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TMI Blog1990 (7) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondent, viz., Income-tax Officer, Central Circle XIII, Madras, alleging commission of offences by the petitioners and another under sections 120B, 34, 193, 196 and 420, Indian Penal Code, and sections 276C, 277 and 278 of the Income-tax Act, 1961, referable to the assessment year 1977-78. The petitioners are A-1, A-2, A-4 and A-5. A-3 has not chosen to invoke the inherent powers of this court to have the proceedings against him quashed. A complaint was filed before the trial Magistrate on August 1, 1982. The first petitioner, Messrs. Kothari and Sons (A-1), filed an application on November 3, 1982 before the Settlement Commission which, after notice to the Commissioner of Income-tax as contemplated under section 245D, was allowed to be proceeded with by an order dated October 20, 1983. The second petitioner, D. C. Kothari (A-2), filed a similar application before the Settlement Commission on September 21, 1984, which was permitted to be proceeded with by an order dated February 2, 1990. The third petitioner, P. D. Kothari (A-4), had not filed any application before the Settlement Commission. The fourth petitioner, C. S. Menon (A-5), filed an application on November 6, 1982, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... An application dated November 6, 1982 before the Settlement Commission by the fourth petitioner (A-5) was rejected on November 9, 1983, referable to Crl. M. Ps. Nos. 2853, 2855 and 2857 of 1983, while in Crl. M. P. No. 2859 of 1983, he had not filed any petition before the Settlement Commission. H. C. Kothari (A-3 in the trial court) had not chosen to challenge the proceedings in the criminal court, pending as against him. Crl. M. P. No. 2861 of 1983 is referable to C. C. No. 2181 of 1982. The petitioners are nine in number, and the offences alleged against them are the same as in the earlier cases, though the assessment year is 1982-83. The respondents filed the complaint before the trial Magistrate on October 20, 1982. The first petitioner, Kothari and Sons. (Ind.) Pvt. Ltd. (A-1), filed an application before the Settlement Commission on November 3, 1982, and the same was rejected on October 20, 1983. Similar petitions filed by the second petitioner, Indira D. Kothari (A-2), the third petitioner, Surekha P. Kothari (A-4) and the fourth petitioner, D. C. Kothari (A-5), on September 1, l982, September 15, 1982 and September 1, 1982, respectively, were permitted to be proceeded wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication of the fifth petitioner (A-8) filed on November 6, 1982 was rejected on November 9, 1983. The petitions presented before the Settlement Commission by the second petitioner (A-2) and the third petitioner (A-4) on September 1, 1982 and November 25, 1982 respectively were permitted to be proceeded with by orders dated October 20, 1989. A similar petition filed by the fourth petitioner (A-6) on September 1, 1982 was allowed for further proceedings by an order dated March 30, 1983. Criminal M. P. No. 2867 of 1983 relates to C. C. No. 2184 of 1982 and the assessment year is 1982-83. The complaint was filed on October 21, 1982, the offences alleged being the same as in the earlier cases. The petitioners are A-1 to A-5 and A-7 to A-12 in C. C. No. 2184 of 1982. The second petitioner, B. L. Chitale (A-2), the third petitioner, C. Srinivasan (A-3), the fourth petitioner, C. P. Shah (A-4), the eighth petitioner, C. R. Ramakrishnan (A-9), the ninth petitioner, E. Mahadevan (A-10), the tenth petitioner, B. S. R. Murthy (A-11) and the eleventh petitioner, P. L. N. Reddy (A-12) did not file any application before the Settlement Commission. The applications of the first petitioner Teate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 30, 1983 respectively. The nine petitioners in Crl. M. P. No. 2873 of 1983 are Kothari and Sons (Agencies) P. Ltd., (A-1), Indira D. Kothari (A-2), Surekha P. Kothari (A-4), D. C. Kothari (A-6), C. S. Menon (A-8), D. B. Saxena (A-9), K. Rangarajan (A-10), N. B. Dubey (A-11) and R. Vaidyanathan (A-12), in C. C. No. 2187 of 1982. The allegations in the complaint filed on October 21, 1982, and referable to the assessment year 1982-83 relate to the same offences as in the earlier cases. Petitioners Nos. 7 to 9 (A-10 to A-12) did not choose to file any application before the Settlement Commission. The applications dated November 3, 1982, November 6, 1982 and October 22, 1982 filed by petitioners Nos. 1, 5 and 6 (A-1, A-8 and A-9) were rejected on October 20, 1983, November 9, 1983 and October 20, 1983, respectively. However, applications dated September 1, 1982, September 13, 1982 and September 1, 1983 filed by petitioners Nos. 2 to 5 (A-2, A-4 and A-6) were admitted for further proceedings by the Settlement Commission by orders dated October 20, 1983, October 20, 1983 and March 30, 1983 respectively. The answer to the question in issue will naturally decide the scope of the pend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Provided that where the Settlement Commission is not satisfied with the correctness of the objection raised by the Commissioner the Settlement Commission may, after giving the Commissioner an opportunity of being heard, by order, allow the application to be proceeded with under sub-section (1) and send a copy of its order to the Commissioner. (2) A copy of every order under sub-section (1) shall be sent to the applicant and to the Commissioner. (3) Where an application is allowed to be proceeded with under sub-section (1), the Settlement Commission may call