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AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Hari Swarup, J.
Acts
  • section 561A of the Code of Criminal Procedure.10.
  • section 561A of the Code of Criminal Procedure
  • SECTION 277 INCOME TAX ACT
  • sub-section (1A) of section 279. Sub-section (1A)
  • clause (iii) of sub-section (1) of section 271
  • sub-section (1A) of section 279
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Hari Swarup, J.
Acts
  • section 561A of the Code of Criminal Procedure.10.
  • section 561A of the Code of Criminal Procedure
  • SECTION 277 INCOME TAX ACT
  • sub-section (1A) of section 279. Sub-section (1A)
  • clause (iii) of sub-section (1) of section 271
  • sub-section (1A) of section 279
See more information ...
Smart Summary

Structured Summary of the Legal Opinion

Factual and Procedural Background

A revision was filed against an order of the 1st Civil and Sessions Judge which had dismissed the revision challenging a trial court order that refused to discharge an accused who contended that the prosecution could not legally proceed. The prosecution arose from a complaint by the Income-tax Officer under section 277 of the Income-tax Act concerning the assessment year 1963–64, alleging concealment of particulars of income.

Summonses were issued and, before charge was framed, the accused objected to further proceedings relying on section 279 of the Act. The accused contended that the complaint had not been filed "at the instance of the Commissioner" and that prosecution was barred because the penalty had been waived or set aside under section 279(1A). The Magistrate rejected these contentions and the 1st Civil and Sessions Judge dismissed the revision. Certified copies of the Tribunal's judgment in the penalty appeal and of an order of the Appellate Assistant Commissioner dismissing the appeal against the original assessment as infructuous were filed in this Court as additional evidence.

The underlying tax-administrative history as set out in the opinion: the assessee filed a return; the Income-tax Officer completed assessment at a higher figure and referred the question of penalty under section 271(1)(c) (because the amount would exceed Rs. 1,000) to the Inspecting Assistant Commissioner, who imposed a penalty. The Income-tax Appellate Tribunal (ITAT) allowed an appeal against that penalty order and set it aside. The Income-tax Officer issued notice under section 147 and made a supplementary assessment for escaped income; the ITAT set aside that supplementary assessment and remanded it to the assessing officer for fresh consideration after giving the assessee opportunity to lead evidence. An appeal against the original assessment to the Appellate Assistant Commissioner was dismissed as infructuous.

The specific legal question for the Court was whether, in view of these tax-administrative orders (including the ITAT's setting aside of the penalty), the criminal prosecution under section 277 could continue or had to be quashed.

Legal Issues Presented

  1. Whether the prosecution under section 277 could be said to have been instituted "at the instance of the Commissioner" as required by section 279(1) of the Income-tax Act.
  2. Whether an order of the Income-tax Appellate Tribunal setting aside a penalty is equivalent to a "reduction or waiver" of penalty by the Commissioner under section 271(4A) such that prosecution is barred by section 279(1A) of the Income-tax Act.
  3. Whether the criminal court can refuse to proceed with, or this Court can quash, the prosecution on the basis of the ITAT's finding (including invocation of the power under section 561A of the Code of Criminal Procedure and reliance on R.P. Kapur v. State of Punjab).

Arguments of the Parties

Accused's Arguments

  • The accused contended that once the penalty had been held to be not imposable (as by the ITAT), he could not be prosecuted under section 277 — the reduction or waiver contemplated by section 279(1A) included a situation where the penalty was held not imposable by an appellate authority.
  • It was argued that the Commissioner was bound by the Tribunal's order and therefore, having regard to the Tribunal's setting aside of the penalty, the prosecution could not legally continue.
  • Learned counsel for the applicant (the accused) urged exercise of the Court's powers under section 561A of the Code of Criminal Procedure to quash the prosecution in view of the ITAT's findings, relying on R.P. Kapur v. State of Punjab (the third category of cases where no legal evidence or manifest failure of evidence permits quashing).

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
T.S. Baliah v. T.S. Rangachari, Income-tax Officer, [1969] 72 ITR 787 Interpreting the phrase "at the instance of the Commissioner" to mean "at the authorisation of the Commissioner". The Court relied on this authority to hold that the prosecution in the present case was authorised by the Commissioner (evidence showed Commissioner had authorised the prosecution) and therefore was not without legal authority under section 279(1).
R.P. Kapur v. State of Punjab, AIR 1960 SC 866 Use of the Court's power to quash criminal proceedings where there is no legal evidence or where the evidence clearly or manifestly fails to prove the charge (third category described by the Supreme Court). The accused relied on this decision and the Court considered whether the present case fell into that third category. The Court found that stage had not been reached (no charge framed and no evidence yet led) and therefore the authorities did not support quashing the proceedings at this stage under section 561A CrPC.

