JUDGMENT
Kamlesh Sharma, J.
1. Both these petitions (Cr. M. Ps. (M) Nos. 1023 and 1024 of 1988) are being disposed of by a common judgment as these involve identical facts and questions of law and the parties are also the same.
2. The facts giving rise to Criminal Miscellaneous Petition (Main) No. 1023 of 1988 are that pro forma respondent No. 3, Naubat Rai, who was Karyana dealer at ]oginder Nagar, filed his income-tax return for the year 1971-72 with the Income-tax Officer, Mandi. He had shown in his income-tax return rental income of Rs. 3,500 net from his building alleged to be let out to his son, Vinod Kumar, the petitioner. It was also the case of Naubat Rai that in the said building his son, Vinod Kumar, was running a hotel in the name and style of Messrs. Tourist Hotel. But from the evidence, the Income-tax Officer found that Naubat Rai, the assessee, was
himself running the hotel and in order to conceal his income from the hotel business and evade tax, he had put up the false plea of giving the building on rent to his son, Vinod Kumar. Accordingly, the Income-tax Officer assessed the income from the hotel business at Rs. 35,000 and added the same to the income of Naubat Rai by his assessment order dated September 23, 1974. He also gave a penalty notice under Section 274/271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), for concealment of particulars of income, to Naubat Rai.
3. In the appeal filed by Naubat Rai, the Appellate Assistant Commissioner of Income-tax, Ludhiana Range, Ludhiana, upheld the findings of the Income-tax Officer that Messrs. Tourist Hotel was being run by the assessee himself and not by his son, Vinod Kumar, but reduced the income from the hotel business from Rs. 35,000 to Rs. 15,000 by his order dated March 1, 1975. Thereafter, a second appeal was filed by Naubat Rai before the Income-tax Appellate Tribunal, Chandigarh Bench, which by its order dated September 21, 197G, further reduced the income from the hotel business to Rs. 8,000.
4. The Income-tax Officer by his order dated October 16, 1975, had also imposed penalty on Naubat Rai under Section 27l(1)(c) of the Act. But this order was set aside by the Appellate Assistant Commissioner of Income-tax, Ludhiana Range, Ludhiana, on December 6, 1977, inter alia, on the ground that it was passed without giving proper opportunity to the assessee.
5. Thereafter, the Income-tax Officer, Mandi, filed a complaint against Naubat Rai, Vinod Kumar and one Nanak Chand under Sections 277 and 278 of the Act read with Sections 193, 177 and 109 of the Indian Penal Code. Besides the above-stated facts, it was alleged in the complaint that on further enquiry, the rent deed dated April 1, 1970, executed by Naubat Rai in favour of his son, Vinod Kumar, and witnessed by Nanak Chand was found fabricated, inasmuch as, on the date of its execution, i.e., April 1, 1970, the non-judicial stamp papers on which it was written were not printed and issued for sale by the India Security Press, Nasik. On the facts alleged in the complaint, Naubat Rai was accused of the offences under Section 277 of the Act read with Sections 193, 177 and 109 of the Indian Penal Code, and his son, Vinod Kumar, and one Nanak Chand of offences under Section 278 of the Act read with Sections 193, 177 and 109 of the Indian Penal Code. This complaint was filed on the authorisation order dated March 13, 1981, of the then Income-tax Commissioner, Patiala.
6.
In the complaint the accused were summoned and after prolonged proceedings, the charge was framed ultimately on October 14, 1987, by the Chief ]udicial Magistrate, Mandi. While framing the charge, the Chief Judicial Magistrate, Mandi, has held that the offences alleged against the accused persons were made out from the pre-charge evidence. The contention raised on behalf of the accused persons that their case was covered under Section 279(1A) of the Act as the penalty order stood cancelled was rejected. These findings were upheld by the Sessions Judge, Mandi, in his order dated October 6, 1988, passed in criminal revision filed by the accused persons except that the charge framed against Nanak Chand was declared untenable.
