2002 (9) TMI 3 - SC - Income Tax

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

The SC allowed the appeal, set aside the HC order and quashed prosecution proceedings under section 276DD, holding that omission of the provision cannot ... Omission of statutory provision - distinction between omission and repeal - section 6 of the General Clauses Act - saving of proceedings on repeal - prosecution under an omitted provision - penalty liability unaffected by omissionOmission of statutory provision - distinction between omission and repeal - section 6 of the General Clauses Act - saving of proceedings on repeal - prosecution under an omitted provision - section 276DD of the Income-tax Act - Whether prosecution under section 276DD of the Income-tax Act could be continued after that provision was omitted, by invoking section 6 of the General Clauses Act. - HELD THAT: - The Court applied binding precedents of the Constitution Benches in Rayala Corporation (P.) Ltd. and Kolhapur Canesugar Works Ltd., which hold that an 'omission' of a provision is legally distinct from a 'repeal' for the purposes of section 6 of the General Clauses Act. Section 6 operates to preserve rights, liabilities and proceedings where a provision is repealed, but those decisions establish that section 6 does not extend to omissions. Although arguments were advanced that an omission operates in effect as a repeal and that legislative practice uses omission to abrogate parts of statutes, the Court declined to depart from the earlier authoritative decisions which have been consistently followed. The Court further noted that omission of the prosecutory provision (section 276DD) does not affect the levy of penalty under the Income-tax Act, but that omission precludes initiation or continuance of criminal prosecution by relying on section 6. Applying these principles to the facts, prosecution based on section 276DD could not be sustained after its omission with effect from April 1, 1989.Prosecution under section 276DD could not be continued after its omission; section 6 of the General Clauses Act does not save prosecution for an omitted provision.Final Conclusion: Appeal allowed; the High Court's order upholding prosecution under the omitted section 276DD is set aside and the criminal proceedings are quashed, while noting that omission does not affect penalty liability under the Act. 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.