Enterprises & Ors Vs. State of Bihar & Anr  Insc 182 (22 March 2004)
Raju & Arijit Pasayat. Arijit Pasayat, J.
was launched against the appellants for alleged concealment of income and
thereby willfully attempting to evade tax, and for making false statement on
verification in terms of Sections 276C of the Income Tax Act, 1961 (in short
the 'Act') relating to the assessment year 1988-89. Cognizance was taken by the
Special Court, Economic Offences, Muzaffarpur, Bihar in complaint case no. 50 of 1992 instituted by the
Income Tax Authorities.
under Section 482 of the Code of Criminal Procedure, 1973 (in short 'the Code')
were filed by appellant no.1 (hereinafter referred to as 'the firm') and L.N. Poddar,
a partner of the assessee firm before the Patna High Court. The specific stand
of the petitioners before the High Court was that the proceedings should not
continue as applications for settlement were filed and pending before the
Settlement Commission, Income Tax and Wealth Tax (hereinafter referred to as
'the Commission'). The High Court did not accept the stand as no order granting
any immunity had been passed by the Commission. Referring to the factual
position also it was held that no case for interference was made out at the
S.K. Gupta, learned counsel for the appellants submitted that in the meantime
Settlement Commission has passed necessary orders in the matter and, therefore,
proceedings should not be continued. Reference was made to Order No.
3/3/5/91-IT dated 20.9.1999 passed by the Commission.
H.L. Agrawal, learned senior counsel for the respondents submitted that the
immunity if granted by the Commission is a conditional one, and unless there is
fulfillment of the conditions stipulated, the proceedings have to be continued.
According to him, it is open to the appellants to appear before the Trial Court
and bring to its notice any order which has relevance in the matter.
order to appreciate the rival stands, it would be necessary to take note of
Section 245 (H) of the Act. It reads as under:
245H: POWER OF SETTLEMENT COMMISSION TO GRANT IMMUNITY FROM PROSECUTION AND
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 (either wholly or in part) from the imposition of any penalty]
under this Act, with respect to the case covered by the settlement :
that no such immunity shall be granted by the Settlement Commission in cases
where the proceedings for the prosecution for any such offence have been instituted
before the date of receipt of the application under section 245C.] [(1A) An
immunity granted to a person under sub-section (1) shall stand withdrawn if
such person fails to pay any sum specified in the order of settlement passed
under sub- section (4) of section 245D within the time specified in such order
or within such further time as may be allowed by the Settlement Commission, or
fails to comply with any other condition subject to which the immunity was
granted and thereupon the provisions of this Act shall apply as if such
immunity had not been granted.]
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
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 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." The proviso to sub-section (1) was introduced
by Finance Act, 1987 (11 of 1987) with effect from 1.6.1987, excluding grant of
immunity in cases where proceedings for the prosecution have been instituted
before the date of receipt of the application under Section 245C of the Act.
245C of the Act deals with application of settlement of cases. As noted above
no immunity can be granted by the Commission in cases where the proceedings for
prosecution under the Act or under the Indian Penal Code, 1860 (in short 'the
IPC') or under any Central Act for the time being in force have been instituted
before the date of receipt of application under Section 245C after 1.6.1987.
is logic in the prohibition. It is intended to discourage filing of belated
applications after prosecution is launched and also reasons envisaged in CIT v.
B.N. Bhattachargee (1979) ITR 461, wherein it was observed that Section 245H is
a magnet which attracts large tax-dodgers, and it was emphasised that power of immunisation
against criminal prosecution should be used in deserving cases.
grant of immunity is called for in a given case is to be decided by the
Commission on the facts of each case and no straight-jacket formula for any
universal application can be laid down. In the instant case, the Commission has
been satisfied that grant of immunity is called for. Since that decision has
not been questioned by the Income Tax Authorities it has attained finality.
Conditions required to be fulfilled before immunity can be granted are that the
Commission has to be satisfied that the applicant
made full and true disclosure of his income and the manner in which such income
has been derived and
co- operated with the Commission in the proceedings before it.
instant case as the records reveal the application for settlement in terms of
Section 245C was filed on 27.5.1991. The prosecution was launched on 27.2.1992.
therefore, application for settlement was filed before prosecution was
launched. The order of the Commission refers to the immunity granted in the following
view of the full and true disclosure of his income made and the cooperation
extended by the applicant in the settlement of his income tax liabilities, his
prayer for immunity from penalty and prosecution under the I.T. Act and the
corresponding provisions of the IPC in respect of the assessment years covered
by the settlement period is granted." Above being the position, the
proceedings before the Special
Court are quashed.
However, at this stage, the apprehension of Mr. Agrawal, learned senior counsel
for the respondent no.1 about consequences flowing from non- compliance with
Commission's order needs to be taken note of. Sub-section (1A) of Section 245H
deals with the consequences of non-compliance with the orders and sufficiently
takes care of such apprehensions. In case, there is non-compliance of the
Commission's order, provision of sub-section (1A) of Section 245H shall be
operative and the appellants are rendered liable, notwithstanding the earlier
immunity granted as if such immunity was not granted at all. It shall be open
to the Income Tax Authorities to ask for restoration of proceedings before the
Special Court if there is non- compliance with Commission's order or withdrawal
of immunity in terms of Section 245H(2).
be noted here that High Court had declined to quash the proceedings on ground
that proceedings were pending before the Commission. The view of the High Court
is on terra firma. This Court in P. Jayappan v. S.K. Perumal, First I.T.O.
(1984) 149 ITR 696 (SC) observed that merely because the application for
settlement is pending before the Commission that cannot be a ground to quash
the pending prosecution. But the position has changed in this case as after
High Court's judgment final orders have been passed by the Commission according
immunity on an application presented, apparently before the institution of the
proceedings for prosecution.
are allowed and disposed of accordingly on the above terms.