Full Judgment Text
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PETITIONER:
P. JAYAPPAN
Vs.
RESPONDENT:
S.K. PERUMAL, FIRST INCOME-TAX OFFICER, TUTICORIN
DATE OF JUDGMENT17/08/1984
BENCH:
VENKATARAMIAH, E.S. (J)
BENCH:
VENKATARAMIAH, E.S. (J)
REDDY, O. CHINNAPPA (J)
SEN, A.P. (J)
CITATION:
1984 AIR 1693 1985 SCR (1) 536
CITATOR INFO :
R 1992 SC1831 (49)
ACT:
Code of Criminal Procedure, 1973-Section 482-Criminal
proceedings launched against assessee under sections 276C
and 277 of Income Tax Act, 1961 for filing false income-tax
returns pending finalisation of reassessment proceedings-
Criminal proceedings cannot be stopped on mere expectancy of
assessee that there will be favourable finding in
reassessment proceedings-Criminal proceedings are no abuse
of process of court and cannot be quashed or stayed being
premature.
Code of Criminal Procedure, 1973-Section 309-Discretion
to adjourn hearing of criminal case must be exercised
judicially and not to frustrate object of criminal
proceedings.
Income Tax Act, 1961, sections 279 and 273A or any
other provision do not bar initiating criminal proceedings
for offences under sections 226C and 277 pending re-
assessment proceedings.
HEADNOTE:
The petitioner, an assessee under the Income Tax Act,
1961, filed income-tax returns which were accepted. Later a
search of the petitioner’s residence revealed that the
petitioner had suppressed certain business transactions and
had kept false accounts. On the basis of the allegation that
the petitioner had deliberately filed false returns and had
kept false accounts with the intention of using them as
genuine evidence under the assessment proceedings,
complaints were filed against him in the trial court for
taking action against him for offences punishable under
sections 276C and 277 of the Income Tax Act and under
sections 193 and 196 of the Indian Penal Code. The
petitioner moved the High Court under section 482 of the
Code of Criminal Procedure for quashing the proceedings
contending that the launching of the prosecution was a
premature one on the ground that the reassessment
proceedings started against him under the Income Tax Act had
not been completed. The High Court dismissed the petitions.
The petitioner filed this petition for special leave to
appeal. The petitioner did not urge any legal bar for the
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institution of the proceedings except stating that in the
event of the petitioner being exonerated in the reassessment
proceedings, the prosecutions may have to be dropped.
Dismissing the petition for special leave,
537
^
HELD: The pendency of the reassessment proceedings
cannot act as a bar to the institution of the criminal
prosecution for offences punishable under section 276C or
section 277 of the Act. The institution of the criminal
proceedings cannot in the circumstances also amount to an
abuse of the process of the court. [543 E]
There is no provision in law which provides that a
prosecution for the offences in question cannot be launched
until reassessment proceedings initiated against the
assessee are completed. [540 H]
A mere expectation of success in some proceeding in
appeal or reference under the Act cannot come in the way of
the institution of the criminal proceedings under section
276C and section 277 of the Act. In the criminal case all
the ingredients of the offence in question have to be
established in order to secure the conviction of the
accused. The criminal court no doubt has to give due regard
to the result of any proceeding under the Act having a
bearing on the question in issue and in an appropriate case
it may drop the proceedings in the light of an order passed
under the Act. It does not, however, mean that the result of
a proceeding under the Act would be binding on the criminal
court. The criminal court has to judge the case
independently on the evidence placed before it. Otherwise
there is a danger of a contention being advanced that
whenever the assessee or any other person liable under the
Act has failed to convince the authorities in the
proceedings under the Act that he has not deliberately made
any false statement or that he has not fabricated any
material evidence, the conviction of such person should
invariably follow in the criminal court.[541 E-H]
Uttam Chand & Ors. v. Income-tax Officer Central
Circle, Amritsar, (1982)133 I.T.R. 909, referred to.
M/s. Telu Ram Raungi Ram & Anr. v. Income-tax Officer,
’A’ Ward. Hoshiar Pur & Anr., (1984)145 I.T.R. 111, upheld.
