TMI Blog1997 (9) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... able or imposable under the Income Tax Act, (hereinafter the Act ), by deliberately concealing the accurate particulars of income for the assessment year 1988-89. The firm had filed a return on October 14, 1988, showing a total loss of Rs. 1,14,850 for the assessment year. The return had been signed and verified by Lakshmi Narain Poddar, the petitioner in Criminal Miscellaneous No. 5025 of 1992. Following a search and seizure operation conducted at the business premises of the firm on September 13, 1990, in the course of which several incriminating documents and papers were seized, the assessment was completed on a total income of Rs. 8,58,733. A proceeding under Section 271(1)(c) of the Act was also initiated by the Assessing Officer. The Commissioner of Income Tax by his order dated February 14, 1992, under Section 279(1) of the Act authorised the filing of a complaint for the offences punishable under Sections 276C and 277 of the Act. The said order of sanction was attached with the complaint petition (annexure-1) filed on February 27, 1992, on the basis of which the Special Court for Economic Offences passed the impugned order dated February 27, 1992, taking cognizance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission by its letter dated July 18, 1991, for a report in the prescribed manner. The said report was received in the office of the Commission on May 12, 1994, and it was only thereafter that the Commission after hearing the petitioners passed its order allowing the application to be proceeded with. As already noticed earlier the Income Tax authority had sanctioned the prosecution of the firm and its partners on February 14, 1992, and pursuant to which the complaint was filed on February 27, 1992. In other words, the prosecution was sanctioned and the complaint filed after the filing of the application before the Commission on May 27, 1991, but before September 15, 1994, the day the Commission allowed the application to be proceeded with. 6. Learned counsel for the petitioners has referred to the provisions of Section 245F(1) of the Act in support of his contention that once the application had been filed before the Commission on May 27, 1991, under Section 245C, the Settlement Commission alone was competent to exercise the powers of the Income Tax authority under the Act and hence the Income Tax Commissioner could not have sanctioned the prosecution on February 14, 1992, within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K. Pachisia v. Union of India [1993] 2 PLJR 21 and Muhesh Kumar v. CIT [1998]230ITR230(Patna) , in support of his contention that the criminal prosecution of the petitioners cannot be quashed. It was argued that this court in Mukesh Kumar's case [1998]230ITR230(Patna) had referred to a number of authorities of different High Courts as also observations made by the apex court in some other cases before expressing its view that mere pendency of an application before the Commission or even after an application had been allowed to be proceeded with is no good ground for quashing the complaint and in such a situation only an order of stay of the criminal proceedings can be passed. Learned counsel for the Revenue also contended that the judgment of this court in K. Pachisia's case [1993] 2 PLJR 21 applies to the facts of the present case as admitted by the petitioners in their own application and hence in terms of the orders passed in the said case, the criminal proceedings against the petitioners could alone be stayed and there was no question of the complaint itself being quashed. 8. For proper appreciation of the rival contentions of the parties some of the provisions of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eard : Provided further that the Commissioner shall furnish the report within a period of forty-five days of the receipt of communication from the Settlement Commission in case of all applications made under Section 245C on or after the 1st day of July, 1995, and if the Commissioner fails to furnish the report within the said period, the Settlement Commission may make the order without such report. . . (3) Where an application is allowed to be proceeded with under Sub-section (1), the Settlement Commission may call for the relevant records from the Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case. (4) After examination of the records and the report of the Commissioner, received under Sub-section (1), and the report, if any, of the Commissioner received under Sub-section (3), and after giving an opportunity to the applicant and to the Commissioner to be hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of any penalty under this Act, with respect to the case covered by the settlement : Provided that no such immunity shall be granted by the Settlement Commission in cases where the proceedings for the prosecution for any such offence have been instituted before the date of receipt of the application under Section 245C. (1A) An immunity granted to a person under Sub-section (1) shall stand withdrawn if such person fails to pay any sum specified in the order of settlement passed under Sub-section (4) of Section 245D within the time specified in such order or within such further time as may be allowed by the Settlement Commission, or fails to comply with any other condition subject to which the immunity was granted and thereupon the provisions of this Act shall apply as if such immunity had not been granted. (2) An immunity granted to a person under Sub-section (1) may, at any time, be withdrawn by the Settlement Commission, if it is satisfied that such person had, in the course of the settlement proceedings, concealed any particulars material to the settlement or had given false evidence, and thereupon such person may be tried for the offence with respect to which the imm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for any offence under the Act or under the Indian Penal Code or under any other Central Act for the time being in force and also either wholly or in part from the imposition of any penalty under the Act with respect to the case covered by the settlement. The grant of such immunity was dependent upon the satisfaction of the Commission that the applicant had co-operated with the Commission in the proceedings before it and has made a full and true disclosure of his income and the manner in which such income had been derived and is also subject to such conditions as it may think fit to