The Judgment of the Court was delivered by

Paul, J.:— Crl. M.P No. 617 of 1979 is a petition for quashing the criminal proceedings launched against the petitioners in C.C No. 5674 of 1976 on the file of the Chief Metropolitan Magistrate, Egmore, Madras, while Crl. M.P No. 618 of 1979 is a petition to stay the proceedings in the aforesaid criminal case till the disposal of Crl. M.P No. 617 of 1979.

2. The respondent-ITO laid a complaint before the Chief Metropolitan Magistrate, Egmore, Madras, against the petitioners under s. 195, Cr. P.C, and s. 136 of the I.T Act, alleging offences under s. 120B read with ss. 193 and 196, IPC, under s. 193, IPC, under s. 196 IPC and under ss. 277 and 278 of the I.T Act, 1961. It is contended now that the aforesaid complaint is not legally valid inasmuch as the offences are non-cognizable and in regard to the offence of criminal conspiracy alleged against the petitioners, sanction under s. 196(2) of the Cr. P.C had not been obtained and when an objection was raised to that effect before the learned Chief Metropolitan Magistrate, the Magistrate has wrongly held that no sanction under s. 196(2) is necessary for taking cognizance of those offences. Section 196, Cr. P.C, states as follows:

“(1) No court shall take cognizance of—

(a) any offence punishable under Chapter VI or under s. 153A, section 153B, section 295A or section 505 of the Indian Penal Code (45 of 1860), or

(b) a criminal conspiracy to commit such offence, or

(c) any such abetment, as is described in s. 108A of the Indian Penal Code (45 of 1860), except with the previous sanction of the Central Government or of the State Government.

(2) No Court shall take cognizance of the offence of any criminal conspiracy punishable under section 120B of the Indian Penal Code (45 of 1860), other than a criminal conspiracy to commit a cognizable offence punishable with death, imprisonment for life or rigorous imprisonment for a term of two years or upwards, unless the State Government or the District Magistrate has consented in writing to the initiation of the proceedings:

Provided that where the criminal conspiracy is one to which the provisions of section 195 apply, no such consent shall be necessary.”

3. Section 195, Cr. P.C, states:

“(1) No court shall take cognizance—

(a)(i) of any offence punishable under sections 172 to 188 (both inclusive) of the Indian Penal Code (45 of 1860), or

(ii) of any abetment of, or attempt to commit, such offence, or

(iii) of any criminal conspiracy to commit such offence, except on the complaint in writing of the public servant concerned or of some other public servant to whom he is administratively subordinate;

(b)(i) of any offence punishable under any of the following sections of the Indian Penal Code (45 of 1860), namely, sections 193 to 196 (both inclusive), 199, 200, 205 to 211 (both inclusive) and 228, when such offence is alleged to have been committed in, or in relation to, any proceeding in any court, or

(ii) of any offence described in section 463, or punishable under section 471, section 475 or section 476, of the said Code, when such offence is alleged to have been committed in respect of a document produced or given in evidence in a proceedings in any court, or

(iii) of any criminal conspiracy to commit, or attempt to commit or the abetment of, any offence specified in sub-clause (i) or subclause (ii),

except on the complaint in writing of that court, or of some other court to which that court is subordinate…”

4. Sub-section (3) of s. 195, Cr. P.C, states:

“In clause (b) of sub-section (1), the term ‘court’ means a civil, revenue or criminal court, and includes a tribunal constituted by or under a Central, Provincial or State Act if declared by that Act to be a court for the purposes of this section.”

5. On behalf of the respondent it is contended that no such sanction under s. 196(2), Cr. P.C, is necessary in this case since s. 195, Cr. P.C, Would apply inasmuch as proceedings before the Assistant Commissioner of Income-tax are judicial proceedings before a court for the purpose of s. 195(1)(b), Cr. P.C The learned Chief Metropolitan Magistrate accepted the contention of the respondent.

