. 2 & 3 relied
upon the judgment of Hon'ble Supreme Court of India in K.C. Builders & Anr.
Vs The Assistant Commissioner of Income Tax (2004), 2 SCC 731, and the
judgment of Hon'ble High Court of Delhi in Income Tax Officer Vs M/s Rajan &
Company, Crl. Revision Petition 33/2005 DOD 02.01.2007.
16. Per contra, the Ld. Counsel for respondent submitted that the impugned
judgment and impugned order on sentence does not suffer from any illegality
or incorrectness and has been passed within the periphery of law. It was
agitated that the prosecution before the court of Ld. ACMM and the
proceedings before the assessing officer or Commissioner of Income Tax
(Appeals) or the Appellate Tribunal- Income Tax are independent, and that
simply because the penalty has been deleted by the order of Commissioner of
Income Tax (Appeals), it cannot be ipso facto taken to mean that the
17. Ld. Counsel for the respondent further carried on that the appellants are
harping on the order dt. 25.5.2015 passed by Commissioner of Income Tax
(Appeals) regarding quashing of the deletion of penalty u/s 271 (F) Income Tax
Act which was slapped upon appellant in connection on non compliance of
section 139 Income Tax Act. It has been claimed that as per section 139(1)
Income Tax Act, the appellant no. 1 was statutorily bound to file the return on
or before 30.09.2011. It has been explained by ld. Counsel for respondent that
ld. ACMM has convicted the appellants for non compliance of the notice u/s
142(1) which is admitted to have been served to the appellants Ex.PW1/7 dt.
08.10.2012. It was further highlighted that there was a time gap in issuing
notice u/s 142(1) Ex.PW1/7 dt. 08.10.2012 and the deletion of penalty for non
compliance of the provisions of Section 139 of Income Tax Act according to
which the return ought to have been filed by 30.09.2011, though as per
appellant the time was still 30.09.2011. Upon being questioned by this court
during arguments, the Ld. Counsel for the respondent has clarified that no
adjudicatory proceedings were initiated against the appellant by the Assessing
Officer of Commissioner of Income Tax (Appeals) for non compliance of the
notice u/s 142(1) Ex.PW1/7. Ld. Counsel for the respondent further referred to
Section 278(E) Income Tax Act wherein it has been mentioned that the court
shall presume the existence of culpable mental state on the part of the
accused. He further stated that Ld. ACMM had categorically dealt with the
issue regarding distinction with respect to the implications of non filing of
return u/s 139 and Section 142 Income Tax Act coupled with Section 278(E)
Income Tax Act.
18. Ld. Counsel for the respondent referred to the judgment of Hon'ble High
Court of Delhi in V.P. Punj Vs Assistant Commissioner Income Tax DOD
03.08.2001 and also of Hon'ble Supreme Court of India in Prakash Nath Khanna
Vs. Commissioner Income Tax (2004) 9 SCC 686, DOD 16.02.2004 and Radhe
19. Ld. Counsel for the respondent has further drawn the attention of this
court towards Section 276-CC Income Tax Act proviso in order to refute the
arguments of ld. Counsel for the appellants for the word 'willful' as contained
in section 276-CC Income Tax Act with arguments that the proviso of the said
section provided that the person shall not be prosecuted if even after payment
of advance tax his income does not exceed Rs. 3000/-. He highlighted that the
proviso can be taken to mean that in any case if the income of the assessee is
assessed for a sum more than Rs. 3000/- even after the adjustments of
advance tax, he can be prosecuted.
20. Rebutting the arguments of ld. Counsel for the respondent, ld. Counsels for
the appellants more particularly Ld. Counsel for appellants no. 2 & 3 with all
vehemence at their command argued that the ld. Counsel for the respondent is
trying to confuse the provisions of Section 139 and Section 142 Income Tax Act
and have not read/understood the same in its true letter & spirit. He argued
that when once the penalty has already been deleted by the Commissioner of
Income Tax (Appeals) which was imposed for non compliance of provision of
Section 139 Income Tax Act and while deleting the penalty the Commissioner
of Income Tax (Appeals) have also detailed down the reasons and the
compulsions of the appellants for non filing of the return within the prescribed
period u/s 139 Income Tax Act, how can the appellant be convicted for non
compliance of the notice u/s 142 Income Tax Act which can only be pursuant
to the non filing of the return within the prescribed period of Section 139
Income Tax Act. He further argued that the job of the income tax authorities is
primarily the collection of tax and not the prosecution, and that when the CIT
(Appeals)-24 could not find legible reasons for imposition of penalty for
defiance of provision of Section 139 Income Tax Act, the prosecution cannot be
lanched for defiance of subsequent steps i.e. for non compliance of notice u/s
142 of Income Tax Act. He stated that both the provisions are inter related.