impose. In other words, the grant of immunity from prosecution for any offence is not absolute and in fit cases it can be granted subject to certain conditions. Sub-section (1) of Section 245H was amended with effect from June 1, 1987, by the Finance Act, 1987, to introduce a proviso that no such immunity shall be granted by the Commission in cases where the proceedings for the prosecution for any such offence have been instituted before the date of receipt of the application under Section 245C. In other words, the Settlement Commission has no authority under the law to grant immunity from criminal pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the petitioners advanced the argument that the Settlement Commission having admitted the application of the petitioner under Section 245C, the Commission alone had all the powers vested in an Income Tax authority under this Act within the meaning of Section 245F and the Income Tax authority under Section 279(1) of the Act, namely, the Commissioner of Income Tax had no authority to sanction the prosecution of the petitioner. The sanction order is a part of the complaint petition (annexure-1) and as already noticed earlier the sanction had been accorded after the filing of the application under Section 245C but before the Commission allowed the application to be proceeded with. If the provisions of Sub-section (1) of Section 245F which are being relied upon on behalf of the petitioners are read along with the provisions of Sub-section (2) of the said Section it is difficult to avoid reaching a conclusion that under Sub-section (1) the Settlement Commission enjoys concurrent powers with other Income Tax authorities under the Act whereas under Sub-section (2) it exercises exclusive jurisdiction in relation to the case. A combined reading of the two sub-sections in other words lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see for offences under Sections 276C and 277 of the Act. It may be recalled that according to learned counsel for the petitioners the Commissioner (Appeals) or the appropriate authority has no such jurisdiction in view of the exclusive jurisdiction conferred on the Settlement Commission under Sub-section (2) of Section 245F. The provisions of Sub-section (2) or for that matter Sub-section (1) of Section 245F cannot be read in isolation. Moreover, what Section 245F(2) provides is conferring exclusive jurisdiction on the Commission to exercise the powers and perform the functions of an Income Tax authority under the Act in relation to the case. Section 245A(b) contains the definition of case which means any proceeding under the Act for the assessment or reassessment of any person in respect of any year or years, or by way of appeal or revision in connection with such assessment or reassessment, which may be pending before an Income Tax authority on the date on which an application under Sub-section (1) of Section 245C is made. Clause (b) has a proviso that where any appeal or application for, revision has been preferred after the expiry of the period specified for the filing of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation by the assessee before the Settlement Commission under Section 245C but before the Commission passed an order allowing the application to be proceeded with, such prosecution ought to be stayed until such time that a final order is passed by the Settlement Commission under Sub-section (4) of Section 245D. The question assumes importance for the reason that in such cases the Settlement Commission have necessary jurisdiction under Section 245H to grant immunity to the assessee from prosecution for any offence under the Act or under the Indian Penal Code or under any other Central Act for the time being in force. The Settlement Commission while hearing a case has no jurisdiction to grant such immunity where the complaint had already been filed before the application had been filed under Section 245C of the Act. This court in Mukesh Kumar's case [1998]230ITR230(Patna) , had also observed that if the same issue or a relevant or related issue before the Settlement Commission is also the subject-matter of the criminal prosecution, then allowing the prosecution to continue will create an anomalous situation. The Commission, it was observed, in exercise of power during this period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also the judgment of a learned single judge of the Madras High Court in Kothari and Sons v. N. Subramanian, ITO [1992]196ITR82(Mad) , in which a similar view was taken in favour of staying the criminal prosecution until such time that the Commission passes a final order under Section 245D of the Act. 19. Learned counsel for the Revenue had advanced an argument in the alternative that the court may consider the desirability of even refusing to stay the proceedings in view of certain decisions of the apex court. It was contended that some of the observations of the apex court having a bearing on the subject had not been brought to the notice of the learned single judges of this court in K. Pachisia's case [1993] 2 PLJR 21 and Mukesh Kumar's case: [1998]230ITR230(Patna) . The argument advanced is that a blanket order of stay of criminal proceedings only because the Settlement Commission has allowed the application to be proceeded with under Section 245D is not in the interest of justice and this court under Section 482 of the Code ought not to exercise its inherent powers for staying the criminal proceedings indefinitely. The apex court in P. Jayappan v. S.K. Perumal, F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which the petitioner-assessee had been prosecuted for offences under Sections 276(1) and 277 of the Income Tax Act as also under Sections 193 and 196 of the Indian Penal Code. It was urged on behalf of the petitioner that under Section 279(1A) of the Act a person shall not be proceeded against for an offence under Section 276C and 277 of the Act in relation to the assessment year in respect of which penalty imposed or imposable on him under Clause (iii) of Sub-section (1) of Section 271 has been reduced or waived by an order under Section 275A of the Act and that the petitioner is also entitled to compound the offence with the Commissioner and, hence, the launching of the prosecution before the completion of the assessment takes away the valuable benefits that may accrue to the petitioner in the assessment proceedings. The petitioner had, therefore, contended that the Income Tax authorities ought to have waited till the