1997 (9) TMI 646 - HC - Income Tax

Summary

Issues Involved:
1. Quashing of criminal prosecution under Sections 276C and 277 of the Income Tax Act.
2. Competency of the Income Tax Commissioner to sanction prosecution after an application is filed before the Settlement Commission.
3. Impact of pending proceedings before the Settlement Commission on ongoing criminal prosecution.
4. Jurisdiction and powers of the Settlement Commission under Sections 245C, 245D, 245F, and 245H of the Income Tax Act.
5. Stay of criminal proceedings pending the final decision of the Settlement Commission.

Detailed Analysis:

Quashing of Criminal Prosecution:
The petitioners sought to quash the criminal prosecution initiated under Sections 276C and 277 of the Income Tax Act, arguing that the complaint filed was incompetent due to the pending application before the Income Tax Settlement Commission. The court found no merit in the contention that the criminal prosecution was an abuse of the process of the court and dismissed the applications.

Competency of the Income Tax Commissioner:
The petitioners argued that once an application is filed before the Settlement Commission under Section 245C, the Income Tax Commissioner loses the authority to sanction prosecution under Section 279(1). The court clarified that the Settlement Commission's exclusive jurisdiction under Section 245F(2) comes into play only after the application is allowed to be proceeded with under Section 245D(1). Since the sanction for prosecution was accorded before the Commission's decision to proceed with the application, the Commissioner retained the authority to sanction prosecution.

Impact of Pending Proceedings:
The court examined whether the criminal prosecution should be stayed pending the final decision of the Settlement Commission. It was argued that allowing the prosecution to continue would create an anomalous situation if the Settlement Commission eventually grants immunity from prosecution. However, the court emphasized that the mere pendency of an application before the Settlement Commission is not a sufficient ground to stay criminal proceedings. The court held that the criminal court may, in its discretion, stay the proceedings if the decision of the Settlement Commission is imminent and has a bearing on the criminal case.

Jurisdiction and Powers of the Settlement Commission:
The court reviewed the relevant provisions of Chapter XIX-A, including Sections 245C, 245D, 245F, and 245H, which outline the powers and functions of the Settlement Commission. The court noted that the Settlement Commission has exclusive jurisdiction to exercise the powers of an Income Tax authority only after allowing the application to be proceeded with. The Settlement Commission can grant immunity from prosecution under Section 245H, but this power is not absolute and is subject to conditions.

Stay of Criminal Proceedings:
The court disagreed with the view that criminal prosecution should be stayed automatically once the Settlement Commission allows an application to be proceeded with. The court held that such a blanket stay is not necessary and that the criminal court should exercise its discretion under Section 309 of the Code of Criminal Procedure on a case-by-case basis. The court emphasized that the continuation of criminal proceedings does not render the provisions of Section 245H redundant, as the accused can still benefit from any favorable order of the Settlement Commission during the appellate or revisional stages.

Conclusion:
The court concluded that the petitioners failed to make a case for quashing the criminal prosecution or for staying the criminal proceedings. Both criminal miscellaneous cases were dismissed, affirming the competency of the Income Tax Commissioner to sanction prosecution and the concurrent jurisdiction of the Settlement Commission and Income Tax authorities until the application is allowed to be proceeded with.