1997 (9) TMI 70 - HC - Income Tax

Summary

Issues Involved:
1. Quashing of criminal prosecution under sections 276C and 277 of the Income-tax Act.
2. Competence of the Income-tax Commissioner to sanction prosecution after an application under section 245C is filed before the Settlement Commission.
3. Impact of pending application before the Settlement Commission on criminal prosecution.
4. Jurisdiction of the Settlement Commission under section 245F and its exclusive powers.
5. Stay of criminal proceedings pending final order by the Settlement Commission.
6. Immunity from prosecution under section 245H.

Detailed Analysis:

Quashing of Criminal Prosecution:
The petitioners sought quashing of the criminal prosecution under sections 276C and 277 of the Income-tax Act, arguing that the complaint filed was incompetent due to a pending application before the Income-tax Settlement Commission under section 245C. The court found no merit in the contention that the criminal prosecution was an abuse of the process of the court and dismissed the applications.

Competence of the Income-tax Commissioner:
The petitioners argued that once an application is filed under section 245C, the Settlement Commission alone has the authority to exercise the powers of the income-tax authority, rendering the Commissioner's sanction for prosecution under section 279(1) invalid. The court held that the Settlement Commission enjoys concurrent powers with other income-tax authorities under section 245F(1) and exclusive jurisdiction under section 245F(2) only after an application is allowed to be proceeded with under section 245D. Since the sanction for prosecution was accorded before the application was allowed to be proceeded with, the Commissioner's action was valid.

Impact of Pending Application Before the Settlement Commission:
The court examined whether criminal prosecution should be stayed pending the final order by the Settlement Commission. It was observed that the Settlement Commission has the authority to grant immunity from prosecution under section 245H, but this power is not absolute and is subject to the Commission's satisfaction regarding the applicant's cooperation and full disclosure. The court emphasized that the mere pendency of an application before the Settlement Commission is not a ground for quashing the criminal prosecution.

Jurisdiction of the Settlement Commission:
The court clarified that the exclusive jurisdiction of the Settlement Commission under section 245F(2) applies only after an application is allowed to be proceeded with under section 245D. The Commission's exclusive jurisdiction is limited to the case as defined in section 245A(b), which pertains to assessment or reassessment proceedings. The court concluded that the income-tax authority's power to sanction prosecution under section 279(1) was not affected by the pending application before the Settlement Commission.

Stay of Criminal Proceedings:
The court discussed the discretionary power of criminal courts to adjourn or postpone hearings under section 309 of the Code of Criminal Procedure if a related proceeding's outcome is imminent. However, it was emphasized that there is no rigid rule necessitating indefinite adjournment of criminal cases due to pending proceedings elsewhere. The court disagreed with the view that criminal prosecution must be stayed if the Settlement Commission allows an application to proceed, stating that each case should be evaluated based on its facts.

Immunity from Prosecution:
The court highlighted that the Settlement Commission's power to grant immunity from prosecution under section 245H is conditional and not automatic. The Commission cannot grant immunity if criminal proceedings were instituted before the application under section 245C was filed. The court noted that favorable findings by the Settlement Commission could still be considered by criminal courts even if immunity from prosecution is not granted.

Conclusion:
The court dismissed the petitions, finding no grounds for quashing the criminal prosecution or staying the criminal proceedings. The criminal prosecution was deemed valid, and the Settlement Commission's pending application did not affect the Commissioner's authority to sanction prosecution. The court emphasized the need for judicial discretion in staying criminal proceedings and upheld the validity of the criminal prosecution initiated under sections 276C and 277 of the Income-tax Act.