Gurpreet Singh vs Assistant Director Of Income Tax(Investigation)-Iii Ludhiana

CRM-M-12302, 12432-2018 (O&M) 1
IN THE HIGH COURT OF PUNJAB & HARYANA
AT CHANDIGARH.
(1) CRM-M-12302-2018 (O&M)
Jagtar Singh ....Petitioner.
VERSUS
The Assistant Director of Income Tax (Investigation) III,
Ludhiana and another
....Respondents.
WITH
(2) CRM-M-12432-2018 (O&M)
Gurpreet Singh ....Petitioner.
VERSUS
The Assistant Director of Income Tax (Investigation) III, Ludhiana
....Respondent.
*
1. Date when the judgment was reserved 12.08.2026
2. Date when the judgment is pronounced 09.09.2026
3. Date when the judgment is uploaded 11.09.2026
on the website
4. Whether only operative part of the judgment
is pronounced or whether the full judgment
is pronounced
Full
5. The delay, if any, of the pronouncement Not applicable.
of full judgment, and reasons thereof.
CORAM : HON'BLE MR. JUSTICE SANJAY VASHISTH
---
Argued by: Mr. Gautam Dutt, Senior Advocate with
Mr. Rehan Gupta, Advocate for the petitioner(s).
Ms. Nikita Garg, Junior Standing Counsel (Through V.C.)
for the respondent-Income Tax.

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CRM-M-12302, 12432-2018 (O&M) 2
SANJAY VASHISTH, J.
By this common order, both the afore-mentioned petitions are
disposed of together as the same are preferred against, one and the same
order.
2. Petitioner-Jagtar Singh (in CRM-M-12302-2018) and petitioner-
Gurpreet Singh (in CRM-M-12432-2018), have filed aforementioned two
separate petitions under Section 482 of the Criminal Procedure Code
(Cr.P.C.), for quashing of Complaint No.120 dated 31.03.2009 for
commission of offences under Sections 177, 181, 193, 106, 34 of Indian Penal
Code (IPC) and Section 277 of the Income Tax Act.
Also there is a challenge to all subsequent proceedings including
one common summoning order dated 31.03.2009, order dated 03.12.2016
passed by the Court of learned Chief Judicial Magistrate, Ludhiana,
dismissing the application for discharge and also the order dated 01.02.2018,
whereby in revisional jurisdiction, the Court of Sessions dismissed the
revision petition by maintaining the summoning order.
3. Factual matrix of the case is that a search and seizure operation
under Section 132 of the Income Tax Act, 1961, was carried out in the
business as well as residential premises of M/s Gobind Expeller Group on
24.02.2009 by the team of officers of Income Tax Department, which
included a search at the residence of both the petitioners.
At the beginning of the search, preliminary statement of both the
accused (petitioners herein) was recorded on 24.02.2009 for disclosure of the
details of their lockers.
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CRM-M-12302, 12432-2018 (O&M) 3
*Question No.4 put to the petitioner-Gurpreet Singh reads as under:-
“ Q. No.4 : Please give details of your bank accounts and also details
of your lockers with name and address of the bank.
Answer : I am having bank account No.CC73 with Allahabad Bank,
Cheema Chowk, Ludhiana and not having or maintaining
any locker in my name or in the name of my wife Mrs.
Tejinder Kaur.”
*Question No.6 put to the petitioner-Jagtar Singh reads as under:-
“ Q. No.6 : Please mention your bank lockers in your name or in the
name of your family members.
Answer : One locker in Oriental Bank of Commerce, Miller Ganj,
Ludhiana in the Joint name of Smt. Jaspal Kaur and
myself.””
On enquiries, it was found that petitioner-Gurpreet Singh
(accused) had made a false statement as he was having Locker No.74 in
Oriental Bank of Commerce, Miller Ganj, Ludhiana along with wife and was
also having joint account in Kotak Mahindra Bank, Ferorze Gandhi Market,
Ludhiana, having A/c No.02510010004343.
