2021 (12) TMI 1141 - HC - Income Tax

Benefit of DTVSV Act with respect to certain pending income tax litigations before various appellate levels - HELD THAT - As here is a clear purpose and intent to the provisions of Section 9(c) of the DTVSV Act which is to ensure that revenue which has been clogged and the income which is being offered to tax is not shadowed by a likelihood of the same having arisen from socio-economic crimes for which prosecution has been instituted. The DTVSV Act does not and cannot be read as providing a window to regularise tainted money. As at this point noted that the pendency of criminal proceedings against petitioner is an admitted position. The petition itself provides which are the pending criminal proceedings against petitioner. There are two criminal proceedings pending against petitioner wherein petitioner is charged for having conspired (Section 120B of IPC) to commit offences of Cheating (Section 420 of IPC) as also offences under Section 13(1)(d) and Section 13(2) of the IPC Act. The charge against petitioner would have to be read as composite whole as framed and cannot be segregated as read by Shri Nankani. It is however the case of petitioner that despite the pendency of these two criminal proceedings it would not fall within the ambit of Section 9(c) of the DTVSV Act since in the first proceeding prosecution has not yet been instituted and in the second proceeding it is not punishable for offences under the PC Act. In our view both these contentions are misconceived and baseless. At the outset with respect to the plea of prosecution not having been instituted this issue stands squarely covered by Sashi Balasubramaniam 2006 (10) TMI 147 - SUPREME COURT wherein the Hon ble Apex Court whilst considering the provisions of the KVSS and the provisions of Clause 95(iii) thereof after raising a specific issue as to when is a prosecution said to be instituted answered the same stating that w ord prosecution assumes significance. The term prosecution would include institution or commencement of a criminal proceeding. It may include also an inquiry or investigation. The terms prosecution and cognizance are not interchangeable. They carry different meanings. Different statutes provide for grant of sanction at different stages - The term prosecution has been instituted would not mean when charge-sheet has been filed and cognizance has been taken. It must be given its ordinary meaning Both the proceedings are cases where prosecution was instituted since in both cases an FIR had been duly lodged thus casting a shadow on the monies sought to be offered to tax. Also held that benefit of the KVSS 1998 scheme is not to be extended to those against whom a complaint is pending therefore this condition cannot be held to be arbitrary. In any event the submission of petitioner that prosecution can be said to be instituted only upon cognizance being taken is of no use to petitioner as even then cognizance was taken in the second proceeding where chargesheet has been filed. Hence the said issue would not arise. With respect to the second contention of petitioner viz. that petitioner is not punishable for offences under the PC Act the same also is faulty. Therefore not only would this enquiry arise before the Tax Authority but even assuming such an enquiry were to arise the same require consideration. Any finding by the Tax Authority on this issue would amount to deciding on merits the two proceedings under the PC Act referred earlier. In light of the above both the proceedings are cases where prosecution was instituted since in both cases an FIR had been duly lodged. Both cases charge petitioner as having conspired to commit offences under the PC Act thus casting a shadow on the monies sought to be offered to tax.

Summary

Issues Involved:
1. Eligibility of the petitioner under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act).
2. Definition and interpretation of the term "prosecution instituted" under Section 9(c) of the DTVSV Act.
3. Applicability of the Prevention of Corruption Act, 1988 (PC Act) to the petitioner.

Detailed Analysis:

1. Eligibility of the Petitioner under the DTVSV Act:
The petitioner challenged the communication dated 25th January 2021, which withdrew an earlier communication dated 21st October 2020, stating the petitioner was eligible for the DTVSV Act. The petitioner argued that the rejection of their applications under the DTVSV Act was contrary to Section 9(c) of the Act. The court analyzed whether the petitioner was rendered ineligible due to pending prosecutions under the PC Act.

2. Definition and Interpretation of the Term "Prosecution Instituted":
The court examined the term "prosecution instituted" as it is not defined under the DTVSV Act. The petitioner relied on the Supreme Court judgment in Jamuna Singh vs. Bhadai Shah to argue that a case is instituted only when the court takes cognizance. However, the court referred to the Supreme Court judgment in State, CBI Vs. Sashi Balasubramanian, which held that prosecution is instituted once an FIR is lodged and investigation begins, not necessarily when a charge sheet is filed or cognizance is taken. The court observed that in both pending proceedings against the petitioner, FIRs had been lodged, thus prosecution was instituted.

3. Applicability of the Prevention of Corruption Act, 1988 to the Petitioner:
The petitioner contended that even if prosecution was instituted, they could not be punished under the PC Act as they were not public servants. The court referred to State through CBI v. Jitendra Kumar Singh, which clarified that private persons could be abettors or conspirators under the PC Act. The court noted that the petitioner was charged with conspiring to commit offences under Section 120B of IPC and Sections 13(1)(d) and 13(2) of the PC Act, thereby falling under the purview of Section 9(c) of the DTVSV Act.

Discussion and Conclusions:
The court emphasized the purpose of the DTVSV Act, which is to resolve disputed tax matters and generate timely revenue, excluding those involved in socio-economic offences. The court held that the petitioner was not eligible for the benefits under the DTVSV Act due to the pending prosecutions under the PC Act, which cast a shadow on the legality of the money sought to be offered to tax.

The court dismissed the petition, concluding that both pending proceedings against the petitioner were valid instances of prosecution instituted under the PC Act, rendering the petitioner ineligible for the DTVSV Act benefits.