Holding

The pendency of reassessment proceedings does not bar the institution of criminal prosecution under sections 276C and 277, and such prosecution is not an abuse of process.

Summary

The petitioner, a proprietor of a food business, filed income‑tax returns that were later found to contain false statements and suppressed transactions after a search of his premises. Complaints were lodged against him under sections 276C and 277 of the Income‑Tax Act and sections 193 and 196 of the Indian Penal Code, and he sought to quash the criminal proceedings under section 482 of the CrPC, arguing that the pending reassessment proceedings made the prosecution premature. The Madras High Court dismissed the petitions, and the Supreme Court was asked to consider whether the pendency of reassessment barred the initiation of criminal prosecution and whether such prosecution amounted to an abuse of process. The Court held that no statutory provision bars the institution of criminal prosecution while reassessment is pending, and a mere expectation of success in the tax proceedings cannot prevent prosecution. It further ruled that the prosecution does not constitute an abuse of process, although the criminal court may adjourn the case if a related tax proceeding is imminent. Consequently, the Special Leave Petition was dismissed, upholding the High Court's order.

Issues considered

Whether pending reassessment proceedings under the Income‑Tax Act bar the institution of criminal prosecution under sections 276C and 277.
Whether such prosecution amounts to an abuse of the court's process.
Whether section 279(1A) of the Income‑Tax Act creates a statutory bar to prosecution while penalty proceedings are pending.
Whether a petition under section 482 CrPC can be entertained on the ground of premature prosecution.

Legislation cited

Code of Criminal Procedure, 1973s. 309, s. 482
Income Tax Act, 1961s. 271, s. 273A, s. 276C, s. 277, s. 279
Indian Penal Code, 1860s. 193, s. 196

Subjects

Income Tax ActCriminal prosecutionSection 276CSection 277Reassessment proceedingsSection 482 CrPCAbuse of processTax evasionFalse statements

Judgment

A P. JAYAPPAN

v.

S.K. PERUMAL, FIRST INCOME-TAX
OFFICER; TUTICOR!N
B •
August 17, 1984

(0. CHJNNAPPA REDDY, A.P. SEN AND E.S. VENKATARAMIAH, JJ.J

C Code of Criminal Procedure, 197:1-Section 482-Criminal proceedings laun-
ched against assessre under ~cctions 276C and 277 of Income Tax Act, 1961 for
fi/11.g false i11cnme-tax returns pend.rig finalisation of reassessment proctedings-
Criminal procet'dings ca11i:ot be stopped on mere expectancy of as!esste that there
wif/ b'! favourable find ng in reasses,(me!lt proceedings-Cr1n1inal proceedings ari
no abuse of process of court a.1d cannot be quashed O" srayed bt!fng premature,

D Codi:: of Cr/Jn{nal Procedurt', 1973-Seclioa 309-'--Discretf"n to adjourn hear-
ing of criminal case n1u1f be PXercised judicially and not to frustrate object of
crin1inal procfedir gs.
•.
Income Tox Act, 1961, sections 279 ond 273A or any other provision do nol
bar initiating crifnil.al proc,edings for offences und1·r stctions 226C and 277
pending 'e-assessment proceedings,
E
The petitioner, an assessee under the Income Tax Act, 1961, filed income·
tax returns which were accepted. Later a search of the petitioner's residence
revealed th'lt the re ti ti oner had suppressed certain business transactions and had
kept false accounts. On the basis of the allegation that the petitioner had deli-
berately filed false returns and had kept fahe accounts with the intention of
using then1 11s genuine evidence under the assessn1cnt proceedings, complaints
F were filed againt him in the trial court for taking action against him for offences
punishable under sections 276C and 277 of the ·income Tax Act and under
section<> 193 and 196 of the Indian Penal Code. The petitioner moved the High
Court under section 482 of the Code of Criminal Procedure for quashing the pro·
ceedings contending that the launching of the prosecution was ·a premature one
on the ground that the reassessment proceedings started against him under the
Income Tax Act had not been completed. The High Court dismissed the peti·
G tions. The petitioner filed this petition for special leave to appeal. The petitio·
ner did not urge any legal bar for the institution of the proceedings except
stating that in the event of the petitioner being exonerated in the reassessment
proceedings, the prosecutions may have to be dropped.

