2001 JTR(SC) 395
2001 AIR(SC) 1096 ; 2001 AIR(SCW) 1006 ; 2001 AllMR(Cri)(SC) 1208 ; 2001 2 CHN(SC) 36 ; 2001 2 Crimes(SC) 56 ; 2001 2 CTC 635 ; 2001 167 CTR 283 ; 2001 248 ITR 830 ; 2001 1 JLJR(SC) 534 ; 2001 3 JT 271 ; 2001 2 Scale 266 ; 2001 3 SCC 459 ; 2001 SCC(Cri) 544 ; 2001 2 SCR 178 ; 2001 TaxLR 485 ; 2001 116 Taxman 746 ; 2001 2 UJ 1086 ; 2001 KHC 1059 ; 2001 2 Supreme 417
2001(2) Supreme 417
SUPREME COURT OF INDIA
(From Bombay High Court)
S. Rajendra Babu and S.N. Phukan, JJ.
Commissioner of Income Tax, Mumbai -Petitioner
versus
Bhupen Champak Lal Dalal & Anr. etc. -Respondents
SLP (Crl.) No. 2430 of 2000
With
SLP (Crl.) Nos. 2995 and 3141 of 2000
Decided on 27-2-2001
Counsel for the Parties :
For the Petitioner : Altaf Ahmad, Additional Solicitor General, Mrs. Laxmi Aiyangari, Rajiv Nanda, R.N. Verma, Amit Mahajan, B.V. Balram Das and Ms. Sushma Suri, Advocates.
For the Respondents : Dr. Rajiv Dhavan, Sr. Advocate, Vimal Chandra S. Dave, Manoj Shukla, S.S. Shinde and S.V. Deshpande, Advocates.
IMPORTANT POINT
High Court was justified in granting the interim order of stay when ultimately the result of proceedings before I.T. Appellate authorities have a definite bearing on the criminal cases alleged against the respondents/assessees.
Act
Referred
:CONSTITUTION OF INDIA : Art.226
INCOME TAX ACT : .
(A) The proceedings involve twelve cases instituted under the Income Tax Act, 1961 before a Metropolitan Magistrate concerning offences punishable under the Act, where related assessments gave rise to appeals pending before the Commissioner of Income Tax [Appeals] or the Income Tax Appellate Tribunal. The respondents sought a stay of the criminal proceedings on the basis that the appellate authorities findings were relevant to the criminal prosecution and to avoid conflicting outcomes. The court relied on the interplay between adjudicatory processes under the Act and criminal proceedings, examining whether findings of the appellate authorities are relevant for the criminal prosecution and addressing the question of whether criminal proceedings can continue during pendency of income tax appeals, while also considering the principles governing quashing of prosecutions under Section 482 of the Code of Criminal Procedure. Article 226 of the Constitution of India is relevant to the High Courts exercise of jurisdiction in entertaining the writ petition against the interim order.
(B) The core legal principles include: (i) criminal proceedings under the Income Tax Act are independent and may proceed during pendency of income tax appeals; (ii) appellate findings under the Act may be relevant to criminal proceedings where the issue in the criminal case necessarily depends on the outcome of the tax assessment; (iii) interim orders staying criminal proceedings are permissible to avoid conflicting decisions and ensure harmonious adjudication; (iv) the doctrine of quashing under Section 482 Cr.P.C. applies where the conclusion of appellate authorities determines the relevant facts; and (v) the High Court has discretionary power to grant interim relief in such cross-jurisdictional disputes.
Facts of the case:
Twelve criminal cases were filed against the respondents under the Income Tax Act, 1961 before a Metropolitan Magistrate. In relation to assessments under the Act, appeals were filed before the Commissioner of Income Tax [Appeals] or the Income Tax Appellate Tribunal. The respondents filed applications for stay of criminal proceedings on the ground that the appellate proceedings were pending. The learned Magistrate, after examining relevant case law, passed an interim order staying the passing of orders on framing of charges, discharge, or acquittal of the accused until the appeals before the Income Tax Appellate Authorities were finally decided. Revision petitions were filed before the Sessions Court, which dismissed the same. The High Court, while entertaining a writ petition, granted an interim order staying the criminal proceedings. Special leave petitions were then filed challenging the High Courts order.