for the relevant records from the Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case. (4) After examination of the records and the report of the Commissioner received under sub-section (1), and the report, if any, of the Commissioner received under sub-section (3), and after giving an opportunity to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other sum chargeable or imposable under the Indian Incometax Act, 1922 (XI of 1922), or under this Act, has been established or is likely to be established by any income-tax authority, in relation to the case." "245F. (1) In addition to the powers conferred on the Settlement Commission under this Chapter, it shall have all the powers which are vested in an income-tax authority under this Act. (2) Where an application made under section 245C has been allowed to be proceeded with under section 245D, the Settlement Commission shall, until an order is passed under sub-section (4) of section 245D, have, subject to the provisions of sub-section (3) of that section, exclusive jurisdiction to exercise the powers and perform the functions of an incometax authority under this Act in relation to the case. (3) Notwithstanding anything contained in sub-section (2) and in the absence of any express direction to the contrary by the Settlement Commission, nothing contained in this section shall affect the operation of any other provision of this Act requiring the applicant to pay tax on the basis of self-assessment or by way of advance tax in relation to the matters before the Settlement Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 245C." "245-I. Every order of settlement passed under sub-section (4) of section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force." V. R. Krishna Iyer J., speaking for the Bench in CIT v. B. N. Bhattachargee [1979] 118 ITR 461 (SC), had the anatomy of Chapter XIXA dealing with settlement of cases dissected while narrating a few facts so that a hang of the controversy may be got and its just resolution sought. In the words of the learned judge, section 245A is the definition clause even as section 245B is the clause constituting the Settlement Commission. Applications for settlement of cases by assessees are regulated by section 245C. The process of the application is controlled by section 245C and section 245D of the Act. The Supreme Court was concerned in that case with the provisions of section 245M which does not arise in this case. In that context, the Supreme Court observed (at page 472): "Only if he can validly move the Commission under section 245M, can his application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which attract the conditions required by the second proviso, there is little difficulty in holding that the application for settlement having been rejected by the Commissioner, could not be proceeded with. The veto of the Commissioner was the Waterloo of the application." The apex court was considering the second proviso to section 245D(1) which was deleted with effect from April 1, 1979, by the Finance Act, 1979. The present position to which these prosecutions relate is governed by section 245D(1A) which was ushered in on April 1, 1979, when the second proviso referred to earlier was omitted. By this provision, an application shall not be proceeded with under sub-section (1), if the Commissioner objected to the application being proceeded with on the ground that concealment of particulars of income on the part of the applicant or perpetration of fraud by him for evading any tax or other sum chargeable or imposable under the Act has been established or was likely to be established by any income-tax authority, in relation to the case. The proviso to this section is significant, for, where the Settlement Commission was not satisfied with the correctness of that objection raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "And if he can purchase freedom from criminal prosecution and incarceratory sentence he may settle with the commission ; and, towards this end, try to buy those who remotely control the departmental echelons whose veto or green signal closes or opens the jurisdiction of the Settlement Commission and hushes or pushes the prosecutions. Thus, section 245H, which clothes the Commission with the power to grant immunity from prosecution . . . is a magnet which attracts large tax dodgers and offers, indirectly, an opportunity to the highest departmental and political authorities a suspect power to bargain." As stated earlier, the veto power of the Commissioner is no longer in existence and, on a consideration of the entire matter, after hearing both the authorities, the Settlement Commission either allows the applications to be proceeded with or rejects it. It was also observed by the Supreme Court (at page 481 of 118 ITR) that a casual perusal of Chapter XIXA convinced the discerning eye that the Settlement Commission exercised many powers which affected, for good or otherwise, the rights of the parties before it and vested in it powers to grant immunity from prosecution and penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 987] 168 ITR 591, while considering the several sections under Chapter XIXA of the Act observed that, in the light of section 245F of the Income-tax Act, 1961, it was patent that the Settlement Commission, during the pendency of proceedings before it, enjoyed all the powers which were vested in an income-tax authority under the Act. Sub-section (2) made it manifest that, till the culmination of those proceedings, with the passing of an order under sub-section (4) of section 245D of the Act, it had exclusive jurisdiction to exercise