1988 (10) TMI 2 - HC - Income Tax

Court grants immunity for timely disclosure under Income-tax Act but prosecution under other sections continues.

Umayal Ramanathan Versus Income-Tax Officer, City Circle-I (2), Madras

The court partially allowed the application to quash proceedings. It quashed the proceedings related to offenses under sections 276C and 277 of the ... Offences And Prosecution, Search And Seizure Issues Involved:1. Quashing of criminal proceedings under section 482 of the Code of Criminal Procedure.2. Application of Explanation 2 to section 273A of the Income-tax Act, 1961.3. Immunity from prosecution under sections 276C and 277 of the Income-tax Act, 1961.4. Prosecution under section 278 of the Income-tax Act and section 120B read with section 420 of the Indian Penal Code.Detailed Analysis:1. Quashing of Criminal Proceedings under Section 482 of the Code of Criminal Procedure:The petitioner sought to quash the proceedings in C.C. No. 637 of 1985 on the file of the Additional Chief Metropolitan Magistrate (Economic Offences), Egmore, Madras. The prosecution was initiated by the Income-tax Officer against the petitioner and three others for offenses under section 120B read with section 420 of the Indian Penal Code, 1860, and sections 276C, 277, and 278 of the Income-tax Act, 1961. The petitioner was accused of receiving Rs. 1,65,975 as on-money, which was not disclosed in the income-tax return.2. Application of Explanation 2 to Section 273A of the Income-tax Act, 1961:The petitioner argued that Explanation 2 to section 273A of the Act provided complete immunity from prosecution. The court noted that Explanation 2, inserted by the Taxation Laws (Amendment) Act, 1984, and deleted by the Finance Act, 1985, was in force at the time of the search and seizure. The Explanation allowed for deemed voluntary and good faith disclosure if made within fifteen days of seizure. The petitioner had made such a disclosure within the stipulated period.3. Immunity from Prosecution under Sections 276C and 277 of the Income-tax Act, 1961:The court examined whether the petitioner would be immune from prosecution under sections 276C and 277. Section 273A allows the Commissioner to reduce or waive penalties if a full and true disclosure is made voluntarily and in good faith before detection by the Assessing Officer. Section 279(lA) states that a person shall not be prosecuted for offenses under sections 276C or 277 if the penalty is reduced or waived under section 273A. The court noted that the Commissioner had not passed any order under section 273A regarding the waiver or reduction of penalty for the petitioner. However, given the circumstances and the petitioner's timely disclosure, the court deemed that an order under section 273A ought to have been passed, granting the petitioner immunity from prosecution under sections 276C and 277.4. Prosecution under Section 278 of the Income-tax Act and Section 120B read with Section 420 of the Indian Penal Code:The petitioner was also prosecuted for offenses under section 278 of the Income-tax Act and section 120B read with section 420 of the Indian Penal Code. The court clarified that the immunity provided under section 279(lA) of the Act did not extend to these offenses. Therefore, the proceedings for these charges would not be quashed.Conclusion:The application to quash the proceedings was allowed in part. The court quashed the proceedings in respect of the offenses under sections 276C and 277 of the Income-tax Act for the petitioner. However, the prosecution for offenses under section 278 of the Income-tax Act and section 120B read with section 420 of the Indian Penal Code would continue.