completion of the assessment proceedings before filing the criminal prosecution. The court dismissed the application and observed that the mere fact that the petitioner expects the penalty that may be imposed against him to be reduced or waived under Section 273A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f law as disclosed in Chapter XIX-A of the Act captioned Settlement of cases in CIT v. B.N. Bhattachargee [1979]118ITR461(SC) . It was observed therein to quote (page 471) : The incarnation of Chapter XIX-A was in the wake of the Wanchoo Committee Report. The vampirish vices of black money and colossal tax evasion, both together using money power to prevent action against white-collar offenders, had been a terrible menace to the health and wealth of the nation. In particular, black money, whose constant companion was tax evasion, posed a challenge to the country's economy and the Wanchoo Committee was appointed to make recommendations with a view to arrest this evil. That committee, made a wealth of recommendations, but we are concerned only with Chapter 2 of the report which, under the title, 'Black Money and Tax Evasion', proposed a compromise measure of a statutory settlement machinery where the big evader could make a disclosure, disgorge what the Commission fixes and thus buy quittance for himself and accelerate recovery of taxes in arrears by the State, although less than what may be fixed after long protracted litigation and recovery proceedings . . . ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracts large tax dodgers and offers, indirectly, an opportunity to the highest departmental and political authorities a suspect power to bargain. 25. Towards the end of the judgment, the apex court had this to say to quote (page 487) : It is not inappropriate to state that the policy of the law as disclosed in Chapter XIX-A is not to provide a rescue shelter for big tax dodgers who indulge in criminal activities by approaching the Settlement Commission. The Settlement Commission will certainly take due note of the gravity of economic offences on the wealth of the nation which the Wanchoo Committee had emphasised and will exercise its power of immunisation against criminal prosecutions by using its power only sparingly and in deserving cases ; otherwise such orders may become vulnerable if properly challenged. 26. Thus in the light of the judgment of the Supreme Court in CIT v. B.N. Bhattachargee[1979]118ITR461(SC) the Settlement Commission is required to exercise its power of immunising against criminal prosecution by using its power only sparingly and in deserving cases. There is, therefore, no ground to believe that if the Settlement Commission has allowed an applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn by the apex court in another context is also applicable in the matter of staying criminal proceedings pending before the criminal court which had been validly instituted and where on the application of the assessee the Settlement Commission had allowed an application to be proceeded with but had not yet passed any final orders including an order granting or refusing immunity from the criminal prosecution. A blanket order staying criminal proceedings only because the Settlement Commission had allowed an application before it to be proceeded with and the Commission had the necessary authority under the Act to grant immunity from criminal prosecution is also not necessary in the interest of justice. If any such proceeding is decided in favour of the applicant and immunity from criminal prosecution is granted, he can take advantage of any such decision even after his conviction before the appellate or the revisional court or before the Supreme Court in an application under Article 136 for special leave to appeal. The process of criminal law including the trial, appeal and revision is a protracted one and it is difficult to visualise a situation where the Settlement Commission in a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 245F(2) would divest the jurisdiction of the Chief Commissioner or a Director-General under Section 279(2) to compound any offence either before or after the institution of the proceeding once the Settlement Commission allows an application to be proceeded with. Such an interpretation does not seem to be correct considering the scheme of Chapter XIX-A. The question of either grant of sanction for prosecution or compounding the offence under Section 279 (1) and (2) is not before the Settlement Commission and hence the provision of Section 245F(4) that for the removal of doubt, it is hereby declared that, in the absence of any express direction by the Settlement Commission to the contrary, nothing in this Chapter (XIX-A) shall affect the operation of the provisions of this Act in so far as they relate to any matters other than those before the Settlement Commission. Thus in the absence of any express direction of the Settlement Commission to the contrary, the Income Tax authority can exercise its powers under Section 279 (1) and (2) even after the Settlement Commission has allowed the application to be proceeded with and Section 245F(2) comes into play. Be that as it may t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 309 of the Code of Criminal Procedure. I, therefore, find myself in respectful disagreement with the views expressed by the learned single judge in Mukesh Kumar's case [1998]230ITR230(Patna) , that if the application filed by the assessee has been allowed to be proceeded with then the prosecution has to be stayed till the final decision by the Settlement Commission. I am, however, in complete agreement with the views expressed therein that pendency of an application before the Settlement Commission at any stage is no ground for quashing the criminal prosecution. As already observed earlier, it would be an altogether a different matter if the criminal court adjourns or postpones the hearing of the criminal case in exercise of its discretionary power under Section 309 of the Code of Criminal Procedure, if the disposal of any proceeding under the Settlement Commission which has a bearing on the proceeding before it is imminent so that it may also take into consideration the order to be passed therein. However, such exercise of discretion on the part of the criminal court in an appropriate case will depend on the facts of each case and it is not possible to lay down an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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