A.B. Shanthi @ Venniradai Nirmala vs The Asst. Director of Inspection (Investigation)

A.C. Arumugaperumal Adityan, J.—This revision petition has been preferred against the judgment in C.A.No.of 1997 on the file of the

Principle Sessions Judge, Chennai, which had arisen out of the judgment rendered by the learned Additional Chief Metropolitan Magistrate,

Chennai, in E.O.C.C.No.207 of 1986.

The short facts of the complaint is that the revision petitioner/accused, a cinema actress, had obtained a loan of Rs.4,65,000/- from the All India

Anna D.M.K party, Chennai, as per the entry made in the above said party''s ledger folio on 17.4.1986. The accused had admitted in her sworn

statement given before the Assistant Director of inspection (investigation) on 23.4.1986 about the above said borrowal of Rs.4,65,000/- from the

above said political party. According to the prosecution as per Section 269SS of Income Tax Act 1961, a person can obtain any loan or deposit

only through an account payee cheque or an account payee bank draft if the amount of loan exceeds Rs.10,000/-. Since the loan obtained by the

accused which is above Rs.10,000/- was not by way of account payee cheque or account payee bank draft, according to the prosecution, there is

a violation of Section 269SS of the Income Tax Act, 1961, by the accused which is liable to be punished u/s 276DD Rule with 269SS of the

Income Tax Act.

The case was taken on file by the learned Additional Chief Metropolitan Magistrate EO-II, Egmore, as E.O.C.C.No.207 of 1986 and on

appearance of the accused on summons copies u/s 207 Cr.P.C., were furnished to the accused and when charges were explained to her, she

pleaded not guilty.

Before the Trial Court P.Ws.1 to 5 were examined and Ex.P.1 to Ex.P.27 were marked. On the basis of the evidence of P.Ws.1 to 5 when the

incriminating circumstances were put to the accused, the accused had denied her complicity with the crime. The accused has examined herself as

D.W.1 and Ex.D.1 to Ex.D.3 were marked on her side.

When the proceedings were pending, the accused approached the Honourable Apex Court of India in Crl.A.601/1992 against the order passed

by this Court in Crl.M.P.2854/1988 challenging the constitutional validity of Section 269SS, 276DD & 271D of the Income Tax Act. The

Honourable Apex Court in Crl.A.No.601/1992 (alongwith Crl.A.4478/2000) has held that Section 269SS, 271D, 276DD are constitutional.

Crl.A.No.601/1992 was filed by the Assistant Director of Inspection (Investigation) of the Income Tax Department and the respondent therein is

the present accused Kumari.A.B.Shanthi. When the above said Crl.A.No.601/1992 was pending before the Honourable Apex Court, a direction

was given by the Honourable Apex Court in Crl.M.P.5557/1992 in Crl.A.No.601/1992, dated 26.7.1993, to the effect that the substantive

sentence in E.O.C.C.No.207 of 1986 shall not be given effect to until further orders from the Honourble Apex Court.

The learned Trial Judge after due consideration of the evidence both oral and documentary placed before him has come to the conclusion that

the charges levelled against the accused u/s 276DD r/w 269SS of Income Tax Act has been proved beyond any reasonable doubt and

accordingly convicted the accused and sentenced her to undergo 2 years RI and a fine of Rs.4,65,000/- with default sentence. The learned trial

judge has suspended the sentence of imprisonment alone as per the directions of the Honourable Apex Court in Crl.M.P.5557 of 1992 in

Crl.A.No.601 of 1992 dated 26.7.1993. Aggrieved by the findings of the learned Trial Judge, the accused had preferred an appeal before the

Principal Sessions Judge, Chennai, in C.A.182/87. The learned Sessions Judge, after giving due deliberations to the arguments adduced on both

sides, has confirmed the orders of the learned trial judge in E.O.C.C.No.207 of 1986 on the file of the Additional Chief Metropolitan Magistrate

EO-II, Egmore at Chennai, thereby dismissing the appeal. The learned Sessions Judge has also suspended the sentence of imprisonment and fine

as per the directions of the Honourable Apex Court in Crl.M.No.5557 of 1992 in Crl.A.No.601 of 1992 dated 26.7.1993, which necessitated

the accused to prefer this revision.