6. The allegations in the complaint are that all the accused entered into a criminal conspirary to fabricate the day book and the ledger relating to the first accused-firm, letters and receipts in support of bogus payments of sub-commission and to conceal receipts of commission with intent to use them as genuine evidence in the course of the I.T assessment proceedings relating to the first accused-firm and in pursuance of the aforesaid conspiracy all the accused wilfully fabricated the aforesaid account books, letters and receipts, etc., in the aforesaid manner with intent to use them as genuine evidence in the course of the I.T assessment proceedings relating to the first accused-firm and did use the same in the course of the said I.T assessment proceedings and the second and third accused knowingly and wilfully delivered to the ITO false returns of income and false statement of accounts relating to the first accused-firm and the second accused made a false verification in the aforesaid false returns and accused Nos. 4 and 5 abetted accused Nos. 2 and 3 in the commission of the aforesaid offences.

7. In view of s. 195(1)(b)(i), Cr. P.C, the question to be determined is whether the ITO is a court within the meaning of the aforesaid cl. (i) of sub-s. (1)(b) of s. 195. In support of their contention that the ITO is not a court, the petitioners have relied on the decision of the Kerala High Court in Balakrishnan v. ITO (see p. 573 infra). In that case the accused-company filed before the ITO its return of income and during the course of the assessment proceedings the cash book and the ledger of the company were produced before the ITO and in these account books there was a false entry showing the cash receipt of Rs. 30,000 from one K.R.P Chettiar and Sons, Trichirapally, when no such concern existed, and as such (it was alleged) that the entry was a fabrication and it was also alleged that in furtherance of the fabrication mentioned above and in support of the alleged bogus claim of credit the accused produced before the ITO a carbon copy of a cash receipt issued to the accused for the amount of Rs. 30,000 by the non-existent company. The ITO, after obtaining the sanction of the Commissioner, filed a complaint for the offences under ss. 193 and 196, IPC. The learned judge of the Kerala High Court after observing that it cannot be contended that an ITO is a civil court or a criminal court or a revenue court, considered whether an ITO can be said to be a court which would come under the term “a tribunal constituted by or under a Central, Provincial or State Act if declared by that Act to be a court for the purposes of this section” and found that there was no Act which has declared an ITO to be a court for the purposes of this section, and as such the ITO was not a court within s. 195(1)(b). The learned judge of the Kerala High Court has referred to the decision of the Supreme Court in Lalji Haridas v. Stale of Maharashtra, [1964] 52 ITR 423 (SC) and has pointed out that the short question that arose before the five judges of the Supreme Court in that decision was whether the proceedings before the ITO under s. 37 of the Indian I.T Act could be said to be a proceeding in any court within the meaning of s. 195(1)(b) of the Cr. P.C and that that decision was rendered before the new Criminal Procedure Code came into force and the learned judge was of the view that the effect of that decision of the Supreme Court had been taken away by the insertion of sub-s. (3) in s. 195 of the new Code.

8. In Lalji Haridas v. State of Maharashtra, [1964] 52 ITR 423 (SC), the majority decision of the Supreme Court was that it could not have been the intention of the Legislature in making the offence committed during the course of a proceeding before an ITO more serious without affording a safeguard provided by s. 195(1)(b), Cr. P.C, 1898, and that would really carry out the intention of the Legislature in enacting s. 37(4) of the I.T Act, and where, therefore, an offence under s. 193., IPC, is committed in respect of the proceedings before the ITO, a complaint by that officer is a condition precedent prescribed under s. 195(1)(b), Cr. P.C, 1898, before a Magistrate can take cognizance of it.

9. Section 37 of the Indian I.T Act reads as follows:

“Powers of income-tax authorities.—(1) The Income-tax Officer, Appellate Assistant Commissioner, Commissioner and Appellate Tribunal shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely:—

(a) discovery and inspection;

(b) enforcing the attendance of any person, including any officer of a banking company, and examining him on oath;

(c) compelling the production of books of account and other documents; and

(d) issuing commissions.