The view of the Calcutta High Court in Jyoti Prakash
Mitter v. Haramohan Chowdhury that the provisions of section
279(1A) of the Income Tax Act established the necessity for
the completion of the penalty proceedings before the
institution of the prosecution and therefore as long as the
penalty proceedings were pending the criminal proceedings
could not be instituted was erroneous. Section 279(1A) does
not provide that merely because there is a possibility of
the Commissioner passing an order under section 273A, the
prosecution shall not be instituted. [542 D; H; 543 A]
Jyoti Prakash Mitter v. Haramohan Chowdhury, (1978) 112
I.T.R. 384. overruled.
It may be that in an appropriate case the criminal
Court may adjourn or postpone the hearing of a criminal case
in exercise of its discretionary power under section 309 of
the Code of Criminal Procedure if the disposal of any
proceeding under the Act which has a bearing on the
proceedings before it is imminent so that it may take also
into consideration the order to be passed therein. Even here
the discretion should be exercised judicially and in such a
way as not to frustrate the object of the criminal
proceedings. There is no rigid rule which makes it necessary
for a criminal court to adjourn or postpone the
538
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hearing of a case before it indefinitely or for an unduly
long period only because some proceeding which may have some
bearing on it is pending elsewhere. But this, however, has
no relevance to the question of maintainability of the
prosecution. The prosecution in those circumstances cannot
be quashed on the ground that it is a premature one. [543 B-
D]
JUDGMENT:
CRIMINAL APPELLATE JURISDICTION: Petition for Special
Leave to Appeal (Criminal) No. 1923 of 1984.
From the Judgment and Order dated the 19th June, 1984
of the Madras High Court in Crl. Misc. Petition No. 8164/83,
8168, 8166 & 8170/83.
C.S. Vaidyanathan for the Petitioner.
The Order of the Court was delivered by
VENKATARAMIAH, J. The petitioner is the proprietor of
M/s. Ratnam Food Stuff Co., Tuticorin. He is an assessee
under the Income-tax Act, 1961 (hereinafter called ’the
Act’). For the assessment year 1977-78, he filed his return
under the Act on January 20, 1978 disclosing an income of
Rs. 13,380/- alongwith the profit and loss account, trial
balance, income tax adjustment statement and a copy of the
capital account. The return was accepted. On August 20 and
21, 1981, a search was conducted at the residence of the
petitioner under section 132 of the Act which resulted in
the seizure of several documents and account books which
revealed the suppression of purchase of chicory seeds, the
existence of several bank accounts, fixed deposits,
investments in the names of his wife and daughters and
several bank accounts not disclose in the statements filed
alongwith the return. The trading and profit and loss
account for the assessment year 1977-78 filed alongwith the
return showed that he had purchased chicory seeds of the
value of Rs. 65,797/- as against Rs. 2,15,729/- as per the
seized accounts. There were several other wrong statements
in the accounts. On the basis of the allegation that the
petitioner had deliberately filed a false return and had
kept false accounts with the intention of using them as
genuine evidence in the assessment proceedings, a complaint
was filed against him in the Court of the Additional Chief
Judicial Magistrate (Economic Offences), Madurai for taking
action against him for offence punishable under section 276C
and section 277 of the Act and under sections 193 and 196 of
the Indian Penal Code. Similarly three other complaints were
filed against the petitioner for the same offences said to
have been committed by him in respect of three succeeding
assessment years 1978-79, 1979-80 and
539
1980-81 before the same Magistrate. The petitioner thereupon
filed four petitions under section 482 of the Code of
Criminal Procedure before the High Court of Madras
requesting it to quash the said proceedings contending that
the launching of the prosecution in each of the four cases
was a premature one on the ground that the reassessment
proceedings started against him under the Act had not been
completed.
All the four petitions were dismissed by the High Court
by four separate orders dated June 19, 1984. The petitioner
has filed this petition before this Court under Article 136
of the Constitution for leave to appeal against the above
said four orders of the High Court.
