1990 (7) TMI 8 - HC - Income Tax

Issues Involved:
1. Liability for prosecution when the Settlement Commission has not passed final orders.
2. Jurisdiction and powers of the Settlement Commission.
3. Effect of pending applications before the Settlement Commission on ongoing prosecutions.
4. Interpretation of relevant sections of the Income-tax Act, 1961, particularly sections 245C, 245D, 245H, and 245F.
5. Impact of the Settlement Commission's orders on immunity from prosecution.

Detailed Analysis:

1. Liability for Prosecution When the Settlement Commission Has Not Passed Final Orders:
The central issue is whether an assessee who has filed an application before the Settlement Commission under section 245C, which includes a request for immunity from prosecution under section 245H, can still be prosecuted if the Settlement Commission has not yet passed final orders under section 245D(4). The court held that prosecutions should be stayed pending the final decision of the Settlement Commission. This is to avoid an "anomalous situation" where the prosecution proceeds while the Settlement Commission's decision is pending.

2. Jurisdiction and Powers of the Settlement Commission:
The Settlement Commission has exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority under the Act in relation to the case, as per section 245F(2). This jurisdiction continues until an order is passed under section 245D(4). The court emphasized that allowing prosecutions to proceed would render section 245F(2) meaningless and would contradict the objective of the Act.

3. Effect of Pending Applications Before the Settlement Commission on Ongoing Prosecutions:
The court analyzed various precedents and concluded that proceedings in criminal courts should be stayed if the Settlement Commission has allowed the application to proceed under section 245D(1). This stay is necessary until the Settlement Commission passes its final order, as it holds exclusive jurisdiction over the case during this period.

4. Interpretation of Relevant Sections of the Income-tax Act, 1961:
- Section 245C: Allows an assessee to apply for settlement.
- Section 245D: Details the procedure for the Settlement Commission to follow upon receiving an application. It includes calling for a report from the Commissioner and deciding whether to proceed with the application.
- Section 245H: Grants the Settlement Commission the power to provide immunity from prosecution if the applicant has cooperated and made a full and true disclosure.
- Section 245F: Confers additional powers to the Settlement Commission, including exclusive jurisdiction over the case until a final order is passed under section 245D(4).

The court noted that the term "case" in section 245A(b) includes prosecution, which means the Settlement Commission's jurisdiction covers ongoing prosecutions.

5. Impact of the Settlement Commission's Orders on Immunity from Prosecution:
The court observed that the Settlement Commission has the authority to grant immunity from prosecution under section 245H. This power is significant because it can affect ongoing prosecutions. If the Settlement Commission grants immunity, the prosecution cannot proceed. However, if immunity is not granted, the prosecution can continue or be re-initiated.

Conclusion:
The court concluded that prosecutions should be stayed pending the final decision of the Settlement Commission. The Settlement Commission's exclusive jurisdiction and the potential for granting immunity from prosecution necessitate this stay. The court's decision ensures that the objectives of the Income-tax Act are upheld, and the powers of the Settlement Commission are respected.

Orders for Specific Petitions:
- Criminal M. P. No. 2849 of 1983: Proceedings stayed for A-1 and A-2; dismissed for A-4 and A-5.
- Criminal M. P. No. 2851 of 1983: Proceedings stayed for A-1 and A-2; dismissed for A-4 and A-5.
- Criminal M. P. No. 2853 of 1983: Proceedings stayed for A-1, A-2, and A-4; dismissed for A-5.
- Criminal M. P. No. 2855 of 1983: Proceedings stayed for A-1, A-2, and A-4; dismissed for A-5.
- Criminal M. P. No. 2857 of 1983: Proceedings stayed for A-1, A-2, and A-4; dismissed for A-5.
- Criminal M. P. No. 2859 of 1983: Proceedings stayed for A-1, A-2, and A-4; dismissed for A-5.
- Criminal M. P. No. 2861 of 1983: Proceedings stayed for A-2, A-4, and A-6; dismissed for A-1, A-8, A-9, A-10, A-11, and A-12.
- Criminal M. P. No. 2863 of 1983: Proceedings stayed for A-2, A-4, and A-6; dismissed for A-1, A-8, A-9, A-10, A-11, and A-12.
- Criminal M. P. No. 2865 of 1983: Proceedings stayed for A-2, A-4, and A-6; dismissed for A-1, A-8, A-9, A-10, A-11, and A-12.
- Criminal M. P. No. 2867 of 1983: Proceedings stayed for A-5; dismissed for A-1, A-2, A-3, A-4, A-7, A-8, A-9, A-10, A-11, and A-12.
- Criminal M. P. No. 2869 of 1983: Proceedings stayed for A-2, A-4, and A-6; dismissed for A-1, A-8, A-9, A-10, A-11, and A-12.
- Criminal M. P. No. 2871 of 1983: Proceedings stayed for A-2, A-5, and A-6; dismissed for A-1, A-8, A-9, and A-10.
- Criminal M. P. No. 2873 of 1983: Proceedings stayed for A-2, A-4, and A-6; dismissed for A-1, A-7, A-8, A-9, A-10, and A-11.

The court expressed hope that the Settlement Commission would expedite its decisions to avoid loss of evidence due to the passage of time.

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