TaxTMI 
TaxTMI 
1994 (9) TMI 5
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....ated first for appreciating the point involved in both the cases. Petitioner No. 1, Shri Mukesh Kumar, petitioner No. 2 Smt. Neelam Singh, petitioner No. 3, Sri Baban Bihari Singh, and petitioner No. 4, Smt. Durga Devi, in Crl. Miscellaneous No. 3398 of 1992 are partners of a registered firm, namely, Chitranjan Construction Company, Rajendra Nagar. The accused persons filed the return of income of Rs. 1,94,980 for the assessment year 1989-90 under the provisions of the Act. The assessment was completed on a total income of Rs. 11,37,950 after making additions of bogus debits in raw materials account, false credit in the bills account, cash credits and excess of the assets over liabilities. The petitioners are alleged to have concealed the particulars of income and to have deliberately furnished the incorrect particulars of income and as such attempted to evade the tax chargeable and imposable under the Act. One of the partners accused, Sri Chitranjan Prasad Singh, who verified the return deliberately made a false statement which he either knew or believed to be false or did not believe to be true and as such the accused persons committed the offences under sections 276C and 277 ....
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.... entirely set off against unabsorbed depreciation of the early years. The petitioner aggrieved by the redetermination of income filed an application for settlement before the Settlement Commission under section 245C of the Act for the assessment years 1985-86, 1987-88 and 1988-89. The Settlement Commission denied the admission of the application for the assessment year 1985-86. Thereafter, a complaint petition was filed on February 28, 1992, after obtaining sanction on February 20, 1992, by the Commissioner of Income-tax under section 279(1) of the Act. It was asserted in the complaint, inter alia, that the accused wilfully attempted to evade the tax chargeable or imposable under the Act by furnishing incorrect particulars of the income. The accused persons also wilfully made the statement in verification of return or delivered an account or statement which was false and which they either knew or believed to be false or did not believe to be true and as such committed an offence punishable under sections 276C and 277 of the Act. There is no dispute between the parties that even after rejection of the petition by the Settlement Commissioner the petitioner has again filed a fresh ....
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.... believe to be true he commits an offence punishable under section 277 of the Act. Chapter XIX-A was inserted in the Act by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976, with a view to give effect to one of the recommendations of the Wanchoo Committee Report. This part provides for settlement of tax disputes and immunity from prosecution and penalty. Section 245B of the Act provides for constitution of a Commission to be called the Income-tax Settlement Commission. Section 245C of the Act provides for filing of an application for settlement of cases, the relevant portion of which runs as follows : " (1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full, and true disclosure of his income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided : Provided th....
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....of. (2C) Where the additional amount of income-tax is not paid within the time specified under sub-section (2A), then, whether or not the Settlement Commission has extended the time for payment of the amount which remains unpaid or has allowed payment thereof by instalments under sub-section (2B), the assessee shall be liable to pay simple interest at fifteen per cent per annum on the amount remaining unpaid from the date of expiry of the period of thirty-five days referred to in sub-section (2A). (2D) Where the additional amount of income-tax referred to in sub-section (2A) is not paid by the assessee within the time specified under that sub-section or extended under sub-section (2B), as the case may be, the Settlement Commission may direct that the amount of income-tax remaining unpaid, together with any interest payable thereon under sub-section (2C), be recovered and any penalty for default in making payment of such additional amount may be imposed and recovered, in accordance with the provisions of Chapter XVII, by the Assessing Officer having jurisdiction over the assessee. (3) Where an application is allowed to be proceeded with under sub-section (1), the Settlement....
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....he period of thirty-five days aforesaid. (7) Where a settlement becomes void as provided under sub-section (6), the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and the income-tax authority concerned may, notwithstanding anything contained in any other provision of this Act, complete such proceedings at any time before the expiry of two years from the end of the financial year in which the settlement became void. (8) For the removal of doubts, it is hereby declared that nothing contained, in section 153 shall apply to any order passed under sub-section (4) or to any order of assessment, reassessment or recomputation required to be made by the Assessing Officer, in pursuance of any directions contained in such order passed by the Settlement Commission and nothing contained in the proviso to sub-section (1) of section 186 shall apply to the cancellation of the registration of a firm required to be made in pursuance of any such directions as aforesaid. " Section 245F of the Act provides the powers and procedure of Sett....