The learned Counsel Mr.A.K.Mylsamy appearing for the revision petitioner has not touched the merits of the case, but entire arguments of the

learned Counsel for the revision petitioner would revolve around the subsequent amendment in the Income Tax Act in respect of Section 276DD

which is the penal section for violation of the provision of Section 269SS of the Income Tax Act, 1961. Section 276DD of the Income Tax Act,

1961 was omitted by Direct Tax Laws (Amendment) Act, 1987 which came into force with effect from 1.4.1989. Relying on the ratio of the

Honourbale Apex Court in General Finance Co. and Another Vs. Assistant Commissioner of Income Tax, Punjab, , the learned Counsel for the

revision petitioner would contend that after the omission of Section 276DD from the Income Tax Act, 1961 by Direct Tax Laws (Amendment)

Act, 1987, a prosecution cannot be launched or continued for the violation of the provisions u/s 269SS of the Income Tax Act. The short facts of

the above cited case are that:

The appellants viz. General Finance Company and another had received deposits from one Amar Singh, Gurdev Singh and Hardev Singh on

different dates in the year 1985 and the said fact was disclosed in the income tax returns filed by them for the assessment year 1986-87. The

Income Tax department initiated prosecution against the appellants for an offence u/s 269SS of the Income Tax Act, 1961, which provides that no

person shall take or accept any other person any loan or deposit otherwise than by the account payee cheque or account payee bank draft which

exceeds Rs.10,000/- (now Rs.20,000/-). Section 276DD is the penal section for the violation of the provision u/s 269SS of the Income Tax Act

(herein after referred as the ""Act""). Section 276DD has been omitted from the Act by the Direct Tax Laws (Amendment) Act, 1987, with effect

from 1.4.1989. A complaint was filed u/s 276DD of the Act before the Chief Judicial Magistrate, Sangrur, on 31.3.1989. A petition u/s 482 of the

Cr.P.C., and Article 227 of the Constitution was filed for a direction to quash the proceedings for prosecution u/s 276DD of the Act. The High

Court took a view that at the time of initiation of the prosecution by the department the provision was in force ie., during the accounting year 1986-

87 and that the said provision u/s 276DD of the Act was omitted from the statute book only from 1.4.1989 and accordingly dismissed the writ

petition.

Aggrieved by the orders of the High Court, the appellants preferred an appeal before the Honourable Apex Court by Special Leave. The

contention putforward by the appellants before the Honourable Apex Court was that the offence, if at all, had been committed in the year 1985

prosecution could not be continued nor could the punishment be imposed u/s 276DD of the Act after it was omitted on and from 1.4.1989.

After hearing the learned Counsel appearing on both sides and also referring two earlier decisions rendered by the Constitution Benches of the

Honourable Apex Court in AIR 1970 SC 494 (Rayala Corporation (P) Ltd. and M.R.Pratap v. Director of Enforcement, New Delhi), and

Kolhapur Canesugar Works Ltd. and Another Vs. Union of India and Others, , wherein in has been held that Section 6 of the General Clauses

Act applies to a repealed law and not to omission, ultimately rendered the findings to the effect that Section 276DD of the Act stood omitted from

the Act, but not repealed and hence the prosecution could not be launched or continued by invoking Section 6 of the General Clauses Act after its

omission.

The relevant observation noteworthy in the above said ratio decidendi for the purpose of deciding this revision runs as follows:

Though we find the submissions of the learned Counsel to be forceful, we are constrained to follow the two decisions of the constitution Benches

of this Court in Rayala Corporation (P) Ltd case (supra) and Kolhapur Canesugar Works Ltd. case (supra). This view has held the field for over

three decades and reiterated even as late as two years ago. Non~compliance with Section 269SS of the Act attracted prosecution as well as

penalty. Omission of the provision regarding prosecution will not affect the levy of penalty. The advantage arising out of application of the ratio of

the two decisions resulting in prosecution in cases of non-compliance with Section 269SS of the Act is only transitional affecting a few cases arising

prior to 1.4.1989. Such cases may be few and far between. Hence, we find this is not an appropriate case for reference to the larger Bench.

