1980 (3) TMI 17 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the criminal proceedings against the petitioners.
2. Necessity of sanction under Section 196(2) of the Criminal Procedure Code (Cr. PC) for taking cognizance of the offence of criminal conspiracy.
3. Whether the Income Tax Officer (ITO) is considered a court under Section 195(1)(b) of the Cr. PC.
4. Retrospective application of the amendment to Section 196(2) of the Cr. PC.

Detailed Analysis:

1. Legality of the Criminal Proceedings Against the Petitioners:
The petitioners sought to quash the criminal proceedings in C.C. No. 5674 of 1976, arguing that the complaint was not legally valid because the offences were non-cognizable. They also contended that the necessary sanction under Section 196(2) of the Cr. PC for the offence of criminal conspiracy had not been obtained. The respondent-ITO had laid a complaint alleging offences under Sections 120B read with 193 and 196 of the IPC, and Sections 277 and 278 of the Income Tax Act, 1961.

2. Necessity of Sanction Under Section 196(2) of the Cr. PC:
The petitioners argued that the Chief Metropolitan Magistrate wrongly held that no sanction under Section 196(2) was necessary. Section 196(2) states that no court shall take cognizance of the offence of any criminal conspiracy punishable under Section 120B of the IPC unless the State Government or the District Magistrate has consented in writing to the initiation of the proceedings. The court observed that the criminal conspiracy in this case was to commit offences under Sections 193 and 196 of the IPC, which were alleged to have been committed in a proceeding before the ITO. Therefore, the court concluded that the consent in writing of the State Government was not necessary for prosecution under Sections 193 and 196 of the IPC.

3. Whether the ITO is Considered a Court Under Section 195(1)(b) of the Cr. PC:
The petitioners relied on the decision of the Kerala High Court in Balakrishnan v. ITO, which held that the ITO is not a court within the meaning of Section 195(1)(b) of the Cr. PC. The court noted that Section 37(4) of the Indian Income Tax Act states that any proceeding before the ITO shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 of the IPC. However, it does not declare the ITO to be a court within the meaning of Section 195 of the Cr. PC. The court referenced the Law Commission Report, which suggested that a tribunal created by an Act should be regarded as a court only if the Act declares it to be a court for the purposes of Section 195. Since the Income Tax Act does not declare the ITO to be a court, the court concluded that the ITO is not a court under Section 195(1)(b).

4. Retrospective Application of the Amendment to Section 196(2) of the Cr. PC:
The court considered whether the amendment to Section 196(2) of the Cr. PC, which came into force after the complaint was laid, would apply retrospectively. The court cited Bindra's Interpretation of Statutes, which states that a statute would operate retrospectively only if the intent clearly appears from the Act or its terms. The court concluded that the amendment to Section 196(2) does not have retrospective effect. Therefore, the requirement for the State Government's consent did not apply to the offences alleged in the complaint.

Conclusion:
The court dismissed the petitions, holding that the criminal proceedings against the petitioners were valid. The ITO is not considered a court under Section 195(1)(b) of the Cr. PC, and the consent of the State Government was not necessary for the prosecution of the offences under Sections 193 and 196 of the IPC. Additionally, the amendment to Section 196(2) of the Cr. PC does not apply retrospectively. Therefore, there were no grounds to quash the criminal proceedings.