(2) Subject to any rules made in this behalf, any Income-tax Officer specially authorised by the Commissioner in this behalf may,—

(i) enter and search any building or place where he has reason to believe that any books of account or other documents which in his opinion will be useful for, or relevant to, any proceeding under this Act may be found and examine them, if found;

(ii) seize any such books of account or other documents or place marks of identification thereon or make extracts or copies therefrom;

(iii) make a note or an inventory of any other article or thing found in the course of any search under this section which in his opinion will be useful for, or relevant to, any proceeding under this Act;

and the provisions of the Code of Criminal Procedure, 1898 (5 of 1898), relating to searches shall apply so far as may be to searches under this section.

(3) Subject to any rules made in this behalf, any authority referred to in sub-section (1) may impound and retain in its custody for such period as it thinks fit any books of account or other documents produced before it in any proceeding under this Act:

Provided that an Income-tax Officer shall not—

(a) impound any books of account or other documents without recording his reasons for so doing; or

(b) retain in his custody any such books or documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Commissioner therefor.

(4) Any proceeding before any authority referred to in this section shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code (45 of 1860).”

10. It might be noted that sub-s. (4) of s. 37 merely states that any proceeding before any authority referred to in the section shall be deemed to be a judicial proceeding within the meaning of ss. 193 and 228, and for the purposes of s. 196 of the IPC. It does not Say that the authority referred to in the section shall be deemed to be a court within the meaning of s. 195, Cr. P.C Now, at the time when the aforesaid decision of the Supreme Court was rendered, the new Criminal Procedure Code of 1973 had not been passed. There is a vital change effected in s. 195, Cr. P.C, by the new Code. In s. 195(2) of the Cr. P.C of 1898, which is analogous to sub-s. (3) of s. 195 of the Cr. P.C of 1973, the words “and includes a tribunal constituted by or under a Central, Provincial or State Act if declared by that Act to be a court for the purposes of this section” are not to be found. These words have been added to sub-s. (3) of s. 195 of the Code of 1973.

11. In Balakrishnan, Managing Director, Terelac Furnaces (P.) Ltd. v. ITO (see p. 573 infra), a learned single judge of the Kerala High Court has pointed out that the decision in Lalji Haridas v. State oj Maharashtra, [1964] 52 ITR 423 (SC), was rendered before the new Cr. P.C came into force, and the learned judge then went on to say whether the effect of the aforesaid decision of the Supreme Court had been taken away by the insertion of sub-s. (3) in s. 195 of the new Code. The learned judge pointed out that in Balwant Singh v. L.C Bharupal, ITO, [1968] 70 ITR 89, the Supreme Court had clarified the ratio decidendi of the decision in Lalji Haridas v. State oj Maharashtra, [1964] 52 ITR 423 (SC). The learned judge has pointed out that in Balwant Singh v. L.C Bharupal, ITO, [1968] 70 ITR 89 (SC), the Supreme Court clarified its decision in Lalji Haridas v. State of Maharashtra, [1964] 52 ITR 423 (SC) as follows (p. 94 of 70 ITR):

“In view of these provisions, the majority view was that proceedings before the Income-tax Officer are judicial proceedings for the purposes of sections 193, 196 and 228 of the Penal Code and though the court did not go into the general question whether the officer is a court or not held that those proceedings must be treated as proceedings in a court for the purposes of section 195(1)(b) of the Code of Criminal Procedure.”

12. The learned single judge pointed out that under the new Code, an ITO can be said to be a court only when it is a tribunal constituted by an Act and if that Act declared the said Tribunal to be a court for the purpose of the section and there is no Act which has done so and, therefore, it has to be held that the ITO is not a court within s. 195(1)(b), I am in respectful agreement with the aforesaid view. The effect of the decision of the Supreme Court in Lalji Haridas v. State of Maharashtra, [1964] 52 ITR 423 has been taken away by the insertion of the words “and includes a tribunal constituted by or under a Central, Provincial or State Act if declared by that Act to be a court for the purpose of this section”.