For the purposes of arriving at conclusion, this court would first of all discuss
the arguments of Ld. Counsel for the appellant that the proposition whether
the appellant has committed an offence or not will depend upon the final
assessment of Income tax and tax liability determined by appropriate authority
and not by the assessment made by Assessing Officer and that the assessment
has not attained finality for which the complaint has become pre mature on
the date of filing the same and hence the no offence is attracted under section
276-CC of the Act. In this regard the Hon'ble supreme Court has categorically
laid down clear ratio in the aforementioned judgment in Sasikala's case
wherein the same issue was dealt with in detail by Hon'ble Supreme Court as
laid by the Ld. Counsel for the defence in the case in hand. The Hon'ble
Supreme Court has laid down the following dictum- "28. We also find no basis
in the contention of the learned senior counsel for the appellant that pendency
of the appellate proceedings is a relevant factor for not initiating prosecution
proceedings under Section 276CC of the Act. Section 276CC contemplates that
an offence is committed on the non-filing of the return and it is totally
unrelated to the pendency of assessment proceedings except for second part
of the offence for determination of the sentence of the offence, the
department may resort to best judgment assessment or otherwise to past
years to determine the extent of the breach. The language of Section 276CC, in
our view, is clear so also the legislative intention. It is trite law that as already
held by this Court in B.Permanand v. Mohan Koikal (2011) 4 SCC 266 that " the
language employed in a statute is the determinative factor of the legislative
intent. It is well settled principle of law that a court cannot read anything into a
statutory provision which is plain and unambiguous." If it was the intention of
the legislature to hold up the prosecution proceedings till the assessment
proceedings are completed by way of appeal or otherwise the same would
have been provided in Section 276CC itself. Therefore, the contention of the
learned senior counsel for the appellant that no prosecution could be initiated
till the culmination of assessment proceedings, especially in a case where the
appellant had not filed the return as per Section 139(1) of the Act or following
the notices issued under Section 142 or Section 148 does not arise."
To fulfill its obligation to rebut the presumption u/s 278 Income Tax Act, the
defence has examined its own witness DW-1 Kailash Jogani who placed on
record and proved the order of the Commissioner of Income Tax (Appeals)-24
dt. 25.05.2015 Ex. DW1/1 vide which a penalty was imposed by Assessing
Officer on the appellant for defiance of provisions of Section 139 Income Tax
Act was deleted.
a) That the group cases of Shiv Vani Group are not yet fully centralized
with the Central Circle-11, New Delhi.
b) That the group was earlier assessed at Nagpur, hence all the
photocopies of seized materials are lying at Nagpur.
e) That the assessee had already filed the return of income on 27th
November, 2012 and paid complete tax for the aforesaid assessment
year.
24. On the basis of the submissions of the appellants before the CIT(Appeals)-
24, the CIT (Appeals)-24 observed that as per the section 273-B Income Tax Act
no penalty should levied for any failure referred to section 271-F Income Tax
Act if there was reasonable cause for the said failure. It was mentioned in the
25. Now I shall come to the arguments of the ld. Counsel for the appellants
vide which the judgment of Hon'ble Supreme Court in K.C. Builders & Anrs. Vs
Assistant Commissioner of Income Tax (2004) 2SCC 731 was referred and also
the arguments of the ld. Counsel for the respondent vide which a three Judge
Bench judgment of Hon'ble Supreme Court in Radhe Shyam Kejriwal Vs State
of West Bengal & Anr. (2011) 3 SCC 581 was relied by respondents to confront
judgment in K.C. Builders case (supra).
26. In the judgment of K.C. Builders (supra) the following issues were raised:
"9. On the above pleadings and facts and circumstance of the case, the
following questions of law arise for consideration by this Court:-
(c) Whether the High Court was justified in dismissing the Criminal
Revision Petition vide its impugned order ignoring the settled law as laid
down by this Court that the finding of the Appellate Tribunal was
exclusive and the prosecution cannot be sustained since the penalty
after having been cancelled by the complainant following the Income
Tax Appellate Tribunal's order no offence survives under the Income Tax
Act and thus the quashing of the prosecution is automatic?
(d) Whether the finding of the Income Tax Appellate Tribunal is binding
upon the Criminal Court in view of the fact that the Chief Commissioner
and the Assessing Officer who initiated the prosecution under Section
276C(1) had no right to overrule the order of the Income Tax Appellate
Tribunal. More so when the Income Tax Officer giving the effect to the
order cancelled the penalty levied under Section 271(1)(c).
