UMAYAL RAMANATHAN Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THIS is an application filed under section 482 of the Code of Criminal Procedure, to quash the proceedings in C. C. No. 637 of 1985 on the file of the Additional Chief Metropolitan Magistrate (Economic Offences), Egmore, Madras.

(2.) BRIEF facts are : - The Income-tax Officer, City Circle-I (2), Madras, launched a prosecution against the petitioner (fourth accused) and three others (accused Nos. 1 to 3) for offences under section 120B read with section 420, Indian Penal Code, 1860, and sections 276C, 277 and 278 of the Income-tax Act, 1961. The petitioner owned vacant land to the extent of 11 grounds and 276 sq. ft., situated in Door No. 25, Ritherdon Road, Madras. The first accused is a private limited company, registered under the Companies Act. Accused Nos. 2 and 3 in the criminal court are the directors of the first accused company. The petitioner entered into an agreement with the first accused company represented by its directors (accused Nos. 2 and 3), for the sale of the vacant site on August 7, 1979. As per the agreement, the sale consideration was Rs. 3,89,025. Subsequent to the sale transaction, it so happened that the Income-tax Department made a search of the business premises of the first accused company and the residential premises of the second and third accused as well as the premises of the petitioner (fourth accused). During the search of the petitioner's premises, it was found that the petitioner had received a sum of Rs. 1,65,975 as on-money over and above the sale price, viz., Rs. 3,89,025, as found mentioned in the sale agreement. This on-money of Rs. 1,65,975 was not only not brought on record by the petitioner, but it was also not found mentioned in the income-tax return filed by the petitioner. So also is the case with regard to accused Nos. 1 to 3 in the sense that they did not also bring the excess money paid by them in the accounts, nor did they file their income-tax return specifying the on-money paid to the petitioner. Hence, the Department prosecuted the petitioner as well as accused Nos. 1 to 3 before the court below for the various offences under the Indian Penal Code as well as under the Income-tax Act (hereinafter referred to as "the Act"). On receipt of the process from the court below, the petitioner has come forward with this petition to quash the criminal proceedings initiated against her.

(3.) FROM a cursory perusal of the said provision, it is crystal clear that the section starts with a non obstante clause, namely, "notwithstanding anything contained in this Act..." The Commissioner has the power of discretion under the section to reduce or waive penalty in certain cases. He has power to reduce or waive penalty if the assessee makes a full and true disclosure of his income voluntarily and in good faith prior to the detection by the Assessing Officer. The sort of immunity was also provided by the provision of Explanation 2 to section 273A then in existence. Normally, if a detection is made by the Assessing Officer of the escape of income particulars or concealment of income by the assessee, then the power of discretion vested in the Commissioner to reduce or waive the penalty in respect of such escaped income is not there in the sense that there is absence of provision to exercise such discretion. The Legislature thought it fit to introduce Explanation 2 to section 273A in the year 1984 that, even in respect of escaped or concealed income detected by the Assessing Officer during the course of search, the power of the Commissioner to exercise his discretion in the matter of waiver or reduction of penalty was made available under the Explanation. In other words, but for the Explanation, the assessee has to face the music of the consequences flowing from the concealment of escaped income detected by the officers during the course of the search. The Explanation does not at all state that once the assessee maker a free and full disclosure voluntarily and in good faith within fifteen days of the detection of such income during the course of the search, he will be immune from prosecution in a criminal court. Section 279 of the Act provides for prosecution to be at the instance of the Chief Commissioner of Commissioner in respect of offences arrayed under that section. The petitioner is prosecuted for the offences under sections 276C and 277 of the Act, apart from other offences found mentioned in the complaint. A perusal of section 279 of the Act would make it abundantly clear that the two sections, namely, sections 276C and 277 of the Act, in respect of which the petitioner has been prosecuted, are included in section 279 of the Act. At this juncture, reference may be made to the provision of section 279(1A) of the Act. It reads as follows :