Heard Mr.vijay Narayan, Learned Seniorcounsel,Assistedbymr.r.sivaraman,Mr.a.p.srinivas, Senior Standing Counsel For Theincome Tax Department And Perused The Mat v. Income Tax Settlement Commission Reportedin ((2013) 35 Taxmann. Com 56 (Delhi), We Are Ofthe View That The Matter Requires Adjudication

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 21.11.2019 CORAM THE HONOURABLE DR. JUSTICE ANITA SUMANTH Writ Petition No.16540 of 2016 and W.M.P. No.14286 of 2016 Shri.G.N.Anbuchezhian ...PetitionerVs The Deputy Director of Income Tax (INV)Unit 1 (2), No.46/108, Uthamar Gandhi Salai,Nungambakkam, Chennai – 600 034. ... Respondent Prayer: PETITION filed under Article 226 of The Constitution ofIndia praying for the issuance of Writ of Certiorari calling forthe records of the respondent in prosecution/DDIT/U1 (2) 2016-17dated 29.03.2016 and quash the same. For Petitioner : Mr.R.Sivaraman For Respondents : Mr.A.P.Srinivas Senior Standing Counsel. O R D E R This Writ Petition challenges show cause notice dated29.03.2016 calling upon the petitioner to respond and show causeas to why proceedings for prosecution in terms of Section 276C(1) of the Income Tax Act, 1961 (in short 'Act') not beinitiated against him. 2. Though the Writ Petition is of the year 2016, no stayhas been granted by this Court and the Department was well atliberty to proceed with the matter. 3. The petitioner was subject to search and seizure actionin terms of Section 132 of the Act on 30.09.2015, pursuant towhich the petitioner approached the Settlement Commission forsettlement of the matter. The Settlement Commission came to https://hcservices.ecourts.gov.in/hcservices/ dismiss the application, as against which the petitionerapproached this Court by way of a Writ Petition in W.P.No.666 of2018. The Writ Petition also came to be dismissed, as againstwhich Writ Appeal No.301 of 2018 was filed wherein a DivisionBench of this Court, vide order dated 08.02.2018, passed thefollowing order: 'Challenge in this Writ Appeal is to anorder dated 19.01.2018, made in W.P. No.666 of2018, by which the writ Court, declined to quashthe order, of the Income Tax SettlementCommission, Additional Bench, Chennai, dated05.01.2018, wherein, the Commission rejected theapplication, under Section 245 D(1) of the IncomeTax Act, 1961. 2. Heard Mr.Vijay Narayan, learned SeniorCounsel,assistedbyMr.R.Sivaraman,Mr.A.P.Srinivas, Senior Standing Counsel for theIncome tax Department and perused the materialsavailable on record. 3. Though at paragraph No.8.1 of the orderof the Income Tax Settlement Commission, dated05.01.2018, the settlement Commission hasdiscussed the incongruency between the seizedmaterials and the paper book submitted by theappellant, before the Settlement Commission andarrived at a finding that there was no full andtrue disclosure of Income, a requisite conditionslaid down in Section 245 D(1) of the Act, havinggone through the relevant provisions and takingnote of the decision, in Commissioner of IncomeTax Vs. Income tax Settlement Commission reportedin ((2013) 35 Taxmann. com 56 (Delhi), we are ofthe view that the matter requires adjudication. 4. Though the appellant has sought forinterim stay of the order impugned before us, andconsequently prayed for a direction against theAssistant Commissioner of Income tax, CentralCircle 2(2), Chennai, second respondent, not toproceed with the assessment proceedings, till thedisposal of the writ Appeal, on the materialsconsidered, we are not inclined to accede to theprayer sought for. 5. Assistant Commissioner of Income Tax,Central Circle 2(2), Chennai, second respondent,can proceed with the assessment, but shall notpass any order.' 4. The aforesaid Writ Appeal is pending. Thus, accordingto him, since the proceedings for prosecution hinge on the assessment itself, the impugned show cause notice is pre-matureand all proceedings should be kept in abeyance till such time adecision is taken by the Division Bench in the Writ Appeal. 5. Assistant Commissioner of Income Tax,Central Circle 2(2), Chennai, second respondent,can proceed with the assessment, but shall notpass any order.' 4. The aforesaid Writ Appeal is pending. Thus, accordingto him, since the proceedings for prosecution hinge on the assessment itself, the impugned show cause notice is pre-matureand all proceedings should be kept in abeyance till such time adecision is taken by the Division Bench in the Writ Appeal. 