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....Act or under the Indian Penal Code (45 of 1860) or under any other Central Act for the time being in force and also (either wholly or in part) from the imposition of any penalty under this Act, with respect to the case covered by the settlement : Provided that no such immunity shall be granted by the Settlement Commission in cases where the proceedings for the prosecution for any such offence have been instituted before the date of receipt of the application under section 245C. (1A) An immunity granted to a person under sub-section (1) shall stand withdrawn if such person fails to pay any sum specified in the order of settlement passed under sub-section (4) of section 245D within the time specified in such order or within such further time as may be allowed by the Settlement Commission, or fails to comply with any other condition subject to which the immunity was granted and thereupon the provisions of this Act shall apply as if such immunity had not been granted. (2) An immunity granted to a person under sub-section (1) may, at any time, be withdrawn by the Settlement Commission, if it is satisfied that such person had, in the course of the settlement proceedings conceale....
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....r materials referred to thereunder, the Commission shall allow the application to be proceeded with or reject the application. In case the application is allowed to be proceeded with, the matter has to be again re-examined and the final order has to be passed after taking into consideration the materials referred to in sub-section (4) of section 245D of the Act. Section 245F of the Act provides with regard to the powers and procedure of the Settlement Commission. Sub-section (1) of section 245F provides that in addition to the powers conferred on the Settlement Commission under this Chapter, it shall have all the powers which are vested in an income-tax authority. Sub-section (2) of section 245F provides that after the application under section 245C has been allowed to be proceeded with under section 245D, the Settlement Commission is vested with exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority under this Act in relation to the case. However, sub-section (4) of section 245F provides that in the absence of any specific direction by the Settlement Commission to the contrary, nothing in this Chapter shall affect the operation of the pr....
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....and after having been unsuccessful before him it filed an appeal before the Income-tax Appellate Tribunal. While the appeal was pending the Income-tax Department filed a complaint against the assessee for the offence under section 277 of the Act and other sections of the Indian Penal Code with regard to the assessment year 1963-64. The appeal was finally, decided in favour of the assessee regarding the relevant assessment year and thereafter he filed an application for discharging him in the criminal prosecution under section 482, Criminal Procedure Code, before the Punjab and Haryana High Court, which was dismissed and thereafter the matter was brought before the Supreme Court, where it was held as follows : " Heard counsel, special leave granted. In view of the finding recorded by the Income-tax Appellate Tribunal that it was clear on the appraisal of the entire material on the record that Smt. Janak Rani was a partner of the assessee-firm and that the firm was a genuine firm, we do not see how the assessee can be prosecuted for filing false returns. We, accordingly, allow this appeal and quash the prosecution. There will be no order as costs. " The aforesaid case has no ap....
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.... considered by the criminal court while deciding a proceeding regarding the relevant assessment year and the resultant finding in the said proceedings has to be given due regard in deciding the criminal prosecution. In the words of the Supreme Court : " It may not be out of place to refer to an observation of this court in Uttam, Chand v. ITO [1982] 133 ITR 909, wherein it was observed that the prosecution once initiated may be quashed in the light of a finding favourable to the assessee recorded by an authority under the Act subsequently in respect of the relevant assessment proceedings. But, in Jayappan's case [1984] 149 ITR 696 (SC), it has been held that the decision in Uttam Chand's case [1982] 133 ITR 909, is not an authority for the proposition that no proceedings can be initiated at all under section 276C and section 277 as long as some proceeding under the Act in which there is a chance of success of the assessee is pending. Though, as held in Jayappan's case [1984] 149 ITR 696 (SC), a criminal court has to judge the case before it independently on the materials placed before it, there is no legal bar in giving due regard to the result of the proceedings under the Incom....
