2016 (8) TMI 1308 - SC - Income Tax

Territorial limits of the Court - jurisdiction of the criminal courts - Proceedings u/s 191,193, 200 IPC - deemed judicial proceedings in terms of Section 136 - undisclosed lockers details - search proceedings undertaken by the authorities under Section 132 - whether as the search operations having been undertaken by the I.T.Os. of Nashik and Dhule, the complaint could not have been lodged by the Deputy Director of Income Tax (Investigation)-I, Bhopal (M.P.)? - no part of the alleged offence having been committed within the territorial limits of the Court of the Chief Judicial Magistrate, Bhopal, it had no jurisdiction to either entertain the complaint or take cognizance of the accusations Held that - The appellants as assesses, had residences both at Bhopal and Aurangabad and had been submitting their income tax returns at Bhopal. The search operations were conducted simultaneously both at Bhopal and Aurangabad in course whereof allegedly the appellants, in spite of queries made, did not disclose that they in fact did hold a locker located at Aurangabad. They in fact denied to hold any locker, either individually or jointly. The locker, eventually located, though at Aurangabad, has a perceptible co-relation or nexus with the subject matter of assessment and thus the returns filed by the appellants at Bhopal which in turn were within the purview of the search operations. The search conducted simultaneously at Bhopal and Aurangabad has to be construed as a single composite expedition with a common mission. Having regard to the overall facts and the accusation of false statement made about the existence of the locker in such a joint drill, it cannot be deduced that in the singular facts and circumstances, no part of the offence alleged had been committed within the jurisdictional limits of the Chief Judicial Magistrate, Bhopal. Chapter XIII of the Code sanctions the jurisdiction of the criminal courts in inquries and trials. Whereas Section 177 of the Code stipulates the ordinary place of inquiry and trial, Section 178 enumerates the places of inquiry or trial. In terms of Section 179, when an act is an offence by reason of anything which has been done and of a consequence which has ensued, the offence may be inquired into or tried by a court within whose local jurisdiction such thing has been done or such consequence has ensued. Thus on a cumulative reading of Sections 177, 178 and 179 of the Code in particular and the inbuilt flexibility discernible in the latter two provisions, we are of the comprehension that in the attendant facts and circumstances of the case where to repeat, a single and combine search operation had been undertaken simultaneously both at Bhopal and Aurangabad for the same purpose, the alleged offence can be tried by courts otherwise competent at both the aforementioned places. To confine the jurisdiction within the territorial limits to the court at Aurangabad would amount, in our view, to impermissible and illogical truncation of the ambit of Sections 178 and 179 of the Code. The objection with regard to the competence of the Court of the Chief Judicial Magistrate, Bhopal is hereby rejected. In the result, the appeal succeeds and the impugned proceeding and the order assailed are set-aside.

Summary

Issues Involved:
1. Competence of the Deputy Director of Income Tax (Investigation)-I, Bhopal to lodge the complaint.
2. Jurisdiction of the Chief Judicial Magistrate, Bhopal to entertain the complaint and take cognizance of the offences alleged.

Detailed Analysis:

Competence of the Deputy Director of Income Tax (Investigation)-I, Bhopal to Lodge the Complaint:
The appellants challenged the competence of the Deputy Director of Income Tax (Investigation)-I, Bhopal to lodge the complaint under Section 195(4) of the Code of Criminal Procedure (CrPC). They argued that the Deputy Director was not the authority to whom appeals would ordinarily lie from the orders or actions of the Income Tax Officers (ITOs) of Nashik and Dhule, who conducted the search operations. According to the appellants, only the authorities conducting the search or the appellate authority specified in Section 195(4) of the CrPC could lodge such a complaint.

The Court examined the relevant provisions of the Income Tax Act, 1961, including Sections 116, 118, 120, 124, 131, and 132, and noted that while the Deputy Director of Income Tax is a designated income tax authority, the Act does not explicitly confer appellate jurisdiction on the Deputy Director over the ITOs. The Court emphasized the importance of the term "ordinarily" in Section 195(4) and concluded that the Deputy Director of Income Tax (Investigation)-I, Bhopal could not be considered an authority to whom appeals would ordinarily lie from the decisions of the ITOs.

The Court referred to precedents, including Kuldip Singh vs. The State of Punjab and Another and Lalji Haridas vs. State of Maharashtra and Another, to underline that the statutory scheme must be strictly interpreted to prevent frivolous and speculative complaints. The Court held that the complaint filed by the Deputy Director of Income Tax (Investigation)-I, Bhopal was incompetent as it did not meet the mandatory requirements of Section 195 of the CrPC.

Jurisdiction of the Chief Judicial Magistrate, Bhopal to Entertain the Complaint:
The appellants also challenged the jurisdiction of the Chief Judicial Magistrate, Bhopal, arguing that no part of the alleged offence was committed within the territorial limits of Bhopal. They contended that the search operations and the recording of their statements took place in Aurangabad, and thus, the Bhopal court lacked jurisdiction under Sections 177 and 178 of the CrPC.

The Court noted that the appellants had residences in both Bhopal and Aurangabad and filed their income tax returns in Bhopal. The search operations were conducted simultaneously at both locations, and the false statements regarding the existence of a locker were made during these operations. The Court held that the search operations constituted a single composite expedition with a common mission, and thus, part of the offence could be considered to have been committed within the jurisdiction of Bhopal.

The Court referred to Sections 177, 178, and 179 of the CrPC, which provide flexibility in determining the jurisdiction of criminal courts. It concluded that the Chief Judicial Magistrate, Bhopal, had the jurisdiction to entertain the complaint and take cognizance of the offences alleged, as the search operations and the false statements had a perceptible nexus with the subject matter of assessment in Bhopal.

Conclusion:
The Court ultimately found that the complaint filed by the Deputy Director of Income Tax (Investigation)-I, Bhopal, was unsustainable in law due to the lack of competence to lodge the complaint under Section 195 of the CrPC. However, it rejected the appellants' challenge to the jurisdiction of the Chief Judicial Magistrate, Bhopal, affirming that the Bhopal court had the jurisdiction to entertain the complaint. The appeal was allowed, and the impugned proceedings and the order were set aside, with liberty granted to the respondent to take appropriate steps as available in law.