During enquiry, the statement of petitioner-Jagtar Singh was also
found to be false as he was having one Locker No.150 in Kotak Mahindra
Bank, Ferorze Gandhi Market, Ludhiana, and it was operated by him which
later on was sealed on 26.02.2009 by separately passing a restraint order
under Section 132(3) of Income Tax Act. On enquiry, it was also found that
the said locker was allotted to Jagtar Singh on 23.01.2009 and was operated
thereafter on 23.01.2009, 29.01.2009 and 24.02.2009.
Since both the accused/petitioners were bound to furnish true
information and statement on oath before public servant, but both of them
knowingly furnished a false statement, thereby giving rise to the impugned
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CRM-M-12302, 12432-2018 (O&M) 4
complaint submitted by the Income Tax Department, through its authorised
officer.
4. After institution of the complaint on 31.03.2009, vide order of
the same day, Court of learned Chief Judicial Magistrate, Ludhiana,
summoned both the petitioners for facing prosecution under Sections 177,
181, 193, 196, 34 IPC and Section 277 of the Income Tax Act.
5. On 13.12.2010, one Settlement Application No.PB/LD51/2010-
11/19-IT was instituted before the Income Tax Settlement Commission,
Principal Bench, Delhi, and it initiated the proceedings under Section 245D of
the Income Tax Act. In the said proceedings, issue regarding non-disclosure
of the bank locker in Kotak Mahindra Bank, Ludhiana, was considered in
Paragraph No.41.1 to 41.6 by the Settlement Commission. The relevant
Paragraph No.41.4, 41.5 and 41.6 are reproduced hereunder:-
“41.1 xxx
41.2 xxx
41.3 xxx
41.4 During the course of hearing, learned counsel for
the applicant was informed by the Bench that the applicant will
have to make full and true disclosure of contents of the locker
and the value of the same undisclosed contents will be taxed in
the hands of the applicant. The applicant has not furnished any
estimate of the value of assets in the locker.
41.5 We have considered the matter, considering the
social status and economic well being of the applicant in our
view, it would be fair to make an additional of Rs.50 lakhs
which would cover all the discrepancies as a whole and the
same would be taxed in the hands of the applicant as
undisclosed income in assessment year 2009-10 and 2010-11.
41.6 Ld. counsel for the applicant in the course of
hearing agreed that the amount of Rs.50 lakhs is being offered
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CRM-M-12302, 12432-2018 (O&M) 5
by him for taxation to buy peace and in the spirit of settlement.
This is accepted by the Commission.”
6. As per final order dated 29.06.2012 of the Settlement
Commission, total amount payable by petitioner-Jagtar Singh was assessed as
Rs.6,18,69,132.00. (more than rupees six crores, eighteen lakhs and sixty nine
thousands), in regard to the immunity from prosecution, prayer of the
applicant therein was accepted by recording as under:-
“45. The applicant has prayed for immunity from prosecution
and waiver of penalties under various provisions of the Income
Tax Act. In view of the cooperation extended to the Commission
during hearing and on facts and circumstances of the case,
immunity is hereby granted from prosecution and penalty
imposable under the I.T. Act in relation to the issues arising from
the application and covered by this order except in respect of
prosecution proceedings already launched by the Department on
the issue of illegal operation of locker by the applicant on
24.02.2009 in light of proviso to section 245H(1).”
7. It was thereafter that during the course of pre-charge evidence,
petitioners filed application for discharge under Section 245(2) Cr.P.C., which
was dismissed, vide order dated 03.12.2006 passed by learned Chief Judicial
Magistrate, Ludhiana (Annexure P-5 in CRM-M-12302-2018), by concluding
as under:-
“ As such, in the light of entire preceding discussion, it
clearly transpires that no ground is made out for dropping of the
proceedings at this stage in the present complaint, which
pertains merely to the aspect of recording of false statements by
the accused on 24.2.2009, concealing their locker and bank
account. The technicality of the offence contemplated is bereft of
any consequence of some advantage or benefit having been
availed by the accused by way of making of the false statements
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CRM-M-12302, 12432-2018 (O&M) 6
alleged. As such, no merit is found in the application and same is
hereby ordered to be dismissed. File is now adjourned to
22.12.2016 for remaining pre charge evidence of the
complainant.”
