Union of India and Others vs Shree Singhvi Brothers and Others

N.N. Mathur, J.

The Union of India being aggrieved of part of the order of the learned Single Judge dated 9-5-1990 has preferred this special appeal.

The material facts giving rise to the instant appeal are that the respondent M/s Shree Singhvi Brothers the original writ petitioner (hereinafter referred to as the respondent) is a registered partnership firm. It is alleged that a search was conducted at the business premises as well as the residential premises of the partners namely Kushal Singh and Laxman Singh under the provisions of section 132(1) of the Act on 6-5-1981. During the course of the search 65 kg. silver was found., out of which 16 Kg. silver/silver ornaments were treated as unexplained by the authorised officers of the Income Tax Department. Therefore, the department included its value amounting to Rs. 32,000 in their income for the assessment year 1982-83 while making regular assessment. The respondent-assessee explained that the said silver belonged to Shri Mohansingh, Shri Banshi Singh and Shri Abdul Mazid. After an order u/s 132(5) of the Act, the respondent-firm filed its return on 1-10-1982. The assessing officer rejected the explanation given by the assessee and included the value of 16 kg. silver amounting to Rs. 32,000 in their income and also imposed a penalty of Rs. 29,600 u/s 271(1)(c) of the Act on the tax amount of Rs. 14,880. The Commissioner (Appeals) dismissed the appeal against the order of assessment. On further appeal the Tribunal sustained the addition to the tune of Rs. 28,800. With respect to the penalty u/s 271(1)(c) an appeal was filed before the Commissioner (Appeals). An application was filed before the Commissioner u/s 273A for waiver of substantial reduction in the penalty imposed. It is averred that during the course of hearing of the application u/s 273A on the assurance given by the appellate authority that on payment of tax due the penalty of Rs. 29,600 shall be waived, the respondent-assessee deposited tax due of Rs. 7,230 in the account of the firm and Rs. 10,330 in the account of Kushal Singh Singhvi. However, the application for the waiver was rejected by the Commissioner. The respondent-assessee aggrieved of the order of the Commissioner filed an application u/s 154 of the Act. However, the said application was also rejected. It is further averred that a notice was served on the respondent-assessee by the department regarding launching of the prosecution. A sanction for the prosecution of the partners of the firm was granted by the order dated 31-5-1988. A complaint was also filed in the court of Chief Judicial Magistrate (Economic Offences), Jaipur for offence u/s 276C(1) of the Income Tax Act. The respondent-assessee prayed in the writ petition that the order of the Commissioner dated 31-5-1988, passed u/s 273A and 273A(4) may be quashed. A further direction was sought for reconsideration of waiver petition by the tax authority. A further direction was sought to quash the complaint filed in the court of Chief Judicial Magistrate (Economic Offences), Jaipur. The learned Single Judge refused to interfere with the order imposing penalty particularly for the reason that an appeal against the said order was pending before the competent authority. The prayer with respect to quashing of the order rejecting the application for waiver and also the application u/s 154 was rejected. However, the prayer with respect to quashing of the proceedings was granted. The learned Single Judge observed that in the instant case four alternate remedies were available to the department and the remedy of launching prosecution being one of the remedies was optional. In such circumstances it was obligatory on the part of the department to afford an opportunity of hearing to the respondent-assessee before launching the prosecution. In view of the finding the learned Single Judge quashed the complaint filed against the respondent-assessee pending in the Court of Chief Judicial Magistrate (Economic Offences), Jaipur.

It is no more res integra that assessee is not entitled to show-cause notice before launching of prosecution. The Apex Court in Union of India and Another Vs. Banwari Lal Agarwal, found :

"Sub-section (2) of section 279 is a provision which enables the Chief Commissioner or the Director General to compound any offence either before or after the institution of proceeding. There is no warrant in interpreting this sub-section to mean that before any prosecution is launched, either a show-cause notice should be given or an opportunity afforded to compound the matter. The enabling provision cannot give a right to a party to insist on the Chief Commissioner or the Director General to make an offer of compounding before the prosecution is launched."

Thus, the decision of the learned Single Judge is clearly untenable so far as it relates to quashing of the prosecution against the respondent-assessee is concerned. However, in view of the certain development which has undertaken during the pendency of the appeal, we do not consider it appropriate to set aside the order of quashing of prosecution and thereby revive the same. In compliance of the directions of the learned Single Judge and in absence of any interim order by the Division Bench, the learned trial court by order dated 17-7-1990, has disposed of the prosecution. We do not consider it desirable to revive the said prosecution with respect to an offence of more than 20 years old more particularly when the Commissioner, Udaipur by order dated 15-11-1995, has deleted the penalty imposed on the respondent-assessee firm u/s 271(1)(c) of the Income Tax Act.

Consequently, the special appeal is partly allowed as indicated above.

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