(e) Whether the High Court's order is liable to be set aside in view of the
errors apparent on record."
After discussing the previous law on the issues, the Hon'ble Supreme Court
held as under:
"29. In our view, once the finding of concealment and subsequent levy
of penalties under section 271 (1)(c) of the Act has been struck down by
the Tribunal, the Assessing Officer has no other alternative except to
correct his order under Section 154 of the Act as per the directions of
the Tribunal. As already noticed, the subject matter of the complaint
before the Court is concealment of income arrived at on the basis of the
finding of the Assessing Officer. If the Tribunal has set aside the order of
concealment and penalties, there is no concealment in the eyes of the
law and, therefore, the prosecution cannot be proceeded with by the
complainant and further proceedings will be illegal and without
jurisdiction. The Assistant Commissioner of Income Tax cannot proceed
with the prosecution even after the order of concealment has been set
aside by the Tribunal. When the Tribunal has set aside the levy of
27. The Hon'ble Supreme Court in K.C. Builders case (supra) has categorically
held that after the order of the Tribunal and the consequent cancellation of
penalty, if the trial is allowed to be proceeded further, the same would be an
idle and empty formality to require the appellants to have the order of
Tribunal exhibited as a defence document in as much as the passing of the
order as unsustainable and unquestionable.
"38. The ratio which can be culled out from these decisions can broadly
be stated as follows:
(iv) The finding against the person facing prosecution in the adjudication
proceedings is not binding on the proceeding for criminal prosecution;
31. Contrary to arguments of Ld. Counsel for respondent, this court could find
that the verdict of the Hon'ble Supreme Court in K.C.Builder's case stands as
ratified by the subsequent judgment in Radhe Shyam Kejriwal's case (supra).
32. In the case in hand as already said, the CIT (Appeals)-24 had already
deleted the penalty imposed upon the appellants by the order of Assessing
Officer for infraction u/s 139 of Income Tax Act. Accordingly, in the
adjudicatory proceedings, the appellants were not found guilty and sufficient
cause was found by CIT (Appeals)-24 for the failure to file the return by the
income tax department and the CIT(Appeals)-24 had exonerated all the
appellants in the adjudicatory proceedings. It has already been opined in
previous paras that final decision in adjudicatory proceedings before CIT
(Appeals)-24 were based on merits. Therefore, the judgment of Hon'ble
Supreme Court in K.C. Builders case (supra) as well as Radhe Shyam Kejriwal
case (supra) is fully applicable to the given facts of this case as there remains
no dispute as far as question of law is concerned. A strict interpretation of both
these judgments would warrant that the appellant could not have been
prosecuted or convicted for the offence u/s 276-CC Income Tax Act for an
infraction u/s 139(1)(2) of Income Tax Act.
"that you accused no. 1 (herein appellant no. 1) willfully not filed the
return of income for A.Y. 2011-12 as required u/s 139 (1) of the IT Act
and also not filed the same in response to notices u/s 142 (1) of the IT
Act Ex.PW1/5, Ex.PW1/6 and Ex.PW1/7 within stipulated time. Accused
no. 2 & 3 (herein appellant no. 2 & 3) being the persons responsible and
incharge of day to day affairs of accused no. 1 company and thus are
also guilty of the offence u/s 276-CC read with Section 278(B) of the IT
Act for the A.Y. 2011-12. You all thus, committed offence punishable u/s
276-CC, Section 278-B and Section 278-E of the Income Tax Act, which is
within my cognizance.
And I hereby direct you all to be tried for the said offences."