7. Similarly, in the income-tax return of 1972-73, Naubat Rai had again shown rental income of Rs. 4,200 net from his building which was alleged to be let out to his son, Vinod Kumar. Taking into consideration, the assessment order of the earlier year as well as the order dated March 1, 1975, passed by the Appellate Assistant Commissioner, which had come into existence in the meantime, the Income-tax Officer, Mandi, assessed the income from Messrs. Tourist Hotel business at Rs. 20,000 by his order dated March 21, 1975. For concealment of particulars of income from the hotel business, a penalty notice under Section 274 read with Section 271(1)(c) of the Act was also given. Thereafter, a penalty of Rs. 7,500 was also imposed under Section 271(1)(c) of the Act by the Income-tax Officer, Mandi, which was confirmed by the Appellate Assistant Commissioner of Income-tax in the second appeal filed by Naubat Rai. The Income-tax Appellate Tribunal, Chandigarh, remitted the penalty by its order dated September 30, 1982.
8. In respect of income-tax return for the year 1972-73 another criminal complaint was filed by the Income-tax Officer, Mandi, against Naubat Rai, Vinod Kumar and Nanak Chand in the court of the Chief Judicial Magistrate, Mandi. The facts and circumstances brought on record in the said complaint and the offences alleged against the accused persons were similar as these were in the criminal complaint filed in respect of the income-tax return for the year 1971-72. In this criminal complaint, charges were framed against the accused persons on October 14, 1987, by the Chief Judicial Magistrate, Mandi, holding that from the pre-charge evidence on record, offences alleged against the accused persons were made out. It was also held that the cancellation of the penalty order had no effect on the continuation of criminal proceedings. In the criminal revision petition filed against the order dated October 14, 1987, of the Chief Judicial
Magistrate, Mandi, the Sessions Judge, Mandi, upheld the findings of the trial court except that the charge framed against Nanak Chand was declared untenable. Both the criminal revision petitions against the orders of charge passed in both the criminal complaints were disposed of by a common order dated October 6, 1988, which has been challenged before this court in the present petitions.
9. I have heard learned counsel for the parties and have gone through the record. The first point raised by Shri M. C. Mandhotra, learned counsel for the petitioner, is that Vinod Kumar and his father, Naubat Rai, cannot be proceeded against under Section 277 and other sections of the Act as the penalty imposed upon Naubat Rai stood cancelled for the year 1970-71 and remitted for the year 1971-72. For making this submission, Shri Mandhotra has referred to Section 279(lA) of the Act. On the other hand, Shri Inder Singh, learned counsel for the first respondent, has opposed it and according to him, this section has no application to the present case.
10. To find out the answer, first, the provisions of law are to be perused. Section 279(iA) is :
“A person shall not be proceeded against for an offence under Section 27GC 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.”
11. Section 279(1A) of the Act is in existence since October 1, 1975, and it will apply to the present case but it is to be seen whether penalty has been waived or reduced under Section 273A of the Act. The relevant portion of Section 273A is :
“273A. Power to reduce or waive penalty, etc., in certain cases.–(1) Notwithstanding anything contained in this Act, the Chief Commissioner or Commissioner may, in his discretion, whether on his own motion or otherwise,–….
(ii) reduce or waive the amount of penalty imposed or imposable on a person under Clause (iii) of Sub-section (1) of Section 271.; or . . .. ”
12. Clause (iii) of Sub-section (1) of Section 271 has been in the Act from October 1, 1975, and it governs the present case also, but the point to be examined is whether in the present case penalty has been waived or reduced by the Commissioner as provided in this section. The order dated
December 6, 1977, cancelling the penalty order dated October 16, 1975, of the Income-tax Officer, Mandi, in respect of the year 1970-71 was passed by the Appellate Assistant Commissioner of Income-tax under Section 250(6) of the Act Similarly, the order dated September 30, 1982, remitting the penalty imposed by the Income-tax Officer, Mandi, and affirmed by the Appellate Assistant Commissioner, was passed by the Income-tax Appellate Tribunal. Admittedly, these orders were not passed by the Commissioner of Income-tax. Later on, the Commissioner of Income-tax, Patiala, had passed authorisation orders dated March 13, 1981, in favour of the Income-tax Officer, Mandi, to file complaints against Naubat Rai under Section 277 of the Act read with Sections 109, 177 and 193 of the Indian Penal Code and against Vinod Kumar and Nanak Chand under Section 278 of the Act read with Sections 109, 177 and 193 of the Indian Penal Code in the court of the competent jurisdiction at Maridi. These authorisation orders were brought on the record of the trial Magistrate as exhibits P-6 and P-10. These were granted by the Commissioner under Section 279 of the Act which provides that a person shall not be proceeded against for offences under Sections 275A, 276, 276A, 276BB, 276C, 276CC, 276D, 277 or Section 278 except with the previous sanction of the Chief Commissioner or the Director-General or the Commissioner. Had the Commissioner of Income-tax waived or reduced the penalty as provided under Section 279(1A) of the Act, he would not have granted sanction/ authorisation orders for prosecution of Naubat Rai, Vinod Kumar and Nanak Chand.
