1991 (6) TMI 29 - HC - Income Tax

Issues Involved:

1. Judicial proceeding and court definition under Section 195(1)(b)(i) of the CrPC.
2. False verification in Form No. 37-G and its legal consequences.
3. Premature initiation of prosecution under Sections 276C, 277, and 278 of the Income-tax Act.
4. Penalty proceedings under Section 271 and their impact on prosecution.
5. Legal permissibility of prosecution under the IPC without sanction under Section 279(1) of the Income-tax Act.
6. Aiding or abetting in the commission of offences under the Income-tax Act.
7. Applicability of Chapter XX-A of the Income-tax Act and prosecution for false verification.
8. Prima facie materials for offences under Sections 120B and 420 of the IPC.

Detailed Analysis:

1. Judicial Proceeding and Court Definition:
The court determined that the proceedings before the raiding authority, who seized the letter of arrangement and recorded the sworn statements, are deemed judicial proceedings under the amended Section 136 of the Income-tax Act. This amendment, effective from April 1, 1974, by the Finance Act, 1985, retroactively validates such proceedings as judicial proceedings, making the raiding authority a "court" for the purposes of Section 195 of the CrPC. Consequently, the prosecution launched by an authority other than the raiding authority (i.e., the Income-tax Officer) falls within the embargo of Section 195(1)(b)(i) of the CrPC, thereby invalidating the prosecution for offences under Sections 193 and 196 of the IPC.

2. False Verification in Form No. 37-G:
The petitioner presented Form No. 37-G, falsely stating the sale consideration as Rs. 5,86,000. This form was forwarded to the Assessing Officer, whose proceedings are judicial under Section 136 of the Income-tax Act. The false verification in anticipation of assessment proceedings invokes the embargo of Section 195(1)(b)(i) of the CrPC, necessitating a complaint from the Assessing Officer. Since such a complaint was filed, the prosecution for offences under Sections 193 and 196 of the IPC, arising from false recitals in Form No. 37-G, is valid.

3. Premature Initiation of Prosecution:
The prosecution under Sections 276C, 277, and 278 of the Income-tax Act is not premature despite the incomplete assessment proceedings. The court clarified that the terms "tax sought to be evaded" and "amount of tax which would have been evaded" indicate that prosecution can be launched before the completion of assessment. The quantum of tax evasion can be determined during the trial, and the prosecution does not require the assessment to be finalized.

4. Penalty Proceedings and Impact on Prosecution:
The court rejected the argument that prosecution under Sections 276C and 277 of the Income-tax Act is contingent upon the initiation and completion of penalty proceedings under Section 271. Section 279(1A) provides immunity from prosecution only after a penalty is reduced or waived under Section 273A, which was not applicable in this case as the petitioner filed the return long after the prosecution was launched. The Commissioner's authorization for prosecution further validated the proceedings.

5. Legal Permissibility of Prosecution under IPC:
The court held that prosecution for offences under the IPC does not require sanction under Section 279(1) of the Income-tax Act. The offences under Sections 120B, 420, 109, 34, and 37 of the IPC can be prosecuted based on a complaint filed before a competent magistrate under Section 190(1)(a) of the CrPC. The joinder of offences under the IPC and the Income-tax Act does not cause prejudice, as the offender will not be punished twice for the same offence under Section 26 of the General Clauses Act and Section 71 of the IPC.

6. Aiding or Abetting in Commission of Offences:
The petitioner's argument that he did not aid or abet accused No. 4 in filing false returns was rejected. The court noted that the Amnesty Scheme under Circular No. 451 did not apply to cases where concealment was detected by a search and seizure operation. The petitioner's conduct, including the filing of returns and revised returns after the raid, indicated an attempt to evade tax, supporting the charges of aiding and abetting.

7. Applicability of Chapter XX-A and Prosecution:
The court dismissed the argument that the Legislature did not contemplate prosecution for false verification in Form No. 37-G under Chapter XX-A. Section 277 of the Income-tax Act makes false statements in verification punishable, and the omission of Section 276AA does not preclude prosecution for other violations under Chapter XX-A.

8. Prima Facie Materials for Offences under IPC:
The court found prima facie materials in the complaint to support charges of criminal conspiracy under Section 120B and cheating under Section 420 of the IPC. The letter of arrangement, false statements in Forms Nos. 37-G and 34-A, and the petitioner's conduct indicated a conspiracy to evade tax and cheat the Income-tax authorities.

Conclusion:
The petition was allowed in part, quashing the prosecution for offences under Sections 193 and 196 of the IPC arising from the sworn statement given to the raiding officer. The prosecution for other offences under the IPC and the Income-tax Act was upheld, and the petitioner was directed to face trial for those charges.

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