Dr. Mrs. Geeta Gupta vs Inspecting Assistant ...
1986 Latest Caselaw 409 Del

JUDGMENT

Jagdish Chandra, J.

1. A complaint was filed by the Inspecting Assistant Commissioner of Income-tax (Assessment), Range XIV, New Delhi, against the present petitioner, Dr. (Mrs.) Geeta Gupta, and her accountant, Atma Singh under sections 276-C, 277 and 278 of the Income-tax Act, 1961 (for short "the Act"), read with sections 193 and 196 of the Indian Penal Code (IPC), in respect of the assessment year 1980-81 on the allegations that Dr. Geeta Gupta was guilty of making a willful attempt to evade tax, and also of making a statement in the verification under the Act and of delivering an account and statement which were false and which she knew or believed to be false and did not believe to be true. The complaint further proceeded on the allegations that she had also fabricated false evidence for the purpose of being used in the course of income tax proceedings and she dishonestly and fraudulently used that evidence in the course of the assessment proceedings for the assessment year 1980-81 which are judicial proceedings. As against Atma Singh, accountant, the allegation was that he was an abettor in respect of the aforesaid allegations against Dr. Geeta Gupta. Dr. Geeta Gupta had filed her return of income on October 7, 1980 for the aforesaid year 1980-81 declaring an income of Rs. 56,923 from the medical profession of running two dispensing clinics and from a nursing home called "Dr. Gupta Nursing Home"

2. Both the accused persons were ordered to be summoned by Shri. S. L. Khanna, then ACMM, Delhi, who had taken cognizance of the aforesaid complaint.

3. An complaint under section 245C of the Act was made by the present petitioner, Dr. Geeta Gupta, before the statutory Settlement Commission constituted and exercising full functions and powers under Chapter XIX-A of the Act, which, after rejecting the objection of the Commissioner of Income-Tax, Delhi, came to the view, vide order dated December 27, 1985, that it could not be said that concealment of income had been established or was likely to be established for the assessment year 1980-81 and thus allowed the aforesaid application to be proceeded with. On the basis of this finding of the Settlement Commission, a prayer was made before Smt. Manju Goel, learned ACMM, Delhi, the petitioner by means of an application for the dropping of the aforesaid complaint pending before her but the learned ACMM did not find favor with the prayer of the petitioner and dismissed the same, vide impugned order dated July 23, 1986, and thereby allowed the continuance of the complaint against her.

4. In the present revision petition, the petitioner, Dr. Geeta Gupta, has assailed the aforesaid impugned order dated July 23, 1986, of Smt. Manju Goel, ACMM, Delhi, and has also prayed for the quashing of the complaint on account of the aforesaid order dated December 27, 1985, passed by the Statutory Settlement Commission.

5. Chapter XIX-A of the Act deals with the settlement of cases. Applications for settlement of cases is made to the Settlement Commission under section 245C. Under section 245D(1), the Settlement Commission, on receipt of such application, shall call for a report from the Commissioner and on the basis of the material contained in any such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission may, by order, allow the application to be proceeded with or reject the application provided that such an application shall not be rejected by the Settlement Commission unless an opportunity has been given to the applicant of being heard. Sub-section (IA) of section 245D provides as under :

"Notwithstanding anything contained in sub-section(1), an application shall not be proceeded with under that sub-section if the Commissioner objects to the application being proceeded with on the ground that concealment of particulars of income on the part of the applicant or perpetration of fraud by him for evading any tax or other sum chargeable or imposable under the Indian Income-tax Act, 1922, or under this Act, has been established or is likely to be established by any income-tax authority, in relation to the case :

Provided that where the Settlement Commission is not satisfied with the correctness of the objection raised by the Commissioner, the Settlement Commission may, after giving the Commissioner an opportunity of being heard, by order, allow the application to be proceeded with under sub-section (1) and send a copy of its order to the Commissioner."

6. The Commissioner of Income-tax raised objections before the Settlement Commission to the effect that the concealment had already been [detected] for the assessment year 1980-81 and that prosecution had also been launched against both the accused persons as aforesaid and on the basis of those objections, he objected to the petition for settlement being proceeded with by the Settlement Commission. The Settlement Commission, after hearing the Commissioner, was not satisfied with the correctness of the aforesaid objections raised by the Commissioner, and thus allowed, vide order dated December 27, 1985, the petitioner's application under section 245C of the Act to be proceeded with under sub-section (1) of section 245D. Those proceedings before the Settlement Commission have not as yet concluded and are still pending before it.

