Citation Codes

Equivalent Citations

citation codes

Case Number

Crl. Rev. No. 173 of 1986

Advocates

Mr. S.C Gupta. Advocate.
Mr. R.D Jolly Adv. and Mr. D.K Jain, Advocate, Amicus Curiae.

Judges

Jagdish Chandra, J.

Acts

Sections 276-C/277/278 of Income-Tax Act, 1961 (in short the Act) read with Sections 193/196 IPC
Sub-sections (3) and (4) of Section 245
Sub-section (1) or Sub-section (3)..(6)
Sub-section (1A) of Section 245
Sub-section (4) of Section 245
provision of Sub-section 1 (A)
provisions of Sub-section (3)
Indian Income-tax Act, 1922
INCOME TAX ACT
Section 245-H
Section 245 C

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Smart Summary

Structured Summary of the Opinion by Jagdish Chandra, J.

Factual and Procedural Background

A complaint was filed by the Inspecting Assistant Commissioner of Income-tax (Assessment), Range XIV, New Delhi against the petitioner Dr. (Mrs.) Geeta Gupta and her accountant Atma Singh under Sections 276‑C/277/278 of the Income‑tax Act, 1961 read with Sections 193/196 IPC in respect of the assessment year 1980‑1981. The allegations included wilful attempt to evade tax, making false statements in verification, delivering false accounts and statements known to be false, fabrication of evidence and dishonest use of that evidence in assessment proceedings. Dr. Geeta Gupta had filed a return of income on 7‑10‑1980 declaring income of Rs. 56,923 from medical practice and associated clinics/nursing home.

Both accused were ordered to be summoned by Shri S.L. Khanna (then ACMM, Delhi). The petitioner applied under Section 245C to the statutory Settlement Commission (Chapter 19‑A). The Commissioner of Income‑tax objected under Section 245D(1A) that concealment had been established and prosecution had been launched. The Settlement Commission, after hearing the Commissioner, was not satisfied with the Commissioner’s objection and, by order dated 27‑12‑1985, allowed the application to be proceeded with, holding that concealment of income had not been established nor was likely to be established for the assessment year 1980‑1981. Proceedings before the Settlement Commission remained pending thereafter.

On the basis of the Settlement Commission’s order, the petitioner sought before Smt. Manju Goel (ACMM, Delhi) that the criminal complaint be dropped. The learned ACMM dismissed that application by order dated 23‑7‑1986, allowing the continuance of the complaint. The petitioner filed the present revision petition challenging the ACMM’s order and seeking quashing of the complaint in view of the Settlement Commission’s order dated 27‑12‑1985.

Legal Issues Presented

Whether the Settlement Commission’s order allowing an application under Section 245C to be proceeded with (having overruled the Commissioner’s objection under Section 245D(1A)) precludes the continuation of a criminal prosecution/complaint initiated by the income‑tax authorities in respect of the same assessment year during the period until the Settlement Commission passes its final order under Section 245D(4).
Whether the learned ACMM erred in refusing to drop the criminal complaint and in allowing the continuance of prosecution despite the Settlement Commission’s order dated 27‑12‑1985.
Whether the Settlement Commission’s interim order of 27‑12‑1985 should be treated as merely prima facie (not affecting the complaint) or as having the practical effect of suspending the prior prosecution pending final settlement proceedings.

Arguments of the Parties

Petitioner’s Arguments (Dr. Geeta Gupta)

The Settlement Commission’s order dated 27‑12‑1985 held that concealment of income had not been established nor was likely to be established for AY 1980‑1981; therefore there was no basis left for the continuance of the criminal complaint and the ACMM should have dropped the complaint.
On the basis of the Settlement Commission's finding at that stage, the pending prosecution lacked the necessary substratum and should have been terminated until, if ever, the Settlement Commission’s final order allowed resumption.

Respondent’s Arguments (represented by Mr. Jolly)

The Settlement Commission’s order was only interim in nature and prima facie; it could not adversely affect the continuance of the criminal complaint before the ACMM.
The proceedings before the Settlement Commission were still pending and not concluded; therefore the ACMM correctly refused to drop the complaint.