13. I might also refer to the Law Commission Report with reference to s. 196(3) of the Cr. P.C of 1973. The Law Commission observed as follows:

“In any concrete case this question is bound to raise difficult and complex issues. Consequently, we have the long series of cases over the years deciding what tribunals and officers acting in a judicial capacity should be regarded as courts and what should not be so regarded. The substitution of ‘includes for means’ in the definition has, if anything, added to the difficulties of the problem. We consider that for the purpose of clauses (b) and (c), ‘Court’ should mean a Civil Court or a Revenue Court or a Criminal Court properly so called, but where a tribunal created by an Act has all or practically all the attributes of a court, it might be regarded as a court only if it is declared by that Act to be a court for the purposes of this section. This would make the position clear to all concerned and particularly to Criminal Courts when required to take cognizance of offences falling within the scope of clause (c).”

14. Therefore, even though the proceedings before the ITO are judicial proceedings under s. 193, IPC and even though those judicial proceedings must be treated as proceedings in any court for the purpose of s. 195 (1)(b), Cr. P.C, as laid down by the Supreme Court yet, after the Cr. P.C of 1973 came into effect, the position has been rendered different and in my view inasmuch as in the I.T Act there is no provision declaring the Tribunal to be a court, the ITO is not a court.

15. Now under s. 196A(2), Cr. P.C, 1898, before it was amended by the Code of 1973, no court shall take cognizance of the offence of criminal conspiracy punishable under s. 120B of the IPC, in a case where the object of the conspiracy is to commit any non-cognizable offence, or a cognizable offence not punishable with death, imprisonment for life or rigorous imprisonment for a term of two years or upwards, unless the State Govt. or a Chief Presidency Magistrate or District Magistrate empowered in this behalf by the State Govt. has, by order in writing, consented to the initiation of the proceedings: Provided that where the criminal conspiracy is one to which the provisions of sub-s. (4) of s. 195 apply, no such consent shall be necessary.

16. Under s. 279A of the I.T Act, notwithstanding anything contained in the Cr. P.C, 1973, offences punishable under s. 276B or s. 276C or s. 276CC or s. 277 or s. 278 shall be deemed to be non-cognizable within the meaning of that Code.

17. One of the offences alleged against the petitioners is an offence under s. 277 of the I.T Act. Therefore, it is not an offence which comes under the exception provided by the words “other than a criminal conspiracy to commit a cognizable offence punishable with death, imprisonment for life or rigorous imprisonment for a term of two years or upwards”, for, an offence under s. 277 of the I.T Act is non-cognizable and consequently the consent in writing of the State Govt. or of the District Magistrate is not necessary. Of course, subsequently, sub-s. (2) of s. 196 was amended by the Code of 1973. That amendment came into force long after the laying of the complaint against the petitioners. As it now stands, sub-s. (2) of s. 196, Cr. P.C, states that no court shall take cognizance of the offence of any criminal conspiracy punishable under s. 120B of the IPC, other than a criminal conspiracy to commit a cognizable offence punishable with death, imprisonment for life or rigorous imprisonment for a term of two years or upwards unless the State Govt. or the District Magistrate has consented in writing to the initiation of the proceedings. This amendment would not have, in my view, a retrospective effect. As stated in Bindra's Interpretation of Statutes, at p. 734, the statute would operate retrospectively when the intent that it should so operate clearly appears from a consideration of the Act as a whole or from the terms thereof which unqualifiedly give the statute a retrospective operation or imperatively require such a construction or negative the idea that it is to apply only to future cases. If the court is in doubt whether the statute was intended to operate retrospectively, it should resolve the doubt against such operation.

18. The criminal conspiracy in this case was to commit offences under ss. 193 and 196, IPC, alleged to have been committed is a proceeding before the ITO. Therefore, viewed in any angle, I am of the view that a consent in writing of the State Govt. is not necessary for the prosecution for offences under ss. 193 and 196, IPC, in this case. Furthermore, the complaint alleged not merely offences under s. 120B read with ss. 193 and 196 of the IPC but also offences under ss. 277 and 278 of the I.T Act. Therefore, even if it is to be held that a sanction of the State Govt. is necessary for the offences under s. 120B read with ss. 193 and 196 of the IPC, even then, there are the other offences u/ss. 277 and 278 of the I.T Act, the trial of which would not be barred at all. Therefore, there are no grounds whatsoever to quash the criminal proceedings launched against the petitioners. Hence, these petitions are dismissed.