Findings of Court:
The Supreme Court held that while criminal proceedings are independent and may proceed during pendency of tax assessments, a wholesome rule must be adopted where appellate conclusions have a bearing on the criminal case and one authority must await the outcome of the other. The Court relied on prior precedents to emphasize that prosecution cannot be sustained if the relevant facts are dependent on the outcome of appellate proceedings. It found that the High Court was justified in granting the interim order and declined to interfere with it.
Issues:
(i) Whether the findings of the Income Tax Appellate Authorities are relevant to the criminal prosecution. (ii) Whether criminal proceedings can continue during the pendency of income tax appeals. (iii) Whether an interim order staying the criminal proceedings is permissible to avoid conflicting decisions.
Ratio Decidendi:
The Court held that although criminal proceedings are independent, where the conclusion in the criminal case necessarily depends on the outcome of the income tax assessment, the criminal prosecution must await the decision of the appellate authorities. The interim stay granted by the High Court was justified to prevent conflicting findings and ensure that the determination of tax liability does not prejudice the criminal proceedings.
Result:
The special leave petitions are dismissed without costs, and the interim order of the High Court staying the criminal proceedings during the pendency of the income tax appeals is upheld.
(A) The proceedings involve twelve cases instituted under the Income Tax Act, 1961 before a Metropolitan Magistrate concerning offences punishable under the Act, where related assessments gave rise to appeals pending before the Commissioner of Income Tax [Appeals] or the Income Tax Appellate Tribunal. The respondents sought a stay of the criminal proceedings on the basis that the appellate authorities findings were relevant to the criminal prosecution and to avoid conflicting outcomes. The court relied on the interplay between adjudicatory processes under the Act and criminal proceedings, examining whether findings of the appellate authorities are relevant for the criminal prosecution and addressing the question of whether criminal proceedings can continue during pendency of income tax appeals, while also considering the principles governing quashing of prosecutions under Section 482 of the Code of Criminal Procedure. Article 226 of the Constitution of India is relevant to the High Courts exercise of jurisdiction in entertaining the writ petition against the interim order.
(B) The core legal principles include: (i) criminal proceedings under the Income Tax Act are independent and may proceed during pendency of income tax appeals; (ii) appellate findings under the Act may be relevant to criminal proceedings where the issue in the criminal case necessarily depends on the outcome of the tax assessment; (iii) interim orders staying criminal proceedings are permissible to avoid conflicting decisions and ensure harmonious adjudication; (iv) the doctrine of quashing under Section 482 Cr.P.C. applies where the conclusion of appellate authorities determines the relevant facts; and (v) the High Court has discretionary power to grant interim relief in such cross-jurisdictional disputes.
Facts of the case:
Twelve criminal cases were filed against the respondents under the Income Tax Act, 1961 before a Metropolitan Magistrate. In relation to assessments under the Act, appeals were filed before the Commissioner of Income Tax [Appeals] or the Income Tax Appellate Tribunal. The respondents filed applications for stay of criminal proceedings on the ground that the appellate proceedings were pending. The learned Magistrate, after examining relevant case law, passed an interim order staying the passing of orders on framing of charges, discharge, or acquittal of the accused until the appeals before the Income Tax Appellate Authorities were finally decided. Revision petitions were filed before the Sessions Court, which dismissed the same. The High Court, while entertaining a writ petition, granted an interim order staying the criminal proceedings. Special leave petitions were then filed challenging the High Courts order.
Findings of Court:
The Supreme Court held that while criminal proceedings are independent and may proceed during pendency of tax assessments, a wholesome rule must be adopted where appellate conclusions have a bearing on the criminal case and one authority must await the outcome of the other. The Court relied on prior precedents to emphasize that prosecution cannot be sustained if the relevant facts are dependent on the outcome of appellate proceedings. It found that the High Court was justified in granting the interim order and declined to interfere with it.
Issues:
(i) Whether the findings of the Income Tax Appellate Authorities are relevant to the criminal prosecution. (ii) Whether criminal proceedings can continue during the pendency of income tax appeals. (iii) Whether an interim order staying the criminal proceedings is permissible to avoid conflicting decisions.
Ratio Decidendi:
The Court held that although criminal proceedings are independent, where the conclusion in the criminal case necessarily depends on the outcome of the income tax assessment, the criminal prosecution must await the decision of the appellate authorities. The interim stay granted by the High Court was justified to prevent conflicting findings and ensure that the determination of tax liability does not prejudice the criminal proceedings.
