2002 (9) TMI 3 - SC - Income Tax

Omission of penal provision in section 276DD not cured by Section 6 of the General Clauses Act

General Finance Co. And Another Versus Assistant Commissioner of Income-Tax

The SC allowed the appeal, set aside the HC order and quashed prosecution proceedings under section 276DD, holding that omission of the provision cannot ... Prosecution under section 276DD - Punishment for non-compliance with provisions of section 269SS is provided under section 276DD - Applicability of section 6 of the General Clauses Act to save the action post-omission - HELD THAT:- Though we find the submissions of learned counsel to be forceful, we are constrained to follow the two decisions of the Constitution Benches of this court in Rayala Corporation P. Ltd., [1969 (7) TMI 109 - SUPREME COURT] and Kolhapur Canesugar Works Ltd.,[2000 (2) TMI 823 - SUPREME COURT]. This view has held the field for over three decades and reiterated even as late as two years ago. Non-compliance with section 269SS of the Act attracted prosecution as well as penalty. Omission of the provision regarding prosecution will not affect the levy of penalty. The advantage arising out of application of the ratio of the two decisions resulting in prosecution in cases of non-compliance with section 269SS of the Act is only transitional affecting a few cases arising prior to April 1, 1989. Such cases may be few and far between. Hence we find this is not an appropriate case for reference to the larger Bench. The net result of this discussion is that the view taken by the High Court is not consistent with what has been stated by this court in the two decisions aforesaid and the principle underlying section 6 of the General Clauses Act as saving the right to initiate proceedings for liabilities incurred during the currency of the Act, will not apply to omission of a provision in an Act but only to repeal, omission being different from repeal as held in the aforesaid decisions. In the Income-tax Act, section 276DD stood omitted from the Act but not repealed and hence, a prosecution could not have been launched or continued by invoking section 6 of the General Clauses Act after its omission. Hence, we allow this appeal, set aside the order of the High Court and quash the proceedings for prosecution. Issues:Prosecution under section 276DD of the Income-tax Act for non-compliance with section 269SS - Applicability of section 6 of the General Clauses Act to save the action post-omission.Analysis:The case involved the appellants receiving deposits in 1985, disclosed in the income-tax return for the assessment year 1986-87, leading to prosecution under section 276DD of the Income-tax Act for non-compliance with section 269SS. The appellants sought quashing of the proceedings, arguing that since section 276DD was omitted from the Act from April 1, 1989, prosecution could not continue post-omission. The High Court upheld the prosecution, stating that the provisions were in force during the relevant accounting year. The appellants contended that section 6 of the General Clauses Act could not save the action taken post-omission.The respondent argued that section 276DD could be enforced for offences committed before its omission, emphasizing that the complaint was filed before the omission. The respondent highlighted that section 6 of the General Clauses Act aims to maintain rights and liabilities acquired during the operation of a statute, allowing prosecution even after repeal. However, the appellants referenced cases where it was held that 'omission' is distinct from 'repeal,' and section 6 does not apply to omission. The respondent argued for reconsideration of these precedents, asserting that omission effectively results in repeal, and legislative intent is crucial in determining the effect of omission.While the respondent's arguments seemed compelling, the court adhered to previous decisions holding that omission is different from repeal. Non-compliance with section 269SS attracted prosecution and penalty; however, the omission of the provision regarding prosecution did not affect the penalty levy. The court clarified that the principle of section 6 of the General Clauses Act applies to repeal, not omission. As section 276DD was omitted, not repealed, prosecution post-omission was not permissible under section 6. Consequently, the court allowed the appeal, setting aside the High Court's order and quashing the prosecution proceedings.