Assistant Commissioner of Income Tax vs N.K. Mohamed Ali

C.T. Selvam, J.—As the petitioner and respondent are common in all these petitions and the same question is raised for consideration in all

of them, they can be disposed of by a common order.

The petitioner herein, an Assistant Commissioner in the Income Tax Department has preferred three complaints alleging commission of offences

by the respondent herein in respect of three different periods. These complaints were made on the assertion that the respondent had filed false

returns of income. The facts leading to the filing of the complaints do not in any manner weigh upon the issue arising for consideration and hence,

are not informed herein.

The complaints of the petitioner in EOCC Nos. 62,63,64 of 1992 are as follows:

a wilful attempt to evade Income Tax u/s 276C(1) of the Income Tax Act, 1961;

b filing of false return of income with false statement of accounts u/s 277 of the Income Tax Act, 1961;

c fabricating false evidence u/s 193 IPC;

d using such false evidence in judicial proceedings before the Income Tax Officer u/s 196 IPC;

e cheating the Income Tax Officer u/s 420 IPC.

for the Assessment Years 1984-85, 1985-86 and 1986-87.

Penalties were levied upon the respondent u/s 271(1)(c) of the Income Tax Act. Against the orders of penalty imposed by the department, the

respondent filed appeals before the Income Tax Appellate Tribunal, Madras. The Economic Offences Court has taken cognizance of the

complaints while these appeals were pending. The Appellate Tribunal allowed the appeals and the penalties levied against the respondent were

cancelled. The respondent had moved petitions for discharge on 06.03.1996 before the Economic Offences Court. The contention therein is that in

view of the order of the Appellate Tribunal undoing the levy of penalty, the very basis of prosecution in the complaint case has been taken away

and as such the complaints ought to be dismissed as groundless. The petitioner filed counter and the said petitions have not been disposed of till

date.

The petitioner herein has filed a petition u/s 244(2) Cr.P.C. on 21.07.2005, seeking a direction for issue of process to the list witnesses towards

their examination. This was done on the basis of a direction passed by this Court in decision reported in K.M. Mohamed Ali Vs. Assistant

Commissioner of Income Tax, .

The decision of this Court in K.M. Mohamed Ali Vs. Assistant Commissioner of Income Tax, came about in the following manner:

A petition u/s 311 Cr.P.C. was moved before the trial court by the petitioner herein, which was allowed. The respondent challenged that order.

This Court under order dated 17.04.1995 rejected the contention of the respondent observing as follows:

the Magistrate shall proceed to hear the prosecution and take all such evidence as may be produced in support of the prosecution. Accepting the

contention of the petitioner amounts to narrowing the scope of Section 244, Criminal Procedure code, and would actually lead to grave injustice

and hardship to the complainants.

The petitioner informs that pursuant to the order of this Court, witnesses were produced before the lower Court, but the matter has been

adjourned on a petition moved on behalf of the respondent u/s 309 Cr.P.C. Thereafter, the respondent filed a petition u/s 245(2) Cr.P.C. seeking

discharge.

The petitioner had filed a counter taking the stand that 245(2) Cr.P.C. petition was not maintainable without the evidence of the prosecution

being recorded u/s 244(1) Cr.P.C. The contention was that the petition u/s 245(2) Cr.P.C. will be considered only after taking evidence of the

prosecution u/s 244(1) Cr.P.C. The petition moved by the respondent u/s 245(2) Cr.P.C. had been kept endlessly pending and the reason

therefore is not clear. As above stated, on 21.07.2005, the petitioner moved a petition u/s 244(2) Cr.P.C. before the trial Court seeking a

direction for issue of process to the witnesses.

The trial Court has required the prosecution to argue on the maintainability of the petition filed by the complainant u/s 244(2) Cr.P.C. Written

arguments were submitted by the prosecution on 01.08.2005. Informing that the trial Court is not following the procedure prescribed in Chapter

XIXB, Sections 244 - 247 Cr.P.C. and the unwillingness of the lower Court to follow the decision of the Honourable Apex Court and

disobedience of circular issued by this Court in S. MOHAN GANDHI Vs. 1. SRI VISALAM CHIT FUNDS AND OTHERS. (CRL. R. C.

NO. 584 OF 1983) 2. NELLAI FINANCE P. LTD. AND OTHERS. (CRL. R.C. NO. 794 OF 1984)., , the petitioner seeks a direction to the

trial Court to record evidence u/s 244 Cr. P.C.