7. Discarding the aforesaid objections of the Commissioner, the Settlement Commission observed as follows in its aforesaid order dated December 27, 1985 :

"... In our opinion, it cannot be said that concealment of income has been established or is likely to be established. We, therefore, hold that even for the assessment year 1980-81, it cannot be said that concealment of income has been established or is likely to be established. Under the circumstances, we allow the application to be proceeded with for the assessment years 1976-77 to 1983-84."

8. On the basis of the aforesaid finding of the Settlement Commission, learned counsel for the petitioner prays for the setting aside of the impugned order dated July 23, 1986, of Smt. Manju Goel, ACMM, Delhi, as also for the quashing of the complaint, as according to him, for the present there is no basis left for the continuance of the complainant. On the other hand, Mr. Jolly representing the respondent has contended that the aforesaid order of the Settlement Commission is only in the nature of an interim order and is thus only prima facie in character and cannot adversely affect the complaint or the continuance thereof and further that the impugned order of the learned ACMM too cannot be set aside as the proceedings before the Settlement Commission have not yet come to a final conclusion and are still pending there. The learned ACMM had found favor with this contention of learned counsel for the respondent and had for that reason dismissed the application of the petitioner, Dr. Geeta Gupta, which she had brought for the dropping of the complaint.

9. The provision of sub-section (1A) together with its proviso of section 245D of the Act does not anywhere describe the nature of the order of the Settlement Commission. In order to ascertain whether it was only prima facie or was conclusive on the material available by then to the Settlement Commission, it would be also necessary to set out the remaining relevant portions of section 245D and the same are set out as under :

(3) Where an application is allowed to be proceeded with under sub-section (I), the Settlement Commission may call for the relevant records from the Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case.

(4) After examination of the records and the report of the Commission received under sub-section (1), and the report, if any, of the Commissioner received under section (3), and after giving an opportunity to the applicant and to the Commissioner to be heard, either in person or through a representative duly authorised on behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner under sub-section (1) or sub-section (3)...

(6) Every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of tax, penalty or interest, the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts...."

10. Section 245F(2), 245H and 245-H also appear to be relevant for the purpose of ascertaining the nature of the aforesaid order dated December 27, 1985, of the Settlement Commission and the same are reproduced below :

"245F. (2) Where an application made under section 245C has been allowed to be proceeded with under section 245D, the Settlement Commission shall, until an order is passed under sub-section (4) of section 245D, have, subject to the provisions of sub-section (3) of that section, exclusive jurisdiction to exercise the powers and perform the functions of an income tax authority under this Act in relation to the case.

245H. (I) 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, 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 from the imposition of any penalty under this Act, with respect to the case covered by the settlement.

(2) An immunity granted to a person under sub-section (1) may, at any time be withdrawn by the Settlement Commission, if it is satisfied that such person has not compiled with the conditions subject to which the immunity was granted or that such person had, in the course of the settlement proceedings, concealed any particulars materials to the settlement or had given false evidence, and thereupon such person may be tried for the offence with respect to which the immunity was granted or for any other offence of which he appears to have been guilty in connection with the settlement and shall also become liable to the imposition of any penalty under this Act to which such person would have been liable, had not such immunity been granted.

245-I. Every order of settlement passed under sub-section (4) of section 245(D) shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in the Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force."

