Rajasthan High Court - Jaipur
Shree Singhvi Brothers And Ors. vs Union Of India (Uoi) And Ors. on 9 May, 1990
Equivalent citations: [1991]187ITR219(RAJ)
JUDGMENT Jasraj Chopra, J.
1. By this writ petition filed under Articles 226 and 227 of the Constitution, the petitioners have prayed for quashing the order annexure 13 dated May 31, 1988, whereby the waiver petition filed under Sections 273A and 273A of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), has been rejected. A direction has also been sought for reconsideration of the waiver petition by the non-petitioners or, in the alternative, the petitioners have claimed waiver of the penalty amounting to Rs. 29,600 imposed against them under Section 271, vide order annexure 6 dated March 12, 1987, They have further sought relief by way of quashing of the order, annexure 15, dated December 12, 1988, the notice annexure 16 dated February 15/24, 1988, the order annexure 21, dated March 23, 1989, and the complaint annexure 20 pending in the Court of the Chief Judicial Magistrate (Economic Offences), Jaipur.
2. The facts necessary to be noticed for the disposal of this writ petition briefly stated are : that petitioner No. 1, M/s. Shree Singhvi Bros, is a registered partnership firm and petitioners Nos. 2 and 3, Shri Kushal Singh and Laxmansingh, are its partners. It is alleged that a search was conducted at the business premises as well as at the residential premises of the partners under the provisions of Section 132 of the Act on May 6, 1981. During the course of the search, 65 kgs. of silver was found, out of which 16 kgs. of silver/silver ornaments were treated as unexplained by the Authorised Officers of the Income-tax Department and, therefore, the Department included its value amounting to Rs. 32,000 in their income for the assessment year 1982-83 while making the regular assessment. The petitioners explained that this silver belonged to Shri Mohansingh, Shri Banshilal and Shri Abdul Razid. After an order under Section 132 of the Act was made on August 1, 1981, the petitioner firm filed its return on October 1, 1982. However, the learned Income-tax Officer was not satisfied with this explanation and he included the value of 16 kgs. silver amounting to Rs. 32,000 in their income and further imposed a penalty of Rs. 29,600 under Section 271 of the Act on the tax amounting to Rs. 14,880.
3. An appeal was filed against this regular assessment and that came to be dismissed by the learned Appellate Assistant Commissioner of Income-tax, Udaipur Range, Udaipur, vide order annexure 2 dated September 19, 1985. Thereafter, by order annexure 3 dated July 23, 1987, the learned Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, also sustained the addition in question to the tune of Rs. 28,800. It may be stated here that the addition of Rs. 32,000 was reduced to Rs. 28,800 by the learned Appellate Assistant Commissioner and to this extent, the order of the learned Appellate Assistant Commissioner was sustained by the learned Tribunal.
4. Thereafter, the petitioners filed an application under Section 132(11) of the Act and that too was dismissed by the learned Commissioner of Income-tax, vide order annexure 5 dated June 14, 1984.
5. According to the petitioners, the maximum amount of penalty has been imposed in this case, vide order annexure 6 dated March 12, 1987, under Section 271 of the Act, and, therefore, they filed an appeal against this order before the Commissioner of Income-tax (Appeals), Jaipur, and the same is still pending. No final order has been passed but the written arguments which were submitted before the learned Commissioner of Income-tax (Appeals) are contained in annexure 7. Thereafter, it is alleged that the petitioners filed an application before the learned Commissioner of Income-tax, Income-tax Department, under Section 273A of the Act for waiver or substantial reduction in the penalty imposed against them. A copy of the waiver petition has been filed and marked as annexure 8.
6. The petitioners have submitted that as per Section 273A of the Act, the Income-tax Commissioner has discretion either on his own motion or otherwise to reduce or waive the amount of penalty imposed against the assessee and that discretion has to be exercised judicially and with extra caution because such a right is available to the assessee only once in his lifetime.
7. It was contended on behalf of the petitioners that a hearing on the application under Section 273A of the Act was fixed on March 21, 1988, in pursuance of a notice dated March 2, 1988. It is alleged that, during the course of the hearing of the petition under Section 273A of the Act, the learned Commissioner of Income-tax asked the petitioners to deposit the tax found due for the assessment year 1982-83 including the tax on the alleged unexplained silver weighing 16 kgs. and then he would waive the penalty imposed against the petitioner-firm under Section 271 of the Act. Such an assurance was specifically given to the petitioners during the course of hearing of the petition under Section 273A of the Act on March 29, 1988. It was submitted that, actually acting on the said promise/ assurance of the learned Commissioner of Income-tax, the petitioners agreed to pay the tax found due against the petitioner-firm as per the assessment order dated January 5, 1988, including tax on the alleged unexplained silver weighing 16 kgs. and, therefore, on March 30, 1988, itself, the petitioners managed the funds and deposited the tax, vide challans (annexure 10).
8. It is alleged that this fact of specific assurance was duly put on record by a handwritten letter dated March 30, 1988 (annexure 11) by counsel for the petitioner-firm which was duly handed over to the learned Commissioner of Income-tax personally on March 30, 1988 itself. It was submitted that, if no such categorical and specific assurance was given by the learned Commissioner of Income-tax, such letter could not have been given to the learned Commissioner of Income-tax personally, who duly acknowledged the same and did not controvert the same at any time prior to the rejecting of the prayer for waiver. According to the petitioners, if it was otherwise, the learned Commissioner of Income-tax would certainly have felt rather offended by putting on record such a letter, but nothing of this sort happened and, therefore, the petitioners have contended that such an assurance was given. This fact of assurance was further reiterated in the application annexure 12 dated April 11, 1988 filed by the authorised representative of the petitioner-firm to the learned Commissioner of Income-tax.
9. However, overlooking the said promise/assurance and to the surprise of the petitioners and without giving any further opportunity of hearing to them after March 30, 1988, the waiver petition filed by the petitioners was dismissed by the learned Commissioner of Income-tax, vide his order annexure 13 dated May 31, 1988. According to the petitioners, the order annexure 13 is totally a non-speaking order and it does not contain any reasons whatsoever for rejecting the waiver petition. It is based on the findings of the Tribunal and that is no ground for rejecting the waiver petition.
10. It was submitted that, immediately upon receiving the aforesaid order annexure 13 rejecting the waiver petition, the petitioners moved an application under Section 154 of the Act and that too came to be rejected by the learned Commissioner of Income-tax, vide order annexure 15 dated December 12, 1988. It was contended by the petitioners that unless the Commissioner of Income-tax was not ready to waive or substantially reduce the penalty, there was no reason for the petitioner to deposit the tax on March 30, 1988. It was contended on behalf of the petitioners that while acting as a court in a quasi-judicial capacity, the learned Commissioner of Income-tax, while hearing the arguments on the waiver petition, has given a categorical and specific assurance/promise to the petitioner for complete waiver/substantial reduction of penalty in question, although that assurance/promise was not reduced in writing but that can be inferred by the order sheet dated March 29, 1988, which reads as under :
"Shri B.M. Kothari C. A. Promise has been made to pay all the taxes for this year after giving effect. The payment should be made by March 30, 1988 at Udaipur. Heard. Put up with Tribunal's order."