I have heard Mr. T.I. Ramanathan, learned Special Public Prosecutor (I.T.) and Mr. A. Raghunathan, learned Counsel for the respondent.

While, the contention of the learned Special Public Prosecutor (I.T.) is that the stage for discharge u/s 245(2) Cr.P.C. would arise only after

recording of evidence of prosecution in keeping with Section 244 Cr.P.C., the learned Senior counsel for the respondent would submit that

Section 245(2) Cr.P.C. specifically informs that an order of discharge of the accused could be passed at any previous stage of the case if, for

reasons to be recorded, the Magistrate considers the charge to be groundless. Strong reliance was placed on the decision of the Honourable Apex

Court in Ajoy Kumar Ghose Vs. State of Jharkhand and Another, , wherein it had been specifically stated in Paragraph 20 as follows:

We are convinced that u/s 245(2) Cr.P.C., the Magistrate can discharge the accused at any previous stage, i.e., even before any evidence is

recorded u/s 244(1) Cr.P.C. and if u/s 245(2) Cr.P.C., there could be a discharge at any previous stage then there is a necessary sequel, an

application could also be made at that stage.

The learned Senior counsel would submit that respondent had moved an application for discharge on the ground that the prosecution case is

groundless. Such a petition specifically had been held to be maintainable by the Honourable Apex Court in the decision referred to above. It is

contended that the trial Court ought to be permitted to dispose of the petition of the respondent u/s 245(2) before doing anything further.

On a perusal of the above judgments, it is clear that a petition for discharge u/s 245(2) Cr.P.C. would be maintainable before the stage of

examination of witnesses contemplated u/s 244 Cr.P.C. has been passed. If the matter stood thus, there would be no difficulty in disposing of the

petition. But, this Court finds that the petition for discharge moved u/s 245(2) Cr.P.C. rests solely on the contention that the order of the Tribunal,

whereby the levy of penalty against the respondent stands undone would render the complaint cases groundless.

Elaborate arguments have been advanced by either side on the binding nature of the order of the Tribunal upon a criminal Court. While, the

learned Senior counsel for the respondent would submit that the same would be binding on the trial Court, the learned Special Public Prosecutor

would argue otherwise. Various decisions were relied upon by counsel on either side.

The submissions of the learned Senior counsel for the respondent predominantly lie on the reasoning of the Honourable Apex Court in K.C.

Builders and Another Vs. The Assistant Commissioner of Income Tax, and other decisions which reflect a similar line of thought and to the effect

that levy of penalties and prosecution u/s 276C of the Income Tax Act are simultaneous and hence, once the penalties are cancelled on the ground

that there was (no) concealment, the quashing of prosecution u/s 276C of the Income Tax Act was automatic.

In Standard Chartered Bank and Others Vs. Directorate of Enforcement and Others, , the Honourable Apex Court has distinguished the

decision in K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, , case in the following words:

The decision in K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, is clearly distinguishable. The court proceeded as if

under the Income Tax Act, the prosecution is dependent on the imposition of penalty. That was a case where the prosecution was based on a

finding of concealment of income and the imposition of penalty. When the Tribunal held that there was no concealment, and the order levying

penalty was cancelled, according to this court, the very foundation for the prosecution itself disappeared. This Court held that it was settled law

that levy of penalties and prosecution u/s 276C of the Income Tax Act are simultaneous and hence, once the penalties are cancelled on the ground

that there was (no) concealment, the quashing of the prosecution u/s 276C of the Income Tax Act was automatic. We have held already that on

the scheme of the FERA, the adjudication and the prosecution are distinct and separate. Hence, the ratio of the above decision is not applicable.

That apart, there is merit in the submission of the learned Additional Solicitor-General that the correctness of the view taken in K.C. Builders and

Another Vs. The Assistant Commissioner of Income Tax, may require reconsideration as the reasoning appears to run counter to the one adopted

by the Constitution Bench in Assistant Collector of Customs, Bombay v. L.R. Melwani (supra) and in other decisions not referred to therein.