Assistance / Intervention by Amicus Curiae (Mr. D.K. Jain)

Mr. D.K. Jain opposed the interpretation advanced by the petitioner’s counsel (Mr. S.C. Gupta) as to the legal effect of the Settlement Commission’s order.
He suggested that, as a practical measure, the continuance of the complaint might be stayed until the Settlement Commission passed its final order under Section 245D(4). The court, however, did not accept that suggestion.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court undertook a statutory analysis of the relevant provisions of Chapter 19‑A (Sections 245C, 245D, 245F(2), 245H and 245I) to determine the legal effect of the Settlement Commission’s order dated 27‑12‑1985. The reasoning proceeded in sequential steps:

The court identified Section 245D(1A) as the provision under which the Commissioner could object to the Settlement application on the ground that concealment of particulars of income or fraud had been established or was likely to be established. The proviso to Section 245D(1A) permits the Settlement Commission, after giving the Commissioner an opportunity to be heard, to allow the application to be proceeded with if it is not satisfied with the correctness of the Commissioner’s objection.
The court noted Sections 245D(3) and (4): once an application is allowed to be proceeded with, the Settlement Commission may call for records, direct further enquiry by the Commissioner, receive reports, hear the applicant and Commissioner, examine evidence and finally pass such order as it thinks fit under Section 245D(4).
Section 245F(2) was emphasized: where an application under Section 245C has been allowed to be proceeded with under Section 245D, the Settlement Commission shall, until an order is passed under Section 245D(4), have exclusive jurisdiction to exercise the powers and perform the functions of an income‑tax authority under the Act in relation to the case (subject to the limited role under Section 245D(3) to direct further enquiries).
The court further considered Section 245H (immunity from prosecution) and Section 245I (conclusiveness of a settlement order). Section 245H empowers the Settlement Commission to grant immunity from prosecution if the applicant has co‑operated and made full and true disclosure; Section 245I makes every order of settlement under Section 245D(4) conclusive as to matters stated therein and bars re‑opening of such matters in other proceedings.
Applying these provisions to the facts, the court concluded that once the Settlement Commission, after considering and rejecting the Commissioner’s objection under Section 245D(1A), held on the material then before it that concealment of income had not been established nor was likely to be established, there was at that point no material for the continuation of the prior prosecution. The Settlement Commission thereby acquired exclusive jurisdiction under Section 245F(2) with respect to the case, and the prosecution already launched could not be permitted to continue during the interim between that order and any final order under Section 245D(4).
The court explained that the Settlement Commission might subsequently, on records called for under Section 245D(3), or on further evidence under Section 245D(4), find concealment and either recommend prosecution or grant immunity under Section 245H; if no immunity is granted and concealment is established by the final order, prosecution could thereafter be launched afresh on the basis of material collected in the Settlement proceedings. But the existing prosecution could not continue during the void created by the Settlement Commission's finding that concealment was not established (or likely to be established) at the earlier stage.
The court rejected the suggestion (from the learned Amicus Curiae) that the proper remedy would be to stay the criminal proceedings pending final settlement; the court held that such a stay was not acceptable in circumstances where the Settlement Commission had, on the material before it, negatived the Commissioner’s objection under Section 245D(1A).

Holding and Implications

Holding:

The revision petition is allowed; the impugned order dated 23‑7‑1986 of Ms. Manju Goel, ACMM, Delhi is set aside, and the complaint against the petitioner as well as the order summoning the petitioner as an accused are quashed.

Implications:

As a direct consequence, the criminal proceedings and summons that were continuing against Dr. Geeta Gupta were terminated by the quashing order of the revisional court.
The court’s analysis establishes that, upon the Settlement Commission (after hearing the Commissioner under Section 245D(1A)) being not satisfied with the Commissioner’s objection and allowing the application to be proceeded with, the Settlement Commission acquires exclusive jurisdiction under Section 245F(2) in relation to the case until a final order under Section 245D(4) is passed; in that interim the prior prosecution cannot be continued for want of the necessary substratum.
If, at a later stage, the Settlement Commission (on further enquiry, reports or evidence) finds concealment or withdraws immunity, prosecution may be re‑instituted on the basis of the material and findings emerging from the Settlement proceedings. The court specifically notes that the Settlement Commission may also grant immunity under Section 245H if conditions of co‑operation and full disclosure are satisfied.
The court rejected a merely procedural stay of the criminal complaint as an inadequate response where the Settlement Commission had already, on available material, overruled the Commissioner’s objection under Section 245D(1A).
The opinion records no invocation of precedent authority to alter these conclusions; the determination turns on statutory construction of the cited provisions of Chapter 19‑A of the Income‑tax Act, 1961 and their application to the facts before the court.