11. Thereafter, it is said that prosecution has also been launched against the petitioners. Before the launching of the prosecution, notice was given to the petitioner-firm to show cause as to why prosecution should not be launched against them. It is alleged that a hearing on the waiver petition was fixed on March 21, 1988. The hearing on the prosecution notice was also fixed on March 21, 1988 and, on that day, an adjournment application was filed to defer the decision on prosecution notice until the waiver application/petition is decided. Although the case was adjourned on that day, thereafter, no further opportunity was given to the petitioners in pursuance of the said notice, annexure 16 dated February 15/24, 1988, and an order was given for launching prosecution against the petitioners'.
12. It was contended that, in pursuance of the notice (annexure 16) that was issued to petitioner No. 1, no opportunity of hearing was provided to petitioners Nos. 2 and 3. Even no notice was issued to non-petitioners Nos. 2 and 3, which was mandatory. Petitioners Nos. 2 and 3 came to know about this prosecution when a complaint was filed in the Court of the Chief Judicial Magistrate (Economic Offences), Jaipur, which was registered as Criminal Case No. 153 of 1989 (Asst.. CIT, Investigation Circle, Udaipur v. Shree Singhvi Brothers) and the police came with arrest warrants and arrested petitioner No. 2, Shri Kushal Singh. Petitioner No. 3, Shri Laxmansingh, being out of station, could not be arrested and later he obtained anticipatory bail, Petitioner No. 2 was, however, released on bail. The petitioners have, therefore, prayed for quashing of the prosecution proceedings and have also sought the reliefs as aforesaid.
13. A return was filed on behalf of respondents Nos. 2 and 3 and it has been strenuously contended that no assurance whatsoever was given by the Commissioner of Income-tax. In this case, the waiver petition under Section 273A of the Act has been rightly rejected. It was submitted that before launching any prosecution, no notice whatsoever was necessary and the case did not require any sanction. The prosecution has to be launched at the instance of the Commissioner. The petition filed under Section 154 has also been rightly rejected because no mistake apparent on the face of the record was noticed. The prosecution has been launched against the petitioners under Sections 276C(1) and 277 read with Section 278B of the Act. The prosecution was launched by the respondents after giving an opportunity of hearing to the petitioners. A notice was given to the petitioner-firm by registered post on February 15, 1988, and, in pursuance of that notice, petitioner No. 2 filed the reply and, after considering that reply and the relevant record, respondent No. 2 came to the conclusion that the prosecution should be launched against the petitioner. No separate notice was needed to be issued to the partners of the registered partnership firm, though in the present case, one of its partners has filed a reply. It was submitted that, before launching the prosecution and taking a decision for the same, the Commissioner of Income-tax is not required to give any notice to the assessee but anyhow, in the present case, a notice was given to the assessee. There is no prohibition for launching prosecution against the assessee for contravention of the provisions of the Act" till the disposal of the waiver petition. However, in the present case, the waiver petition has also been dismissed before the launching of the prosecution. The addition of tax has been maintained up to the stage of the Tribunal.
14. It was further submitted that if the petitioners have any grievance as regards the criminal proceedings, they can take action according to the provisions of criminal law applicable to the case concerned but, so far as this writ petition is concerned, it is not maintainable. It was further contended that the prosecution has been launched against the petitioners after affording an opportunity of hearing. The provisions of Section 279 of the Act are not applicable in the present case. It was admitted that the appeal against imposition of penalty is still pending and it will be decided as and when it comes up for hearing. The petitioners cannot be permitted to raise this point before this court as it is sub judice before the Competent Authority.
15. According to the respondents, no question of promissory -estoppel arises in the present case because no promise whatsoever was given by the Commissioner. All the orders have been passed after giving an opportunity of hearing to the petitioner. They have, therefore, prayed that this writ petition be dismissed. It was, however, disclosed that Shri P.C. Mishra, the then Commissioner of Income-tax, against whom it is alleged that he has given the assurance/promise, is no more alive and, therefore, his affidavit in this respect cannot be filed.
16. I have heard Mr. Vineet Kothari, learned counsel appearing for the petitioners, and Mr. B.R. Arora, learned counsel appearing for the non-petitioners, and have carefully gone through the record of the case.
17. It was contended by Mr. Vineet Kothari, learned counsel appearing for the petitioners, that now, he does not challenge the addition of income because the petitioners have already paid the tax levied against them on the basis of the assurance furnished by the Commissioner of Income-tax.
He has further submitted that no penalty could have been imposed against the petitioners because it is not a case of concealing income. It is a case where a particular explanation has been offered by the assessee but that explanation has not been accepted. It was submitted that this explanation was offered prior to October 1, 1982, when the return was filed and; therefore, it is not a case of concealment of income and hence no penalty can be imposed. He has, however, submitted that a specific assurance was given by the learned Commissioner of Income-tax that if the petitioners deposit the amount of tax levied against them, then the penalty imposed against them will be waived or substantially reduced and, therefore, the learned Commissioner of Income-tax is precluded from rejecting the waiver petition on account of the application of the principle of promissory estoppel in such cases.
18. The contention of Mr. Kothari is that the addition to the income was made by the learned Income-tax Officer and that was upheld up to the stage of the Tribunal but that is no ground to reject the waiver petition. The waiver petition has to be judged independently on the basis of the pleas taken therein and when it is not a case of concealment of income, the waiver petition should have been allowed. According to the petitioners, once the waiver petition is allowed and the tax is either reduced or waived, no prosecution can be launched. This right which is available to the petitioners only once in his lifetime should be decided after careful consideration of the material on record and the decision on the waiver petition should not be based on any extraneous reasons. It was contended that the prosecution has to be sanctioned by the Income-tax Officer but in this case, no sanction has been accorded after due application of mind. It was further submitted that the partnership being a juristic person cannot be prosecuted.
19. Mr. Kothari has further argued that in such quasi-judicial matters, the domestic tribunals should follow the principles of natural justice. Mr. Kothari has submitted that, if the waiver petition is disposed of or the prosecution is launched, an opportunity of hearing should be provided to the affected persons. The principle of audi alteram partem is the basic principle of natural justice. He has submitted that, in this case, before launching prosecution, the principle of audi alteram partem has not been followed. Mr. Kothari has submitted that, although petitioner No. 1 has been issued a notice and the case was fixed for hearing on March 21, 1988, it was adjourned on that day and thereafter no further hearing was provided to the petitioners. According to Mr. Kothari, so far as petitioners Nos. 2 and 3 are concerned, the prosecution has been launched against them without giving them any notice.