Though, in such case, the Honourable Apex Court was seized of a matter arising under FERA, the observations therein and the reference to

the decision of Constitution Bench in The Assistant Collector of Customs, Bombay and Anr. v. L.R. Melwani and Anr. AIR 1970 Supreme Court

962 are most relevant. It would be useful to extract paragraphs 4 to 9 thereof:

4.The prosecution case is that the accused persons and some other unknown persons had entered into a conspiracy at Bombay and other places in

the beginning of October 1959 or thereabout for the purpose of smuggling goods into India and in pursuance of that conspiracy they had smuggled

several items of foreign goods in the years 1959 and 1960.

5.In that connection an enquiry was held by the Customs Authorities. In the course of the enquiry some of the goods said to have been smuggled

were seized. After the close of the enquiry those goods were ordered to be confiscated. In addition penalty was imposed on some of the accused.

Thereafter on February 19, 1965, the Assistant Collector of Customs, Bombay after obtaining the required sanction of the Government filed a

complaint against five persons including the appellants in Criminal Appeal No. 35 of 1967 (accused Nos. 1 and 2 in the case) u/s 120-B Indian

Penal Code read with Clauses (37), (75), (76) and (81) of Section 167 of the Sea Customs Act, 1878 (Act VIII of 1878) as well as u/s 5 of the

Imports and Exports (Control) Act, 1947. Before the commencement of the enquiry in that complaint, the 1st accused filed on August 3, 1965, the

application mentioned above.

6.Now we shall proceed to examine the contentions set out earlier.

6A. Reliance on Article 20(2) is placed under the following circumstances. In the enquiry held by the Collector of Customs, he gave the benefit of

doubt to accused Nos. 1 and 2. This is what he stated therein:

As regards M/s. Larmel Enterprises (of which accused No. 1 is the proprietor and accused No. 2 is the Manager) although it is apparent that they

have directly assisted the importers in their illegal activities and are morally guilty, since there is no conclusive evidence against them to hold them as

persons concerned in the act of unauthorised importation, they escape on a benefit of doubt.

Despite this finding the Assistant Collector in his complaint referred to earlier seeks to prosecute these accused persons. Hence the question is

whether that prosecution is barred under Article 20(2) of the Constitution which says that no person shall be prosecuted and punished for the same

offence more than once. This Article has no direct bearing on the question at issue. Evidently those accused persons want to spell out from this

Article the rule of autre fois acquit embodied in Section 403, Criminal Procedure Code. Assuming we can do that, still it is not possible to hold that

a proceeding before the Collector of Customs is a prosecution for an offence. In order to get the benefit of Section 403, Criminal Procedure Code

or Article 20(2), it is necessary for an accused person to establish that he had been tried by a ""Court of competent jurisdiction"" for an offence and

he is convicted or acquitted of that offence and the said conviction or acquittal is in force. If that much is established, it can be contended that he is

not liable to be tried again for the same offence nor on the same facts for any other offence for which a different charge from the one made against

him might have been made u/s 236 or for which he might have been convicted u/s 273. It has been repeatedly held by this Court that adjudication

before a Collector of Customs is not a ""prosecution"" nor the Collector of Customs a ""Court"". In Maqbool Hussain Vs. The State of Bombay, , this

Court held that the wording of Article 20 of the Constitution and the words used therein show that the proceedings therein contemplated are

proceedings of the nature of criminal proceedings before a court of law or a judicial tribunal and ""prosecution"" in this context would mean an

initiation or starting of proceedings of a criminal nature before a Court of law or a judicial tribunal in accordance with the procedure prescribed in

the statute which creates the offence and regulates the procedure. This Court further held that where a person against whom proceedings had been

taken by the Sea Customs Authorities u/s 167 of the Sea Customs Act and an order for confiscation of goods had been passed, was subsequently

prosecuted before a Criminal Court for an offence u/s 23 of the Foreign Exchange Regulation Act in respect of the same act, the proceeding

before the Sea Customs Authorities was not a ""prosecution"" and the order for confiscation was not a ""punishment"" inflicted by a Court or judicial

tribunal within the meaning of Article 20(2) of the Constitution and hence his subsequent prosecution was not barred. The said rule was reiterated

in Thomas Dana Vs. The State of Punjab, and in several other cases.

