1987 (8) TMI 17 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of sections 193 and 196 of the Indian Penal Code (IPC) to proceedings before the Income-tax Officer.
2. Requirement of a declaration under section 195(3) of the Criminal Procedure Code (CrPC) for the Income-tax Officer to be considered a court.
3. Retrospective effect of the Amending Act 32 of 1985 on section 136 of the Income-tax Act.

Detailed Analysis:

1. Applicability of Sections 193 and 196 of the IPC:
The primary issue was whether the offences under sections 193 and 196 of the IPC, which pertain to giving false evidence and fabricating false evidence, could be applied to proceedings before the Income-tax Officer. The respondents argued that these sections could only apply to judicial proceedings and since the Income-tax Officer had not been declared a court under section 195(3) of the CrPC, these sections should not apply.

The court clarified that section 136 of the Income-tax Act explicitly states that any proceeding before an income-tax authority shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, IPC, and for the purposes of section 196 of the IPC. Therefore, the applicability of sections 193 and 196 of the IPC does not depend on whether the Income-tax Officer is declared a court under section 195(3) of the CrPC.

2. Requirement of a Declaration under Section 195(3) of the CrPC:
The respondents contended that without a declaration under section 195(3) of the CrPC, the Income-tax Officer could not be considered a court, and hence, sections 193 and 196 of the IPC would not be attracted. They relied on the decision in Associated Industries v. First ITO [1982] 134 ITR 565, where it was held that the Income-tax Officer could not be construed as a court under section 195(3) of the CrPC.

The court distinguished this case by stating that the decision in Associated Industries was focused on the necessity of sanction under section 196 of the CrPC, which was a different context. The court reiterated that section 136 of the Income-tax Act deems proceedings before an income-tax authority as judicial proceedings, making sections 193 and 196 of the IPC applicable irrespective of a declaration under section 195(3) of the CrPC.

3. Retrospective Effect of the Amending Act 32 of 1985:
The Amending Act 32 of 1985 amended section 136 of the Income-tax Act to declare income-tax authorities as civil courts for the purposes of section 195 of the CrPC, with retrospective effect from April 1, 1974. The respondents argued that this retrospective application was illegal as it constituted ex post facto legislation, which is prohibited under Article 20(1) of the Constitution.

The court rejected this argument, citing that the amendment related to procedural matters and did not create a new offence or enhance any punishment. The court referred to Supreme Court decisions in State of Mysore v. Fakkrusab [1977] Crl LJ 1005 and Nayyar (G.P.) v. State [1979] Crl LJ 587, which upheld the validity of retrospective procedural amendments. The court concluded that the retrospective amendment did not violate Article 20(1) of the Constitution or principles of natural justice.

Conclusion:
The court ruled that sections 193 and 196 of the IPC are applicable to proceedings before the Income-tax Officer due to section 136 of the Income-tax Act. The retrospective amendment by Act 32 of 1985, declaring income-tax authorities as courts for the purposes of section 195 of the CrPC, was upheld as valid. Consequently, the order of the trial court quashing the charges under sections 193 and 196 of the IPC was set aside, and the cases were remanded for fresh disposal according to law.