Punjab-Haryana High Court
R.I. Chadha And Ors. vs Income-Tax Officer on 12 May, 1987
JUDGMENT I.S. Tiwana, J.
1. A legal question of some consequence raised in this petition under Section 482, Cr. P.C., relates to the interpretation and true scope of Section 245F of the Income-tax Act, 1961 (for short, the Act). The following undisputed facts give rise to it.
2. The petitioner, a private limited company, and its three directors are sought to be prosecuted in the Court of the Chief Judicial Magistrate, Ludhiana, for offences under Sections 276C and 277 of the Act on a complaint (annexure P-3) filed by the Income-tax Officer, Central Circle-11, Ludhiana, on July 5, 1984. This complaint, as per the stand, of the complainant (respondent), was filed at the instance, authorisation and under the orders of the Commissioner of Income-tax (Central), Ludhiana, as envisaged by Section 279 of the Act, The crux of the complaint is that for the assessment year 1980-81, a return was filed by the company bearing false verification and containing false statement of accounts as stocks worth Rs. 2,87,840 were available with the assessee in excess of what it had disclosed to the Department and the source of these stocks was also not disclosed. It was so done with a view to evade the payment of tax, penalty and the interest chargeable under the Act. As a result of this complaint, the petitioners were summoned by the trial Magistrate. They then moved an application under Section 245(2), Cr. P.C., for their discharge on the plea that they had already moved an application under Section 245C(1) of the Act for settlement before the Income-tax Settlement Commission (hereinafter referred to as " the Commission ") and the latter had allowed the application, vide its order dated August 30, 1983, to be proceeded with as envisaged by Section 245D(3) of the Act, and till the finalisation of those proceedings, the complainant or the Income-tax Commissioner had no jurisdiction to launch any criminal prosecution against them by way of complaint as had been done. The court, however, dismissed their application, vide its order dated April 11, 1986 (annexure P-5), primarily for the reason that criminal proceedings against the petitioners could not be allowed to stagnate till the conclusion of the proceedings before the Commission. 'This was so said on the basis of certain judgments which have no relevance, even remotely, to the provisions of Chapter XIX-A, including Section 245F of the Act. The petitioners now impugn the complaint, annexure P-l, and the order of the trial magistrate, annexure P-5, on the very same ground as was urged before that court.
3. To appreciate the anatomy of the contention raised, the foundational facts need to be sifted without crippling them and are as follows :
4. On February 23, 1983, the company moved an application under Section 245C of the Act before the Commission for the settlement of its tax liability and all related matters in respect of the assessment years 1969-70, 1970-71 and 1978-79 to 1982-83. This application included a prayer under Section 245H of the Act for the grant of immunity from prosecution under the Act or the Indian Penal Code or under any other Central Act for the time being in force. A copy of this application is annexure P-l. The Commission forwarded a copy of it to the Commissioner of Income-tax (Central), Ludhiana (respondent), for his report as envisaged by Section 245D(1) of the Act and on receipt of the same with no objection vide order dated August 30, 1983 (annexure P-2), allowed the application to be proceeded with. One of the material directions contained in this order was as follows :
"The Income-tax Officer may issue tax recovery certificate to the Tax Recovery Officer in respect of arrear demands, if any, to save limitation under Section 231 of the Income-tax Act. Any coercive action in respect of disputed demand pertaining to the admitted assessment years 1969-70 and 1978-79 to 1982-83 would be kept in abeyance till the order of the Commission under Section 245D(4) or any other order relating to recovery matter, whichever is earlier."
5. Concededly application P-l is still pending with the Commission and it has passed no final order under Section 245D(4) of the Act as yet.
6. The case of the petitioners now is that since the company's application, P-l, for settlement had been allowed to be proceeded with by the Commission, vide order P-2, and the said proceedings are still pending before the Commission, the Commission alone had the exclusive jurisdiction under Section 245F(2) of the Act to exercise the powers or perform the functions of any income-tax authority under the Act in relation to the matter pending before it, and the Commissioner of Income-tax could not direct the launching of criminal proceedings against them in exercise of his powers under Section 279 of the Act. It is not in dispute before me that the substance of the complaint referred to above is also the subject-matter of consideration by the Commission in those proceedings. In other words, the Commission is well entitled to or is rather obliged to go into the question whether the petitioners had filed a false return with a false verification to evade tax. Equally not in dispute is the power or the jurisdiction of the Settlement Commission under Section 245H of the Act to grant or tender immunity to the petitioners from prosecution for any offence under the Act. In the face of this accepted position and the provisions of Section 245F reproduced below, I am of the considered view that the Commissioner of Income-tax could not direct or authorise the filing of the complaint against the petitioners during the course of the pendency of the proceedings before the Settlement Commission.
" 245F. (1) 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 under this Act, (2) Where an application made under Section 245C has been allowed to be proceeded with under Section 245D, the Settlement Commission shall, until an order is passed under Sub-section (4) of Section 245D, have, subject to the provisions of Sub-section (3) of that section, exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority under this Act in relation to the case.
(3) Notwithstanding anything contained in Sub-section (2) and in the absence of any express direction to the contrary by the Settlement Commission, nothing contained in this section shall affect the operation of any other provision of this Act requiring the applicant to pay tax on the basis of self-assessment or by way of advance tax in relation to the matters before the Settlement Commission.
(4) For the removal of doubts, it is hereby declared that, in the absence or any express direction by the Settlement Commission to the contrary, nothing in this Chapter shall affect the operation of the provisions of this Act in so far as they relate to any matters other than those before the Settlement Commission.
(5) The Settlement Commission shall, subject to the provisions of this Chapter, have power to regulate its own procedure (including the fixation of places and time of its meetings) and may act notwithstanding that all the members of the Settlement Commission are not present at any of its meetings."
7. In the light of this section, it is patent that the Commission, during the pendency of the proceedings before it, enjoys all the powers which are vested in an income-tax authority under the Act. Sub-section (2) makes it manifest that till the culmination of those proceedings, with the passing of an order under Sub-section (4) of Section 245D of the Act, it has the exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority under the Act in relation to that case. Sub-section (4) further makes it clear that the authorities under the Act, including the Commissioner and the Income-tax Officer, may continue to exercise their jurisdiction under the Act with regard to any matters other than those which are before the Settlement Commission but that too is subject to any direction by the Commission to the contrary.
8. In the face of the above-noted provision of law, i.e., Section 245F of the Act, the Settlement Commission alone had the exclusive jurisdiction to launch or not to launch any prosecution of the petitioners. If the Income-tax Commissioner is also held entitled to initiate these criminal proceedings in exercise of his jurisdiction under Section 279 of the Act, then the " exclusive jurisdiction " of the Settlement Commission hardly has any meaning. To permit the Income-tax Commissioner to do so would be a complete negation of Sub-section (2) of Section 245F.
9. In the light of the discussion above, I allow this petition and quash the impugned complaint, P-I, and the resultant proceedings now pending against the petitioners in the Court of the Chief Judicial Magistrate, Ludhiana.