Additional note recorded by the court: the learned Amicus Curiae Mr. D.K. Jain was commended for the valuable assistance he rendered in the matter.

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Dr. (Mrs.) Geeta Gupta v. Asstt. Commissioner Of Income Tax & Ors.

Jagdish Chandra, J.:— A complaint was filed by the Inspecting Assistant Commissioner of Income-tax (Assessment) Range XIV, New Delhi against the present petitioner Dr. (Mrs.) Geeta Gupta and her accountant Atma Singh under Sections 276-C/277/278 of Income-tax Act, 1961 (in short the Act) read with Sections 193/196 IPC in respect of the assessment year 1980-1981 on the allegations that Dr. Geeta Gupta was guilty of making wilful attempt to evade tax, and also of making a statement in verification under the Act and of delivering an account and statement which were false and which she knew or believed to be false and did not believe to be true. The complaint further proceeded on the allegations that she had also fabricated false evidence for the purpose of being used in the course of income tax proceedings and she dishonestly and fraudulently used that evidence in the course of the assessment proceedings for the assessment year 1980-1981 which are judicial proceedings. As against Atma Singh Accountant the allegation was that he was an abetter in respect of the aforesaid allegations against Dr. Geeta Gupta. Dr. Geeta Gupta had filed her return of income on 7-10-1980 for the aforesaid year 1980-1981 declaring an income of Rs. 56,923/- from the medical profession of running two dispensing clinics and from a nursing home called “Dr. Gupta Nursing Home”.

2. Both the accused persons were ordered to be summoned by Shri S.L, Khanna then ACMM Delhi who had taken cognizance of the aforesaid complaint.

3. An application under Section 245C of the Act was made by the present petitioner Dr. Geeta Gupta before the statutory Settlement Commission constituted and exercising full functions and powers under Chapter 19-A of the Act who after rejecting the objection of the Commissioner of Income-tax Delhi came to the view vide order dated 27-12-1985 that it could not be said that concealment of income had been established or was likely to be established for the assessment year 1980-1981, and thus allowed the aforesaid application to be proceeded with. On the basis of this finding of the Settlement Commission the prayer was made before Smt. Manju Goel learned ACMM Delhi by the petitioner by means of an application for the dropping of the aforesaid complaint pending before her but the learned ACMM did not find favour with the prayer of the petitioner and dismissed the same vide impugned order dated 23-7-1986 and thereby allowed the continuance of the complaint against her.

4. In the present revision petition the petitioner Dr. Geeta Gupta has assailed the aforesaid impugned order dated 23-7-1986 of Smt. Manju Goel ACMM Delhi and has also prayed for the quashing of the complaint on account of the aforesaid order dated 27-12-1985 passed by the statutory Settlement Commission.

5. Chapter 19-A of the Act deals with settlement of cases. Application for settlement of cases is made to the Settlement Commission under Section 245C. Under Section 245D(1) the Settlement Commission, on receipt of such application, shall call for the report from the Commissioner and on the basis of the material contained in any such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission may, by order, allow the application to be proceeded with or reject the application provided that such an application shall not be rejected by the Settlement Commission unless an opportunity has been given to the applicant of being heard. Sub-section IA of Section 245D-provides as under:—

“Notwithstanding anything contained in Sub-section (1), an application shall not be proceeded with under that sub-section if the Commissioner objects 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 Indian Income-tax Act, 1922 or under this Act, has been established or is likely to be established by any income-tax authority, in relation to the case:

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.”

6. The Commissioner of Income Tax raised objections before the Settlement Commission to the effect that the concealment had already been for the assessment year 1980-1981 and that prosecution had also been launched against both the accused persons as aforesaid and on the basis of those objections he objected to the petition for settlement being proceeded with by the Settlement Commission. The Settlement Commission after hearing the Commissioner was not satisfied with the correctness of the aforesaid objections raised by the Commissioner, and thus allowed vide Order dated 27-12-1985 the petitioner's application under Section 245C of the Act to be proceeded with under sub-section (1) of section 245d. Those proceedings before the Settlement Commission have not as yet concluded and are still pending before him.

