HARBANS SINGH vs UNION OF INDIA AND OTHERS

SUKHDEV SINGH KANG J. - This order will dispose of CWP No. 4366 of 1984 and CWP No. 4500 of 1985 as common questions of law and fact are involved. Reference shall be made to the facts in CWP No. 4366 of 1984.

The petitioner in partnership with Kartar Singh was carrying on business under the name and style of M/s. Sadhu Singh Harbans Singh. The firm was registered u/s 185(1)(b) of the Income Tax Act (hereinafter referred to as "the Act").

The petitioner filed the return of income of the assessee-firm for the assessment year 1973-74, on September 14, 1973 and declared an income of Rs. 33,810. The Income Tax Officer, after discussing the case with the petitioner, framed an agreed assessment accepting the net income of the petitioner as Rs. 36,000.

The business premises of petitioner were searched u/s 132(1) of the Act, on June 22, 1976, and certain account books and documents were seized. The petitioner filed a revised return for the assessment year 1973-74, on July 1, 1981. It showed a difference of assets over liabilities of Rs. 39,373. The petitioner received a notice u/s 148 of the Act on September 21, 1981, for reopening the petitioners assessment. The petitioner filed a duplicate/revised return of income for the assessment year 1973-74 declaring the income at Rs. 75,373. A notice u/s 143(2) of the Act dated November 20, 1981, was received by the petitioner. After various adjournments, the assessment was framed by the Income Tax Officer on February 24, 1982. on an income of Rs. 77,450.

It is stated in the petition that without initiating penalty proceedings against the petitioner, a complaint u/s 277 of the Act and u/s 193 of Indian Penal Code was filed by the Income Tax Officer on March 30, 1982, on the allegations that the petitioner had made a false declaration in the verification of the return of income and delivered accounts and statements which were false or which he did not believe to be true. This assertion has been denied by the respondents in the return wherein it is categorically stated that the true position is that while completing the assessment on February 24, 1982, penalty proceedings u/s 271(1)(c) for concealment of income were also initiated by issuing notice u/s 274 read with section 271(1)(c) on February 22, 1982, which was served upon the petitioner on February 23, 1982. Thus, after completing the assessment and also after initiating penalty proceedings u/s 271(1)(c) for concealment of income a complaint u/s 271(1)(c) of the Act and section 193 of the Indian Penal Code was filed before the chief judicial Magistrate, Amritsar, on March 30, 1982.

It is averred in the writ petition that the petitioner had already moved an application u/s 245C of the Act before the Settlement Commission for settlement of his case on November 17, 1981/November 23, 1981, and this petition has been admitted and is pending consideration before the Settlement Commission. It is pleaded that the matter involved in the complaint and in the settlement petition pending before the Settlement Commission is the same and if the Settlement Commission decides the matter in the favour of the petitioner, the proceedings taken on the basis of the complaint would become redundant. The learned Magistrate is continuing with the trial of the case and the petitioners prayer for the adjournment of the case sine die has not been accepted. The petitioner filed a petition u/s 482 of the Code of Criminal Procedure for quashing the proceedings and the same were withdrawn because the petitioner was advised to challenge the vires of sections 277 and 279 of the Act.

The respondents have appeared and resisted the writ petition. The broad facts stated in the petition have been admitted in the manner stated above. It is further pleaded that the provision of sections 277 and 279 of the Act are legal, valid and constitutional. The criminal court was not obliged to stay the proceedings in the complaint case merely on the plea that an application u/s 245C of the Act for settlement of cases has been filed and was pending before the settlement Commission.

The facts in CWP No. 4500 of 1985 are similar. The only difference is that there is no pleading that the petitioner had made an application u/s 245C of the Act for settlement of cases and this relates to the assessment year 1976-77.

Mr. S. S. Mahajan, learned counsel for the petitioner, has raised three points before me :

(i) that sections 277 and 279 of the Act are unconstitutional. They confer unguided discretion on the Commissioner of Income Tax to pick and choose assessees. There are no guidelines for the exercise of the plenary discretion vested in the Commissioner;

(ii) that as the Settlement Commission was, on an application filed by the petitioner, seized of the matter, the criminal court could not go on with the trial of the complaint during the pendency of the proceedings before the Settlement Commission; and

(iii) that criminal proceedings under sections 277 and 279 of the Act cannot be sanctioned and initiated before the conclusion of penalty proceedings.

These arguments have not impressed me. The Final Court had upheld the vires of section 52 of the Act of 1922 in T.S. Baliah Vs. T.S. Rengachari, . The provisions of section 52 of the 1922 Act are analogus to the provisions of sections 277 and 279 of the Act 1961 Act. The ratio of that decision equally applies to the present case and for the reasons given in that judgment, sections 277 and 279 of the Act cannot be held to be unconstitutional.

Chapter XIX-A incorporates special provisions for the settlement of cases. It is a complete code in itself. It provides the procedure and mechanism for the settlement of disputes. Section 245F of the Act spells out the powers of the Settlement Commission. Subsection (4) thereof provides that in the absence of any express direction by the Settlement Commission to the contrary, nothing in Chapter XIX-A shall affect the operation of the provisions of the Act in so far as they relate to any matters others than those before the Settlement Commission. So the mere filing of the application for settlement u/s 245C will not have the effect of staying the operation of the other provisions of the Act, like those providing for the prosecution of the assessee in concealing and making incorrect and false statement in the return. Admittedly, in the present case, the Settlement Commission has not passed any orders staying the proceedings in the criminal complaint. In the absence of such an order, the Magistrate was duty bound to try and decide the case in accordance with law.

The third plea of Mr. Mahajan runs directly in the face of the ratio of the decision of the Apex Court in P. Jayappan Vs. S.K. Perumal, First Income Tax Officer, Tuticorin, . It has been held therein (headnote) :

"There is no provision in law which provides that a prosecution for the offences u/s 276C or section 277 of Income Tax Act cannot be launched until reassessment proceedings initiated against the assessee are completed."

So this plea must also fail.

For the reasons recorded above, there is no merit in the two writ petitions and the same are dismissed but with no order as to costs.