Result:
The special leave petitions are dismissed without costs, and the interim order of the High Court staying the criminal proceedings during the pendency of the income tax appeals is upheld.
JUDGMENT
Rajendra Babu, J.-Twelve cases were lodged against the respondents under the Income Tax Act, 1961 [hereinafter referred to as the Act ] before the Metropolitan Magistrate for offences punishable under the Act. In relation to the assessments arising under the Act, appeals had been preferred either before the Commissioner of Income Tax [Appeals] or the Income Tax Appellate Tribunal [hereinafter referred to as the Tribunal ]. On the basis that the appeals were pending the respondents filed applications for stay of the proceedings arising before the criminal court. Several decisions were cited before the court to support the contention that the decision of the appellate authorities in the income tax proceedings would be relevant to the criminal prosecution instituted against the respondents. The learned Magistrate, after examining the position in law as to whether the findings of the appellate authorities are relevant for the purpose of the criminal proceedings and to avoid conflicting decisions of the criminal court and the appellate authorities, felt that it would be appropriate to grant an interim order of the following nature:
"ORDER
The work of recording evidence shall proceed. However, passing of order about framing of charge, discharge of the accused or acquittal of the accused shall be stayed during pendency of the appeals by the accused before the Income Tax Appellate Authorities. These orders will be passed after the appeals filed by the accused before the Income Tax Authorities are finally decided."
2. Against that order, revision petitions were filed before the Sessions Court. The Sessions Court did not interfere with the order made by the learned Magistrate and dismissed the same. Thereupon, the matter was carried further to the High Court and the High Court, while entertaining a writ petition noticing several decisions of that High Court and of this Court, issued rule in the matter and granted an interim order staying the proceedings in the criminal cases filed before the learned Magistrate. It is against this order that these special leave petitions have been filed.
3. The prosecution in criminal law and proceedings arising under the Act are undoubtedly independent proceedings and, therefore, there is no impediment in law for the criminal proceedings to proceed even during the pendency of the proceedings under the Act. However, a wholesome rule will have to be adopted in matters of this nature where courts have taken the view that when the conclusions arrived at by the appellate authorities have a relevance and bearing upon the conclusions to be reached in the case necessarily one authority will have to await the outcome of the other authority.
4. This Court in G.L. Didwania & Anr. v. Income Tax Officer & Anr.1, dealt with the similar situation where there is a prosecution under the Act for making a false statement that the assessee had intentionally concealed his income and the Tribunal ultimately set aside the assessment holding that there is no material to hold that such income belong to the assessee and the petition was filed before the Magistrate to drop the criminal proceedings and thereafter an application was filed before the High Court under Section 482 Cr.P.C. to quash those criminal proceedings. This Court held that the whole question is whether the appellant made a false statement regarding the income which according to the assessing authority has escaped assessment and this issue was dependent on the conclusion reached by the appellate Tribunal and hence the prosecution could not be sustained. In Uttam Chand & Ors. v. Income Tax Officer, Central Circle, Amritsar2, this Court held that in view of the finding recorded by the Tribunal on appraisal of the entire material on the record that the firm was a genuine firm and the assessee could not be prosecuted for filing false returns and, therefore, quashed the prosecution. In P. Jayappan v. S.K. Perumal, First Income-Tax Officer, Tuticorin3, this Court observed that the pendency of the reassessment proceedings under the Act cannot act as a bar to the institution of the criminal proceedings and postponement or adjournment of a proceedings for unduly long period on the ground that another proceedings having a bearing on the decision was not proper.
5. In the present case, there is no claim of quashing of the proceedings. When ultimately the result to come out of the proceedings before the appellate authorities have a definite bearing on the cases alleged against the respondents, we find that the High Court is justified in granting the interim order it did and we do not think that such an interim order calls for interference at our hands. The learned counsel on either side relied on several decisions, but in the view we have taken it is unnecessary to refer to those decisions.
6. The petitions are, therefore, dismissed. No costs.
(N.K.R.)
**************
Parallel Citations of other Journals :
Commissioner of Income Tax, Mumbai v, Bhupen Champak Lal Dalal & Anr. etc., 2001(2) Supreme 417