5. He relies on the two decisions of the Supreme Court, onein the case of Babita Lila V. Union of India ((2016) 73taxmann.com 32) and the second in the case of Commissioner ofIncome Tax V. Bhupen Champak Lal Dalal ((2001) 116 Taxman 746). 6. Per contra, Mr.A.P.Srinivas, learned Senior StandingCounsel for the respondent seriously objects to the verymaintainability of this Writ Petition pointing out that what isimpugned is only a show cause notice, which itself has beenissued only as a matter of benevolence. He draws my attention tothe judgment of the Supreme Court in the case of AssistantCommissioner V. Velliappa Textiles Ltd. ((2003) 263 ITR 550),wherein the Bench considered a challenge to the sanction issuedby the Commissioner of Income Tax under Section 279(1) of theAct. While dealing with the rival contentions, the Courtconsidered the question of whether an opportunity of hearingshould be extended to an assessee prior to according of asanction. At paragraph 8, they negate the said requirement inthe following terms: '8. The grant of sanction is purely an administrativeact and affording of opportunity of hearing to theaccused is not contemplated at that stage. An identicalquestion has been considered by this court withreference to section 6 of Prevention of Corruption Act,1947 in Superintendent of Police, C.B.I. v. DeepakChowdhary (1995) 6 SCC 225 and it was held as under inpara 5 of the reports : ". . . The grant of sanction is only anadministrative function, though it is true thatthe accused may be saddled with the liability tobe prosecuted in a court of law. What is materialat that time is that the necessary facts collectedduring investigation constituting the offence haveto be placed before the sanctioning authority andit has to consider the material prima facie, theauthority is required to reach the satisfactionthat the relevant facts would constitute theoffence and then either grant or refuse to grantsanction. The grant of sanction, therefore, beingadministrative act the need to provide anopportunity of hearing to the accused beforeaccording sanction does not arise. The High Court,therefore, was clearly in error in holding thatthe order of sanction is vitiated by violation ofthe principles of natural justice. : The legal position is, therefore, clear that noopportunity of hearing was required to be afforded tothe respondents before grant of sanction by theCommissioner of Income Tax and the view to the contrarytaken by the High Court is clearly erroneous in law.' 7. In the present case, the communication impugned beforeme is only a show cause notice that calls upon the petitioner toappear and show cause as to why proceedings for prosecution notbe initiated against him. The conclusion in Vellippa Textiles(supra) would be thus applicable on all fours to the matterbefore me. 8. Then again, the Supreme Court in the case of P.JayappanV. S.K.Perumal, First ITO (149 ITR 696) considered the questionof whether the pendency of assessment proceedings would act as abar to the institution of criminal prosecution. Afterconsidering the statutory provisions at play, at paragraphs 4 to6, the Bench states as follows: 7. In the present case, the communication impugned beforeme is only a show cause notice that calls upon the petitioner toappear and show cause as to why proceedings for prosecution notbe initiated against him. The conclusion in Vellippa Textiles(supra) would be thus applicable on all fours to the matterbefore me. 8. Then again, the Supreme Court in the case of P.JayappanV. S.K.Perumal, First ITO (149 ITR 696) considered the questionof whether the pendency of assessment proceedings would act as abar to the institution of criminal prosecution. Afterconsidering the statutory provisions at play, at paragraphs 4 to6, the Bench states as follows: '4. At the outset it has to be stated that there isno provision in law which provides that a prosecutionfor the offences in question cannot be launched untilreassessment proceedings initiated against theassessee are completed. Section 279 of the Actprovides that a person shall not be proceeded againstforanoffencepunishableunder section276C or section 277 of the Act except at the instanceof the Commissioner. It further provides that aperson shall not be proceeded against for an offencepunishable