Court's Reasoning and Analysis

The Court addressed the issues in sequence:

  1. Section 279(1) requirement: The Court examined whether the prosecution was instituted "at the instance of the Commissioner." The evidence before the Court showed that the Commissioner had authorised the prosecution. Relying on the Supreme Court authority in T.S. Baliah (which held that "at the instance of the Commissioner" means "at the authorisation of the Commissioner"), the Court concluded the prosecution was not without the Commissioner's authority and therefore s279(1) did not bar the prosecution.
  2. Interpretation of section 279(1A): The Court analysed sub-section (1A) which states that a person shall not be proceeded against under section 277 in relation to an assessment year in respect of which the penalty imposable under clause (iii) of sub-section (1) of section 271 has been reduced or waived by an order under sub-section (4A) of that section. The accused argued that an appellate order setting aside a penalty should be treated as equivalent to waiver or reduction under s.271(4A).
  3. Distinction between waiver by the Commissioner and setting aside by the Tribunal: The Court observed that sub-section (1A) contemplates waiver or reduction effected by the Commissioner under s.271(4A) (which is discretionary and based on matters such as the assessee's conduct). By contrast, when the ITAT allows an appeal and sets aside a penalty, it does so on the basis that the penalty was not legally imposable; the ITAT is not acting under the Commissioner's powers under s.271(4A). The Court held that the ITAT's setting aside of a penalty is an order of non-imposition, not an order of waiver under s.271(4A), and therefore is not the kind of order contemplated by s.279(1A).
  4. Consequence for continuance of prosecution: The Court emphasised that it is open to the Commissioner to prosecute under section 277 even if a penalty is not imposed, and that penalty proceedings and criminal prosecution may proceed concurrently. At the moment the complaint was filed, there was no bar to institution of the prosecution and the criminal court had jurisdiction to proceed with the complaint. The criminal court must follow the Criminal Procedure Code in disposing of the complaint; the accused may be acquitted or discharged under CrPC if appropriate.
  5. Evidentiary use of ITAT order and limits on summary quashing: The Court noted the ITAT's order may be used as evidence in the criminal trial to show that there was no offence, but that the ITAT's finding alone is not sufficient to direct dismissal or acquittal under the CrPC. Regarding the application under section 561A CrPC and reliance on R.P. Kapur, the Court held that the stage for exercising that extraordinary power (where there is no legal evidence or the evidence manifestly fails) had not been reached because no charge had been framed and no evidence had been led by the prosecution.
  6. Statutory interpretation point: The Court rejected the accused's proposal to read the words of s.279(1A) so as to treat cancellation by an appellate authority as equivalent to waiver by the Commissioner, observing that such a reading would amount to judicial legislation by adding an extra condition to the statute. Because the statutory language was specific and clear, the Court refused to engraft an additional condition into the provision.

Holding and Implications

Holding: The revision failed and was dismissed. The Court concluded that:

The prosecution may continue; section 279(1A) does not bar further proceedings in the present factual and legal context.

Implications

  • The direct effect is that the criminal prosecution under section 277 is not barred by the orders relied upon by the accused and may proceed in the criminal court.
  • The criminal court has jurisdiction to dispose of the complaint in accordance with the Criminal Procedure Code; the accused remains entitled to seek discharge or acquittal under the procedural law if the prosecution fails to prove the offence.
  • The ITAT's order setting aside the penalty may be used as evidence in the criminal trial but does not automatically entitle the accused to dismissal, discharge, or acquittal; it does not operate as a statutory waiver under section 271(4A) for purposes of section 279(1A).
  • No broader change in legal principle was announced beyond the application of the statutory interpretation and the conclusions drawn in this case; the decision resolves the matter between the parties by dismissing the revision and permitting the prosecution to continue.
Show full summary ...

    Dr. D.N Munshi v. N.B Singh

    Hari Swarup, J.:— This revision is directed against an order of the 1st Civil and Sessions Judge by which he dismissed the revision filed against the trial court's order refusing to discharge the accused on his plea that the prosecution could not legally proceed.