7. Discarding the aforesaid objection of the Commissioner, the Settlement Commission observed as follows in its aforesaid order dated 3-1-1986:—

“………In our opinion it cannot be said that cencealment of income has been established or is likely to be established. We, therefore, hold that even for the assessment year 1980-1981 it cannot be said that concealment of income has been established or is likely to be established. Under the Circumstances, we allow the application to be proceeded with for the assessment years 1976-1977 to 1983-1984.”

8. On the basis of the aforesaid finding of the Settlement Commission, the learned counsel for the petitioner prays for the setting aside of the impugned order dated 23-7-1986 of Ms. Manju Goel ACMM Delhi as also for the quashing of the complaint, as according to him for the present there is left no basis for the continuance of the complaint. On the other hand, Mr. Jolly representing the respondent has contended that the aforesaid order of the Settlement Commission is only in the nature of an interim order and is, thus, only prima facie in character and cannot adversely effect the complaint or the continuance thereof and further that the impugned order of the learned ACMM too cannot be set aside as the proceedings before the Settlement Commission have not yet come to a final conclusion and are still pending there. The learned ACMM had found favour with this contention of the learned counsel for the respondent and had for that reason dismissed the application of the petitioner Dr. Geeta which she had brought for the dropping of the complaint.

9. The provision of Sub-section 1 (A) together with its proviso, of Section 245D of the Act does not anywhere describe the nature of the order of the Settlement Commission. In order to ascertain whether it was only prima facie or was conclusive on the material available by then to the Settlement Commission it would be also necessary to set out the remaining relevant portions of Section 245D and the same are set out as under:—

………………………..

(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 applicant and to the Commissioner to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner under Sub-section (1) or Sub-section (3).

……………………………….

(6) Every order passed under Sub-section (4) shall provide for the terms of settlement including any demand by way of tax, penalty or interest, the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts.

……………………………….

10. Sections 245F (2), 245H and 245-I also appear to be relevant for the purpose of ascertaining the nature of the aforesaid order dated 27th December 1985 of the Settlement Commission and the same are reproduced below:—

“Section 245F (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 income-tax authority under this Act in relation to the case

Section 245H—(1) The Settlement Commission may, if it is satisfied that any person who made the application for settlement under Section 245C has co-operated with the Settlement Commission in the proceedings before it and has made a full and true disclosure of his income and the manner in which such income has been derived, grant to such person, subject to such conditions as it may think fit to impose, immunity from prosecution for any offence under this Act or under the Indian Penal Code (45 of 1860) or under any other Central Act for the time being in force and also from the imposition of any penalty under this Act, with respect to the case covered by the settlement.

(2) An immunity granted to a person under Sub-section (1) may, at any time, be withdrawn by the Settlement Commission, if it is satisfied that such person has not complied with the conditions subject to which the immunity was granted or that such person had, in the course of the Settlement proceedings concealed, any particulars material to the settlement or had given false evidence, and thereupon such person may be tried for the offence with respect to which the immunity was granted or for any other offence of which he appears to have been guilty in connection with the settlement and shall also become liable to the imposition of any penalty under this Act to which such person would have been liable, had not such immunity been granted.

Section 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 the Chapter, be re-opened ia any proceeding under this Act or under any other law for the time being in force.”

11. In view of Section 245F (2) when an application made under Section 245C has been allowed to be proceeded with under Section 245D, the Settlement Commissioner shall have exclusive jurisdiction to exercise the powers and perform the functions of any income-tax authority under the Act in relation to the case till such time a final order under Sub-section (4) of Section 245d is passed. As an exception to this absolute powers and performance of functions of an income-tax authority under the Act in relation to the case, however, finds mention in sub-section (3) of section 245d according to which if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner of Income-tax 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. Before passing the final order under Sub-section (4) of Section 245d the Settlement Commission shall examine the records and the report of the Commissioner of Income-Tax received under Sub-section (1) and his further report, if any, received under Sub-section (3), and after giving an opportunity to the applicant and to the Commissioner to be heard, and after examining such further evidence as may be placed before it or obtained by it, may pass an order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner under sub-section (1) or sub-section (3). under section 245-1 such an order passed by the Settlement Commission has been made conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in Chapter 19 A of the Act, be re-opened in any proceedings under this Act or under any other law for the time being in force. The Settlement Commission is vested with the power under Section 245-H to grant immunity to such an applicant from prosecution for any offence under the Act or under the Indian Penal Code or under any other Central Act for the time being in force and also from the imposition of any penalty neither wholly or in part) under the Act with respect to the case covered by the settle ment and this power of granting immunity rests in the discretion of the Settlement Commission and may be exercised in favour of such applicant if the following two conditions are satisfied by him:

(a)……He has co-operated with the Settlement Commission in the proceedings before it, and

(b) has made a full and true disclosure of his income and the manner in which the same income has been derived.