The only point which arises for consideration in this
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case is whether prosecutions for offences punishable under
section 276C and section 277 of the Act and under section
193 and 196 of the Indian Penal Code instituted by the
Department while the reassessment proceedings under the Act
are pending are liable to be quashed on the ground that they
were not maintainable. The material parts of section 276C
and 277 of the Act read as follows:
"276C. Wilful attempt to evade tax etc.-(1) If a person
wilfully attempts in any manner whatsoever to evade any
tax, penalty or interest chargeable or impossible under
this Act, he shall, without prejudice to any penalty
that may be impossible on him under any other provision
of this Act, be punishable,-
(i) in a case where the amount sought to be evaded
exceeds one hundred thousand rupees, with rigorous
imprisonment for a term which shall not be less
than six months but which may extend to seven
years and with fine;
(ii) in any other case, with rigorous imprisonment for
a term which shall not be less than three months
but which may extend to three years and with fine.
(2). If a person willfully attempts in any manner
whatsoever to evade the payment of any tax, penalty or
interest under this Act, he shall, without prejudice to
any penalty that may be imposable on him under any
other provision of this Act, be punishable with
rigorous imprisonment for a term which shall not be
less than three months but which may extend to three
540
years and shall in the discretion of the court, also be
liable to fine.
Explanation...........................................
"277. False statement in verification etc.-If a person
makes a statement in any verification under this Act or
under any rule made thereunder, or delivers an account
or statement which is false, and which he either knows
or believes to be false, or does not believe to be
true, he shall be punishable,-
(i) in a case where the amount of tax, which would
have been evaded if the statement or account had
been accepted as true, exceeds one hundred
thousand rupees, with rigorous imprisonment for a
term which shall not be less then six months but
which may extend to seven years and with fine.
(ii) in any other case, with rigorous imprisonment for
a term which shall not be less than three months
but which may extend to three years and with
fine."
The relevant parts of sections 193 and 196 of the
Indian Penal Code read thus:
"193. Punishment for false evidence.-Whoever
intentionally gives false evidence in any stage of a
judicial proceeding, or fabricates false evidence for
the purpose of being used in any stage of a judicial
proceeding, shall be punished with imprisonment of
either description for a term which may extend to seven
years, and shall also be liable to fine; and whoever
intentionally gives or fabricates false evidence in any
other case, shall be punished with imprisonment of
either description for a term which extend to three
years, and shall also be liable to fine.
Explanation.-........................................
"196. Using evidence known to be false.-Whoever
corruptly uses or attempts to use as true or genuine
evidence any evidence which he knows to be false or
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fabricated, shall be punished in the same manner as if
he gave or fabricated false evidence.’
At the outset it has to be stated that there is no
provision in law which provides that a prosecution for the
offences in question cannot
541
be launched until reassessment proceedings initiated against
the assessee are completed. Section 279 of the Act provides
that a person shall not be proceeded against for an offence
punishable under section 276C or section 277 of the Act
except at the instance of the Commissioner. It further
provides that a person shall not be proceeded against for an
offence punishable under those provisions in relation to the
assessment for an assessment year in respect of which
penalty is imposed or imposable on him under clause (iii) of
sub-section (1) of section 271 has been reduced or waived by
an order under section 273A. The Commissioner has the power
either before or after the institution of proceedings to
compound any such offence. In this case it is not claimed
that the Commissioner has not initiated the proceedings for
instituting the complaints. No other legal bar for the
institution of the proceedings is urged except stating that
in the event of the petitioner being exonerated in the
reassessment proceedings, the prosecutions may have to be
dropped. It is true that as observed by this Court in Uttam
Chand & Ors. v. Income-tax officer, Central Circle,
Amritsar(1) the prosecution once initiated may be quashed in
the light of a finding favourable to the assessee recorded
by an authority under the Act subsequently in respect of the
relevant assessment proceedings but that decision is no
authority for the proposition that no proceedings can be
initiated at all under section 276C and section 277 as long
as some proceeding under the Act in which there is a chance
of success of the assessee is pending. A mere expectation of
success in some proceeding in appeal or reference under the
Act cannot come in the way of the institution of the
criminal proceedings under section 276C and section 277 of
the Act. In the criminal case all the ingredients of the
offence in question have to be established in order to
secure the conviction of the accused. The criminal court no
doubt has to give due regard to the result of any proceeding
under the Act having a bearing on the question in issue and
in an appropriate case it may drop the proceedings in the
light of an order passed under the Act. It does not,
however, mean that the result of a proceeding under the Act
would be binding on the criminal court. The criminal court
has to judge the case independently on the evidence placed
before it. Otherwise there is a danger of a contention being
advanced that whenever the assessee or any other person
liable under the Act has failed to convince the authorities
in the proceedings under the Act that he has not
deliberately made any false statement or that he has not
fabricated any material evidence, the conviction of such
person should invariably
542
follow in the criminal court. The High Court of Punjab and
Haryana has correctly applied the rule regarding the
maintainability of prosecution in such circumstances in M/s.
