HC refuses to quash Section 277 Income Tax Act prosecution despite Settlement Commission immunity claim filed after charges

The HC refused to quash criminal proceedings under Section 277 of the Income Tax Act against accused who sought immunity from the Settlement Commission. The court held that Section 245I immunity was not applicable since prosecution was initiated in 2016, two years before the Settlement Commission application in 2018. The accused had concealed the pending prosecution from the Settlement Commission when seeking immunity. Additionally, the immunity order was under appeal before the Board, making it non-conclusive. The criminal proceedings remained valid and continued.

---

---

Issues Involved:
The judgment involves the quashing of proceedings in E.O.C.C.Nos.185 to 189 of 2016 pending for the offence under Section 277 of the Income Tax Act, 1961.

Details of the Judgment:

Issue 1: Allegations of Underreporting Sales and Expenses
The complaint alleges that the accused, a company engaged in the restaurant business, underreported sales and expenses, evading tax by not maintaining proper books of accounts. A search revealed discrepancies between reported and actual sales figures, leading to a charge under Section 277 of the Income Tax Act.

Issue 2: Admission of Undisclosed Income
The accused admitted to undisclosed income for various assessment years, indicating false and incorrect original income tax returns. The prosecution was initiated for willfully under-reporting income, constituting an offence under Section 277 of the Income Tax Act.

Issue 3: Settlement Commission Proceedings
The accused approached the Settlement Commission, disclosing income and paying taxes. The Settlement Commission granted immunity from prosecution for settled assessment years. However, the prosecution had already been initiated before the Settlement Commission application, rendering the immunity inapplicable as per Section 245H(1) of the Income Tax Act.

Issue 4: Prosecution and Pending Appeal
The Special Public Prosecutor argued that incriminating materials support the prosecution under Section 277 of the Income Tax Act, despite the Settlement Commission proceedings. The fact of pending prosecution was not disclosed to the Settlement Commission, and an appeal against the immunity granted is pending before the Board.

Conclusion:
The Court dismissed the Criminal Original Petitions, upholding the continuation of proceedings in E.O.C.C.Nos.185 to 189 of 2016. The judgment emphasizes the importance of full disclosure and compliance with Settlement Commission provisions in tax evasion cases.

---