Satish Vohra and Others Vs State of Punjab and Another (Punjab and Haryana High Court)
Summary: The Punjab and Haryana High Court, in Satish Vohra and Others Vs State of Punjab and Another, allowed a petition under Section 482 of the Code of Criminal Procedure seeking quashing of an income-tax criminal complaint dated 20 February 2018 and the consequential summoning order dated 2 April 2018 passed by the Chief Judicial Magistrate, Amritsar. The complaint concerned alleged offences under Sections 276C, 277, 277A and 278 of the Income-tax Act, 1961, along with various provisions of the Indian Penal Code. The Income Tax Department alleged that the petitioners, associated with M/s RS Rice Mills, had shown bogus purchases of paddy, generated unaccounted cash through fictitious transactions, concealed taxable income and invested undisclosed funds in immovable properties. It was further alleged that the petitioners had used the identity of Dalbir Singh alias Resham Singh for carrying out benami transactions and had fabricated documents and financial records to conceal the true nature of these activities.
The petitioners disputed the allegations and submitted that Dalbir Singh alias Resham Singh was a genuine person whose identity was established through income-tax records, partnership documents and a driving licence verified by the competent authority. They further contended that the alleged benami transactions had already been examined by the Adjudicating Authority under the Prohibition of Benami Property Transactions Act, 1988. By its order dated 28 February 2019, the authority had concluded that the transactions were not benami and that the persons shown as owners were the actual owners of the properties. Since the Department had not challenged that order, the findings had attained finality. The petitioners argued that the prosecution could not continue on factual allegations that had already been rejected by a competent statutory authority. They also submitted that the criminal complaint lacked sufficient material to establish dishonest intention, deliberate tax evasion, fabrication of evidence or the other essential ingredients of the alleged offences.
The High Court also considered the subsequent proceedings before the Interim Board for Settlement, Mumbai. The petitioners submitted that the tax dispute arising from the same transactions had been settled and that approximately ₹10.53 crore towards tax and interest had been deposited. In its order dated 24 February 2023 under Section 245D of the Income-tax Act, the Interim Board recorded that the applicants had cooperated throughout the proceedings, furnished the required information, disclosed additional income and explained the manner in which such income had been derived. The Board granted immunity from penalty under Section 245H. However, immunity from prosecution was declined because the criminal complaint had already been instituted before the settlement proceedings commenced. The Department opposed quashing on the grounds that the complaint was supported by investigation records and that the settlement proceedings had not resulted in immunity from prosecution.
In examining the legal position, the High Court relied upon the Supreme Court’s decision in Vijay Krishnaswami alias Krishnaswami Vijayakumar Vs Deputy Director of Income Tax (Investigation), which emphasised the significance of conclusive settlement findings and the statutory finality attached to settlement orders under Section 245-I. The Court observed that the allegations forming the foundation of the prosecution had already been substantially examined by the competent authorities. The findings under the Benami Act had attained finality, while the Interim Board for Settlement had expressly recorded full disclosure and cooperation by the petitioners. The Court distinguished the decisions relied upon by the Department in P. Jayappan Vs S.K. Perumal, First Income Tax Officer and Ambey Construction Co. and Others Vs Deputy Commissioner of Income Tax, observing that the present dispute was not merely about the simultaneous continuation of criminal prosecution and tax proceedings, but involved subsequent statutory findings directly relevant to the allegations underlying the complaint.
Considering the cumulative effect of these developments, Justice H.S. Grewal held that continuation of the criminal proceedings would serve no useful purpose and would amount to misuse of the process of law. The Court accordingly allowed the petition and quashed criminal complaint No. COMA-2391/2018 dated 20 February 2018, bearing CNR No. PBAS030023922018, the summoning order dated 2 April 2018 and all consequential proceedings insofar as they related to the petitioners. The judgment highlights the importance of final findings by competent statutory authorities and subsequent settlement proceedings when determining whether an income-tax prosecution should continue. It also demonstrates that the refusal of immunity from prosecution during settlement proceedings does not, by itself, prevent the High Court from exercising its inherent jurisdiction to quash criminal proceedings where the particular facts establish that their continuation would amount to an abuse of process.
FULL TEXT OF THE JUDGMENT/ORDER OF PUNJAB AND HARYANA HIGH COURT
1. This petition has been preferred by the petitioner under Section 482 Cr.P.C. seeking setting aside of criminal complaint dated 20.02.2018 (Annexure P-1), bearing registration No.COMA-2391/2018, registered on 20.02.2018, CNR No.PBAS030023922018, along with all the subsequent proceedings arising therefrom including summoning order dated 02.04.2018 (Annexure P-2) passed by the Court of learned CJM, Amritsar.
