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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
B.A. PATIL, J.
Sri. D.K. Shivakumar S/o D.K. Kempegowda - Petitioner
Vs.
Income Tax Department - Respondent
Criminal Revision Petition No.955, 959, 969 of 2019
Decided On : 12-12-2019
INCOME TAX ACT - Section 279 - Sanction for prosecution - Principal Director of Income Tax - Authority to grant sanction - Notification dated 13.11.2014 - Validity - Interpretation of Section 2(16) and Section 279 - Scope of judicial review at the stage of discharge - Principles governing discharge application under Section 245(2) of Cr.P.C. - Applicability of Section 195 and 197 of Cr.P.C. - Judicial proceedings under Section 132(4) of the Income Tax Act.
Fact of the Case:
Petitioners, accused in a criminal case under Sections 276(C)(1), 277, 278 of the Income Tax Act and Sections 193, 199, and 120B of the Indian Penal Code, challenged the order dismissing their application for discharge under Section 245(2) of Cr.P.C. The main contention was that the sanction for prosecution under Section 279 of the Income Tax Act was invalid as it was granted by the Principal Director of Income Tax, who, according to the petitioners, lacked the authority to do so. The petitioners also raised issues related to the validity of the Notification dated 13.11.2014, the applicability of Sections 195 and 197 of Cr.P.C., and the scope of judicial review at the stage of discharge.
Finding of the Court:
The Court held that the Principal Director of Income Tax had the authority to grant sanction for prosecution under Section 279 of the Income Tax Act, as the definition of "Commissioner" in Section 2(16) of the Act included the Principal Director of Income Tax. The Court also upheld the validity of the Notification dated 13.11.2014, which authorized the Principal Director of Income Tax to exercise certain powers and perform certain functions. The Court further held that Sections 195 and 197 of Cr.P.C. were not applicable in the present case as the proceedings under the Income Tax Act were considered to be judicial proceedings under Section 132(4) of the Act. The Court also clarified that the scope of judicial review at the stage of discharge under Section 245(2) of Cr.P.C. was limited to determining whether a prima facie case had been made out against the accused, and that the Court could not conduct a mini-trial or weigh the evidence in detail.
Issues: 1. Whether the Principal Director of Income Tax had the authority to grant sanction for prosecution under Section 279 of the Income Tax Act? 2. Whether the Notification dated 13.11.2014, authorizing the Principal Director of Income Tax to exercise certain powers and perform certain functions, was valid? 3. Whether Sections 195 and 197 of Cr.P.C. were applicable to the proceedings under the Income Tax Act? 4. What was the scope of judicial review at the stage of discharge under Section 245(2) of Cr.P.C.?
Ratio Decidendi: 1. The definition of "Commissioner" in Section 2(16) of the Income Tax Act includes the Principal Director of Income Tax, and therefore, the Principal Director of Income Tax had the authority to grant sanction for prosecution under Section 279 of the Act. 2. The Notification dated 13.11.2014, which authorized the Principal Director of Income Tax to exercise certain powers and perform certain functions, was valid and had the force of law under Article 13 of the Constitution of India. 3. Sections 195 and 197 of Cr.P.C. were not applicable to the proceedings under the Income Tax Act, as the proceedings were considered to be judicial proceedings under Section 132(4) of the Act. 4. The scope of judicial review at the stage of discharge under Section 245(2) of Cr.P.C. was limited to determining whether a prima facie case had been made out against the accused, and the Court could not conduct a mini-trial or weigh the evidence in detail.
Final Decision: The Court dismissed the petitions filed by the petitioners, upholding the order of the trial court dismissing their application for discharge under Section 245(2) of Cr.P.C.
ORDER :
Criminal Revision Petition No.955/2019 has been preferred by petitioner-accused No.1, Criminal Revision Petition No.959/2019 has been preferred by petitioner-accused No.5, Criminal Revision Petition No.969/2019 has been preferred by petitioner-accused No.4 being aggrieved by the order passed on application filed under Section 245 of Cr.P.C. for discharge by LXXXI Additional City Civil and Sessions Judge, Bengaluru, in Special Criminal Case No.759/2018 dated 25.6.2019.
2. I have heard the learned Senior Counsel Sri. B.V. Acharya for Sri Aravind V. Chavan in Criminal Revision Petition No.955/2019, Sri. A. Shankar, learned Senior Counsel for Sri. Shayam Sundar M.S. in Criminal Revision Petition No.959/2019, and Sri. Shashi Kiran Shetty for Smt. Latha S. Shetty in Criminal Revision Petition No.969/2019 and Sri. G. Rajagopalan, Additional Solicitor General, along with Sri. Jeevan J. Neeralgi, Senior Standing Counsel for respondent.
3. The factual matrix of the case of the prosecution is that Deputy Director of Income Tax Investigation, Bengaluru, lodged a complaint against the accused persons for having committed an offence punishable under Sections 276 (C)(1), 277, 278 of the Income Tax Act and also under Sections 193, 199 and 120B of Indian Penal Code. In the said complaint it is alleged that there is escapement of the income tax in the middle of the financial year and thereby they have committed the alleged offence. Earlier all the accused persons filed a criminal petition before this Court for quashing, but the same has been withdrawn with liberty to file an application for discharge. Accordingly, application under Section 245(2) of Cr.P.C. was filed and to the said application, the respondent also contested by filing his objections. The learned Special Judge after hearing both the parties dismissed the application. Challenging the same, the petitioners-accused are before this Court.
4. It is the first contention of the learned Senior Counsel Sri. B.V. Acharya appearing for petitioner-accused No.1 that there is no valid sanction as contemplated under Section 279 of the Income Tax Act (hereinafter called as an ‘Act’). In the instant case the sanction has been granted by Principal Director of Income Tax, but as per Section 279 of the Act, sanction has to be given only by Principal Commissioner who is heading the assessment wing, though there are two wings i.e. the investigation wing and assessment wing. It is his further submission that as per Section 279 of the Act no proceedings can be initiated for the offence under Sections 275A, 275B, 276, 276A, 276B, 276BB, 276C, 276CC, 276D, 277, 277A or 278 except with the previous sanction of the Principal Commissioner or the Commissioner or Commissioner (Appeals) or the appropriate authority. It is his specific contention that the intent of the legislation if it is taken as contemplated under Section 279 of the Act, the Principal Director of Income Tax is not having any authority. It is his further submission that though Section 2(16) of the Act defines the Commissioner and it includes the Commissioner of Income Tax or Director of Income Tax or a Principal Commissioner of Income Tax or a Principal Director of Income Tax under sub-section (1) of Section 117 of the Act, but the general definition does not have a legislative intent to include them under Section 279 of the Act. The Scheme of the Act if it is taken into consideration each word of the section has got its own intent and the definition clause not applicable and it cannot be read with inclusive clause or a power of the Director of Income Tax. It is his further submission that the trial without authority is going to vitiate the entire proceedings. The trial Court without looking into the said facts has come to a wrong conclusion and has wrongly dismissed the application filed by the petitioner-accused. The sanction order passed is without jurisdiction. It is his further submission that in the absence of specific power to gran
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