- (1.) N. S. Gupta, J. By means of this peti tion under Section 482, Cr. P. C. the petitioner M/s Krishna Pipe and Tube and its partners Nand Kishore Agarwal and Smt. Krishna Devi seek to quash the proceedings of criminal complaint No. 19 of 1983, Union of India through Sri V. B. Mishra, Income Tax Officer, Circle 1 (5), Kanpur v. Mis Krishna Pipe and Tube and others, initiated against them for the contravention of the provisions of Income Tax Act (Referred to as the Act) punishable under Section 376-C of the said Act, which are pending before the Chief Judicial Magistrate (Special), Kanpur.
(2.) THE facts of the case briefly stated are as follows: The petitioner No. 1 is a firm registered under the Indian Partnership Act. It carries on business for purchase and sale of steel tubes and fittings at Kanpur. The petitioner Nos. 2 and 3 were the partners of the said firm. For the assessment year 1980-81, relevant to the accounting year ending 31. 3. 80, the petitioner No. 1 filed a return of income showing an income of Rs. 1,08,260 on 31-1-81. On 21-5-80, a search was conducted at tae residential and business premises of Sri. Banwari Lal Agarwal, husband of petitioner No. 3. On the basis of the papers found on the said search, it transpired that the petitioners had omitted to record certain transactions in their account books. However, a settlement was arrived at in between the Commissioner of Income Tax and the petitioner, in accord ance with which the petitioner surrendered a sum of Rs. 60,000/- on the understanding that no penal action or prosecution would be initiated against them. The petitioner accordingly filed return surrendering an amount of Rs. 60,000/ -. The assessments of the applicant were completed on 28-2-81 and no penal action under Section 271 (1) (c) was initiated against the petitioners. The petitioners claimed that in view of the settlement arrived at with the Commis sioner of Income Tax, Kanpur no appeal was filed by them against the order of the assess ment. It was pleaded that the aforesaid criminal complaint has been filed by the O. P. without giving any opportunity of being heard. The applicant at no stage were in formed about the impugned prosecution. The said complaint was pleaded to an ab solutely frivolous and false, inasmuch as that the applicants had not made any at tempt wilfully or otherwise to evade any tax or penalty or interest. No allegations have been made in the complaint as to who out of the two petitioners viz. No. 2 and 3 was incharge of the affairs of the firm in ques tion, the complaint filed by the O. P. was without jurisdiction and the sanction for prosecution accorded by the Commissioner was vitiated, the same having been granted without application of mind and mechani cally, the Commissioner of Income Tax having failed to consider the settlement reached between him and the petitioner and the assurance given by him. On behalf of the O. P. viz. Union of India and Commissioner of Income Tax, a counter-affidavit was filed, which was sworn in by Sri V. L. Sharma, Income Tax Inspector ward 3/5, Kanpur. It was stated therein that upon the detection of the concealed income by the department on the basis of in criminating account books ceased during the search, the return filed by the petitioners showing extra income of Rs. 60. 000/- was accepted. It was stated that no assurrance was given to the petitioners to the effect that there would be no prosecu tion. It was, however, admitted that only penalty and interest were later on waived by the Commissioner of Income Tax, Kanpur in pursuance of the waiver application filed by the petitioner. The applicants were not entitled for an opportunity of being heard granted to them before filing the complaint in question. There was no bar for the initia tion of the criminal prosecution against the petitioners without the issuance of notice under Section 271 (1) (c) of the Act. The Commissioner of Income Tax had not waived his right to launch prosecution against the applicant. The petition filed by the petitioners was, therefore, bad in law and was sought to be dismissed.
(3.) I have heard Sri R. S. Agarwal, learned counsel for the petitioners and Sri Shekher Srivastava, learned standing coun sel for the Income Tax Department, con sidered their contentions. This is an admitted case of the par ties that a search at the business and residential premises of the petitioner was conducted by the Income Tax Officials. The petitioner thereafter filed a return of in come mentioning therein a sum of Rs. 60,000/- as income from other sources, which was added to the trading account for working out the gross profit of the firm. It is also not disputed that assessment had be come final and was not further challenged in appeal, and further that the penal proceed ings were waived by the Commissioner of Income Tax. The petitioners in paragraphs 3 and 9 of their petition have very clearly averred that in order to purchase peace and in order to avoid protracted litigation with the department, the dispute was settled with the then Commissioner of Income Tax, Kanpur in pursuance of which the petitioner surrendered a sum of Rs. 60,000/- on the assurance that no penal action in the form of penal interest shall be taken against the petitioner. When the Commissioner of In come Tax admittedly waived the penalty and interest, which were imposable upon the petitioners, it was obvious that all the penal action which were available to the depart ment including their criminal prosecution was also waived.;