12. Keeping in mind the aforesaid provisions contained in Sections 245D, 245F(2), 245H and 245-I of the Act when the Settlement Commission, after dealing with the objections of the Commissioner of Income-tax raised under Sub-section (1A) of Section 245 D, is not satisfied with the correctness of the same and dismissed the same on the basis of the material available at that point of time holding that concealment of income has not been established nor is likely to be established, there is left no material whatever with him at that particular point of time to continue with the prosecution of the person who has made application under Section 245 C for settlement as after the making of that application it is the Settlement Commission alone in whom vests thereafter the exclusive jurisdiction under Section 245F (2) to exercise the powers and perform the functions of an income-tax authority under the Act in relating to the case including the power of continuing the prosecution already launched by the Commissioner of Income-tax even prior to the making of the application under Section 245D. The making of the aforesaid order by the Settlement Commissioner holding that there had been established no concealment of income of likely to be established acted as a complete interception at that point of time for the continuance Of the prosecution against the petitioner for want of any material for the same, and it was only thereafter that on considering the further report of the Commissioner of Income-tax on further enquiry or investigation under Sub-section (3) or after examining such further evidence as may be placed by the parties before the settlement Commission or obtained by it and the examination of the material already before it and after hearing both the parties if the Settlement Commission while making the final order finds any concealment of income on the part of the petitioner, he may recommend the launching of a prosecution against the petitioner or may grant immunity from prosecution under Section 245H and if no such immunity from prosecution is granted by the Settlement Commission, the thread may again be picked up by the Inspecting Assistant Commissioner of Income-tax (Assessment) for launching a fresh complaint against the petitioner on the basis of the material collected by the Settlement Commission under Sub-sections (3) and (4) of Section 245 D and the finding of concealment resting thereupon, but the prosecution already launched by the Inspecting Assistant Commissioner of Income-tax (Assessment) Range XIV New Delhi against the petitioner cannot be allowed to continue during the void between the passing of the first order dated 27-12-1985 by the Settlement Commission that no concealment of income on the part of the petitioner had been established nor was likely to be established for the assessment year 1980-1981 and the order of settlement yet to be passed by him under Sub-section (4) of Section 245 D, during which period the verdict of “the concealment of income” having been given by the Settlement Commission against the Commissioner of Income-tax rendered the present complaint against the petitioner bereft of any substratum necessary for prosecution of the petitioner, and the suggestion emanating from the learned Amicus Curiae Mr. D.K Jain, Advocate who is a brilliant expert on income-tax matters and who opposed the contentions of Mr. S.C Gupta learned counsel for the petitioner regarding the interpretation of the question of law involved in this case, that the continuance of complaint against the petitioner may be ordered to be simply stayed till the settlement order is made by the Settlement Commission under Sub-section (4) of Section 245 D cannot be accepted.

13. In the view geared up from the aforesaid discussion this revision petition succeeds and so setting aside the impugned order dated 23-7-1986 passed by Ms. Manju Goel, ACMM Delhi the complaint against the petitioner as also the order of summoning the petitioner as an accused person by the learned ACMM are quashed.

14. Before parting with the records of this case I would like to record my deep appreciation of the great assistance rendered by the learned Amicus Curiae Mr. D.K Jain, Advocate whose ability and mastery of the Income-tax Act as also his preparedness of the case were at once sterling and impressive.

Dr. (Mrs.) Geeta Gupta v. Asstt. Commissioner Of Income Tax & Ors.

Structured Summary of the Opinion by Jagdish Chandra, J.

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner’s Arguments (Dr. Geeta Gupta)

Respondent’s Arguments (represented by Mr. Jolly)

Assistance / Intervention by Amicus Curiae (Mr. D.K. Jain)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Dr. (Mrs.) Geeta Gupta v. Asstt. Commissioner Of Income Tax & Ors.

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