The discharge application filed by the petitioners was based
mainly on two grounds, firstly that the allegations against them are false and
secondly that Settlement Commission has already provided immunity to the
petitioners and they cannot be tried again because proceedings before
Settlement Commission also amounts to judicial proceedings.
Trial Court dismissed the application for discharge on the ground
that, “ no immunity from proceedings have been granted to the petitioners
with respect to proceedings which have already been launched.” It has also
been observed by learned trial Court that plea of petitioners can only be
evaluated after conclusion of pre-charge evidence.
8. Order dismissing the discharge application was upheld
maintained by the Revisional Court, vide its order dated 01.02.2018. By
giving reference of Section 245H(1) of the Income Tax Act, learned
Revisional Court also observed that the Settlement Commission was not
competent to grant immunity from proceedings, which have already been
launched by the Department. Thus, there being no illegality in the
proceedings or institution of the complaint, Revisional Court also dismissed
the plea of discharge.
9. In view of the aforesaid backdrops, Mr. Gautam Dutt, Senior
Advocate argued that the alleged non-disclosure of the details of the existing
locker and the contents lying in it relates back to the period 24.02.2009. The
complaint was instituted on 31.03.2009 but without recording any reason
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CRM-M-12302, 12432-2018 (O&M) 7
therein, same day the petitioners were summoned to face prosecution by a
non-speaking order.
After being summoned, at the earliest an application under
Section 245H of the Act, to initiate proceedings before the Settlement
Commission was filed on 13.12.2010 and by accepting the offer of Rs.50
lakhs, proceedings before the Settlement Commission were concluded on
29.06.2012.
Without challenging the constitutional validity of Section 245H
of Income Tax Act, regarding the absence of provision for granting immunity
where prosecution has already been launched, Mr. Gautam Dutt, submitted
that the Settlement Commission itself retains discretion. Specifically, if
satisfied with the explanation offered, the Commission may, by recording
reasons in writing grant immunity from prosecution for any offence under the
Act or under IPC, or any other Central Act for the time being in force.
He further submitted that while the Settlement Commission may
lack discretion to grant immunity from prosecution where proceedings have
already been instituted, the Act nowhere bars the Constitutional Courts from
exercising their inherent power to quash/annul the proceedings, if their
continuation solely serves to impose penal punishment of imprisonment. He
also submitted that in the present case, petitioner was granted immunity from
future prosecution and thus, it gives rise to a recurring cause of action,
allowing petitioners to challenge the pendency of prosecution proceedings
before the High Court or the Apex Court for exercising their Constitutional
powers, of course in the larger interest of justice.
To substantiate his arguments, Mr. Gautam Dutt, Senior
Advocate relied upon judgment of Hon’ble Supreme Court in Vijay
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CRM-M-12302, 12432-2018 (O&M) 8
Krishnaswami @ Krishnaswami Vijay Kumar vs. The Deputy Director of
Income Tax (Investigation), 2025 SCC Online SC 1843; and judgments of
this Court in Satish Vohra and others vs. State of Punjab and others, passed
in CRM-M-3413-2024 decided on 29.05.2026 and Nagesh Aggarwal vs.
Deputy Director of Income Tax (Investigation), passed in CRM-M-37047-
2013 decided on 09.02.2015.
Mr. Gautam Dutt, argued that the proceedings are meaningless
because of petitioners have been granted immunity from prosecution. He
submitted that there is no loss to the revenue as the department has already
been compensated along with interest pursuant to Settlement Commission
exercising its statutory jurisdiction. Once said order has already attained
finality, no fruitful purpose under law would be served by continuing the
proceedings. Thus, prayed for quashing of the impugned complaint,
summoning order dated 31.03.2009, order dated 03.12.2016 and revisional
court order dated 01.02.2018.
10. Ms. Nikita Garg, Junior Standing Counsel for respondent-Income
Tax Department, argued that the complaint filed by the Department is not
confined solely to Section 277 of the Income Tax Act, rather the entire case
set up by the petitioners proceeds on the incorrect premise that the
prosecution lies exclusively under Section 277 of the Income Tax Act.
Prosecution is founded upon the allegations that knowingly false information
was provided during search proceedings by concealing an existing bank
locker and, subsequently by making false statement regarding its operation.
