1990 (5) TMI 14 - HC - Income Tax

Summary

Issues Involved:
1. Quashing of the complaint under sections 276C(1), 277, and 278 of the Income-tax Act, 1961, and sections 193 and 196 of the Indian Penal Code.
2. Validity of the criminal proceedings in light of the orders passed by the Commissioner of Income-tax (Appeals) and the Settlement Commission.
3. Allegation of no notice/opportunity given before filing the complaint.
4. Applicability of criminal proceedings against a company.
5. Impact of the Settlement Commission's findings on the criminal complaint.
6. Continuation of criminal proceedings as an abuse of the process of law.

Detailed Analysis:

1. Quashing of the Complaint:
The petitioners sought the quashing of the complaint dated March 27, 1986, filed against them under sections 276C(1), 277, and 278 of the Income-tax Act, 1961, and sections 193 and 196 of the Indian Penal Code. The complaint alleged that the petitioners had wilfully attempted to evade tax by fraudulently introducing undisclosed income and made false verifications in their tax returns.

2. Validity of Criminal Proceedings:
The petitioners argued that the orders of the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal indicated that they did not attempt to evade tax or furnish a wrong return. The Commissioner of Income-tax (Appeals) had deleted the addition of Rs. 16,50,000 to the income of the petitioner-company, stating that the amount was not the income of the petitioner-company but of another entity. The Appellate Tribunal upheld this view, noting that the real owner of the income was Ralson Cycles Pvt. Ltd.

3. Allegation of No Notice/Opportunity:
The petitioners claimed that no notice or opportunity was given to them before filing the complaint, which they argued was a legal requirement. They contended that respondents were duty-bound to give them a hearing before launching the criminal complaint.

4. Applicability of Criminal Proceedings Against a Company:
The petitioners argued that the provisions of Chapter XXII of the Income-tax Act do not contemplate the conviction of a company, as a company, being an artificial person, cannot be punished with imprisonment and fine. They also argued that once an application is admitted by the Settlement Commission, proceedings under sections 276C, 277, and 278 do not survive.

5. Impact of Settlement Commission's Findings:
The Settlement Commission had found that the amount of Rs. 16,50,000 was the income of Ralson Cycles Pvt. Ltd., not the petitioner-company. The petitioners argued that this finding was final and unchallengeable under section 245-I of the Act. They contended that since the income was not theirs, the charges against them could not stand.

6. Continuation of Criminal Proceedings as an Abuse of Process:
The petitioners argued that continuing the criminal proceedings would serve no purpose and would amount to an abuse of the process of law, causing unnecessary harassment. They requested that the complaint and subsequent proceedings be quashed.

Court's Conclusion:

The court concluded that the criminal court must independently judge the case based on the evidence presented before it, despite the findings of the income-tax authorities. The criminal court is not bound by the results of proceedings under the Income-tax Act and must determine whether the petitioners committed offences under sections 276C(1), 277, and 278 of the Income-tax Act and sections 193 and 196 of the Indian Penal Code.

The court found that the facts alleged in the complaint and the documents produced justified the summoning of the petitioners. The criminal proceedings were not deemed an abuse of the process of court, and the petition to quash the complaint was dismissed. The parties were directed to appear before the trial court on June 11, 1990.