    2. A complaint was filed by the Income-tax Officer for an offence under section 277 of the Income-tax Act (hereinafter to be referred to as “the Act”). The complaint made the allegation that for the assessment year 1963-64, the accused had filed a return in which he had concealed the particulars of his income. The summonses were issued to the accused but before the charge was framed an objection was taken to the further proceeding of the trial in view of section 279 of the Act. It was urged that the (complaint had not been filed at the instance of the Commissioner and that the case could not proceed against the accused in view of the penalty being waived within the meaning of section 279(1A) of the Act. The contentions were not accepted by the Magistrate and the 1st Civil and Sessions Judge dismissed the revision. Certified copy of the judgment of the Tribunal in the appeal arising out of the penalty proceeding and of the Appellate Assistant Commissioner of Income-tax dismissing the appeal against the original assessment order as infructuous have been filed as additional evidence in this court.

    3. The facts leading to the case as have finally emerged out are the following. A particular income was returned by the assessee. The Income-tax Officer found that the return was not correct and hence completed the assessment at a higher figure. He was further of the opinion that penalty was imposable under section 271(1)(c) of the Act but as the amount of pena|lty had to be greater than Rs. 1,000 he referred the matter to the Inspecting Assistant Commissioner of Income-tax. The Inspecting Assistant Commissioner imposed a penalty Against that order an appeal was preferred before the Tribunal. The Tribunal allowed the appeal and set aside the order imposing the penalty. The Income-tax Officer issued notice under section 147 and made a supplementary assessment for the escaped income. The Income-tax Appellate Tribunal set aside that assessment and remanded the case to the Income-tax Officer for fresh consideration after giving opportunity of leading evidence to the assessee. With respect to the original assessment, the assessee filed an appeal before the Appellate Assistant Commissioner of Income-tax. That appeal was dismissed as infructuous. The Appellate Assistant Commissioner appears to have thought that the appeal had become infructuous because of the order of the Income-tax Appellate Tribunal passed in appeal arising out of the supplementary assessment made by the Income-tax Officer under section 147 of the Act.

    4. The effect of the various orders is that the appeal against the original assessment has been dismissed as infructuous the case under section 147 of the Act has been remanded to the assessing authority by the Income-tax Appellate Tribunal and the penalty imposed on the basis of original assess ment has been set aside. On the basis of these facts it has to be seen whether the prosecution can continue or it has to be quashed.

    5. According to sub-section (1) a person can be proceeded against for an offence under section 277 only at the instance of the Commissioner. The evidence produced in the case shows that the Commissioner had authorised the prosecution. In view of the law laid down by the Supreme Court in the case of T.S Baliah v. T.S Rangachari, Income-tax Officer, [1969] 72 ITR 787 “at the instance of the Commissioner” must mean” at the authorisation of the Commissioner”. The prosecution cannot, therefore, be held to be without authority of law by reason of sub-section (1) of section 279 of the Act.

    6. sub-section (1A) of section 279 of the Act provides:

    “A person shall not be proceeded against for an offence under section 277 in relation to the assessment for an assessment year in respect of which the penalty imposable upon him under clause (iii) of sub-section (1) of section 271 has been reduced or waived by an order under sub-section (4A) of that section.” Learned counsel for the accused has contended that once the penalty has been held to be not imposable, the accused cannot be prosecuted for an offence under section 277 of the Act. The contention is that the reduction or waiver contemplated by sub-section (1A) is reduction or waiver of the penalty and that such waiver or reduction need not necessarily be by the Commissioner under sub-section (4A) of section 271 of the Act but may be even when it is held to be not imposable by the Tribunal. According to the learned counsel, the Commissioner is bound by the order passed by the Tribunal and, therefore, he must be held to be bound to hold that the penalty was not imposable. If the penalty was not imposable, according to the learned counsel, the question of his continuing the prosecution cannot arise. Of course, if the penalty is not impossable upon an assessee under section 271(1)(c) of the Act, it may not be possible to hold that he has committed an offence under section 277 of the Act. But the question that arises for decision is whether the criminal court can refuse to proceed with the complaint on the finding given by the Income-tax Appellate Tribunal. The further question that arises is whether the order of the Income-tax Appellate Tribunal setting aside the penalty is equivalent to the order reducing or waving the penalty contemplated by sub-section (1A) of section 279 of the Act.