20. The contention of Mr. Kothari is that it is not a case of concealment of income because the facts leading to the disclosure of income were very much within the knowledge of the Department much prior to the filing of the return. He has, therefore, submitted that it is not a case of concealment of income. Rather, it is a case of non-acceptance of the given explanation as regards the property possessed by the petitioners and, therefore, no penalty can be imposed against them. Mr. Kothari has submitted that there was no criminal intention to conceal income and, therefore, no prosecution should have been launched against the petitioners. He has, therefore, submitted that the order rejecting the waiver petition should be quashed and the case be sent back to the learned Commissioner of Income-tax for redeciding it.
21. These arguments put forth by Mr. Kothari have been strenuously opposed by Mr. B.R. Arora, learned counsel appearing for the respondents. Mr. Arora has argued that no assurance whatsoever was given and, therefore, the principle of promissory estoppel does not arise in this case. Mr. Arora has further submitted that before launching prosecution, according to Section 279(1) of the Income-tax Act (old), no sanction is necessary and the prosecution has only to be launched at the instance of the Commissioner and, therefore, the argument about sanction is not available to the petitioners.
22. The contention of Mr. Arora is that if the petitioners have any grievance as to who is the active partner and who is responsible, they must raise that plea before the criminal court. The proceedings can be compounded under the Act either before the launching of the prosecution or after the launching of the prosecution and, therefore, the launching of the prosecution is no bar to the compounding of the case. Moreover, the pendency of the appeal against the penalty proceedings is no bar to the launching of the prosecution.
23. It has been contended by Mr. Arora that the appeal against imposition of penalty is still pending and, therefore, this court should not interfere with the matter which is sub judice. According to Mr. Arora, when the matter is sub judice, this court cannot waive the penalty at this stage. Mr. Arora has submitted that if the petitioners are aggrieved by the prosecution, they should avail of the proper remedy under Section 482, Criminal Procedure Code, as the writ jurisdiction is not the proper remedy which may be availed of in such matters. Mr. Arora has also taken me through the file in which proceedings as regards waiver petition and the petition filed under Section 154 of the Act have been recorded and, on the basis of those proceedings, Mr. Arora has argued that no specific assurance was given to the petitioners.
24. I have considered the rival submissions made at the Bar. Now, I proceed to decide this writ petition on merits.
25. At the very outset, I make it clear that so far as the levy of penalty under Section 271(1)(c) of the Act is concerned, an appeal against that order is still pending and, therefore, this court is not going to give any finding as regards that contention of the petitioners. In that view of the matter, now only two controversies remain to be decided and they are :
(1) Whether the waiver petition filed under Section 273 A has been rightly rejected or that order deserves to be quashed along with the order passed on the application under Section 154 of the Act ? and (2) Whether the prosecution launched against the petitioners is uncalled for and if that is so, whether it deserves to be quashed ?
26. It is the admitted case of the parties that a search was undertaken in the business and residential premises of the partners of the petitioner-firm on May 6, 1981, and, in that search, 65 kgs. of silver was found in their possession. The Department accepted their explanation as regards possession of 49 kgs. of silver but it did not accept their explanation as regards possession of 16 kgs. of silver. It was contended by the assesses that 5,400 kgs. of silver belongs to Shri Mohan Singh ; 8 kgs. of silver belongs to Shri Banshilal and 2,600 kgs. of silver belongs to one Abdul Mazid and that is how they tried to explain their possession over this alleged unexplained 13 kgs. of silver, which according to them belonged to their three workmen (karigars) named above, who prepare silver uterisils and silver ornaments. This explanation was submitted by the assessee in the proceedings under Section 132 of the Act but that was not accepted by the Department. However, the learned Income-tax Officer felt that it is a case of concealment of income and, therefore, he added that income in the return that was filed by the petitioner on October 1, 1982. The search took place on May 6, 1981, and the proceedings under Section 132 of the Act were also initiated in which this explanation was furnished and it was not accepted. Thereafter, on October 1, 1982, i.e., after one year and 5 months, the return for the assessment year 1982-83 was filed. Thus, prior to the filing of this return, it was very much within the knowledge of the Department that the petitioners were in possession of 16 kgs. of silver and they have furnished a particular explanation which was not acceptable to the Department. The regular assessment for the assessment year 1982-83 was done by the learned Income-tax Officer on January 5, 1985, and in that assessment, he added the value of 16 kgs. of silver in the income of the petitioners, treating it to be a case of concealment of income. Thereafter, an appeal was filed and, in that appeal, the addition of Rs. 32,000 as the value of 16 kgs. of silver was reduced to Rs. 28.000 by the learned Appellate Assistant Commissioner and that appellate order was also maintained by the learned Tribunal. No appeal or any other appropriate proceedings against that order have been filed and hence that order of the learned Tribunal has become final.
27. Thereafter, it is alleged that proceedings under Section 271 of the Act were initiated by the learned Income-tax Officer, who imposed the maximum penalty amounting to Rs. 29,600 against the petitioners on the amount of tax evasion amounting to Rs. 14,800, It was against this imposition of penalty that an appeal" was filed and a waiver petition was also- preferred by the assessee before the learned Commissioner of Income-tax. That waiver petition came to be fixed for hearing on March 21, 1988. In the meanwhile, a show cause notice was also issued to the petitioner-firm calling upon them to show cause why prosecution for concealment of income should not be launched against them. It is the admitted case of the parties that no notice was issued to the partners of the petitioner-firm. Be that as it may, in the notice, it was recorded that the case will be heard on March 8, 1988, as regards launching of the prosecution. On that day, an adjournment application was filed. The notice is annexure 16. The adjournment application is annexure 17 wherein it has been prayed on behalf of the petitioner-firm that the waiver petition is pending under Section 273A of the Act and that has been fixed on March 21, 1988, and, therefore, the hearing of the aforesaid matter be adjourned to the next date convenient to the learned Commissioner and it may be decided after the decision of the waiver petition. However, on the request of the parties, the case was adjourned so far as the notice regarding launching of the prosecution was concerned and the waiver petition was, however, fixed on March 21, 1988, and, on that day, an adjournment was sought and the case was again fixed on March 29, 1988. The order sheet dated March 29, 1988 reads as follows :
"Shri B.M. Kothari, C. A. Promise has been made to pay all the taxes for this year after giving effect. The payment should be made by March 30, 1988 at Udaipur. Hoard. Put up with Tribunal's order."
