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Issues Involved:
1. Prosecution under section 276DD read with section 278B of the Income-tax Act. 2. Prosecution under section 276E read with section 278B of the Income-tax Act. 3. Territorial jurisdiction of the court. Summary: Issue 1: Prosecution under section 276DD read with section 278B of the Income-tax Act The petitioners challenged the prosecution u/s 276DD read with section 278B of the Income-tax Act, arguing that section 276DD was omitted from the Act effective April 1, 1989, without any saving clause. They contended that the omission of these sections meant they never existed, making the prosecution launched on February 18, 1992, unwarranted by law. The court referenced the case of Rayala Corporation (P.) Ltd. v. Director of Enforcement, AIR 1970 SC 494, which held that the omission of a section or rule implies it never existed. The court concluded that the prosecution for offences under section 276DD after its deletion was illegal and unwarranted. Issue 2: Prosecution under section 276E read with section 278B of the Income-tax Act Similarly, the petitioners challenged the prosecution u/s 276E read with section 278B of the Income-tax Act, asserting that section 276E was also omitted effective April 1, 1989, without any saving clause. They argued that the transactions between the two sister concerns were genuine and did not amount to loans or deposits under section 269SS of the Income-tax Act. The court noted that the Income-tax Department had previously accepted the petitioners' explanations and dropped the proceedings. The court held that reopening the case for prosecution after the deletion of section 276E was unauthorized by law. Issue 3: Territorial jurisdiction of the court The respondents raised a preliminary objection regarding the territorial jurisdiction of the court. This issue was previously decided by Brother Shacheendra Dwivedi J. on October 5, 1993, affirming that the Gwalior Bench had jurisdiction to entertain the petitions u/s 482 of the Criminal Procedure Code. The court reiterated that this decision was final as no appeal or revision was filed against it. Conclusion: The court allowed the petitions u/s 482 of the Criminal Procedure Code, quashing the notices/summons issued against the petitioners (annexures "P/10-A" to "P/10-E") and the prosecution proceedings. The criminal cases against the petitioners were deemed to have been dropped. The order also applied to Miscellaneous Criminal Case No. 1988 of 1992.
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