Telu Ram Raungi Ram & Anr. v. Income-tax officer A Ward
Hoshiarpur & Anr(1). We do not however, agree with the view
expressed by the High Court of Calcutta in Jyoti Prakash
Mitter v. Haramohan Chowdhury.(2) In that case on a
complaint made against the assessee for an offence
punishable under section 277 of the Act, the Chief
Metropolitan Magistrate issued process. Thereupon the
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assessee questioned the validity of the initiation of the
criminal proceedings before the High Court of Calcutta on
the ground that until the penalty proceedings initiated in
respect of the same period under section 271(1)(c) of the
Act were finally disposed of, no complaint could be filed.
The contention of the assessee was that the prosecution was
opposed to the principles of natural justice as he would be
deprived of the benefit of a finding which was likely to be
recorded in his favour in the penalty proceedings. It was
urged on behalf of the Department that the penalty
proceedings under section 271(1)(c) had no direct bearing on
the maintainability of a prosecution launched under Chapter
XXII of the Act. The High Court took the view which
according to us is an erroneous one that the provisions of
section 279(1A) of the Act established the necessity for the
completion of the penalty proceedings before the institution
of the prosecution and therefore as long as the penalty
proceedings were pending the criminal proceedings could not
be instituted. Section 279(1A) of the Act merely states that
a person shall not be proceeded against for an offence under
section 276C or section 277 in relation to the assessment
for an assessment year in respect of which the penalty
imposed or imposable on him under clause (iii) of sub-
section (1) of section 271 has been reduced or waived by an
order under section 273A. Section 273A(1)(ii) provides that
notwithstanding anything contained in the Act, the
Commissioner may, in his discretion, whether on his own
motion or otherwise, reduce or waive the penalty if the
conditions mentioned therein are satisfied. The power
conferred on the Commissioner under section 273A is an
overriding power which he may exercise at his discretion. It
is only where the Commissioner reduces or waives the penalty
imposed or imposable under section 271(1)(iii) of the Act in
exercise of his discretion under section 273A, section
279(1A) comes into operation and acts as a statutory bar for
proceeding with the prosecution under section 276C or
section 277. It does not, however, provide that merely
because there is a possibility of the Commissioner
543
passing an order under section 273A, the prosecution shall
not be instituted. The reason given by the High Court of
Calcutta, therefore, does not appeal to us.
It may be that in an appropriate case the criminal
Court may adjourn or postpone the hearing of a criminal case
in exercise of its discretionary power under section 309 of
the Code of Criminal Procedure if the disposal of any
proceeding under the Act which has a bearing on the
proceedings before it is imminent so that it may take also
into consideration the order to be passed therein. Even here
the discretion should be exercised judicially and in such a
way as not to frustrate the object of the criminal
proceedings. There is no rigid rule which makes it necessary
for a criminal court to adjourn or postpone the hearing of a
case before it indefinitely or for an unduly long period
only because some proceeding which may have some bearing on
it is pending elsewhere. But this, however, has no relevance
to the question of maintainability of the prosecution. The
prosecution in those circumstances cannot be quashed on the
ground that it is a premature one.
On a careful consideration of the relevant provisions
of the Act, we are of the view that the pendency of the
reassessment proceedings cannot act as a bar to the
institution of the criminal prosecution for offences
punishable under section 276C or section 277 of the Act. The
institution of the criminal proceedings cannot in the
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circumstances also amount to an abuse of the process of the
court. The High Court was, therefore, right in refusing to
quash the prosecution proceedings in the four cases
instituted against the petitioner under section 482 of the
Code of Criminal Procedure.
The Special Leave Petition is, therefore, dismissed.
H.S.K. Petition dismissed.
544