Dismissing the petition for special leave,
YAYAPPAN v. $.K' PERUMAL 531
HELD : The pendcncy of the reassessment proceedings cannot act as a bar A
to the institution of the criminal prosecution for offences punishable under
section 276C or section 277 of the Act. The institution of the criminal proceed·
ings cannot in the circumstances also amount to an abuse of the process of
the court. [543 El

There is no provision in law which provides that a prosecution for the
offences in question cannot be launched until reassessment proceedings initiated B
against the assessee are completed. [ 540 HJ
,
A mere expectation of success in some prOceeding in appeal or reference
under the Act cannot come in the way of the institution of the criminal proceed·
ings 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 cou~t no doubt has to give due regard to c
' 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 the
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 c'eliberately made D
any false statement or that he has not fabricated any material evidence, the con-
viction of such person should invariably follow in the criminal court. [541 E-H]

~ Uttam Chand & Ors. v. lnco1ne-tax Officer, Central Circle, Amritsar, {1982)
133 I.T.R. 909, referred to.
I M{s. Tetu Rain Raungi Ranz & Anr. v. Incon1e-tax Officer, 'A' Ward. Hoshiar E
Pur & Anr., (1984) 145 I.T.R. Ill, upheld.
J·
The view of the Calcutta High Court in Jyoti Prakash Mitter V• Haramohan
Chowdhury that the provisions of section 279( I A) of the Income Tax Act establi-
shed the necessity for the completion of the penalty proceedings before the insti-
tution of the prosecution and therefore as Jong as the penalty proceedings were
pending the criminal proceedings could not be instituted was erroneous. Section
279(1A) does not provide that merely because there is a possibility of the
F
Commissioner passing an order undc-r section 273A, the prosecution shall not be
instituted. [542 D ; H ; 543 Al

Jyoti Prakash Mitter v. Haran1ohan Chowdhury, (1978) 112 I.T.R. 384.
overruled.

It may be that in an appropriate case the criminal Court may adjourn or G
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 H
538 SUPREME COURT REPORTS [ l 985j 1 S.C.R.
A hearing of a case before it indefinitely or for an unduly Jong period only because
some proceeding which may have some bearing on it is pending elsewhere. But
this, however, has no relevance to lhe question of maintainability of the pro·
sccution. The prosecution in those circumstances cannot be quashed on the
ground that it is a premature one. [543 B-D)

CRIMINAL APPELLATE JuR1so1cnoN : Petition for Special Leave
B to Appeal (Criminal) No. 1923 of 1984 .
.
From the Judgment and Order dated the 19th June, 1984 of the
Madras High Court in Crl. Misc. Petition No. 8164/83, 8168, 8166 &
8170/83.

c C.S. Vaidyanathan for the Petitioner.

The Order of the Court. was delivered by

VENKATARAMIAH, J. The petitioner is the proprietor of M/s.
Ratnam Food Stuff Co., Tuticorin. He is an assessee under the
D Income-tax Act, 1961 (hereinafter called 'the Act'). For the assess-
ment year 1977-78, he filed his return under the Act on January 20,
1978 disclosing an income of Rs. 13,380/- alongwith the profit and
Joss account, trial balance, income tax adjustment statement and a ••
copy of the capital account. The return was accepted. On August
20 and 21, 1981, a search was conducted at the residence of the peti-
E tioner under section 132 of the Act which resulted in the seizure of
several documents and account books which revealed the suppression
of purchase of chicory seeds, the existence of several bank accounts.
fixed deposits, investments in the names of his wife and daughters and
several bank accounts not disclosei in the statements filed alongwith
the return. The trading and profit and Joss account for the assessment
F year 1977-78 filed alongwith the return showed that be had purchased
chicory seeds of the value of Rs. 65,797/- as against Rs. 2,15,729/- as •
per the seized accounts. i here were several other wrong statements
in the accounts. On the basis of the allegation that the petitioner had
deliberately filed a false return and had kept false accounts with the
intention of using them as genuine evidence in the assessment proceed-
G ings, a complaint was filed against him in the Court of the Additional
Chief Judicial Magistrate (Economic Offences), Madurai for taking
action against him for offence punishable under section 276C and sec-
tion 277 of the Act and under sections 193 and 196 of the Indian
Penal Code. Similarly three other complaints were filed against the
petitioner for the same offences said to have been comitted by him in
H respect of three succeeding assessment years 1978-79, 1979-80 and
. JAYAPPAN v.·s.K. PLRUMRL (Ve11katara111iah, J.) 539

