Allahabad High Court
Banwari Lal Agarwal vs Union Of India (Uoi) And Anr. on 4 February, 1997
Equivalent citations: [1999]238ITR464(ALL)
JUDGMENT N.S. Gupta, J.
1. Sri Banwari Lal Agarwal, proprietor, Saraswati Pipe Company, Kanpur, the petitioner above named has filed the aforesaid four petitions for quashing the Criminal Complaints Nos. 99 of 1988, 94 of 1988, 97 of 1988 and 98 of 1988, filed by the Union of India through Sri V.B. Mishra, Income-tax Officer, Circle 1(5), Kanpur, for his criminal prosecution under Section 276C of the Income-tax Act, 1961.
2. The admitted facts of the cases are that the petitioner was carrying on business in the purchase and sale of steel tubes and fittings at Kanpur. On May 21, 1980, a search was conducted by the income-tax officials at the business and residential premises of the petitioner. During the said search it was found that the petitioner had omitted to record certain transactions in his account books. The petitioner claimed that with a view to purchase peace and to avoid protracted litigation with the Department he was advised to settle the dispute with the then Income-tax Commissioner, Kanpur. Accordingly, the petitioner surrendered a sum of Rs. 35,000 to be added towards the income for the assessment year 1980-81, Rs. 20,000 for the assessment year 1979-80. For the assessment year 1978-79 the petitioner filed return of income showing an income of Rs. 35,000, His income was, however, assessed to Rs. 56,254, after adding back certain items towards the depreciation and for low withdrawal. The Department maintained that since the petitioner filed wrong and belated returns, he was guilty of committing offence punishable under Section 276C of the Income-tax Act. Hence, four separate criminal complaints were filed by the then Income-tax Officer before the Chief Judicial Magistrate, Kanpur, and the petitioner was sought to be punished. Feeling aggrieved by the said criminal complaints, the petitioner filed the aforesaid four criminal miscellaneous applications before this court under Section 482 of the Criminal Procedure Code, and prayed for quashing of the said complaints.
3. Since common questions of law and fact were involved in all these petitions, these petitions were heard together and are being disposed of by this common judgment.
4. I have heard Sri R. S. Agarwal, learned counsel for the petitioner, and Sri Shekhar Srivastaya, standing counsel for the Income-tax Department.
5. The first point urged by learned counsel for the petitioner before me is that since the assessments were made on the basis of the compromise arrived at between the petitioner and the then Income-tax Commissioner, Kanpur, and since in pursuance of the understanding given by the then Commissioner of Income-tax, Kanpur, that no penal action would be taken against the petitioner, the petitioner surrendered various amounts. The assessment in question being a compromised assessment, there was no occasion for the Income-tax Officer to initiate any criminal penal action against the petitioner. Further it was contended on behalf of the petitioner that the offence being compoundable and the prosecution having been launched without offering an opportunity of being heard and to compound the matter, as was contemplated by the provisions of Sub-section (2) of Section 279 of the Income-tax Act, before or after the institution of the proceedings, the criminal prosecution initiated against the petitioner was bad in law.
6. The provisions of Sub-section (2) of Section 279 read as under :
"Any offence under this Chapter may, either before or after the institution of proceedings, be compounded by the Chief Commissioner or a Director-General."
7. The words "either before or after the institution of the proceedings" appearing in Sub-section (2) of Section 279 reproduced supra are very significant. It is clear from the record of the case that before according the sanction for prosecution the Commissioner of Income-tax did not offer an opportunity of being heard to the petitioner. The petitioner in this case being a businessman, it is probable for me to believe that if an opportunity of being heard was afforded to the petitioner by the authorities of the Income-tax Department before according sanction for prosecution, the petitioner would have offered to compound the matter before the prose-
cution was launched against him, in order to save himself from disgrace and ordeal of the prosecution, on such terms and conditions which the compounding authority may have imposed. By not affording such an opportunity to the petitioner, the authorities of the Income-tax Department have failed to observe the rules of natural justice. Therefore, the criminal complaints instituted against the petitioner cannot be appreciated and would be deemed to be abuse of the process of the court.
8. Thus to sum up, I find that the petitioner was a businessman ; that the various assessments of his income were made on the basis of mutual settlement and on the understanding that no penal action would be taken against him ; that the petitioner was not offered an opportunity to compound the matter prior to the institution of the criminal prosecution and to explain that the errors and omissions, if any detected by the income-tax authorities during the raid of the premises of the petitioner, were the results of wilful default coupled with criminal intention to evade tax.
9. Under the circumstances, I hold that the approach of the income-tax authorities in instituting the criminal complaints against the petitioner was bad in law and amounted to abuse of the process of the court. These petitions therefore, deserve to be allowed and the various criminal complaints being Criminal Complaints Nos. 99 of 1988, 94 of 1988, 97 of 1988 and 98 of 1988--Union of India through V. B. Mishra, Income-tax Officer, Circle 1(5), Kanpur v. Banwari Lal Agarwal are hereby quashed.