34. The aforementioned charge suggests that the appellants are being tried
against the charge framed on 23.02.2015 by ld. ACMM against all the
appellants to the effect that the appellant no. 1 willfully not filed the return of
the income for A.Y. 2011-2012 as required u/s 139(1) of Income-Tax Act and
also not filed the same in response to notices u/s 142 (1) of Income-Tax Act
Ex.PW1/5, Ex.PW1/6 and Ex.PW1/7 within stipulated period. It was also
mentioned in the charge that appellant no. 2 & 3 being the persons
responsible for day to day affairs of appellant no. 1 company are also guilty for
offences u/s 276-CC & 278-B of Income-Tax Act. It is also clear from the
adjudicatory proceedings that though the Assessment Officer-Income Tax had
imposed a penalty of Rs. 5000/- vis a vis Section 271-F Income-Tax Act for
infractions u/s 139 Income Tax Act upon the appellants but they were not
imposed with any penalty for infraction u/s 142 Income-Tax Act. It was
submitted by Ld. Counsel for the respondent that even if for the sake of
assumption we accept the arguments of Ld. Counsel for the appellants as
correct that the proceedings under section 276-CC of Income Tax Act for
infraction under section 139(1) of Income Tax Act could not have been
continued for deletion of penalty in the adjudication proceedings in terms
judgment of K.C. Builders case (supra), still the appellants are liable for the
35. In this case, a notice under section 142 of Income Tax Act was given by
Income tax department to the appellants asking therein to prepare a true and
correct return and to appear before the Dy.Commissioner of Income Tax. The
said notices were dated 25.04.12 Ex.PW1/5, 05.09.12 Ex.PW1/6, 08.10.12
Ex.PW1/7 etc. The said notices were issued to the Principal Officer of the
appellant no.1 company. The Income Tax Department has not taken any follow
up action after issuance of the aforementioned notices u/s 142 Income Tax Act
to the appellant no.1 company and as also admitted by the Ld. Counsel for the
respondent during the course of arguments. No penalty
proceedings/adjudicatory proceedings etc. were initiated by the Income tax
department against the appellant for the infraction under section 142 of
Income Tax Act. The prosecution has been launched directly for the said
infraction under section 142 of Income Tax Act without initiating any
adjudicatory proceedings under the Income Tax Act.
The CIT Appeals -24 in its order Ex.DW1/1 while deleting penalty upon the
appellants has categorically mentioned that since the appellant therein (same
appellants herein) had made considerable disclosure of undisclosed income in
the group and return has been filed after taking into consideration the effect of
such finding etc. there was reasonable cause in failing with to comply with the
provisions of section 139(1) of the Act. It has also been mentioned in the order
that this was not a case of non filing of return, but it was a case of delay in
filing the return. The CIT Appeals-24 has also prescribed in the order that the
delay occurred due to the fact that the returns under section 153(A) Income
Tax Act were also pending. This as per CIT Appeals-24 led it to the frame
conclusion that appellants had adhered to surrender made in the such
proceedings and has in fact filed the return for the current Assessment year on
the same day on which the returns for the remaining assessment years under
section 153(A) Income Tax Act were filed. Meaning thereby it can very well be
assumed that in case penalty could have been imposed by the Assessing
Officer for an infraction u/s 142 Income Tax Act, it would have certainly been
deleted by the CIT Appeals-24 as the reasons assigned for non filing of return
for both the infractions under sections 139 & 142 of Income Tax Act are almost
same. Moreover, section 142 of Income Tax Act is a follow up proceedings for
the infraction under section 139 of Income Tax Act and when the CIT Appeals-
24 have already detailed down the reasons for delay and have accepted it to
be as genuine, it would be abuse of process of law if the appellants are held
guilty for the infraction under section 276CC Income Tax Act for the infraction
under section 142 of Income Tax Act in the given circumstances when the
penalty was already deleted for infraction u/s 139 Income Tax Act.
36. Further, the judgment relied upon by the ld. Counsel for the respondent in
Prakash Nath Khanna Vs Commissioner of Income Tax (Supra) is not applicable
to the given facts of this case. In the cited judgment, the Hon'ble Supreme
Court had interpreted section 276-CC with reference to Section 139 (1) & (2)
vis a vis Section 139(4) of Income Tax Act. In the cited judgment, the appellant
had taken the plea that the expression "to furnish in due time" occurring in
section 276 CC Income Tax Act means to furnish within the time permissible
under the Act and that the return furnished u/s 139(4) Income Tax Act at any
time before the assessment is made has to be regarded as a return furnished
37. Though the non initiation of adjudicatory proceedings does not in any
manner bar prosecution of the appellants for offence u/s 276-CC Income Tax
Act as rightly pointed out by ld. Counsel for respondent, but due appreciation
can be given to the arguments for ld. counsel for the appellants that the basic
aim of the income-tax authorities is the generation of revenue and not the
prosecution which being a secondary one. No cogent reason has been
explained by the respondent as to why further proceedings were not carried
on by the Department of Income-tax for defiance of the provisions of Section
142 with respect to imposition of penalty.
38. Accordingly, the plea of the Ld. Counsel for the appellants that no
prosecution could have been last under section 276CC Income Tax Act as the
assessment was not yet final is rejected in terms of the aforementioned
judgment of Hon'ble Supreme Court of India.
The fine, if any, deposited by the appellants before the court of Ld. ACMM be
refunded to the appellants. Announced in the open court on this 28th day of
October, 2017.