2018 (9) TMI 539 - HC - Income Tax

Validity of prosecution proceedings u/s 279 when application for settlement of case is pending - Power of Settlement Commission to grant immunity from prosecution and penalty - Criminal case against the petitioner - offences punishable u/s 277(i) - Held that - The fact that the Settlement Commission receives, entertains, accepts or takes on board an application for settlement cannot result in the other process getting frozen. The order of the Commission allowing the application for settlement to be proceeded with cannot by itself result in an action legitimately initiated under the law being set at naught. The arguments to the above effect raised vis- -vis the criminal complaint which was filed on 27.01.2015 leading to the summoning order being passed by the Additional Chief Metropolitan Magistrate on 30.01.2015 and, of course, in relation to the sanction for prosecution which was granted on 09.01.2015, cannot be accepted. The same are, thus, repelled. It will have to be remembered that the petition has been filed invoking the inherent power and jurisdiction of this Court under Section 482 Cr.P.C. where questions of fact cannot ordinarily and in absence of evidence of unimpeachable character to the contrary be properly inquired into or adjudicated upon. There is no case made out for any interference by this Court in the ongoing criminal prosecution of the petitioner on the complaint of the respondent.

Issues Involved:
1. Validity of the criminal complaint and summoning order.
2. Jurisdiction of the Income Tax Settlement Commission and its impact on prosecution.
3. Allegations of false accusations and suppression of material facts.

Detailed Analysis:

1. Validity of the Criminal Complaint and Summoning Order:
The petitioner was summoned as the second accused by the Additional Chief Metropolitan Magistrate (ACMM) based on a criminal complaint filed by the respondent, supported by a sanction for prosecution under Section 279 of the Income Tax Act, 1961. The search and seizure operations revealed unaccounted cash, valuables, and documents, leading to allegations of false statements and abetment under various sections of the Income Tax Act and the Indian Penal Code (IPC). The ACMM, considering the complaint presented by a public servant in discharge of official duties, dispensed with the examination under Section 200 of the Code of Criminal Procedure, 1973 (Cr.P.C.), and issued summons to the accused.

2. Jurisdiction of the Income Tax Settlement Commission and Its Impact on Prosecution:
The petitioner argued that the initiation of criminal proceedings was impermissible due to the pending settlement applications before the Income Tax Settlement Commission under Section 245-C (1) of the Income Tax Act, 1961. The petitioner contended that upon the Settlement Commission allowing the applications "to be proceeded with" under Section 245-D (1), the other income-tax authorities became "functus officio," rendering the grant of sanction for prosecution and the filing of the criminal complaint invalid.

The court examined the provisions of Chapter XIX-A of the Income Tax Act, particularly Sections 245-B, 245-C, 245-D, and 245-F, which delineate the powers and procedures of the Settlement Commission. The court emphasized that the Settlement Commission's jurisdiction to settle cases does not automatically grant immunity from prosecution. Section 245-H specifically addresses the power to grant immunity, which is contingent upon the applicant's full and true disclosure and cooperation with the Commission. The court clarified that the powers of the income tax authorities regarding assessment and recovery are suspended upon the Settlement Commission taking up the case, but this does not extend to criminal prosecution.

3. Allegations of False Accusations and Suppression of Material Facts:
The petitioner claimed that the criminal complaint was based on false accusations and suppression of material facts. The court noted that the inherent jurisdiction under Section 482 Cr.P.C. is not typically exercised to inquire into questions of fact unless there is evidence of unimpeachable character. Citing the Supreme Court's observations in Rajiv Thapar and Ors. Vs. Madan Lal Kapoor, the court highlighted that the power under Section 482 Cr.P.C. should be exercised with caution, ensuring that the material produced by the accused is of sterling and impeccable quality, ruling out the veracity of the allegations without the necessity of recording any evidence.

Conclusion:
The court concluded that the petitioner's arguments regarding the impact of the Settlement Commission's proceedings on the prosecution were misconceived. The court held that the Settlement Commission's order allowing the application "to be proceeded with" does not equate to immunity from prosecution, and the income tax authorities retain the power to initiate criminal action. The court found no merit in the petitioner's claims of false accusations and suppression of facts, affirming that there was no case for interference in the ongoing criminal prosecution. Consequently, the petition and the pending application were dismissed.

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