28. This order sheet has been signed by Shri B.M. Kothari, C. A., as also by petitioner No. 2, Shri Kushal Singh Singhvi. It is alleged that it was on that date that an assurance was given that if the payment of tax is made by March 30, 1988, then the penalty will be waived or substantially reduced. On March 30, 1988, the payment of tax was actually made and it is not disputed that this payment was made, vide annexure-10. However, on March 30, 1988, "Shri B.M. Kothari has filed an application before the learned Commissioner in which he has submitted that with reference to the direction given by the learned Commissioner yesterday, the assessee has informed on telephone to his office that the entire amount of tax due for the relevant year for which waiver petition has been heard by the Commissioner has been deposited on March 30, 1988 in S. B. B. J., Chetak Circle Branch, Udaipur. It was asserted by him that the learned Commissioner was pleased to observe that if the full demand of tax is paid on March 30, 1988, their prayer for waiver or substantial reduction of penalty under Section 271 imposed for the aforesaid year will be considered favourably. This application has also been signed by Shri B.M. Kothari, C. A., and Shri Kushal Singh Singhvi, petitioner No. 2. There is receipt of this application on the file also. Thereafter, one more application dated April 11, 1988 (annexure 12), was filed by Shri B. M. Kothari which is also signed by him as also by Shri Kushal Singh Singhvi, petitioner No. 2. In this application too, the same averments have been reiterated. However, no reference of these two applications has been made in the order sheet nor in the order of disposal of the waiver petition dated May 31, 1988. In spite of the fact that the application, annexure 11, was submitted personally as alleged by the petitioners and this fact has not been denied. When this waiver petition was dismissed, an application under Section 154 of the Act for rectification of the order dated May 31, 1988, was filed and in that application it was contended that such an assurance was given by the learned Commissioner that if they deposit the amount of the tax their prayer for waiver or substantial reduction of penalty imposed under Section 271 would be considered favourably, if the entire tax demand was deposited on March 30, 1988. It is alleged that, on the aforesaid assurance given by the learned Commissioner of Income-tax, the partner of the petitioner-firm went to Udaipur and deposited the amount of tax. This application was dealt with on July 21, 1988, in which the fact of the assurance given by the learned Commissioner of income-tax was mentioned and the learned Commissioner, on this note, has given the following order ;
"Put up with the legal opinion from the standing counsel.
(Sd.) P. C. Mishra, 21/7"
29. It may be stated here that the learned Commissioner of Income-tax has nowhere stated prior to July 21, 1988, or on July 21, 1988, that no such assurance was ever given to the assessee. When the application was submitted to him personally, he could very well have mentioned on that application that it is absolutely wrong on the part of Mr. Kothari as also the assessee to claim that such an assurance has been given by him. There was no occasion for the petitioner, without extending any assurance by the learned Commissioner, to deposit the amount of tax including the tax on the amount which, has been added to his income for the assessment year 1982-83 within one day. Even in the order rejecting the application under Section 154 of the Act, the learned Commissioner of Income-tax has recorded as under :
"I am of the view that no such specific assurance that if the assessee makes the payment of tax, the penalty imposed will be waived/reduced was given nor from the proceedings recorded on March 29, 1988 (as noted above) can it be said that such an assurance was given to the assessee."
30. Thus, the learned Commissioner observed that no specific assurance was given. Probably, no firm assurance was given. Initially, the contention of the petitioners was that an assurance was given that their case for reduction or waiver of penalty will be considered favourably. There was no firm assurance that it will be waived or substantially reduced but it appears that such an assurance was given that it will be considered favourably, other-wise there was no occasion for the petitioner-firm or its partners to give an assurance that the amount of tax will be deposited on March 30, 1988. I am, therefore, firmly of the view that some sort of assurance was given to the assessee-firm, although it was not firm but it was specific that if the amount of tax imposed against them is deposited oh or before March 30, 1988, then the prayer for waiver or substantial reduction of tax will be considered favourably. Had the Commissioner not given any assurance to counsel for the petitioners, Shri B.M. Kothari, counsel for the petitioner would not have dared to give in writing on March 30, 1988, and on April 11, 1988, personally to the learned Commissioner of Income-tax that such an assurance was given and that the assessee had deposited the amount of tax on March 30, 1988, on the basis of that assurance and the learned Commissioner would have written on these applications that no such assurance was given by him. This shows that although he gave such an assurance, he did not like to refer to that assurance in the order sheets. If it was a case of grant of no assurance, he would have mentioned on these two applications that no such assurance was given by him. To this extent, I, therefore, entirely agree with Mr. Kothari that some sort of assurance was given to the petitioners to deposit the tax on March 30, 19S8, so that their case may be considered favourably.
31. It was contended by Mr. Kothari that if a party acts in pursuance of the promise then the party extending the promise is estopped by rule of promissory estoppel to act against such a promise, i.e., it cannot resile from it. In this respect, reliance has been placed on a decision of their Lordships of the Supreme Court in State of Madhya Pradesh v. Orient Paper Mills Ltd. [1990] 1 SCC 176, wherein it has been held that if action is taken in pursuance of the Government assurance, the principle of promissory estoppel applies and the Government or its officer who has given that assurance will be bound by its assurance to grant that relief.
32. Be that as it may, in this case, the only assurance that has been given to the petitioners appears to be that the case of the petitioners will be considered favourably. This cannot be treated as a specific assurance. Although, when such an assurance comes from the Commissioner of Income-tax, a party can easily be led to believe that if they agree to that suggestion of the learned Commissioner, their case will be considered favourably and a favourable decision can be expected, but giving an assurance that the matter will be considered favourably cannot be treated to be a firm or specific assurance and, therefore, it can at Dest be treated to be a case where the learned Commissioner of Income-tax has led a party to believe that if the petitioners act in a particular way, their case may be considered favourably but, if, after due consideration of the matter, the learned Commissioner found that he cannot grant any relief to the petitioners, then that assurance being non-specific or not firm, that assurance cannot be acted upon and the learned Commissioner cannot be held bound to substantially reduce or waive the penalty imposed against the petitioners. Thus, to this extent, although I agree with Mr. Kothari that some sort of assurance was given to the petitioners, still no relief can be granted to the petitioners because it is not a specific or firm assurance, and, therefore, in such a case, the learned Commissioner cannot be held bound by it on the basis of the principle of the promissory estoppel to reduce or waive the penalty imposed against the petitioners.
33. I have gone through the order of rejection of the waiver petition. It is not at all a non-speaking order. It shows proper application of mind. The learned Commissioner has given his reasons for rejecting the waiver petition and, in doing so, he has also taken into consideration the decisions given by the learned Tribunal as also by the learned Appellate Assistant Commissioner and the learned Income-tax Officer wherein evidence in regard to the explanation was considered and was not held to be believable and, therefore, this case was treated to be a case of concealment of income. Thus, it cannot be said that the waiver petition has been dismissed without any application of mind and that the order rejecting his waiver petition is a non-speaking order. Thus, to this extent, the argument of Mr. Kothari cannot be sustained.