under those provisions in relation to theassessment for an assessment year in respect of whichpenalty is imposed or imposable on him under clause(iii) of sub-section (1) of section 271 has beenreduced or waived by an order under section 273A. TheCommissioner has the power either before or after theinstitution of proceedings to compound any suchoffence. In this case it is not claimed that theCommissioner has not initiated the proceedings forinstituting the complaints. No other legal bar forthe institution of the proceedings is urged exceptstating that in the event of the petitioner beingexonerated in the reassessment proceedings, theprosecutions may have to be dropped. It is true thatas observed by this Court in Uttam Chand & Ors. v.Income-tax officer, Central Circle, Amritsar(1) theprosecution once initiated may be quashed in thelight of a finding favourable to the assesseerecorded by an authority under the Act subsequentlyin respect of the relevant assessment proceedings butthat decision is no authority for the proposition that no proceedings can be initiated at allunder section 276C and section 277 as long as someproceeding under the Act in which there is a chanceof success of the assessee is pending. A mereexpectation of success in some proceeding in appealor reference under the Act cannot come in the way ofthe institution of the criminal proceedingsunder section 276C and section 277 of the Act. In thecriminal case all the ingredients of the offence inquestion have to be established in order to securethe conviction of the accused. The criminal court nodoubt has to give due regard to the result of anyproceeding under the Act having a bearing on thequestion in issue and in an appropriate case it maydrop the proceedings in the light of an order passedunder the Act. It does not, however, mean that theresult of a proceeding under the Act would be bindingon the criminal court. The criminal court has tojudge the case independently on the evidence placedbefore it. Otherwise there is a danger of acontention being advanced that whenever the assesseeor any other person liable under the Act has failedto convince the authorities in the proceedings underthe Act that he has not deliberately made any falsestatement or that he has not fabricated any materialevidence, the conviction of such person shouldinvariably follow in the criminal court. The HighCourt of Punjab and Haryana has correctly applied therule regarding the maintainability of prosecution insuch circumstances in M/s. Telu Ram Raungi Ram & Anr.v. Income-tax officer A Ward Hoshiarpur & Anr(1). Wedo not however, agree with the view expressed by theHigh Court of Calcutta in Jyoti Prakash Mitter v.Haramohan Chowdhury.(2) In that case on a complaintmade against the assessee for an offence punishableunder section 277 of the Act, the Chief MetropolitanMagistrate issued process. Thereupon the assesseequestioned the validity of the initiation of thecriminal proceedings before the High Court ofCalcutta on the ground that until the penaltyproceedings initiated in respect of the same periodunder section 271(1)(c) of the Act were finallydisposed of, no complaint could be filed. Thecontention of the assessee was that the prosecutionwas opposed to the principles of natural justice ashe would be deprived of the benefit of a findingwhich was likely to be recorded in his favour in thepenalty proceedings. It was urged on behalf of theDepartment that the penalty proceedings under section271(1)(c) hadnodirectbearingonthe maintainability of a prosecution launched underChapter XXII of the Act. The High Court took the viewwhich according to us is an erroneous one that theprovisions of section 279(1A) of the Act establishedthe necessity for the completion of the penaltyproceedings before the institution of the prosecutionand therefore as long as the penalty proceedings werepending the criminal proceedings could not beinstituted. Section 279(1A) of the Act merely statesthat a person shall not be proceeded against for anoffence under section 276C or section 277 in relationto the assessment for an assessment year in respectof which the penalty imposed or imposable on himunder clause (iii) of sub- section (1) of section271 has been reduced or waived by an orderunder section 273A. Section 273A(1)(ii) provides thatnotwithstanding anything contained in the Act, theCommissioner