1995 (1) TMI 27 - HC - Income Tax

Criminal Proceedings, Immunity From Prosecution, Settlement Commission, Wilful Attempt To Evade Tax

Summary

Issues:
Petition to quash criminal proceedings under sections 276C and 277 of the Income-tax Act, 1961 for the assessment year 1985-86. Interpretation of section 245F(2) of the Act regarding Settlement Commission's jurisdiction. Jurisdiction of the High Court under section 482 of the Code of Criminal Procedure.

Analysis:
The petitioner filed a petition seeking to quash criminal proceedings based on a complaint alleging willful tax evasion for the assessment year 1985-86. The petitioner argued that the prosecution was illegal due to the provisions of section 245F(2) of the Income-tax Act, which grants exclusive jurisdiction to the Settlement Commission in cases where an application for settlement has been allowed to proceed. The petitioner contended that once their application for settlement was admitted by the Settlement Commission, the prosecution became unwarranted and without jurisdiction. The respondent, however, argued that the decision cited by the petitioner had been stayed by the Supreme Court and that the Magistrate had validly issued process against the petitioner, questioning the High Court's jurisdiction under section 482 of the Code of Criminal Procedure.

Upon considering the arguments, the High Court found that the petitioner had indeed filed an application before the Settlement Commission, which included issues such as determining total income, immunity from penalties and interest, and immunity from prosecution under the Income-tax Act and other laws. The Court noted that the Settlement Commission was seized of these issues, including the grant of immunity from prosecution, as per the legislative intent behind section 245F(2) of the Act. The Court held that the respondent should have refrained from prosecuting the petitioner given the pending settlement application. The Court emphasized the statutory obligation of the Settlement Commission to promptly address such matters and ruled that the petitioner should not be penalized for the Commission's delay. Consequently, the Court stayed the proceedings before the Magistrate until the Settlement Commission made a decision, exercising its jurisdiction under section 482 of the Code of Criminal Procedure.

In conclusion, the High Court granted the petitioner's request to quash the criminal proceedings, emphasizing the Settlement Commission's exclusive jurisdiction in such matters and the importance of addressing pending settlement applications promptly to avoid unnecessary prosecution. The Court's decision highlighted the legislative intent behind the relevant provisions of the Income-tax Act and upheld the petitioner's right to have their settlement application considered before facing prosecution.