Thus, the case is completely covered by provisions of Section 245H(1) of the
Income Tax Act.
It was further argued that since the criminal complaint had
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CRM-M-12302, 12432-2018 (O&M) 9
already been instituted nearly 20 months prior to the filing of the Settlement
Application, the first proviso to Section 245H(1) directly operates as a
statutory bar against granting of immunity. There are other offences also
which are punishable under IPC. In the proceedings before the Settlement
Commission, there was a clear admission by the petitioners regarding
existence of the locker. The events connected therewith were specifically
considered by the Settlement Commission along with the admission regarding
proviso in relation to the prosecution already initiated. Therefore, petitioners
cannot be allowed to approbate and reprobate at the same time by taking a
diametrically opposite stand. The order of Settlement Commission must be
considered in its entirety and not in parts.
During arguments, learned counsel for respondent-Income Tax
Department also highlighted that prosecution was not launched for the
contents/ articles lying in the locker; rather it is based upon the concealment
and existence of having a locker itself, which was not even disclosed despite
there being a specific query. Furthermore, Paragraph 45 of the order of
Settlement Commission expressly excludes the immunity from prosecution
for the petitioners, wherein it is mentioned “if already not initiated”. Ratio of
judgments relied upon by learned senior counsel for the petitioners in Vijay
Krishnaswami @ Krishnaswami Vijay Kumar’ s case (supra) etc., cannot be
extended to the facts and circumstances of the present case. Therefore, as per
respondents, same would not be applicable and thus, both petitions, being
devoid of merit, are liable to be dismissed.
11. I have heard the submissions made by respective counsel from
both the sides and also perused the appended documents including the
complaint and the impugned orders.
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CRM-M-12302, 12432-2018 (O&M) 10
12. For ready reference, Section 245H of the Income Tax Act, 1961,
is reproduced hereunder:-
“Power of Settlement Commission to grant immunity from
prosecution and penalty .
245H. 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 for the reasons to be recorded in writing,
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:
Provided 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:
Provided further that the Settlement Commission shall not grant
immunity from prosecution for any offence under the Indian
Penal Code (45 of 1860) or under any Central Act other than
this Act and the Wealth-tax Act, 1957 (27 of 1957) to a person
who makes an application under section 245C on or after the 1st
day of June, 2007.”
13. Section 277 of the Income Tax Act, 1961, is also reproduced
hereunder:-
“ False statement in verification, etc.
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277. 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 twenty-five 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 two years and with fine.
14. Bare reading of Section 245H of Income Tax Act outlines
circumstances and enabling provisions under which Settlement Commission
may grant immunity from prosecution for any offence under this Act or under
IPC or under any other Central Act for the time being in force as well as from
the imposition of any penalty under this Act with respect to the case covered
by the settlement.
However, the first proviso clearly prohibits the exercise of any
such power in cases where the proceedings for prosecution for any such
offence have already been instituted prior to the date of receipt of the
application under Section 245C. Therefore, as per Section 245H of the
Income Tax Act, the Settlement Commission lacks the jurisdiction or power
to grant exemption from prosecution that has already been initiated against
any such assessee. There appears to be a clear statutory objective and
rationale underlying the scope of power conferred upon the Settlement
Commission, regarding the stage at which immunity may or may not be
granted. There is third stage also i.e. not to grant immunity from prosecution
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under law other than the provisions of Income Tax Act, to a person, who
moved an application under Section 245C on or before 01.06.2007.
Since it is an admitted position that the application under Section
245C was filed subsequent to the filing of the criminal complaint against the
petitioners, there appears to be no illegality or error in the statutory order
passed by the Settlement Commission. In fact, in Paragraph No.45 of the
order dated 29.06.2012 of Settlement Commission, it has been categorically
made clear that the immunity would apply except in respect of the prosecution
proceedings already launched by the department regarding on the issue of
illegal operation of the locker by the applicant/petitioner.