We shall now take up the contention that the finding of the Collector of Customs referred to earlier operated as an issue estoppel in the present

prosecution. The issue estoppel rule is but a facet of the doctrine of autre fois acquit. In Sambasivan v. Public Prosecutor, Federation of Malaya

1950 AC 458 at p. 479, Lord Mac Dermott enunciated the said rule thus:

The effect of a verdict of acquittal pronounced by a competent court on a lawful charge and after a lawful trial is not completely stated by saying

that the person acquitted cannot be tried again for the same offence. To that it must be added that the verdict is binding and conclusive in all

subsequent proceedings between the parties to the adjudication. The maxim ""Res judicata pro veritate accipitur"" is no less applicable to criminal

than to civil proceedings. Here, the appellant having been acquitted at the first trial on the charge of having ammunition in his possession, the

prosecution was bound to accept the correctness of that verdict and was precluded from taking any step to challenge it at the second trial. And the

appellant was no less entitled to rely on his acquittal in so far as it might be relevant in his defence. That it was not conclusive of his innocence on

the firearm charge is plain, but it undoubtedly reduced in some degree the weight of the case against him, for at the first trial the facts proved in

support of one charge were clearly relevant to the other having regard to the circumstances in which the ammunition and revolver were found and

the fact that they fitted each other.

The rule laid down in that decision was adopted by this Court in Pritam Singh and Another Vs. The State of Punjab, and again in N.R. Ghose Vs.

The State of West Bengal, . But before an accused can call into aid the above rule, he must establish that in a previous lawful trial before a

competent court, he has secured a verdict of acquittal which verdict is binding on his prosecutor. In the instant case for the reasons already

mentioned, we are unable to hold that the proceeding before the Collector of Customs is a criminal trial. From this it follows that the decision of the

Collector does not amount to a verdict of acquittal in favour of accused Nos. 1 and 2.

This takes us to the contention whether the prosecution must be quashed because of the delay in instituting the same. It is urged on behalf of the

accused that because of the delay in launching the same, the present prosecution amounts to an abuse of the process of the Court. The High Court

has repelled that contention. It has come to the conclusion that the delay in filing the complaint is satisfactorily explained. That apart, it is not the

case of the accused that any period of limitation is prescribed for filing the complaint. Hence the Court before which the complaint was filed could

not have thrown out the same on the sole ground that there has been delay in filing it. The question of delay in filing a complaint may be a

circumstance to be taken into consideration in arriving at the final verdict. But by itself it affords no ground for dismissing the complaint. Hence we

see no substance in the contention that the prosecution should be quashed on the ground that there was delay in instituting the complaint.

In P. Jayappan v. S.K. Perumal, First Income Tax Officer, Tuticorin ITR 149 696 the Honourable Apex Court has observed as follows:

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 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 had

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.

It further has observed that

The power conferred on the Commissioner u/s 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 u/s 271(1)(iii) of the Act in exercise of his discretion u/s 273A, Section

279(1A) comes into operation and acts as a statutory bar for proceeding with the prosecution u/s 276C or Section 277. It does not, however,

provide that merely because there is a possibility of the Commissioner passing an order u/s 273A, the prosecution shall not be instituted.

It is the rationale of the judgments of the Honourable Apex Court that are to be followed by this Court. In so doing, this Court would have to

accept the contention of the learned Special Public Prosecutor (I.T.) that the finding of the Tribunal can have no binding effect on the proceedings

of the criminal Court. This Court also finds that the present complaints do not stop with offences under the Income Tax Act. They also speak of

commission of offences under Sections 193, 196 and 420 IPC towards commission of offence under the Income Tax Act. Thus, it is clear that the

finding of the Tribunal cannot render the proceedings before the criminal Court groundless.

In conclusion,

i. A petition for discharge u/s 245(2) Cr.P.C. would be maintainable at a stage prior to recording of evidence u/s 244 Cr.P.C. As I find, in the

instant case that the order of the Tribunal will not be the last word on the matter, the lower Court shall take up the petition u/s 245(2) Cr.P.C. and

dispose of the same in keeping with the observations herein above made.

ii. Thereafter, the lower Court shall take up the petition filed by the petitioner u/s 244(2) Cr.P.C., issue summons to the witnesses and proceed

further in the case.

This is an unfortunate case which has been pending on the file of the lower Court from the year 1992. Interests of justice would require for

early disposal of the case. Accordingly, the lower Court is directed to complete the proceedings before it within a period of six months from the

date of receipt of a copy of this order.

The observations herein above are merely towards disposal of present petitions pending before this Court and shall not in any manner influence

the lower Court.

These Criminal Original Petitions are disposed of with the above direction. Consequently, the connected miscellaneous petitions are closed.