Net result of this discussion is that the view taken by the High Court is not consistent with what has been stated by this Court in the two decisions

aforesaid and the principle underlying Section 6 of the General Clauses Act as saving the right to initiate proceedings for liabilities incurred during

the currency of the Act will not apply to omission of a provision in an Act but only to repeal, omission being different from repeal as held in the

aforesaid decisions. In the Income Tax Act, Section 276DD stood omitted from the act but not repealed and hence a prosecution could not have

been launched or continued by invoking Section 6 of the General Clauses Act after its omission.

The learned Counsel appearing for the revision petitioner relying on the above observation would content that the initiation of proceedings u/s

269SS of the Act against the revision petitioner itself is not maintainable after the omission of Section 276DD of the Act as per the Direct Tax

Laws (Amendment) Act with effect from 1.4.1989. The learned Counsel would attract the attention of this Court to the penal section provided u/s

271D of the Act which was also incorporated into the statute book by Direct Tax Laws (Amendment) Act, 1987 with effect from 1.4.1989 i.e.,

on the same day on which Section 276DD of the Act was directed to be omitted by the Direct Tax Laws (Amendment) Act, 1987. Section 271D

of the Act gives enormous powers to the Commissioner (Joint) of the Income Tax to levy penalty against any person who contravenes the

provisions of Section 269SS of the Act. After the induction of the above said provision of law, the Commissioner of Income Tax is empowered to

levy penalty on a person who violates the provision of Section 269SS of the Act. Relying on the above said provision of law ie., Section 271D of

the Act, the learned Counsel for the revision petitioner would contend that the judgment of the Courts below are liable to be set aside and matter

may be remanded to the Commissioner of the Income Tax, who had initiated the proceedings before the Court of law against the accused.

The learned Counsel would further contend that the prosecution initiated by the Complainant/Commissioner of Income Tax itself is null and void

in lieu of the omission of Section 276DD of the Act from the statute book. This contention of the learned Counsel for the revision petitioner, in my

view, cannot be sustainable because even a criminal proceedings were pending before the trial Court in E.O.C.C.No.207 of 1986 on the file of the

Additional Chief Metropolitan Magistrate EO-II, Egmore, the Honourable Apex Court has passed an order in Crl.M.P.5557 of 1992 in

Crl.A.No.601 of 1992 directing the trial Court to the effect that the substantive sentence shall not be given effect to until further orders. There was

no direction given by the Honourable Apex Court to stay the proceedings in E.O.C.C.No.207 of 1986 before the trial Court. In fact

Crl.A.No.601 of 1992 was preferred by the Assistant Director of Inspection (Investigation) of the Income Tax Department against the order

passed by the learned judge of this Court in a petition filed by the accused under Article 227 of the Constitution of India challenging the validity of

Section 269SS and 271D of the Income Tax Act, 1961, as ultra vires and unconstitutional.

After setting aside the findings rendered by the trial Court, the Honourable Apex Court in Crl.A.No.601 of 1992 has held that Section 269SS,

271D and 276DD of the Act are constitutional and cannot be said that they are draconian or exproprietory in nature. Under such circumstances, it

cannot be said that the initiation of proceedings by the complainant/Commissioner of Income Tax department in E.O.C.C.No.207 of 1986 after

the omission of Section 276DD of the Act is invalid or nonest in law because both the initiation as well as the continuation are prior to 1.4.1989 on

which date section 276DD of the Act was ommitted by way of Direct Tax Laws (Amendment) Act.

Now the point to the considered is whether the imposition of sentence by the Court below can be sustained. The accused was convicted by

the Court below to undergo RI for 2 years and a fine of Rs.4,65,000/- even after the amendment and after the omission of Section 276DD of the

Act, as per the penal provision inducted thereafter u/s 271D of the Act, the Income Tax Commissioner can levy only penalty and the person who

violates the provisions of Section 269SS of the Act, cannot be sentenced to any imprisonment. Under such circumstances, I am of the view that

the penalty levied by the Courts below by way of fine should sustain and only the sentence of 2 years RI alone is to be set aside in lieu of march of

law on this subject.

In fine, the revision is allowed in part and the sentence of two years RI on the accused passed in E.O.C.C.No.207/1986 on the file of the

Additional Chief Metropolitan Magistrate E.O-II, Egmore, Chennai, is set aside while confirming the fine of Rs.4,65,000/-.