15. For perusal, Paragraph 45 of order dated 29.06.2012 of
Settlement Commission reads as under:-
“The applicant has prayed for immunity from prosecution
and waiver of penalties under various provisions of the Income
Tax Act. In view of the cooperation extended to the Commission
during hearing and on facts and circumstances of the case,
immunity is hereby granted from prosecution and penalty
imposable under the I.T. Act in relation to the issues arising from
the application and covered by this order except in respect of
prosecution proceedings already launched by the Department on
the issue of illegal operation of locker by the applicant on
24.02.2009 in light of proviso to section 245H(1).”
16. Now coming to the constitutional power vested with the High
Court as well as the Apex Court, reliance placed upon by petitioners’ counsel
on few judgments, this Court notices that in the case of Vijay Krishnaswami
@ Krishnaswami Vijay Kumar’ s case (supra), Paragraphs No.35 to 38 read as
under:-
“35. Perusal of the said order makes it clear that in the
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settlement proceedings, assessee has disclosed all the facts
material to the computation of his additional income and fully
satisfied the provisions of Section 245H . The Commission
recorded a finding that overall additional income is not on
account of any suppression of any material facts and it does not
disclose any variance from the manner in which the said income
had been earned. As such the immunity from penalty under IT
Act was granted in exercise of powers under Section 245H . From
perusal of Section 245-I , it is clear that every order of settlement
shall be conclusive as to the matters stated therein and no matter
covered by such order shall, save as otherwise provided, be
reopened in any proceeding under the Act or under any other
law for the time being in force.
36. In view of the foregoing discussions in conclusion we can
safely hold that the prosecution lodged with the help of proviso
to sub-section (1) to Section 245H was in defiance to the circular
dated 24.04.2008, which was in vogue. It was the duty of the
PDIT and DDIT to look into the facts that in absence of any
findings of imposition of penalty due to concealment of fact, the
said prosecution cannot be proved against the assessee. It seems,
even after passing the order by the Settlement Commission on
26.11.2019, it was brought to the notice of the High Court, but
the authorities were persistent to pursue the prosecution without
looking into the procedural lapses on their part. Such an act
cannot be construed in right perspective and the Revenue have
acted in blatant disregard to binding statutory instructions. Such
willful non-compliance of their own directives reflects a serious
lapse, and undermines the principles of fairness, consistency,
and accountability, which in any manner cannot be treated to be
justified or lawful.
37. It must also be noted that, in terms of Section 245-I , the
findings of the Settlement Commission are conclusive with
respect to the matters stated therein. Once such an order was
passed, it was incumbent upon the authorities to inform the High
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Court that continuation of the prosecution would amount to an
abuse of the process of law, in particular when the Settlement
Commission did not record any finding of wilful evasion of tax
by the appellant. Even otherwise, it was the duty of the High
Court to examine the facts of the case in their right context and
assess whether, in light of the above circumstances, the
continuation of the prosecution would serve any meaningful
purpose in establishing the alleged guilt. Upon a holistic
consideration of the matter, we are of the view that the conduct
of the authorities lacks fairness and reasonableness, and the
High Court’s approach appears to be entirely misdirected,
having failed to appreciate the factual and legal position in right
earnest.
38. In view of the foregoing discussions, we are constrained to
allow these appeals setting aside the order impugned passed by
the High Court. It is directed that prosecution lodged by the
Revenue against the appellant shall stand quashed. In the facts
and circumstances of the case as discussed hereinabove, we are
inclined to impose costs against the Revenue which is quantified
at Rs.2,00,000/- payable to the appellant. Pending
application(s), if any, shall stand disposed of.”
17. In the case of Satish Vohra and others (supra), Paragraphs
No.10, 11 and 13 read under:-
“10. It is also not in dispute that the tax dispute arising from
the same set of transactions was subsequently placed before the
Interim Board for Settlement, Mumbai, which examined the
matter in detail and settled the issue. The Board recorded a
specific finding in the order dated 24.02.2023 (Annexure P-9)
passed under Section 245(D) of the Income Tax Act, 1961 that
the applicants/petitioners had cooperated in the proceedings,
made full disclosure of income, and explained the manner in
which such income had been derived. Immunity from penalty was
granted to the petitioners. Immunity from prosecution was
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declined not because of any specific finding of fraud or wilful
concealment, but only because the criminal complaint had
already been instituted before the settlement proceedings were
initiated. The terms and conditions set out in therein are as
under:-
“18. Terms of Settlement
The computation of income of above applicants for the
different assessment years under consideration is annexed
to this order as per separate Annexures.