34. It was contended by Mr. B.R. Arora, learned counsel appearing for the respondents, that it is wrong on the part of Mr. Kothari to suggest that this opportunity is available to an assessee only once in his lifetime. It is true that when an application made by the petitioner is rejected by the learned Commissioner, then a further opportunity is available under Section 273A(3) of the Act. Section 273A(a) of the Act reads as under :
"273A(3). Where an order has been made under Sub-section (1) in favour of any person, whether such order relates to one or more assessment years, he shall not be entitled to any relief under this section in relation to any other assessment year at any time after the making of such order."
35. Thus, it is clear that this particular opportunity cannot be granted to an assessee again when an order is made in his favour. When the application is rejected, the assessee can file a second or third or fourth application. Thus, to this extent, the argument of Mr. Arora is sustained.
36. The next contention raised by Mr. B.R. Arora, learned counsel appearing for the respondents, is that even if the learned Commissioner had assured the petitioners, that if the amount of tax is deposited on March 30, 1988, their application shall be considered favourably, then too the consideration only means examination of the circumstances with an objective mind instead of scrutinising it rather than on mere subjective considerations. In this respect, reliance has been placed on a decision of this court in Kuldeep Singh v. Union of India [1974] RLR 171, wherein the word' " consideration" came up for interpretation before the Division Bench of this court and it came to the conclusion that the word "consider" or the process of consideration has within its ambit an examination of circumstances with objectivity rather than a mere subjective conclusion. Essentially, it implies a duty to act judicially. The order dated May 31, 1988, clearly shows that the facts of the case have been taken into consideration and thereafter, a conclusion was arrived at that the case does not deserve any waiver and, therefore, the waiver application was rejected. It was, therefore, submitted by Mr. Arora that, judged from any angle, this contention of Mr. Kothari cannot be sustained. I am in agreement with the contention of Mr. Arora that so far as this particular aspect of the matter is concerned, in the absence of any firm or specific assurance, the learned Commissioner could not have been held bound by that promise. He only assured that he would consider the matter favourably or sympathetically. Consideration does not mean any subjective conclusion and, therefore, to this extent, the contention of Mr. Kothari cannot he sustained.
37. It has been next contended by Mr. Kothari that the appeal against imposition of penalty under Section 271 of the Act is pending and, therefore, no prosecution could have been launched against the petitioners. In this respect, reliance has been placed on a decision of the Karnataka High Court in Balaji Oil Traders v. ITO [1984] 150 ITR 128, wherein it has been held that the offences under Sections 276C and 277 of the Income-tax Act, 1961, are non-cognizable and a complaint as to these offences can only be at the instance of the Commissioner. The acts (or omissions) of the assessee that would constitute an offence under Sections 276C and 277 of the Act arise only when he does or omits to do something in the discharge of his statutory obligation. The acts or omissions are integrally connected with what the assessee may do or may not do in the matter of his assessment under the Act. Whether he has evaded payment of tax, interest or penalty chargeable under the Act as provided under Section 276C or made a false statement on verification, etc., as provided under Section 277 of the Act are required to be first ascertained on an examination of all the facts and circumstances of the case by the concerned Income-tax Officer. The Commissioner can take steps to prosecute the person concerned only on being satisfied that he has done the acts complained of. If the appellate or revisional authority modifies the order of the subordinate authority holding that the acts or omissions complained of either had not taken place or were not wilful or intentional, etc., the complainant cannot pursue his complaint on the strength of the facts earlier placed, which, in the altered situation, do not at all exist. The order of the subordinate authority merges with that of the appellate or revisional authority. Hence, during the pendency of appellate or revisional proceedings, to continue the prosecution in criminal court would amount to prosecuting on uncertain facts which cannot be countenanced under our system of administration. Even to allow that complaint to be pending in the court awaiting the decision in the appeal or revision, if any, filed and pending, would amount to an abuse of the process of the court. In such a case, the prosecution proceedings are liable to be quashed. In Balaji Oil Traders' case [1984] 150 ITR 128 (Kar), the learned judge followed the decision in Uttam Chand v. ITO [1982] 133 ITR 909 (SC).
38. In Uttam Chand's case [1982] 133 ITR 909 (SC), their Lordships of the Supreme Court, while relying on the decision of the Income-tax Appellate Tribunal, came to the conclusion that it was clear on appraisal of the entire material on the record that Shrimati Janak Rani was a partner of the assessee-firm and that the firm was a genuine firm, the learned members of the Tribunal held that they do not see how the assessee could be prosecuted for filing false returns. Accordingly, the appeal was allowed and the prosecution was quashed.
39. Following Uttam Chand's case [1982] 133 ITR 909 (SC), the learned judge of the Karnataka High Court in Bajaji Oil Traders' case [1984] 150 ITR 128 came to the conclusion that if the Appellate Tribunal decided the case in any manner other than that in which it has been decided by the learned Income-tax Officer, then that order will merge in the appellate order and, therefore, no prosecution can be launched till the rase is finally determined by the appellate authority in favour of the Department.
40. This submission of Mr. Vineet Kothari, learned counsel appearing for the petitioners, has been seriously opposed by Mr. R.R. Arora, learned counsel appearing for the respondents, and he has submitted that pendency of the assessment proceedings or an appeal in this respect does not. bar the prosecution. In this respect, he has placed reliance on a decision of the Punjab and Haryana High Court in Kalyan Rice and General Mills v. ITO [1989] 180 ITR 41, wherein it has been held that the pendency of assessment or reassessment proceedings cannot act as a bar to the institution of criminal proceedings for offences punishable under Sections 276C and 277 of the Act.
41. In R. Bharathan v. ITO [1989] 180 ITR 356, a learned single judge of the Kerala High Court has held that, even if the Tribunal accepts the admission of the assessee and cancelled the penalty, the Tribunal's decision did not even mean that it had found that the accounts were correct and, therefore, the prosecution cannot be quashed.
42. A learned single judge of the Punjab and Haryana High Court has held in Harbans Singh v. Union of India [1988] 171 ITR 23, that the mere filing of an application for settlement under Section 245C will not have the effect of staying the operation of the other provisions of the Act, like those providing for the prosecution of the assessee for concealing and making incorrect and false statements in the return. It was further held that criminal proceedings under Sections 277 and 279 can be sanctioned and initiated before the conclusion of penalty proceedings.
43. Reliance was also placed on a decision of their Lordships of the Supreme Court in P. Jayappan v. S.K. Perumal, First ITO [1984] 149 ITR 696, wherein it has been observed (headnote) :
"There is no provision in law which provides that a prosecution for the offences under Section 276C or Section 277 of the Income-tux Act cannot be launched until reassessment proceedings initiated against the assessee are completed."
