ASHIRVAD ENTERPRISES Vs. STATE OF BIHAR

JUDGEMENT

(1.) BOTH the applications, Criminal Miscellaneous No. 4307 of 1992 and Criminal Miscellaneous No. 5025 of 1992, under section 482 of the Code of Criminal Procedure seek quashing of the criminal prosecution of the petitioners including the order dated 27-2-1992, taking cognizance under sections 276C and 277 of the Income Tax Act, 1961, in Complaint Case No. 50 of 1992 pending before the Special Court (Economic Offences), Muzaffarpur. Since a common question of law has been raised, the applications have been heard together and are being disposed of by this common judgment.

(2.) ASHIRVAD Enterprises is a registered firm. The firm and its partners are the petitioners. A complaint was field on 27-2-1992 by Assistant Commissioner of Income Tax (O.P. No.2), alleging that the petitioners had wilfully attempted to evade tax, interest or penalty chargeable or imposable under the Income Tax Act, (hereinafter referred to as "the Act"), by deliberately concealing the accurate particulars of income for the assessment year 1988-89. The firm had filed a return on 14-10-1988, 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 13-9-1990, 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 by his order dated 14-2-1992, 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 27-2-1992, on the basis of which the special court for Economic Offences passed the impugned order dated 27-2-1992, taking cognizance of the offences alleged, copy of which is Annexure-2. Learned counsel for the petitioners pressed both the applications mainly on the ground that since the firm had already filed an application before the Income Tax Settlement Commission under section 245C of the Act, the complaint subsequently filed is incompetent in the eye of law and the criminal prosecution of the firm and its partners was an abuse of the process of the court. The quashing of the impugned order taking cognizance as also the criminal prosecution of the petitioners, it was argued, was necessary to secure the ends of justice by invoking the inherent powers of this court under section 482 of the Code of Criminal Procedure (hereinafter referred to as the "Code"). The contention has been controverted on behalf of the revenue.

(3.) 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 26-5-1991, 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 of 14-2-1992, within the meaning of section 279(1) of the Act. Since the order of sanction was itself illegal and without jurisdiction, the complaint filed on 27-2-1992, pursuant to the order of sanction was not competent in the eye of law and no valid order of cognizance could have been passed on the basis of such a complaint. In support of his contention, learned counsel for the petitioners had relied on a judgment of the Delhi High Court in Dr. Mrs. Geeta Gupta v. IAC of I.T. (1987) 168 ITR 222 (Del) and of the Punjab and Haryana High Court in R.I. Chadha v. ITO (1987) 168 ITR 591 (P&H) and in Bansal Tool Company v. ITO (1990) 186 ITR 104 (P&H). In all these cases the complaints were quashed pending final disposal of the application before the Settlement Commission which had been allowed to be proceeded with under section 245D of the Act. Learned counsel for the revenue referred to the judgment of the Delhi High Court in Super Rubber Enterprises v. Deputy CIT (1995) 215 ITR 49 (Del), wherein it has been mentioned that the decision of this court in Dr. Mrs. Geeta Gupta's case (1987) 168 ITR 222 (Del), has been stayed by the Supreme Court in Criminal Appeal No. 326 of 1988 on 10-5-1988. In the said case the criminal complaint was dated 11-3-1991, and long before that the petitioner had filed an application for settlement before the Settlement Commission in 1989, which was admitted in the year 1991. There is, however, nothing to indicate in the judgment whether the application was allowed to be proceeded with by the Settlement Commission before the filing of the criminal complaint dated 11-3-1991, or thereafter. Thus though his Lordship was pleased to observe that the right course for the respondents would have been to desist from launching the prosecution against the petitioner, the complaint was not quashed and only the proceedings before the Magistrate were stayed till the decision was made by the Settlement Commission. On behalf of the revenue reference was also made to a judgment of the Gujarat High Court in Ashvin Kumar Vadilal Patel v. S. Rajguru (1987) 165 ITR 583 (Guj), by which the court refused to even stay the criminal prosecution on the ground that until immunity is granted against the criminal prosecution by the Settlement Commission, the criminal prosecution need not be stayed. Learned counsel for the revenue also relied upon two judgments of learned single judges of this court in K. Pachisia v. Union of India (1983) 2 PLJR 21 (Guj) and Mukesh Kumar v. CIT (1998) 230 ITR 230 (Guj), in support of his contention that the criminal prosecution of the petitioners cannot be quashed. It was argued that this court in Mukesh Kumars's case (1998) 230 ITR 230, 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. For proper appreciation of the rival contentions of the parties some of the provisions of Chapter XIX-A of the Act under the caption "Settlement of cases" may be referred to. The Chapter consisting of sections 245A to 245M was inserted by the Taxation Laws (Amendment) Act, 1975, with effect from 1-4-1976. Before some of the provisions of the Chapter are reproduced below all that needs to be stated is that by the said amendment a procedure was introduced whereby an assessee may be enabled to come forward with a proposal to settle his tax liability once and for all in the overall context of the position over a period of years and the investigation, examination and acceptance of such a proposal by an independent Tribunal after a proper scrutiny of his affairs and assets. A Commission to be called the Income Tax Settlement Commission thus came to be constituted by the Central Government under section 245B of the Act for the settlement of cases under the said Chapter. Sections 245C, 245D, 245F and 245H are reproduced below :