19. The Assessing Officer shall communicate the demand
payable by way of tax and interest on the total income
determined for each assessment year as per this order after
giving credit of taxes and interest paid on or before the date
of application and after considering the refund issued, if
any, in respect of total income determined in any earlier
assessment or reassessment or re-computation made for
assessment years covered by the applications. The AO is
directed to issue demand notice as per the provisions of
section 156 rw.s 245D(6) of the Act within 7 days from the
date of receipt of this order.
20. Waiver of interest
The applicants have prayed for waiver of interest. However,
it is well settled by the decision of the Hon'ble Supreme
Court in the case of CIT vs Anjum M.H. Ghaswalla &
Others (2005) 252 ITR 1 (SC) that the Settlement
Commission (now, IBS) is not empowered to grant waiver /
reduction of interest chargeable u/s. 234A, 234B & 234C of
the Act. Accordingly, interest u/s. 234A, 234B & 234C will
be levied by applying inter alia, the position of section
234B(2A) of the Act w.e.f. 01.06.2015.
21. Immunity from Penalty and Prosecution:
The applicants as per Terms of settlement mentioned in
SOF, have prayed for grant of immunity from levy of
penalty and from prosecution under the Act. On the other
hand, the Pr. CIT, in his Rule 9 report has observed that
disclosure of the applicants is not true and full and
therefore, their request for granting immunity from levy of
penalty and prosecution has no merits.
22. We have considered the request made by the
applicants as well as objections of the Ld. PCIT. As per
provisions of section 245H(1) read with section 245H(3) of
the Act, the Interim Board for Settlement may grant
immunity from prosecution and penalty if it is satisfied that
the person making application for settlement has
cooperated with the Board in the proceedings before it and
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has made full and true disclosure of its income and the
manner in which such income has been derived. On
examining the facts of the case on these parameters, it is
noticed that the applicants have furnished all the details
sought by the Board from time to time and facilitated in
sorting out issues with the Department at every stage. Thus,
they have cooperated with the Board in the proceedings
before it. We also noticed that the applicants have fully
disclosed additional income before the Board which it
ought to have offered otherwise. They have also disclosed
the manner in which such income has been derived. The
additional income offered by the applicants is fully justified
during the course of proceedings before us and we have
settled the applications after making the enhancements as
detailed above.
23. The additional income further determined in this
order and duly agreed to by the Ld. AR were not on account
of any facts which were not declared but only to take care
of some explanation which could not be expressly proved
and to cover some calculation mistakes and to put quietus
to the matter in the true spirit of settlement. Hence, it can be
said that the applicants have made true and full disclosure
of their income. The applicants have also specified the
manner in which such income has been derived. Thus, we
are satisfied that the conditions for granting immunity from
penalty under all the provisions of the Act are fulfilled in
these cases. We, therefore, accept the request of the
applicants and grant immunity from penalty under the Act.
However, we are not in a position to accept the prayer of
the applicants regarding immunity from prosecution
because of the reasons given at para 12.12 to 12.12.4 of this
order.
24. The immunity granted to the applicants may at any
time be withdrawn, if the Board is satisfied that the
applicants have in the course of the settlement proceedings
concealed any particulars or materials to the settlement or
have given false evidence. Thereupon, the applicants may
be tried for the offence for which immunity was granted or
for any other offence for which the applicants appear to
have been guilty in connection with the settlement and the
applicants shall also become liable to imposition of any
penalty under the Act to which the applicants would have
been liable had such immunity not been granted. The
immunity so granted will also be withdrawn if the
applicants fail to pay the additional tax and interest, if any,
as stipulated in this order.
25. The applicants are allowed capitalization of the
additional income disclosed before the Commission and no
capitalization is allowed for further additional income
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added in this order as discussed above.
26. The applicants have prayed for grant of instalments
for payment of tax and interest in the settlement
applications. Accordingly, we consider their request and
grant them two equated monthly instalments starting from
March, 2023 to April, 2023.
27. This order shall be declared void if it is subsequently
found by the Board that the same has been obtained by
fraud or misrepresentation of the facts within the meaning
of section 245D(6) of the Act.”