44. It has been further observed as follows (headnote) :
"A mere expectation of success in some proceeding in an appeal or a reference under the Income-tax Act cannot come in the way of the institution of criminal proceedings under Section 276C and Section 277 of the Act."
44. Thus, the matter stands concluded by the decision of their Lordships of the Supreme Court in P. Jayappan's case [ 1984] 149 ITR 696, wherein it, has been held that even pendency of the appeal, reassessment proceedings or even revisional proceedings is no bar to the launching of the prosecution because the mere expectation of success in some proceedings cannot come in the way of the institution of criminal proceedings.
45. Mr. B.R. Arora, learned counsel appearing for the respondents, has next invited my attention to a decision of this court in Copal Lal Dhamam v. ITO [1988] 172 ITR 456, wherein it has been observed that mere pendency of proceedings of assessment or reassessment under the Income-tax Act against an assessee is not a bar against initiation of criminal prosecution for the offence punishable under Section 276C or Section 277 of the Income-tax Act, 1961. In any criminal case, before the prosecution can succeed, it has to establish all the ingredients of the offence. No doubt, in case any Assessment or reassessment order is passed in favour of the assessee during the criminal proceeding, the criminal court has to take note of it and may drop the proceedings. In support of this submission, Mr. Arora has further placed reliance on Devi Dayal v. Union of India [1988] 170 ITR 667 (P & H) ; Ashvin Kumar Vadilal Patel v. S. Rajguru [1987] 165 ITR 583 (Guj) ; T.S. Batiah v. T.S. Rangachari, ITO [1969] 72 ITR 787 (SC) and Badsha (S. M.) v. ITO [1987] 168 ITR 332 (Ker).
46. In T.S. Baliah's case [1969] 72 ITR 787 (SC), it has been observed by their Lordships of the Supreme Court as follows (headnote) :
"In enacting Section 297 of the Income-tax Act, 1961, it was not the intention of Parliament to take away the right of instituting prosecutions in respect of proceedings which were pending at the commencement of the Act. Parliament had not made any detailed provision for the institution of prosecutions in respect of offences under the 1922 Act."
47. It has been further observed as under (headnote) :
"A person can be prosecuted at the same time both under Section 177 of the Indian Penal Code and under Section 52 of the Indian Income-tax Act, 1922. 'A plain reading of Section 26 of the General Clauses' Act shows that there is no bar to the trial or prosecution of the offender under both the enactments but there is only a bar to the punishment of the offender twice for the same offence."
48. Thus, from the aforesaid authorities, it is clear that under the Act, the pendency of appeal or revision is no bar to the launching of prosecution. In this view of the matter, the contention of Mr. Kothari that as an appeal is pending against the penalty proceedings, no prosecution can be launched against the petitioners cannot be sustained. It may be stated here that the decision in Balaji Oil Traders' case [1984] 150 ITR 128 (Kar) is based on the decision of their Lordships of the Supreme Court in Uttam Chand's case [1982] 133 ITR 909 (SC), but that was a case where the Tribunal has already set aside the order of the learned Income-tax Officer and, therefore, taking advantage of that appellate decision, their Lordships quashed the prosecution. Thus, that decision has no application to the facts of this case. Here, the appeal filed against the penalty proceedings has not been decided so far.
49. It was argued by Mr. Vineet Kothari, learned counsel appearing for the petitioners that, in this case, the prosecution has been launched without according any sanction by the learned Commissioner of Income-tax and, therefore, it deserves to be quashed. In this respect, my attention has been drawn to Section 279 of the Act, which reads as follows :
"(1) A person shall not be proceeded against for an offence under Section 275A, Section 276, Section 276A, Section 276B, Section 276BB, Section 276C, Section 276CC, Section 276D, Section 277 or Section 278 except with the previous sanction of the Chief Commissioner or Director-General or Commissioner :
Provided that no such sanction shall be required if the prosecution is at the instance of the Commissioner (Appeals) or the appropriate authority.
Explanation.--For the purposes of this section, 'appropriate authority' shall have the same meaning as in Clause (c) of Section 269UA."
50. Actually, this new section which has been inserted in the Act by the Finance Act, 1988, has come into force with effect from April 1, 1989, and prior to that", prosecution had to be launched at the instance of the Commissioner and not with his prior sanction. The provision for obtaining a prior sanction from the Commissioner or Director General, etc., has been introduced in the Act only by the Finance Act, 1988. This particular prosecution has been launched at the instance of the learned Commissioner of Income-tax, who has passed a speaking order for prosecution of the petitioners. Thus, from a perusal of the order, annexure 21, dated March 23, 1989, it is clear that, in this case, the prosecution has been launched at the instance of the Commissioner and, therefore, to this extent, there is no infirmity in the launching of the prosecution against the petitioners.
51. It was argued by Mr. B.R. Arora, learned counsel appearing for the respondents, that even if it is taken that the prosecution can only be launched with the sanction of the Commissioner, then too. the word "consent" used in Section 20 of the Prevention of Food Adulteration Act is akin to the word "sanction" and that only shows that prosecution cannot be launched without sanction of a particular person and that that sanction has been accorded in this case and, therefore, there is no illegality in launching prosecution against the petitioners. In this respect, reliance has been placed on a decision of this court in Gori Shanker v. State of Rajasthan [1975] PFA Cases 59 as also on the decisions in Chittrarnjan Das v. State of Orissa [1973] 2 Cr. L. J. 1835 and Dhiansingh v. M.B. Saharanpur [1973] PFA Cases 404. All these authorities have little application to the facts and circumstances of this case. In this case, according to Section 279 as it existed before April 1, 1989, i.e., when this prosecution was launched, consent or sanction of the learned Commissioner of Income-tax was not at all necessary. According to Section 279(1) (old), prosecution has to be launched at the instance of the Commissioner. As stated above, in this case, the prosecution has been launched at the instance of the Commissioner and, therefore, to this extent, the contention of the petitioners cannot be sustained.
52. The next contention raised by Mr. Vineet Kothari, learned counsel appearing for the petitioners, is that the petitioner-firm being a partnership-firm, i.e., being a juristic person, it cannot be prosecuted and, therefore, the prosecution launched against it deserves to be quashed. He has further submitted that so far as petitioner No. 3, Shri Laxmansingh, one of the partners of the petitioner firm is concerned, there is no allegation against him that he has made any false verification and, therefore, he could not have been prosecuted.
53. As regards the first contention raised by Mr. Kothari that the petitioner-firm being a partnership firm is a juristic person and it cannot be prosecuted, is concerned, we may gainfully refer to the provisions of Section 278B of the Act, which reads as under ;
"Section 278B. (1) Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly :
Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence, was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in Sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributed to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation.--For the purposes of this section,--
(a) 'company' means a body corporate, and includes-
(i) a firm ; and
(ii) an association of persons or a body of individuals whether incorporated or not; and
(b) 'director', in relation to-
(i) a firm, means a partner in the firm ;
(ii) any association of persons or a body of individuals, means any member controlling the affairs thereof."
