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TMI Blog1969 (9) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... esponse to a notice under section 139(2) of the Income-tax Act, 1961, the petitioners filed a return of income dated 25th July, 1964, for the assessment year 1963-64, and presented the same to the Income-tax Officer on 6th August, 1964, at Salem. This return has been verified and signed by Mari Chetty, one of the partners of the firm. Along with the return, a trading and profit and loss account for the period 14th April, 1962, to 19th April, 1963, and balance-sheet as on April 19, 1963, were also filed as part of the return. A further statement forming part of the return showing a list of sundry debtors and creditors of the firm as on April 19, 1963, has also been filed. In the above return of income and the statements, the income from the business was declared at Rs. 48,261 only, whereas the real income as disclosed during the investigation by the Income-tax Officer was about Rs. 1,43,802. The 3rd Income-tax Officer, Circle I, Salem, filed a complaint against the first petitioner-firm and also the three partners (petitioners (2) to (4)) of the firm at the instance of the Commissioner of Income-tax, Madras II, before the District Magistrate, Salem. It was alleged in the complaint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeding in view of section 136 of the Act and that there are no guidelines in the Act as to when the penalty proceedings should be taken and when the prosecution should be instituted and he further contended that if both are not judicial proceedings, no safeguards are provided for the institution of prosecution in the Act of 1961, corresponding to section 28(4) of the Act of 1922, and that, therefore, section 277 of the Act has to be struck down as violative of article 14 of the Constitution. To appreciate the points raised by the learned counsel, it may be necessary to note the relevant provisions of the Income-tax Act of 1961 and the Income-tax Act of 1922. The complaint has been filed, as noted already, under section 277 of the Act of 1961, which runs thus : " If a person makes a statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not belive to be true, he shall be punishable with rigorous imprisonment for a term which may extend to two years... " The corresponding provision in the old Act is section 52 which restricts a prosecution to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). " The corresponding section in the old Act is section 37(4) which is in pari materia with section 136. Sections 131 to 135 of the Act provide the powers of the income-tax authorities for discovery, production of evidence, etc., search and seizure, power to call for information, power of survey, etc. Under section 131(1), it is stated that the income-tax authorities mentioned therein will have the same powers as are vested in a court under the Code of Civil Procedure, when trying a suit in respect of the following matters, namely :-- (a) discovery and inspection (b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath ; (c) compelling the production of books of account and other documents ; and (d) issuing commissions. The corresponding provision in the old Act is section 37(1). From the above provisions, it is contended that any proceeding under the Income-tax Act is a judicial proceeding and that, therefore, there are no guidelines as to when the penalty proceedings should be instituted and when the prosecution has to be launched. I am unable to see any substance in this contention. Under section 136, it is clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain matters. The proceedings under section 271(1)(c) do not come within the purview of section 136 of the Act. The learned counsel for the petitioners relied upon a decision in Commissioner of Income-tax v. Gokuldas Harivallabhdas, wherein it has been held that the proceedings under section 28(1)(c) of the old Act, which is similar to section 271(1)(c) : of the new Act, are criminal proceedings in their very nature. It is, therefore, contended that they are judicial proceedings. In view of the decision of the Supreme Court in Thomas Dana v. State of Punjab, that the levy of penalty is different from a criminal prosecution and punishment of the criminal by a criminal court, it is doubtful whether the observation in Commissioner of Income-tax v. Gokuldas Harivallabhdas, that the proceeding is in the nature of a criminal proceeding is correct. Even in that decision, what is stated is that such proceeding will be in the nature of a criminal proceeding. It does not equate the proceeding of levying penalty to a criminal proceeding. If certain features of one proceeding are found in another, the latter may be said to be in the nature of the former, but it cannot be the same. It appears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the authorities mentioned in section 271(1) to institute prosecution. It is left in the hands of a higher authority, the Commissioner of Income tax, to exercise his discretion as to when prosecution should be instituted. The very fact that the institution of prosecution is left to the discretion of a higer authority than the authority who institutes proceedings for levying penalty is itself a sufficient protection and safeguard as the higher authority is expected to exercise his discretion in appropriate cases. The second safeguard provided is that when the penalty imposable upon a person in relation to the assessment for an assessment year under clause (iii) of sub-section (1) of section 271 has been reduced or waived by an order under sub-section (4A) of that section, the prosecution cannot be instituted. It is true that in the earlier Act, under section 28(4), no prosecution can be instituted in respect of the same facts on which a penalty has been imposed. In the old Act, a larger protection was given. In the present, under section 279(1A), a partial protection is given, which itself will constitute a sufficient safeguard, fettering the absolute discretion of the Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in a minor official. " In a recent case, T. S. Baliah v. T. S. Rangachari, Income-tax Officer the Supreme Court, in respect of the contention raised that the choice of the prosecution under section 177, Indian Penal Code, or under section 52 of the Income-tax Act of 1922, was left to the arbitrary and unguided discretion of the Income-tax Officer and that, therefore, there was a violation of the guarantee under article 14 of the Constitution, held that the prosecution under section 52 of the Income-tax Act was at the instance of the Inspecting Assistant Commissioner, a higher authority to the Income-tax Officer and that will be a sufficient safeguard and protection. It is also observed that no prosecution could take place if penalty has been imposed under section 28 of the old Act. It is contended by the learned counsel for the petitioners that the second safeguard provided under the old Act and mentioned by the Supreme Court as one of the safeguards has been removed in the present Act, and, therefore, the second safeguard mentioned in the decision is not available under the present Act. As already noted there is also a protection given under the Act in respect of prosecutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no substance in this point. Under article 20(2) of the Constitution, no person shall be prosecuted and punished for the same offence more than once. The requirements under this clause are : (1) Prosecution. (2) Punishment. (3) Both prosecution and punishment for the same offence. (4) More than once. It is therefore, necessary to consider whether the proceedings for levying penalty will amount to a prosecution and whether penalty is itself a punishment and whether the prosecution in respect of the same facts relating to the proceedings levying penalty will amount to the same offence. I have already pointed out while discussing the ingredients of section 271(1)(c) and section 277 that they are different. In section 271(1)(c) there is no mens rea. In section 277 there is mens rea. Therefore, both cannot be said to deal with same offence. It cannot also be said that the institution of proceedings for penalty is tantamount to prosecution in a criminal court and equally the punishment on a conviction which is criminal cannot be equated with the punishment of penalty which is either civil or quasi-criminal. In Thomas Dana's case the Supreme Court held that the penalty imposed on a per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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