11. The Hon’ble Supreme Court in Vijay Krishnaswami @
Krishnaswami Vijayakumar vs. Deputy Director of Income Tax
(Investigation) (supra) fully supports the case of the petitioners
wherein it has been held that once the Settlement
Commission/Board has conclusively examined the matter and
recorded findings regarding disclosure and cooperation,
continuation of criminal proceedings would amount to abuse of
the process of law. The relevant extract thereof are as under:-
“Perusal of the said order makes it clear that in the
settlement proceedings, assessee has disclosed all the facts
material to the computation of his additional income and
fully satisfied the provisions of Section 245H. The
Commission recorded a finding that overall additional
income is not on account of any suppression of any material
facts and it does not disclose any variance from the manner
in which the said income had been earned. As such the
immunity from penalty under IT Act was granted in exercise
of powers under Section 245H. From perusal of Section
245-1, it is clear that every order of settlement shall be
conclusive as to the matters stated therein and no matter
covered by such order shall, save as otherwise provided, be
reopened in any proceeding under the Act or under any
other law for the time being in force.
36. In view of the foregoing discussions in conclusion we
can safely hold that the prosecution lodged with the help of
proviso to sub-section (1) to Section 245H was in defiance
to the circular dated 24.04.2008, which was in vogue. It
was the duty of the PDIT and DDIT to look into the facts
that in absence of any findings of imposition of penalty due
to concealment of fact, the said prosecution cannot be
proved against the assessee. It seems, even after passing the
order by the Settlement Commission on 26.11.2019, it was
brought to the notice of the High Court, but the authorities
were persistent to pursue the prosecution without looking
into the procedural lapses on their part. Such an act cannot
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CRM-M-12302, 12432-2018 (O&M) 18
be construed in right perspective and the Revenue have
acted in blatant disregard to binding statutory instructions.
Such wilful non-compliance of their own directives reflects
a serious lapse, and undermines the principles of fairness,
consistency, and accountability, which in any manner
cannot be treated to be justified or lawful.
37. It must also be noted that, in terms of Section 245-1,
the findings of the Settlement Commission are conclusive
with respect to the matters stated therein. Once such an
order was passed, it was incumbent upon the authorities to
inform the High Court that continuation of the prosecution
would amount to an abuse of the process of law, in
particular when the Settlement Commission did not record
any finding of wilful evasion of tax by the appellant. Even
otherwise, it was the duty of the High Court to examine the
facts of the case in their right context and assess whether, in
light of the above circumstances, the continuation of the
prosecution would serve any meaningful purpose in
establishing the alleged guilt. Upon a holistic consideration
of the matter, we are of the view that the conduct of the
authorities lacks fairness and reasonableness, and the High
Court’s approach appears to be entirely misdirected,
having failed to appreciate the factual and legal position in
right earnest.”
12. xxx
13. Keeping in view the overall facts and circumstances of the
present case, this Court is of the considered view that the
continuation of criminal proceedings would serve no useful
purpose and would amount to misuse of the process of law.”
18. In the case of Nagesh Aggarwal (supra), Paragraph No.7 reads as
under:-
“The facts in the present case are not in dispute.
Admittedly, the residential and business premises of the
petitioner were searched on 24.6.1999. Thereafter, notice was
also issued to the petitioner on 6.1.2000 to explain his position
with regard to making a false statement and for making an
attempt to evade tax etc. Petitioner filed his reply to the show
cause notice. However, the reply submitted by the petitioner was
found to be unsatisfactory. During the pendency of the
assessment proceedings before the Assessment Officer,
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CRM-M-12302, 12432-2018 (O&M) 19
petitioner filed an application for settlement before the Income
Tax Settlement Commission and offered undisclosed income of `
3,55,000/- for settlement in addition to undisclosed income of `
25,000/- offered in the block return filed before the Assessing
Officer. Application moved by the petitioner was accepted and
the income of the petitioner was settled at ` 3,80,000/- including
` 25,000/- offered before the Assessing Officer vide order dated
20.1.2008. However, by passing the order dated 22.1.2008,
Income Tax Settlement Commission declined to grant immunity
to the petitioner from penalty and prosecution. The said order
was upheld in an appeal by the Commissioner, Income Tax
(Appeals). Petitioner approached the Income Tax Appellate
Tribunal. Vide order dated 22.3.2011 (Annexure P-4), the
penalty levied by the Assessing Officer and confirmed by the
Commissioner, Income Tax (Appeals), was set aside and it was
observed as under:-
“In the present case, the assessee has returned
undisclosed income of Rs. 25,000/-. He realized that the
income returned by him was on lower side. He therefore,
approached the Settlement Commission for settlement
and in that process offered additional sum of Rs.
