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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