1980-81 before the same Magistrate. The petitioner thereupon filed A
four petitions under section 482 of the Code of Criminal Procedure
before the High Court of Madras requesting it to quash the said pro-
ceedings contending that the launching of the prosecution in each of
the four cases was a premature one on the ground that the reassess-
ment proceedings started against him under the Act had not been
completed. B

All the four petitions were dismissed by the High Court by four
separate orders dated June 19, 1984. The petitioner has filed this
petition before this Court under Article 136 of the Constitution for
leave to appeal against the above said four orders of the High
Court. c
The only point which arises for consideration in this case is
whether prosecutions for offences punishable under section 276C and
section 277 of the Act and under sections. 19:1 and 196 of the Indian
Penal Code instituted by the Department while the reassessment pro-
ceedings under the Act are pending arc liable to be quashed on the D
ground that they were not maintainable. The material parts of

'l section 276C and 277 of the Act read as follows :

"276C. Wilful attempt to evade tax etc.-(1) If a person wil-
1' fully attempts in any manner whatsoever to evade any tax,
penalty or interest chargeable or imposable under this Act, 'he E
shall, without prejudice to any penalty that may be imposable on
him under any other provision of this Act, be punishable,-

(i) in a case where the amount sought to be evaded exceeds one
hundred thousand rupees, with rigorous imprisonment for a
• term which shall not be less than six months but which may
extend to seven years and with fine ;

(ii) in any other case, with rigorous imprisonment for a term
>, which shall not be Jess than three months but which may
extend to three years and with fine.
G
(2). If a person wilfully attempts in any manner whatso-
ever to evade the payment of any tax, penalty or interest under
this Act, he shall, without prejudice to any penalty that may be
imposable on him under any other provision of this Act, be
punishable with rigorous imprisonment for a -term which shall
not be less than three months but which may extend to three. lI
540 SUPREME COURT REPORTS [1985] 1 S.C.R.

A years and shall in the discretion of the court, also be liable to
fine.

Explanation ............ .. . ....................................................

"277. False statement in verification etc.-Jf a person makes a
B statement in any verification under this Act or under any rule
made thereunder, or delivers an account or statement which is
false, and which he either knows or believes to be false, or does
not believe to be true, he shall be punishable,-

(i) in a case where the amount of tax, which would have been
evaded if the statement or account had been accepted as
c true, exceeds one hundred thousand rupees, with rigorous
imprisonment for a term which shall not be less then six
months but which may extend to seven years and with
fine.

(ii) in any other case, with rigorous imprisonment for a term
D which shall not be Jess than three months but which may
extend to three years and with fine."

The relevant parts of sections 193 and 196 of the Indian Penal
Code read thus : )

E "193. Punishment for false evidence.-Whoever intentionally
gives false evidence in any stage of a judicial proceeding, or
fabricates false evidence for the purpose of being used in any
stage of a judicial proceeding, shall be punished with imprison-
ment of either description for a term which may extend to seven
years, and shall also be liable to fine ; and whoever intentionally
F gives or fabricates false evidence in any other case, shall be
punished with imprisonment of either description for a term
which extend to three years, and shall also be liable to fine.

Explanation.-............................................. .

GI "196. Using evidence known to be false.-Whoever corruptly
uses or attempts Jo use as true or genuine evidence any evidence
which he knows to be false or fabricated, shall be punished in
the same manner as if he gave or fabricated false evidence.'