3,55,000/- for settlement which was also accepted by the
Settlement Commission. The case of the assessee is
squarely covered by the judgment dated 12.11.2008
rendered by the Hon'ble Delhi High Court in CIT Vs.
Harkaran Das v. Ved Pal, ITA No. 1005/2007 (supra),
cited by the ld. Counsel for the assessee. On the facts of
the case as they exist on record, we are also satisfied that
this is a case where the assessee has acted bona-fide and
has concealed nothing, which evident from the fact that
the Settlement Commission has also accepted the income
offered by the assessee for settlement. In this view of the
matter, we cancel the penalty levied by the Assessing
Officer and confirmed by the CIR (A).”
Admittedly, Annexure P-4 has gained finality. Since in the
assessment proceedings, the penalty levied against the
petitioner, has been set aside by the Income Tax Appellate
Tribunal, continuation of criminal proceedings against the
petitioner in relation to the same proceedings, would be nothing
but an abuse of process of law.
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CRM-M-12302, 12432-2018 (O&M) 20
Accordingly, this petition is allowed. Criminal complaint
No. 139 dated 31.3.2000 (Annexure P-1) and orders dated
14.12.2011 (Annexure P-2) and 13.9.2013 (Annexure P-3) and
all the consequential proceedings, arising therefrom, are
quashed.”
19. Ratio of the judgments relied upon by the petitioners’ counsel
along with several other precedents discussed therein, indicates that where the
continuation of proceedings under penal provisions is permitted to linger, no
meaningful or reasonable purpose would be served. The position might have
been different, had the issue been decided at the earliest stage by this Court
when it was initially assailed through instant petitions. Now, after a period of
nearly 17/18 years from the filing of the complaint for non disclosure of one
of the lockers, subjecting the petitioners to continued proceedings would
serve no practical purpose other than remaining an academic exercise.
Moreover, there is no submission by the Department that order of the
Settlement Commission was ever challenged or reversed in any subsequent
proceeding; or that the petitioners failed to comply with the payment of
amount ordered by the Settlement Commission.
20. To the view point of this Court, the inherent power of a
Constitutional Court/this Court is neither constrained nor incapacitated from
examining the issue holistically to arrive at an independent conclusion,
thereby fulfilling the overarching objective fro which the Income Tax Act was
enacted. One of primary the purposes of penal provisions-creating a deterrent
against making false statements already stands served in the present case,
given that the prosecution has been pending for the last 17/18 years, despite
the final payment having been made under the order of the Settlement
Commission in the year 2012.
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CRM-M-12302, 12432-2018 (O&M) 21
21. In the totality of the facts and circumstances and in line of the
precedents relied upon by petitioners’ counsel, this Court deems it appropriate
to quash the proceedings i.e. Complaint No.120 dated 31.03.2009 for
commission of offences under Sections 177, 181, 193, 106, 34 of Indian Penal
Code (IPC) and Section 277 of the Income Tax Act, summoning order dated
31.03.2009 and order 03.12.2016 passed by the Court of learned Chief
Judicial Magistrate, Ludhiana, dismissing the application for discharge and
also the order dated 01.02.2018, whereby in revisional jurisdiction, the Court
of Sessions dismissed the revision petition by maintaining the summoning
order.
22. Petitions stand disposed of accordingly.
Pending miscellaneous application(s), if any, also stand disposed
of.
Photocopy of this order be placed on the connected file.
(SANJAY VASHISTH)
JUDGE
09.09.2026
jitender
Whether speaking/ reasoned : Yes/ No
Whether Reportable : Yes/ No
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