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....aint which was rejected and thereafter the matter came before the Delhi High Court. Dealing with the said matter, the learned single judge of the Delhi High Court held as follows : " Keeping in mind the aforesaid provisions contained in sections 245D, 245F(2), 245H and 245-I of the Act when the Settlement Commission, after dealing with the objections of the Commissioner of Income-tax raised under sub-section (1A) of section 245D, is not satisfied with the correctness of the same and dismisses the same on the basis of the material available at that point of time holding that concealment of income has not been established nor is likely to be established, there is no material left whatever with him at that particular point of time to continue with the prosecution of the person who has made the application under section 245C for settlement as after the making of that application, it is the Settlement Commission alone in whom vests thereafter the exclusive jurisdiction under section 245F(2) to exercise the powers and perform the functions of an income-tax authority under the Act in relation to the case including the power of continuing the prosecution already launched by the Commissi....
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....arned counsel for the petitioner, regarding the interpretation of the question of law involved in this case, that the continuance of complaint against the petitioner may be ordered to be simply stayed till the settlement order is made by the Settlement Commission under sub-section (4) of section 245D cannot be accepted. " With respect to the learned judge, I find myself unable to agree with the proposition that only because an application has been ordered to be proceeded with under section 245D, sub-section (1), of the Act after rejecting the objection of the Commissioner, the prosecution cannot continue and the same has to be quashed. The power has been vested in the Settlement Commission to give immunity from prosecution at the final stage of the proceeding and that power cannot be exercised in favour of the assessee even if an order is passed in favour of the assessee unless the condition mentioned under section 245H of the Act is fulfilled. Only pendency of an application even if it has been ordered to be proceeded with cannot be a ground to quash the pending prosecution as mentioned above. It would only amount to that an application is pending for final decision and the pri....
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....mplaint was filed against him for the offence under section 276B of the Act. Later on, the Commissioner of Income-tax allowed the revision on the merits and deleted the penalty. In such a situation his Lordship held that if an order on the merits is passed in favour of the assessee in the proceeding under the Act by the authority in relation to the very same default which is the subject-matter of the prosecution and the order has attained finality the prosecution of the assessee has to be discontinued. In the present case no final order has been passed and as such the said case is of no help to the petitioners. In my view, mere pendency of the application before the Settlement Commission at any stage that is to say even after the application has been allowed to be proceeded with is not a ground for quashing the prosecution or discharging an accused in a criminal case even if the matter in issue before the Settlement Commission has a direct bearing on the question in issue in the criminal proceeding. It is to be made clear that if the Settlement Commission passed a final order in favour of a person and further grants immunity from prosecution and penalty then the criminal prosecu....
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....ot be proceeded with and has to be stayed. A learned single judge of this court has also had occasion to consider the question as to whether the criminal prosecution has to be stayed or not during the pendency of an application before the Settlement Commission in the case of K. Pechisia v. Union of India [1993] 2 PLJR 21. From the fact of the said case, it appears that before the launching of the prosecution by the Department, the assessee had moved the Settlement Commission for settlement of his case. A report was called for from the Commissioner of Income-tax. The Commissioner objected to the application being proceeded with in accordance with the provision contained under section 245D(1A) of the Act and after considering the matter the Commission rejected the objection of the Commissioner of Income-tax and ordered the application filed under section 245C of the Act to be proceeded with and the matter was pending with the Settlement Commission, for final decision. Thereafter, the prosecution was launched for the offences under sections 276C and 277 of the Act. After taking note of the provision of section 245H, which empowers the Settlement Commission to grant immunity to the per....
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....osecution by virtue of exclusive jurisdiction vested in it. So in the interest of justice and to obviate an anomalous situation being created it is just and proper to stay the criminal prosecution if the matter in issue before the criminal court and the Settlement Commission is the same or related, till the passing of the final order by the Settlement Commission. Such cases would be treated to be appropriate cases for staying the prosecution as held by the Supreme Court in P. Jayappan [1984] 149 ITR 696. However, the question in the present two cases are different. Here the question is as to whether by merely filing an application before the Settlement Commission which has not reached the stage where the Settlement Commission has allowed the application to be proceeded with, the prosecution has to be stayed. Even at the cost of repetition I may mention that on the filing of an application it is not automatically admitted or allowed to be proceeded with by the Settlement Commission. On the other hand, the Settlement Commission has to consider the report of the Commissioner and other materials and then has to pass an order that the application is to be proceeded with as provided unde....