1991 (10) TMI 12 - HC - Income Tax

Issues Involved:
1. Quashing of the complaint under Section 482 of the Criminal Procedure Code.
2. Allegations of offences under Sections 420 and 120B of the Indian Penal Code (IPC) and Sections 276C and 277 of the Income-tax Act.
3. Prima facie case and reasonable cause for investigation.
4. Jurisdiction and inherent powers of the High Court under Section 482, Criminal Procedure Code.
5. Abuse of the process of the court.
6. Delay in investigation.

Issue-wise Detailed Analysis:

1. Quashing of the Complaint under Section 482, Criminal Procedure Code:
The petition was filed under Section 482, Criminal Procedure Code, seeking to quash the complaint against the petitioners for offences under Sections 420 and 120B, IPC, read with Sections 276C and 277 of the Income-tax Act. The primary point for consideration was whether the absence of prima facie and reasonable cause to proceed with the investigation justified the High Court's refusal to exercise its powers under Section 482.

2. Allegations of Offences under Sections 420 and 120B, IPC, and Sections 276C and 277 of the Income-tax Act:
The complaint alleged that the petitioners conspired to cheat the Income-tax Department by evading tax amounting to approximately ten lakhs rupees. The petitioners were accused of handing over unaccounted black money to a co-conspirator, who then obtained demand drafts and deposited them in accounts under fictitious names, ultimately transferring the funds to the petitioners' firms. The Department argued that the ingredients of the offences were made out in the complaint.

3. Prima Facie Case and Reasonable Cause for Investigation:
The court examined whether the allegations in the complaint, if taken at face value, constituted the offences alleged. The court noted that Sections 415 and 420, IPC, which deal with "cheating," require fraudulent or dishonest inducement to deliver property. The court concluded that the complaint did not make out a prima facie case as the allegations did not meet the requirements of Sections 415 and 420, IPC.

4. Jurisdiction and Inherent Powers of the High Court under Section 482, Criminal Procedure Code:
The court referred to several Supreme Court decisions, including State of Bihar v. Murad Ali Khan and R. P. Kapur v. State of Punjab, to outline the scope of inherent powers under Section 482. The court emphasized that these powers should be exercised sparingly and with circumspection, primarily to prevent abuse of the process of the court or to secure the ends of justice. The court held that it would not interfere with the investigation unless the allegations did not constitute any offence or were frivolous and vexatious.

5. Abuse of the Process of the Court:
The court found that the complaint was vague, vexatious, and based on non-application of mind by the Department. There was no fraud or inducement that caused the Department to part with any property. The court held that allowing the investigation to continue would result in abuse of the process of the court. The court emphasized its duty to prevent such abuse at the threshold.

6. Delay in Investigation:
The court noted that the complaint was filed on June 30, 1989, and the investigation had not been completed, indicating a lack of seriousness by the Department. The delay was sufficient to infer that the proceedings were not being pursued diligently.

Conclusion:
The petition was allowed, and the complaint was quashed. Consequently, the proceedings initiated by the prosecution on the said complaint were also quashed. The court left open all other contentions available to the Department, including its right to recover any tax from the petitioners.

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