may, in his discretion, whether on hisown motion or otherwise, reduce or waive the penaltyif the conditions mentioned therein are satisfied.The power conferred on the Commissioner under section273A is an overriding power which he may exercise athis discretion. It is only where the Commissionerreduces or waives the penalty imposed or imposableunder section 271(1)(iii) of the Act in exercise ofhis discretion under section 273A, section 279(1A) comes into operation and acts as a statutory barfor proceeding with the prosecution under section276C or section 277. It does not, however, providethat merely because there is a possibility of theCommissioner passing an order under section 273A, theprosecution shall not be instituted. The reason givenby the High Court of Calcutta, therefore, does notappeal to us.5. It may be that in an appropriate case the criminalCourt may adjourn or postpone the hearing of acriminal case in exercise of its discretionary powerunder section 309 of the Code of Criminal Procedureif the disposal of any proceeding under the Act whichhas a bearing on the proceedings before it isimminent so that it may take also into considerationthe order to be passed therein. Even here thediscretion should be exercised judicially and in sucha way as not to frustrate the object of the criminalproceedings. There is no rigid rule which makes itnecessary for a criminal court to adjourn or postponethe hearing of a case before it indefinitely or foran unduly long period only because some proceedingwhich may have some bearing on it is pendingelsewhere. But this, however, has no relevance to the question of maintainability of the prosecution. Theprosecution in those circumstances cannot be quashedon the ground that it is a premature one. 6. On a careful consideration of the relevantprovisions of the Act, we are of the view that thependency of the reassessment proceedings cannot actas a bar to the institution of the criminalprosecution for offences punishable under section276C or section 277 of the Act. The institution ofthe criminal proceedings cannot in the circumstancesalso amount to an abuse of the process of the court.The High Court was, therefore, right in refusing toquash the prosecution proceedings in the four casesinstituted against the petitioner under section482 of the Code of Criminal Procedure. ................' 9. The grant of sanction is thus an administrative Act andif at all the Officer affords an opportunity of hearing, it ispurely by way of benevolence as no hearing is contemplated atthat stage. The judgments in P.Jayappan (supra), VelliappaTextiles Ltd. (supra), Babita Lila (supra) and Bhupen ChampakLal (supra), have been taken into account by a learned singleJudge of this Court in Krishnaswami Vijayakumar V. PrincipalDirector of Income-tax (Inv.) Chennai (404 ITR 442), after whichthe challenge of the petitioner (in that case) to an identicalshow cause notice as before me was dismissed. ................' 9. The grant of sanction is thus an administrative Act andif at all the Officer affords an opportunity of hearing, it ispurely by way of benevolence as no hearing is contemplated atthat stage. The judgments in P.Jayappan (supra), VelliappaTextiles Ltd. (supra), Babita Lila (supra) and Bhupen ChampakLal (supra), have been taken into account by a learned singleJudge of this Court in Krishnaswami Vijayakumar V. PrincipalDirector of Income-tax (Inv.) Chennai (404 ITR 442), after whichthe challenge of the petitioner (in that case) to an identicalshow cause notice as before me was dismissed. 10. As regards both judgments relied on by the petitioner,they have considered the issue in the context of proceedingsalready initiated and after the law had been set in motionbefore the appropriate fora/Courts. Those decisions are thus ofno assistance to the petitioner before me and reliance on thesame is rejected. 11. The challenge to the show-cause notice is thusrejected and the Writ Petition is dismissed. No costs.Consequently, connected Miscellaneous Petition is also dismissed. Sd/- Assistant Registrar(CS V)//True Copy// Sub Assistant Registrar sl https://hcservices.ecourts.gov.in/hcservices/ To The Deputy Director of Income Tax (INV)Unit 1 (2), No.46/108, Uthamar Gandhi Salai,Nungambakkam, Chennai – 600 034 Writ Petition No.16540 of 2016and W.M.P. No.14286 of 2016 ln(co) nr 25/02/2020