    7. Taking the second question first, it seems that the order of the Tribunal is not contemplated by sub-section (1A) of section 279. Sub-section (1A) contains a bar to the institution or continuance of the prosecution against an assessee under section 277. The import of this provision is that in case the Commissioner himself waives the penalty under sub-section (4A) of section 271, the prosecution should not be initiated or continued. Subsection (4A) of section 271 provides for reduction or waiver of penalty by the Commissioner on the satisfaction reached by him on matters enumerated. In that sub-section. They are of the character of good conduct of the assessee. In such situations, the legislature thought that it is not appropriate to let the Commissioner prosecute the person who has satisfied him in respect of the conditions which permit the reduction or waiver of the penalty. The Income-tax Appellate Tribunal when it allows an assesee's appeal really does not act on the basis of the law contemplated under sub-section (4A) of section 271, but does so on the basis of the existence of the conditions on which penalty may be imposable. If it finds that the pbnalty is not legally imposed, it sets aside the order. The order of the income-tax Appellate Tribunal is really the order of the assessing authority not imposing a penalty. That order is not contemplated by sub-s;ction (1A) of section 279 as the order mentioned in that sub-section is the order which is passed under sub-section (4A) of section 271 and not the order not imposing the penalty. It contemplates waiver and not nonimposition of penalty. The first question, therefore, must be answered against the accused.

    8. It is not denied that it is open to the Commissioner to prosecute a person for an offence under section 277 even if the penalty is not imposed. It can also not be disputed that the assessing authority may take proceedings for imposition of penalty, and, at the same time, the Commissioner may take proceedings for prosecution of an assessee under section 277 of the Act. I The moment at which the complaint was filed, therefore, there was no be to the institution of the prosecution. The criminal court thus got jurisdiction to proceed with the complaint. That complaint has now to be disposed of in accordance with the procedure laid down in the Criminal Procedure Code. The accused can be acquitted or discharged in accordance with the provisions of the Code of Criminal Procedure. If the law permits, the order of the Income-tax Appellate Tribunal may be utilised as a piece of evidence to show that there was no offence committed by the accused. But tjhat cannot take away the right of the prosecution to prove the case. The prosecution has a right to lead evidence before the criminal court in support of the complaint. It will be then for the criminal court to come to the conclusion whether the offence had been made out or not. If it finds that the conditions do not exist for the imposition of penalty, then it has to hold that the offence is not made out. The finding given by the Income-tax Appellate Tribunal cannot by itself be sufficient to direct the dismissal of the complaint or acquittal or discharge of the accused under the provisions of the Code of Criminal Procedure.

    9. Learned counsel contended that in section 279(1A) the words “waived by an order under sub-section (4A) of that section “should be read as cancelled by an order of the Income-tax Appellate Tribunal” as this is the intention of the law. When the words of a provision of law are specific and clear, it is not open to a court to go behind the section to discover the intention of the legislature. The acceptance of the contention of the learned counsel will mean not interpretation but legislation in the sense that another condition will be deemed to be added in sub-section (1A) of section 279 to the effect that a person shall not be proceeded against for an offence under section 277 provided the penalty imposed is subsequently cancelled by an appellate authority. Waiver and cancellation being two things, the reading of additional condition will be foreign to the existing provision. The same cannot, therefore, be read as implied in the section. Learned counsel for the applicant urged that this court should exercise its powers under section 561A of the Code of Criminal Procedure and quash the prosecution in view of the findings recorded by the Income-tax Appellate Tribunal. In support of his contention, the learned counsel relied on the decision of R.P Kapur v. State Of Punjab., AIR 1960 SC 866. Learned counsel has relied on the third category of cases mentioned by the Supreme Court where it was held that if there is no legal evidence adduced in support of the case of the prosecution or the evidence adduced clearly or manifestly fails to prove the charge, the powers can be exercised. That stage, however, has not yet been reached. Learned counsel has admitted that no charge has yet been framed and evidence has not yet been led. It cannot, therefore, be held that there is no evidence in support of the prosecution case so that the proceedings may be quashed in exercise of the powers by this court under section 561A of the Code of Criminal Procedure.

    10. In the circumstances of the case, it would not be possible to hold that section 279(1A) of the Act bars the further proceedings of the case against the applicant. The revision accordingly fails and is dismissed.

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    Comments

    Dr. D.N Munshi v. N.B Singh
    (Dec 17, 1975)