TMI Blog2001 (6) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... complainant, the Deputy Commissioner of Income-tax filed a private complaint on March 20, 1989, against accused Nos. 1 to 10 alleging that they committed the offences punishable under sections 120B, 34, 193, 196, 420, 511, 468 and 471 of the Indian Penal Code, 1860, and under sections 276C, 278B and 278 of the Income-tax Act, 1961. The gravamen of the charge is that Express Newspapers Limited claimed a loss of Rs.74.65 lakhs in the trading in potatoes and set it off against its other income and thereby avoided payment of the legitimate tax and the tax sought to be evaded relating to the fictitious loss of Rs.74.65 lakhs is about Rs.50.95 lakhs. It is further stated in the complaint that the petitioners/ accused Nos. 7 to 10 created and fabricated records as though potatoes were purchased from the suppliers and those potatoes were sold to specific dealers who gave pay orders in favour of the first accused. It is further stated that during the enquiry, it was found that the petitioners/accused forged signatures of the alleged potato suppliers and forged invoices of sales, etc., and, as such, the petitioners/accused Nos. 7 to 10 committed the offences of abetment under section 278 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secution was filed by the complainant only on March 20, 1989 and the same was entertained by the court on April 4, 1989. Therefore, the bar under the proviso to section 245H(1) does not apply to the case of the petitioners. It is settled law that if there is an order of the Settlement Commission granting immunity under section 245H(1), the prosecution will have to be quashed. When the immunity is granted to A-7 and A-8 being the company, automatically A-9 would also get immunity. Hence, the prosecution against all the petitioners are liable to be quashed. The Settlement Commission constituted under the Income-tax Act deals with the filing of the application under section 245C and has passed orders under sections 245D(1) and 245D(4) and, ultimately, the order has been passed under section 245H granting immunity. This order is final and conclusive under section 245-1 of the Act. As against this final order passed by the Settlement Commission, no appeal has been filed. So this order is valid and binding upon the Department until it is set aside. Even though the order passed by the Settlement Commission on the application filed by Express Newspapers Limited in favour of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present complaint, would be a nullity. I have given my thoughtful consideration to the respective contentions urged by counsel for the parties. At the outset, I cannot but appreciate the neat presentation with thorough preparation by both Mr. B. Kumar, learned senior counsel appearing for the petitioners and Mr. Ramasamy K. the learned Special Public Prosecutor for Income-tax by filing complete typed set giving the authorities on the question both for and against to enable this court to have a grip of the facts as well as law and to understand the intricacies of the legal provisions touching upon the subject. In brief, the submission of counsel for the petitioners is that there is no criminal liability in view of the immunity. The straight reply by counsel for the respondent is that the alleged immunity is not only a nullity but also would suffer from non-applicability to the subject-matter of complaint. It is not in dispute that under section 245H(1), the Settlement Commission can grant immunity from prosecution for any offence under the Income-tax Act or under the Indian Penal Code or under any other Central Act for the time being in force and also from the imposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, Shri S. N. Mandal categorically accepted that the offer contained in the SOF was not genuine and was made only to help Express Newspapers Ltd., to justify its claim for loss in potato dealings. Accordingly, Shri S. N. Mandal requested that the applicant may be permitted to withdraw the offer of Rs.46.50 lakhs contained in the SOF and the total income of the two assessment years determined without taking into account the amount of Rs.46.50 lakhs." It is true that an application had been filed by the petitioner (A-8) in respect of the assessment year 1985-86 and the same was entertained by the Settlement Commission and in the said order also, the same observation has been made in paragraph 4 which is as follows: 'It will be seen from the above two statements that the applicant has now withdrawn its claim regarding the dealings with Express Newspapers Ltd. in potatoes. During the course of the hearing, Shri S. N. Mandal categorically accepted that the offer contained in the SOF was not genuine and was made only to help Express Newspapers Ltd. to justify its claim for loss in potato dealings. Accordingly, Shri S. N. Mandal requested that the applicant may be permitted to wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Admittedly, the present complaint is only in respect of the assessment year 1985-86. Therefore, this observation if at all, would apply to A-8 alone. But, the question that remains to be answered is whether immunity has been granted or could be granted in respect of the subject-matter of the complaint when the claim regarding the same had been withdrawn. Further, the assessment order dated May 12, 1988, relating to A-8 would indicate that in view of the finding of the Assessing Officer that Express Newspapers Ltd. did not have any dealings in potatoes through the petitioner and its claim to have incurred losses in such transactions was of a bogus nature, the Settlement Commission asked the petitioner to furnish necessary evidence in support of the petitioners' claim to have had dealings in potatoes as the agent of Express Newspapers Ltd. and instead of furnishing such evidence, counsel for the petitioner accepted that the said transaction was not genuine and the same was made by the petitioner only to help Express Newspapers Ltd. to justify its claim for loss in potato dealings. The said finding of the Assessing Officer as referred to in the order of the Settlement Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the petitioners. It is not debated that the main accused in this case, namely, A-1, filed a similar application under section 245C before the Settlement Commission and the same was allowed granting immunity to it both from penalty and prosecution in respect of the present case on December 16, 1988, in respect of the assessment years 1985-86 to 1988-89. By order dated May 31, 1990, the Settlement Commission allowed the application filed by A-1. Against the above order, the Department filed a special leave petition before the Supreme Court. The apex court by the order dated January 11, 1994, allowed the application preferred by the Department, by setting aside the order of the Settlement Commission. The said order, as noted above, is reported in CIT v. Express Newspapers Ltd. [1994] 206 ITR 443 (SC). In the said order, the following findings have been given: "(i) The respondent had merely offered a part of the losses claimed by it for the assessment years towards taxable income. In its application the respondent had not disclosed any income not disclosed before the Assessing Officer; nor did it disclose the manner in which such income was derived. The application wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no jurisdiction to entertain the said application. Secondly, this is a case where the income-tax authorities had made extensive investigation and enquiries wherein they had collected voluminous material which, according to them, established the particulars of concealment of income on the part of the respondent-assessee." The above observation, in all fours, would apply to the case of the petitioners also, since the disclosure of their income before the Settlement Com mission was only after the discovery of the same by the income-tax authorities. Under those circumstances, it cannot be said that there is no force in the submission made by counsel for the respondent that the very order by the Settlement Commission itself is nullity. Counsel for both the petitioners and the respondent cited so many other authorities which, in my view, may not be necessary to be referred to here, as it would not serve any purpose. Furthermore, the reading of the relevant portion relating to immunity granted by the Settlement Commission would make it obvious that it is conditional order. According to counsel for the respondent, even assuming that the immunity would be relating to the subject ..... X X X X Extracts X X X X X X X X Extracts X X X X
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