The Hindu Business Line : Let's save the punishment

ARTICLE 20(2) of the Constitution provides that no person shall be prosecuted and punished for the same offence more than once. Prosecution in this context means 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 punishment.

Punishment in this context means a judicial penalty awarded by a criminal court as distinguished from a statutory authority, and would not include penalties under, say, the Customs Act or the Income-Tax Act. Thus, under the I-T Act, it is permissible to impose penalties as well as prosecute a person for the same default and this does not violate Article 20 of the Constitution. However, what is being unauthorisedly done by the Department is to continue with prosecution proceedings even when the penalty for the default, for which prosecution has been launched, gets knocked down in appellate proceedings under the I-T Act.

In such circumstances, the I-T Department has been taking the view that proceedings for penalty and prosecution are independent of each other and that the result of the decision of the appellate authorities under the I-T Act is not binding on the criminal court, which can decide the case independently on the basis of evidence placed before it regardless of the findings and decisions of the appellate authorities under the I-T Act.

It has also been pleaded that prosecution proceedings cannot be dropped or closed without conducting the trial and examination/cross-examination of witnesses and that the discretion of the Magistrate to conduct trial and decide the case on merits should not be interfered with nor any action be allowed through any other proceedings which would frustrate the criminal trial and decision by the concerned Magistrate.

Such pleas have been made persistently despite the contrary views expressed by the various High Courts saying that dropping of penalty proceedings would make prosecution unsustainable [Raghunath Pd. Mohanlal vs UOI (2003 126 Taxman 487 MP); Laxmi Stores vs UOI (2003 131 Taxman 258 Rajasthan); Ajay Tent House vs ITO (2003 133 Taxman 807 (P&H)]. There are similar decisions from other High Courts as well.

Continuing the view expressed earlier, in disregard of the view expressed by the High Courts, has put taxpayers to uncalled-for hardship and humiliation, arising out of criminal proceedings which were being unauthorisedly continued against them. However, to the relief of the taxpayers, an apex court judgment has come, disapproving the I-T Department's unjustified view.

In its decision in the KC Builders & Anr. V. ACIT (2004 186 CTR SC 721) case, the Supreme Court said that levy of penalties and prosecution under Section 276C for concealment of income are simultaneous. Hence, once the penalties are cancelled on the ground that there is no concealment in the eyes of law, the prosecution cannot be proceeded with by the complainants and further proceedings will be illegal and without jurisdiction.

The court has said that taxpayer cannot be made to suffer and face the rigours of criminal trial when the same cannot be sustained in the eyes of law because the prosecution cannot get support from the findings of the Tribunal that there is no concealment of income.

Under Section 254, Tribunal findings supersede an AO's order under Section 143(3). Once the finding of concealment and subsequent levy of penalties under Section 27(1)(c) get struck down by the Tribunal, the bottom for prosecution gets knocked down.

According to the Supreme Court, it is well-established principle that the matter, which has been adjudicated and settled by the Tribunal, need not be dragged into the criminal courts unless and until the act of the assessee could have been described as culpable.

Since the law now gets settled following the apex court decision, the CBDT needs to issue instructions for the review of pending prosecutions and withdrawal of those cases which come under the ambit of the Supreme Court decision. This would avoid hardship to the taxpayers as also infructuous work for the Department.

(The author is a former chairman of CBDT.)