54. Thus, from a perusal of Section 278B of the Act, it is clear that if an offence is committed by a company, the persons responsible to the company for the conduct of the business of the company as well as the company can be prosecuted and proceeded against. In the Explanation added to Section 278B of the Act, the word "company" has been defined to mean a body corporate and includes a firm and an association of persons or a body of individuals whether incorporated or not and the word "director" in relation to a firm has been defined to mean a partner in the firm. In this view of the matter, Shri Kushal Singh and Shri Laxmansingh, petitioners Nos. 2 and 3 who are the partners of the petitioner-firm and who are responsible for the conduct of the business of the partnership firm can be prosecuted along with the petitioner-firm.
55. Mr. Kothari has drawn my attention to a decision of the Calcutta High Court in Kusum Products Ltd. v. S.K. Sinha, ITO [1980] 126 ITR 804. That was a case for prosecution of an offence of submitting a false statement and verification. It was held that mens rea is an essential ingredient for the offence. The word "person" used in Section 277 cannot include a company or a juristic person. Imprisonment is compulsory for the offence under Section 277. A company or a juristic person cannot be sent to prison and, therefore, the company cannot be prosecuted for false verification in return.
56. My attention was also drawn to a decision of the Delhi High Court in General Sales P. Ltd. v. Gopal Mukherjee, ITO [1987] 166 ITR 77. It was a case of wilful attempt to evade tax. It was held that imprisonment is compulsory and, therefore, the company cannot be prosecuted.
57. My attention was further drawn to a decision of the Allahabad High Court in Modi Industries Ltd. v. B.C. Goel [1983] 144 ITR 496, wherein it had been held that the word "person" occurring in Sections 277 and 278 of the Income-tax Act, 1961, in view of the definition clause in Section 2, includes a company. A company is hence prima facie liable to be prosecuted for the commission of an offence under Sections 277 and 278. However, the law is well-settled that a corporation or a juristic personality cannot be subjected to bodily punishment or imprisonment. A company registered under the Companies Act, 1956, is a juristic person and cannot be awarded the punishment of imprisonment and hence cannot be prosecuted for breach of Sections 277 and 278 of the Act.
58. In Rajendra Prasad Agarwal v. ITO [1983] 144 ITR 506, a learned single judge of the Allahabad High Court has observed that it is the person making a statement in any verification, or delivering an account or statement which is false who has been made liable to punishment under Section 277 of the Income-tax Act, 1961. It does not create any vicarious liability. What the law requires is that the complaint should prima facie disclose the offence. If the complaint does not disclose commission of any offence by any person or persons, the court can exercise its inherent powers to quash the proceedings against such person or persons, By virtue of this section in the case of a firm, all the partners can be made guilty. This prosecution, however, does not have any retrospective effect.
59. In Rajendra Prasad's case, [1983] 144 ITR 506 (All), a complaint was made that a return signed by one RP was false and proceedings were launched against RP, AP and RA. In a petition by the three accused under Section 482, Criminal Procedure Code, to quash the proceedings, the court held that, in the present case, the complaint allegations did not disclose prima facie the commission of any offence under the various sections mentioned in the plaint so far as AP and RA were concerned. There was no allegation against AP and RA under Section 278 that they abetted or induced RP to file false return. Moreover, the sanction of the Commissioner of Income-tax had been obtained only under Section 277 and there was no sanction for the prosecution under Section 278. Hence, the proceedings against AP and RA were quashed. Thus, this authority shows that after the introduction of Section 278B of the Act, a firm or its partners can be held guilty but while making a complaint, there must be specific allegations against the persons concerned and if they are not there, they cannot be prosecuted and the prosecution launched against them will be liable to be quashed.
60. Mr. B.R. Arora, learned counsel appearing for the respondents, has further submitted that the provisions of Section 278B of the Act are analogous to Section 10 of the Essential Commodities Act. In the Explanation, added to Section 10 of the Essential Commodities Act also, the company has been defined to mean any body corporate and includes a firm or other association of individuals and the director in relation to a firm has been defined to mean a partner in the firm. He has drawn my attention to a decision, of their Lordships of the Supreme Court in Sheoratan Agarwal v. State of M. P., AIR 1984 SC 1824, wherein, while considering the provisions of Section 10 of the Essential Commodities Act, it was held that the company as also the persons responsible for the business of the company can be. prosecuted. It was further observed that naturally, before the person in charge or an officer of the company is held guilty in that capacity, it must be established that there has been a contravention of the order by the company. That was a case under the Essential Commodities Act, which is punishable under Section 3/7 read with Section 16 of the Essential Commodities Act. Section 7 of the aforesaid Act provides for imprisonment or penalty or both. Thus, the punishment that can be inflicted under the Essential Commodities Act is such that an accused can be punished with imprisonment or penalty or both and it, was in this context that their Lordships of the Supreme Court have held that the company itself can be prosecuted.
61. My attention was also drawn to a decision of the Delhi High Court in Delhi Municipality v. J.B. Bottling Co. [1975] Cr. L. J. 1148 [FB], wherein it has been held that a company is not exempted from punishment. It was further observed as under :
"In case such a company is found guilty of such an offence, it can be punished with fine."
62. It is, therefore, clear from the aforesaid authorities, which relate to the offences under the Prevention of Food Adulteration Act as also the Essential Commodities Act, that a company can be punished with fine alone, and hence, these authorities have no application to the facts of this case.
63. Here, Section 276C clearly provides that, if a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable,--
"(i) in a case where the amount sought to be evaded exceeds one hundred thousand rupees, with rigorous imprisonment for a term, which shall not be less than six months but which may extend to seven years and with fine ;
(ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine."
64. It is, therefore, clear that, on commission of an offence relating to wilful attempt to evade any tax or penalty, the minimum sentence has been provided for and, therefore, it has been held in Kusum Products Ltd.'s case [1980] 126 ITR 804 (Cal), that the company being a juristic person cannot be sent to jail and, therefore, it cannot be made a party to the prosecution for contravention of Section 271 of the Act. Section 277 of the Act provides that, if a person makes a statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable in a case where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine and, in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine. Interpreting these provisions, it was held by the Calcutta High Court in Kusum Products Ltd.'s case [1980] 126 ITR 804 that, for a criminal offence, mens rea is an essential ingredient and the company being a juristic personality cannot have any mens rea to commit any offence. It is only the partners of the firm or the directors of the company, who can be held guilty of making the false statement. In this view of the matter, I am firmly of the view that a partnership being a juristic personality cannot be prosecuted for offences under Sections 276C and 277 and, for that matter, under Section 278 of the Act and, therefore, the prosecution of Messrs Singhvi Brothers (petitioner-firm) cannot be sustained because prosecution has been launched against it under Sections 276C(1), 277 and 278 of the Act.
