Criminal complaint under income-tax proceedings: Section 195 bar, partner liability, and effect of reassessment order clarified.

Section 195 CrPC bars cognizance only where the complainant acts as a court within its meaning, so a complaint by the Income-tax Officer in his personal capacity was maintainable; the retrospective amendment to section 136 of the Income-tax Act was treated as procedural and therefore capable of retrospective operation. Partners who did not file the return or make the impugned statements could not be proceeded against merely because they signed the bank account opening form, as that did not establish responsibility for the false return or statements. Setting aside the reassessment order did not automatically extinguish the criminal complaint, although immediate trial was considered inappropriate while the tax dispute remained unresolved.

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Issues: (i) whether a complaint for offences under sections 193 and 196 of the Indian Penal Code was maintainable at the instance of the Income-tax Officer in view of section 195 of the Code of Criminal Procedure, 1973, and the retrospective amendment to section 136 of the Income-tax Act, 1961; (ii) whether the other partners, who did not file the return or make the impugned statements, could be proceeded against on the basis of their signatures on the bank account opening form; (iii) whether the setting aside of the reassessment order deprived the criminal complaint of its legal basis.

Issue (i): whether a complaint for offences under sections 193 and 196 of the Indian Penal Code was maintainable at the instance of the Income-tax Officer in view of section 195 of the Code of Criminal Procedure, 1973, and the retrospective amendment to section 136 of the Income-tax Act, 1961.

Analysis: Section 195 is an exceptional provision restricting cognizance only where the offence is committed in a court and the complaint is one which the section requires to be made by that court or a superior court. If the Income-tax Officer is not a court within the meaning of section 195(3), the embargo under section 195 does not apply at all. The complaint in the present case was presented by the Income-tax Officer in his personal capacity and not as a court. The amendment to section 136 of the Income-tax Act, 1961, by the Finance Act, 1985, declaring income-tax proceedings to be judicial proceedings for the purpose of section 195 was held to be procedural and capable of retrospective operation, as it did not create a new offence or aggravate the accused's position.

Conclusion: the complaint was maintainable, and the objection based on section 195 of the Code of Criminal Procedure, 1973, was rejected.

Issue (ii): whether the other partners, who did not file the return or make the impugned statements, could be proceeded against on the basis of their signatures on the bank account opening form.

Analysis: The evidence showed that the return and the allegedly false statements were made only by the managing partner. The remaining partners neither signed the returns nor made any statements before the Income-tax Officer. Their signatures on the bank account opening form did not establish responsibility for the contents of the income-tax returns or for the oral statements made by the managing partner, and there was no material showing that each of them knew the contents of the return or that they were all jointly responsible for the alleged false statements.

Conclusion: the discharge of the other partners was justified and was not interfered with.

Issue (iii): whether the setting aside of the reassessment order deprived the criminal complaint of its legal basis.

Analysis: The reassessment order had been set aside and the matter had travelled further within the tax hierarchy, so the tax controversy was not finally resolved in favour of either side. The criminal complaint therefore did not become automatically otiose. At the same time, since the departmental position was still in flux, it was considered inappropriate to proceed with the trial immediately and the Department was left free to withdraw and refile the complaint if warranted, or for the trial to remain stayed until a fresh assessment order was passed.

Conclusion: the complaint did not fail on this ground, though immediate trial was not considered proper.

Final Conclusion: the revision succeeded only against accused Nos. 1 and 2, while the discharge of accused Nos. 3 to 6 remained undisturbed.

Ratio Decidendi: the bar under section 195 of the Code of Criminal Procedure, 1973 applies only when the complainant acts as a court within the meaning of that provision, and a procedural amendment declaring income-tax proceedings judicial may operate retrospectively without enlarging criminal liability.

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