At the outset it has to be stated that there is no provision in law
!:I which provides th.at a prosecution !'or the offences in questiol! ca11not
1AYAPPAN v. S.K. PERUMAL (Venkataramiah, J.) 541
be launched until reassessment proceedings initiated against the asses- A
see 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 Com-
missioner. 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 penalty is B
imposed or imposable on him under clause (iii) of sub-section (I) 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 proceed-
ings for instituting the complaints. No other legal bar for the institution c
of the proceedings is urged except stating that in the event of the
petitioner being exonerated in the reassessment proceedings, the pro-
secutions may have to be dropped. It is true that as observed by this
Court in Uttam Chand & Ors. v. Income-tax Officer, Central Circle,
Amritsar(') the prosecution once initiated may be quashed in the light
of a finding favourable to the assessec recorded by an authority under D
the A.ct subsequently in respect of the relevant assessment proceedings
but that decision is no authority for the proposition that no proceed-
ings can be initiated at all under section 276C 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 E
come in the way of the institution of the criminal proceedings under
section 276C and section 277 of the Act. f n 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
l
court no doubt has to give due regard to the result of any pro-
ceeding under the Act having a bearing on the question in issue F
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 in-
dependently on the evidence placed before it. Otherwise there is a
danger of a contention being advanced that whenever the assessee or G
any other person liable under the Act has failed to convince the
authorities in the proceedings under the Act that he ha> not delibera-
tely made any false statement or that he has not fabricated any
material evidence, the conviction of such person should invariably
(I) (1982) 133 I.T.R. 909,
542 SUPREME COURT REPORTS [1985] 1 S.C.R.
A follow in the criminal court. The High Court of Punjab and Haryana
has correctly applied the rule regarding che maintainability of pro-
secution in such circumstances in M/s. Tetu Ram Raungi Ram & Anr.
v. Income-tax 0(/icer, 'A' Ward Tioshiarpur & An'.(') We do not,
however, agree with the view expressed by the High Court of Calcutta
in Jyoti Prakash Mitter v. !faramohan Clwwdhury.(2) In that case on
B a complaint made against the assessee for an offence punishable under
section 277 of the Act, the Chief Metropoliton Magistrate issued pro-
.
cess. Thereupon the assessee questioned the validity of the initiation of
the criminal proceedings before the High Court of Calcutta on the
ground that until the penalty proceedings initiated in respect of the''"'?)!,,•
same period under section 271(1l(c) of the Act were finally disposed ..-.~·tj
c of; no complaint could be 6.led. The contention of the assessee was
that the prosecution was opposed to the principles of natural justice
as he would be deprived of the benefit of a finding which was likely to
be recorded in bis favour in the penalty proceedings. It was urged on
behalf of the Department that the penaltv proceedings under section
271 (l)(c) had no direct bearing on the maintainability of a prosecution
D launched under Chapter XXII of the Act. The High Court took the
view which according to us is an erroneous one that the provisions of
section 279(1A) of the Act established the necessity for the completion
of the penalty proceedings before the institution of the prosecution
and therefore as long as the penalty proceedings were pending the
.criminal proceedings could not be instituted. Section 279(1A} of the
E Act merely states that a person shall not be proceeded against for an
offence under section 276C or section 277 in relation to the assess-
ment for an assessment year in respect of which the penalty imposed
or imposable on him under clause (iii) of sub-section (I) of section 271
has been reduced or waived by an order under section 273A. Section
273A(l)(ii) provides that notwithstanding anything contained in the Act,
F 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 dis-
cretion. It is onlv where the Commissioner reduces or waives the
penalty imposd or,imposable under section 271(\)(iii) of the Act in
.G exercise of his discretion under section 273A, section 279(1 A) comes
into operation and acts as a statutory bar for proceeding with the pro-
secution under section 276C or section 277. It does not, however, I
provide that merely because there is a possibility of the Commissioner

(I) (19841145 l.T.R. Ill.
(2) 0978) 112 I.T.R. 384,
JAYAPPAN v. S.K. PBRUMAL (Venkataramiah, J.) 543

passing an order under s11ctian 273A, the prosecution shall not be insti- A
tuted. The reason given by the High Court of Calcutta, therefore,
does not appeal to us.

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 Pro· B
cedure if the dis·posal 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 extrcised judicially and in sucli a way as not to
frustrate the object of the ,criminal proceedings. There is no rigid c
rule which makes it necessary for a criminal court to adjourn or post-
pone 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 D
premature one.

On a careful consideration of the relevant provisions of the Act, _,
we are of the view that the pendency of the reassessment procedings
cannot act as a bar to the institution of the criminal prosecution for
offences punishable under section 276C or section 277 of the Act. The E
institution of the criminal proceedings cannot in the circumstances also
amount to an abuse of the process of the court. The High Court was,
therefore, right in refusing to quash the prosecution proceedings iu the
four cases instituted against the petitioner under section 482 of the
Code of Criminal Procedure.

The Special Leave Petition is, therefore, dismissed.

H.S.K Petition dismissed.

•