11. In view of section 245F(2), when an application made under section 245C has been allowed to be proceeded with under section 245D, the Settlement Commission shall have exclusive jurisdiction to exercise the powers and perform the functions of any income-tax authority under the Act in relation to the case till such time a final order under sub-section (4) of section 245D is passed. An exception to this absolute power and performance of functions of an income-tax authority under the Act in relation to the case, however, finds mention in sub-section (3) of section 245D, according to which, if the Settlement Commission is of the opinion that any further enquiry or investigation into the matter is necessary, it may direct the Commissioner of Income-tax to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case. Before passing the final order under sub-section (4) of section 245D, the Settlement Commission shall examine the records and the report of the Commissioner of Income-tax received under sub-section (1) and his further report, if any, received under sub-section (3) and after giving an opportunity to the applicant and to the Commissioner to be heard, and after examining such further evidence as may be placed before it or obtained by it, may pass an order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner under sub-section (1) or sub-section (3). Under section 245-H such an order passed by the Settlement Commission has been made conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in Chapter XIX-A of the Act, be reopened in any proceedings under this Act or under any other law for the time being in force. The Settlement Commission is vested with the power under section 245H to grant immunity to such an applicant from prosecution for any offence under the Act or under the Indian Penal Code or under any other Central Act for the time being in force and also from the imposition of any penalty (either wholly or in part) under the Act with respect to the case covered by the settlement and this power of granting immunity rests on the discretion of the Settlement Commission and may be exercised in favor of such applicant if the following two conditions are satisfied by him :

(a) he has co-operated with the Settlement Commission in the proceedings before it, and

(b) he has made a full and true disclosure of his income and the manner in which the same income has been derived.

12. Keeping in mind the aforesaid provisions contained in sections 245D, 245F(2), 245H and 245-H of the Act, when the Settlement Commission, after dealing with the objections of the Commissioner of Income-tax raised under the sub-section (1A) of section 245D, is not satisfied with the correctness of the same and dismisses the same on the basis of the material available at that point of time holding that concealment of income has not been established nor is likely to be established, there is no material left whatever with him at that particular point of time to continue with the prosecution of the person who has made the applications under section 245C for settlement as after the making of that application, it is the Settlement Commission alone in whom vests thereafter the exclusive jurisdiction under section 245F(2) to exercise the powers and perform the functions of an income tax authority under the Act in relation to the case including the power of continuing the prosecution already launched by the Commissioner of Income-Tax even prior to the making of the application under section 245D. The making of the aforesaid order by the Settlement Commission holding that no concealment of income had been established or is likely to be established acted as a complete interception at that point of time for the continuance of the prosecution against the petitioner for want of any material for the same and it was only thereafter that on considering the further report of the Commissioner of Income Tax on further enquiry or investigation under sub-section (3) or after examining such further evidence, as may be placed by the parties before the Settlement Commission or obtained by it and the examination of the material already before it and after hearing both the parties if the Settlement Commission while making the final order finds any concealment of income on the part of the petitioner, it may recommend the launching of a prosecution against the petitioner or may grant immunity from prosecution under section 245H and if no such immunity from prosecution under section is granted by the Settlement Commission, the thread may again be picked up by the Inspecting Assistant Commissioner of Income Tax (Assessment) for launching a fresh complaint against the petitioner on the basis of the material collected by the Settlement Commission under sub-sections (3) and (4) of section 245D and the finding of concealment resting thereupon, but the prosecution already launched by the Inspecting Assistant Commissioner of Income-tax (Assessment), Range XIV, New Delhi, against the petitioner cannot be allowed to continue during the void between the passing of the first order dated December 27, 1985, by the Settlement Commission that no concealment of income on the part of the petitioner had been established nor was likely to be established for the assessment year 1980-81 and the order of settlement yet to be passed by it under sub-section (4) of section 245D, during which period the verdict of "no concealment of income" having been given by the Settlement Commission against the Commissioner of Income tax rendered the present complaint against the petitioner bereft of any substratum necessary for prosecution of the petitioner, and the suggestion emanating from learned amices curiae, Mr. D. K. Jain, advocate, who is a brilliant expert on income-tax matters and who opposed the contentions of Mr. S. C. Gupta, learned counsel for the petitioner, regarding the interpretation of the question of law involved in this case, that the continuance of complaint against the petitioner may be ordered to be simply stayed till the settlement order is made by the Settlement Commission under sub-section (4) of section 245D cannot be accepted.

13. In the view geared up from the aforesaid discussion, this revision petition succeeds and so setting aside the impugned order dated July 23, 1986, passed by Smt. Manju Goel, ACMM, the complaint against the petitioner as also the order of summoning the petitioner as an accused person by the learned ACMM are quashed.

14. Before parting with the records of the case, I would like to record my deep appreciation of the great assistance rendered by learned amices curiae, Mr. D. k. Jain, advocate, whose ability and mastery of the Income-tax Act as also his preparedness of the case were at once sterling and impressive.

15. Petition allowed.