65. It was next contended that in the complaint, there is no allegation whatsoever against petitioner No. 3, Shri Laxmansingh, that he has made the false statement and has verified it. All the allegations that are contained in paras 3, 4, 5, 6, 9 and 10 of the complaint relate to petitioner No. 1 or, for that matter, petitioner No. 2, Shri Kushal Singh Singhvi, who has filed and verified the return relating to the assessment year 1982-83. It is nowhere alleged that petitioner No. 3, Shri Laxmansingh, took any part in submitting and verifying the alleged return and, therefore, he is not liable to prosecution. In support of this submission, reliance has been placed on Rajendra Prasad Agarwal's case [ 1983] 144 ITR 506 (All) and Murari Lal v. ITO [1985] 154 ITR 227 (P & H). In Murari Lal's case, the return of the petitioner-firm was signed and verified by one partner, M, who had also signed on the statement of accounts. Subsequently, there was an income-tax survey of the business premises and it was found that there had been false entries in the accounts. Proceedings were, therefore, initiated under Section 276C of the Act. On a writ petition to quash the proceedings, it was held that it was nowhere alleged that the three other partners apart from M were in charge of and responsible to the firm for the conduct of the business of the firm at the time of the alleged offence. Hence, no criminal liability could be fixed on them. According to the allegations contained in the complaint, M was the person who was in charge of, and responsible to, the firm for the conduct of the business of the firm and he was actually the person who signed and verified the particulars in the return and submitted the same to the Department. Therefore, the complaint and all the proceedings taken in consequence of the complaint against the three others apart from M were quashed. However, the proceedings against M were allowed to continue,
66. It may be stated here that Section 276C of the Act makes the offence punishable as regards the person who wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, and, in doing that, the prosecution can show prima facie that petitioners Nos. 2 and 3 (the alleged accused) were responsible for those lapses. Initially, the burden is on the prosecution and if that burden is not discharged then, of course, the accused-petitioner can show that he is not responsible. In this case, at the time of the search, petitioner No. 2, Shri Laxmansingh, was present. It was alleged on behalf of the petitioners that Laxmansingh could not offer any explanation at the time of the search because he was not in the knowledge of the fact that the 16 kgs. of silver belonged to three silversmiths and that fact was known to the other partner, Shri Kushal Singh, who was busy in the search proceedings. It is, therefore, clear that Shri Laxmansingh is very much concerned with the business of the firm and was looking after the affairs of the firm and was not in possession of any explanation as regards the possession of 16 kgs. of silver found in their possession on the date of the search in his shop and, therefore, prima facie it cannot be said that he is not responsible for the affairs of the petitioner-firm and so, he cannot be prosecuted.
67. It was lastly contended by Mr. Kothari that, in this case, before the launching of the prosecution, no notice was given to petitioners Nos. 2 and 3. Even petitioners Nos. 2 and 3 were not afforded an opportunity of hearing before the launching of the prosecution and, therefore, it is violative of the principles of natural justice. In case of concealment of any income, the Department has authority to add the concealed income in the assessment for that year of the assessee and can levy tax and it has also authority to levy the penalty. It has also authority to launch prosecution. It is also provided in the Act that in such cases of imposition of penalties, offences can also be compounded either before the filing of the prosecution or thereafter. Section 279 provides that the Chief Commissioner or Commissioner may, either before or after the institution of proceedings, compound any such offence. Thus, when four possibilities are open, the question whether the prosecution has to be launched or whether the case should be compounded before filing of the prosecution or not has to be decided after hearing the parties. In this respect, it was contended by Mr. Arora, learned counsel appearing for the respondents, that no notice is necessary before the launching of the prosecution. The law does not provide for that.
68. In this respect, Mr. Kothari has submitted that it is inherent in the working of the quasi-judicial tribunals that they will inform themselves of quasi-judicial processes, i.e., that the principles of natural justice are followed by them in every process of their functioning. In support of his submissions, he has placed reliance on a decision of their Lordships of the Supreme Court in Institute of Chartered Accountants of India v. L.K. Ratna [1987] 164 ITR 1 (SC), wherein it has been held that there is nothing in Regulation 14 which excludes the operation of the principle of natural justice entitling the member to be heard by the Council when it proceeds to render its findings. The principles of natural justice must be read into the unoccupied interstices of the statute unless there is a clear mandate to the contrary.
69. My attention was also drawn to a decision of their Lordships of the Supreme Court in Siemens Engineering and Mfg. Co. of India Ltd. v. Union of India, AIR 1976 SC 1785, wherein it has been held that it is now settled law that, where an authority makes an order in exercise of a quasi-judicial function, it must record its reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons. It was further observed that the rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not satisfy the requirement of law.
70. It was in this context that Mr. Kothari has submitted that although notice was given to the petitioner-firm, on behalf of the firm, an adjournment was sought. The case was adjourned but thereafter, no notice was given, although in the notings meant for consideration of the learned Commissioner it has been noted that fresh notice should be given but still that noting was overruled by the learned Commissioner and the application for launching prosecution against the petitioners was decided without giving any opportunity of hearing to the petitioners. It is true that the learned Commissioner has passed a detailed order but it is equally true that it has been passed without affording an opportunity of hearing to the petitioners.
71. As observed earlier in Institute of Chartered Accountants of India's case [1987] 164 ITR 1 (SC), the principles of natural justice must be read into the unoccupied interstices of the statute unless there is a clear mandate to the contrary. Thus, it is amply clear that every process of the quasi-judicial tribunals must inform itself of the principles of natural justice. In this particular case, four alternative remedies were available to the Department and specially, this remedy of launching of the prosecution is at the option of the Department and, in such a situation, it is all the more essential that the petitioners should be afforded an opportunity of hearing before the launching of the prosecution and that has not been done at all in this case, so far as petitioners Nos. 2 and 3 are concerned and in the case of petitioner No. 1, a show-cause notice was issued and, thereafter, after adjourning the hearing, petitioner No. 1 was not granted any further opportunity of hearing. Under these circumstances, the launching of such a prosecution cannot be sustained and it deserves to be quashed.
72. In the result, this writ petition is partly allowed. The penalty imposed against the petitioners cannot be interfered with at this stage because an appeal against the penalty proceedings is pending before the Competent Authority. The order rejecting the waiver petition as also the review petition filed under Section 154 of the Act also cannot be interfered with but the order, annexure 21, whereby prosecution was ordered to be launched against the petitioners as also the complaint filed by the Appellate Assistant Commissioner (Income-tax) (Investigation), Udaipur, before the learned Chief Judicial Magistrate (Economic Offences) bearing No. 153 of 1989 and consequential proceedings taken thereunder are quashed. There will be no order as to costs.