1988 (10) TMI 15 - HC - Income Tax

Summary

Issues:
- Prosecution under section 276C of the Income-tax Act, 1961 and section 195 of the Indian Penal Code.
- Quashing of proceedings due to approach to Settlement Commission.
- Interpretation of Settlement Commission's finding in relation to criminal proceedings.

Analysis:
The petitioner faced prosecution under section 276C of the Income-tax Act, 1961, and section 195 of the Indian Penal Code after valuables were found during a raid on their premises. The petitioner sought to quash the proceedings as they had approached the Settlement Commission, which had registered their petition and found no concealment established. The petitioner argued that allowing criminal proceedings to continue despite the Settlement Commission's finding would be unjust, citing a Delhi High Court case where it was held that once a petition is registered by the Settlement Commission, criminal proceedings cannot proceed. However, the Revenue's counsel contended that the mere registration of a petition with the Settlement Commission does not automatically grant immunity, and therefore, criminal proceedings should not be quashed solely based on that.

A judgment by a single judge of the High Court was referenced, where it was held that the mere pendency of a petition before the Settlement Commission does not necessitate the quashing or staying of criminal proceedings. The key distinction in the present case was that the Settlement Commission had already recorded a finding that no income had been concealed and was unlikely to be established as concealed. This finding was crucial as it could lead to an anomalous situation if criminal proceedings were allowed to continue despite potential immunity being granted by the Commission in the future. Therefore, the court ruled that while the complaint should not be quashed at that stage, it needed to be stayed until the Settlement Commission made a final decision on immunity. Consequently, the criminal complaints pending before the Metropolitan Magistrate were stayed until the Settlement Commission's decision on immunity was rendered. The petitions were partly allowed, and the rule was made absolute to that extent.

In conclusion, the court decided to stay the prosecution based on the Settlement Commission's finding to prevent any potential inconsistency if immunity was granted in the future. This case highlights the interplay between criminal proceedings and proceedings before the Settlement Commission, emphasizing the importance of the Commission's findings in determining the course of criminal prosecution.