the powers and perform the functions of an incometax authority under the Act in relation to that case. Sub-section (4) further made it clear that the authorities under the Act, including the Commissioner and the Income-tax Officer, may continue to exercise their jurisdiction under the Act with regard to any matters other than those which were before the Settlement Commission but that too was subject to any direction by the Commission to the contrary. It was, therefore, held that the Settlement Commission had exclusive jurisdiction to launch a prosecution against the assessees. The Commissioner could not direct or authorise, the filing of the complaint ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J., in Ashvin Kumar Vadilal Patel v. S. Rajguru [1987] 165 ITR 583 (Guj). At this stage, it is better to consider the argument of learned counsel for the respondent that the definition of "case" contained in section 245A(b) would relate only to the proceedings under the Act for assessment or reassessment and will not take in its fold a prosecution. This contention has to be negatived, for section 245A reads that in that Chapter, unless the context otherwise required, "case" meant what had been contemplated under (b). Section 245H of the Act has also used the word "case" while dealing with the power of the Settlement Commission to grant immunity from prosecution and penalty. "Case" in that context naturally includes prosecution. In that context, the word "case" used in section 245F(2) will also be significant. The power of the Settlement Commission under section 245H of the Act will certainly form part of the final order to be passed under section 245D(4). In another case reported in Ashwini Kumar Vadilal Patel (Dalal) v. P. T. Mehta, ITO [1989] 178 ITR 385, the Gujarat High Court, after referring to the decision rendered by R. A. Mehta J., in Ashvin Kumar Vadilal Patel v. S. Rajg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement. After the making of the application, it was the Commission alone in whom exclusive jurisdiction was vested under section 245F(2) to exercise the powers and perform the functions of an income-tax authority under the Act in relation to the case including the power of continuing the prosecution already launched by the Commissioner prior to the making of the application. It was also observed that, if the Settlement Commission found any concealment of income on the part of the applicant in its final order, it may recommend the launching of a prosecution or in the absence of it, grant immunity from prosecution under section 245H. If immunity is not granted, the thread may again be picked up by the Department for launching a fresh complaint. It was ultimately held that the continuance of prosecution during that period cannot be merely stayed and that the summons based on the complaint had to be quashed. Both learned counsel represented that the entire case-law available on the subject has been placed before the court. It was also brought to my notice that the Commissioner of Income-tax, Madras, challenged the order of the Settlement Commission, permitting the applications to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complaint", "or the prosecution kept pending can always be continued". (5) The provisions of section 245-1 appear to be very relevant, for every order of settlement passed under section 245D(4) shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in that Chapter, be reopened in any proceeding under the Act or under any other law for the time being in force ; and (6) The policy of the law engrafted in Chapter XIX-A is not a rescue shelter against prosecution, but provides a forum to take note of the entire picture placed by the assessee and the Department before exercising powers of immunisation against criminal prosecution. The expectation of the law-maker was that the power of the Settlement Commission would be sparingly used in deserving cases. The object was to "ensure that the settlement was fair, prompt and independent given a high level machinery for administering the provision". Therefore, the answer to the question framed is, when an assessee had filed an application before the Settlement Commission under section 245C of the Act, the terms of which include grant of immunity from prosecution under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Settlement Commission, proceedings in C. C. No. 2166 of 1982 on the file of the Additional Chief Metropolitan Magistrate, Egmore, Madras, are stayed in the case of petitioners Nos. 1 to 3 (A-1, A-2 and A-4), while the plea of the fourth petitioner (A-5) stands rejected. Criminal M. P. No. 2857 of 1983. - The prosecution in C. C. No. 2167 of 1982 on the file of the Additional Chief Metropolitan Magistrate, Egmore, Madras in respect of petitioners Nos. 1 to 3 (A-1, A-2 and A-4) shall stand stayed, while there will be no bar to proceed with the prosecution as far as the fourth petitioner (A-5) is concerned whose plea stands rejected. Criminal M. P. No. 2859 of 1983. - The prosecution in C. C. No. 2168 of 1982 on the file of the Additional Chief Metropolitan Magistrate, Egmore, Madras, in respect of petitioners Nos. 1 to 3 (A-1, A-2 and A-4) are stayed pending final orders of the Settlement Commission. This petition is rejected in respect of the fourth petitioner (A-5). Criminal M. P. No. 2861 of 1983. - The prayer of petitioners Nos. 1, 5, 6, 7, 8 and 9 (A-1, A-8, A-9, A-10, A-11 and A-12) is rejected. The prosecution in C. C. No. 2181 of 1982 on the file of the Additional C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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