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Issues:
Interpretation of section 245F of the Income-tax Act, 1961 in relation to criminal prosecution during pending settlement proceedings before the Income-tax Settlement Commission. Analysis: The petitioners, a private limited company and its directors, were facing prosecution for offenses under sections 276C and 277 of the Income-tax Act based on a complaint filed by the Income-tax Officer. The complaint alleged false verification and statement of accounts to evade tax. The petitioners had applied for settlement before the Income-tax Settlement Commission under section 245C of the Act, seeking immunity from prosecution. The Commission allowed the application to proceed, and the proceedings were still pending. The petitioners argued that during the pendency of settlement proceedings, the Commission had exclusive jurisdiction under section 245F(2) to exercise the powers of an income-tax authority in relation to the case. The court agreed, emphasizing that the Commission's jurisdiction during proceedings included all powers vested in an income-tax authority. It held that allowing the Income-tax Commissioner to initiate criminal proceedings would negate the exclusive jurisdiction of the Settlement Commission as per section 245F(2). Therefore, the court quashed the complaint and proceedings against the petitioners in the Chief Judicial Magistrate's Court. This judgment clarifies the scope of section 245F of the Income-tax Act, emphasizing the exclusive jurisdiction of the Income-tax Settlement Commission during pending settlement proceedings. It underscores that the Commission has the authority to exercise all powers of an income-tax authority in relation to the case until the finalization of proceedings. The judgment prevents parallel criminal prosecution by the Income-tax Commissioner, ensuring that the Settlement Commission's jurisdiction is not undermined. The court's decision protects the integrity of the settlement process and upholds the statutory framework under the Act.
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