13. In P. Jayappan v. S. K. Perumal, First ITO [1984] 149 ITR 696 ; AIR 1984 SC 1693, the learned judges have made certain observations which are relevant in the present case, though the point before them was a little different in that criminal proceedings under Sections 276C and 277 of the Act and under Sections 193 and 196 of the Indian Penal Code should have been dropped in view of the pendency of assessment proceedings in which the assessee might be absolved of his liability. The observations are in paragraph 5 (at page 1695 of AIR 1984 SC) (at page 700 of 149 ITR) :
“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 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 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. 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 v. ITO [1982] 133 ITR 909 (SC), 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 27GC 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 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 even 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 an 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. . . Section 2 79(1 A) 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, that Section 279(1A) comes into operation and acts as a statutory bar on 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 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.”
14. Further in paragraph 6 (at page 1696) (at page 702 of 149 ITR) :
“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.”
15. In the result, the first submission made by Shri Mandhotra has no force.
16. The next submission made on behalf of the petitioner is that the prosecution of the petitioner and Naubat Rai under Sections 177 and 193 of the Indian Penal Code is bad as Section 195 of the Criminal Procedure Code has not boon complied with. But this argument is raised only to be rejected. Admittedly, in the present case, the complaint has been filed by the Income-tax Officer, Mandi, on the authorisation of his superior, i.e., the Commissioner of Income-tax, Patiala, who is a public servant. As such Section 195(1)(a) of the Criminal Procedure Code is duly complied with in respect of the offence under Section 177 of the Indian Penal Code.
17.
So far as Section 195(1)(b) of the Criminal Procedure Code is concerned, it is to be read with Section 136 of the Act whereby any proceeding under the said Act before an income-tax authority shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 and for the purposes of Section 196 of the Indian Penal Code and every income-tax authority shall be deemed to be a civil court for the purposes of Section 195, but not for the purposes of Chapter XXVI of the Code of Criminal Procedure. As such, the Income-tax Officer, Mandi, is a civil court as provided under Sub-section (3) of Section 195 of the Code of Criminal Procedure and he has made the complaint in writing. Section 136 of the Act was amended by the Finance Act of 1985 with retrospective effect from April 1, 1974, and it applies to the present case. As Chapter XXVI of the Criminal Procedure Code has been excluded from the provisions of Section 136 of the Act, Sections 340 and 341 of the Criminal Procedure Code which provide the procedure in the cases mentioned in Section 195(1) of the Criminal Procedure Code and appeal against the order passed under Section 340 of the Code of Criminal Procedure do not lie in cases of complaints by the authorities of income-tax under Sections 177 and 193 of the Indian Penal Code.
18. So far as the point that offences under Sections 177 and 193 of the Indian Penal Code are barred by the limitation prescribed under Section 468 of the Code of Criminal Procedure as raised by Shri Mandhotra is concerned, this court is not inclined to decide it as it was not raised before the courts below and the trial is at the advanced stage of recording the statement of the accused persons under Section 313 of the Code of Criminal Procedure. The petitioner is at liberty to raise this point before the trial court.
19. The result of the above discussion is that these petitions fail and are dismissed. The records of the trial court be sent back immediately to enable it to proceed with the trial in accordance with law.