2001 (3) TMI 41 - HC - Income Tax

Summary

Issues Involved:
1. Whether the order passed by the lower court is proper and correct.
2. Applicability of section 273A(4) and section 279(1A) of the Income-tax Act in waiving penalties and stopping prosecution.
3. Whether the prosecution under sections 276C(1), 277, and 278B of the Income-tax Act and sections 120B, 193, 196, 420, and 511 of the Indian Penal Code can continue after the waiver of penalties.

Issue-wise Detailed Analysis:

1. Whether the order passed by the lower court is proper and correct:
The court examined whether the lower court's decision to dismiss the application under section 245 of the Criminal Procedure Code was appropriate. The prosecution had examined six witnesses and marked 28 documents to establish a prima facie case against the accused. The application for discharge was filed only after the examination of the accused under section 313 of the Criminal Procedure Code and after the conclusion of the prosecution's evidence. The court found that there was a delay of three years from the date of the order relied upon by the petitioners and that the application was unnecessary at this stage. The court upheld the lower court's decision, stating that there was sufficient prima facie material to frame charges.

2. Applicability of section 273A(4) and section 279(1A) of the Income-tax Act in waiving penalties and stopping prosecution:
Section 273A(4) allows the Commissioner to waive penalties if satisfied with the assessee's application. The petitioners relied on an order dated March 23, 1994, under section 273A(4), which waived the penalties for the assessment years 1982-86. They argued that this order attracted section 279(1A), which bars further prosecution for offences under sections 276C and 277 if penalties are waived. However, the court noted that the revised return was filed only after a search and detection of escaped income, indicating that the disclosure was not voluntary. The court also highlighted that the prosecution was initiated with proper sanction from the competent authority and included charges under the Indian Penal Code, making the petitioners' reliance on section 279(1A) inapplicable.

3. Whether the prosecution under sections 276C(1), 277, and 278B of the Income-tax Act and sections 120B, 193, 196, 420, and 511 of the Indian Penal Code can continue after the waiver of penalties:
The court emphasized that the waiver of penalties under section 273A(4) does not automatically bar prosecution under sections 276C and 277 of the Income-tax Act, especially when the revised return was not filed voluntarily. The court referred to various precedents, including Ajay Medical Agency v. CIT and Hokam Singh v. CIT, which supported the view that disclosures made after detection of escaped income are not voluntary and do not entitle the assessee to immunity from prosecution. The court also noted that the criminal court must judge the case independently of the proceedings under the Income-tax Act and that the waiver of penalties does not bind the criminal court.

Conclusion:
The court concluded that the lower court's order was proper and correct as there was sufficient prima facie material to frame charges. The waiver of penalties under section 273A(4) did not bar the continuation of prosecution under sections 276C(1), 277, and 278B of the Income-tax Act and sections 120B, 193, 196, 420, and 511 of the Indian Penal Code. The revision petition was dismissed, and the trial court was directed to expedite the trial.