FACTUAL MATRIX
2. Briefly stated, the facts of the case are that the complainant- Assistant Director of Income Tax, Investigation Wing, Amritsar, filed a complaint (Annexure P-1) against petitioner Nos.1 to 3, who are the Directors of M/s RS Rice Mills, and against petitioner No.4, who is an employee of the said firm. One Dalbir Singh @ Resham Singh was also stated to be working as an employee in the firm. It is alleged in the complaint that the petitioners, in connivance with each other and other persons, were involved in fraudulent and illegal financial transactions with the intention to conceal taxable income and evade lawful tax liability.
2.1 It is alleged that the petitioners generated unaccounted cash by showing false purchases of paddy in the name of M/s RS Rice Mills, despite no real purchase of paddy having taken place. In order to create false entries in the books of account, cheques were allegedly issued in the names of paddy suppliers. These cheques were stated to have been encashed through certain supplier firms, alleged to be dormant entities operated by one Raman Arora, who would return the cash amount to the petitioners or the partners of the firm after deducting commission at the rate of 0.8% per transaction. It is alleged that the cash so generated was thereafter used for making investments in real estate through various middlemen.
2.2 It is further alleged that the petitioners concealed the true financial position of the firm and filed false income tax returns for the relevant assessment years. The petitioners also alleged to have created a fake and fictitious identity in the name of Resham Singh son of Ajit Singh, and opened a bank account in his name by using a forged driving licence, with the intention of carrying out benami property transactions. According to the complaint, various immovable properties were purchased and transferred in the name of the said fictitious person, whereas the actual beneficiaries were allegedly the petitioners themselves.
2.3 It is also alleged that the petitioners furnished false statements, fabricated records and misleading information before the authorities in order to conceal the true nature of the transactions and to obstruct the lawful proceedings initiated by the Income Tax Department. On the basis of these allegations, the present complaint (Annexure P-1) has been filed against the petitioners for commission of offences punishable under the relevant provisions of the Indian Penal Code as well as the Income Tax Act.
2.4 After pursing the complaint (Annexure P-1), the learned Chief Judicial Magistrate, Amritsar, vide order dated 02.04.2018 (Annexure P-2), summoned the accused/petitioners for the offences punishable under Section 200 Cr.P.C. read with Section 120-B IPC, Sections 276C, 277, 277-A, 278 of the Income Tax Act and Sections 176, 177, 181, 186, 187, 192, 423, 465, 467, 468 & 471 IPC.
SUBMISSIONS
3. Learned Senior counsel for the petitioners submitted that the petitioners have been falsely implicated and the entire complaint is based on incorrect facts and contradictory stands taken by the respondent-Department. He submits that petitioner Nos.1 to 3 are directors/partners of M/s RS Rice Mills, while petitioner No.4 is an employee thereof. It is submitted that Dalbir Singh @ Resham Singh, who was also associated with the firm, was a real person known to all concerned who expired in the year 2020. It is argued that the very foundation of the complaint is factually incorrect, as the Department attempted to represent Dalbir Singh @ Resham Singh as a fictitious person allegedly created for carrying out fraudulent transactions, whereas the record itself clearly proves otherwise. Learned counsel submits that the Income Tax Department had full knowledge of the existence and identity of Dalbir Singh @ Resham Singh, as his income tax returns were duly filed, accepted and processed by the Department from time to time. Therefore, the allegation that he was a non-existent or fictitious person is completely false and self- contradictory. Furthermore, the identity of Dalbir Singh @ Resham Singh stands independently established from official documents and business records. In this regard, reference is made to the partnership firm M/s Amritsar Properties, which was constituted in the year 2007, wherein Dalbir Singh @ Resham Singh was shown as one of the partners with a defined share in profits. The partnership deed was duly executed and registered through valid stamp papers, and even the stamp vendor concerned, when summoned by the Department itself, confirmed the sale of those stamp papers and the relevant entries in his official register.
3.1 Learned Senior counsel further pointed out that even the driving licence of Dalbir Singh @ Resham Singh, which the complainant sought to describe as fake, was officially verified by the competent authority i.e. the District Transport Office, Khadur Sahib, Punjab, and was found to be genuine as per official records. Therefore, every attempt made by the prosecution to challenge the identity of Dalbir Singh @ Resham Singh is contrary to documentary evidence.
3.2 It is further submitted that neither the petitioners nor Dalbir Singh @ Resham Singh were ever involved in any benami transaction. The very transactions now being alleged by the complainant to be benami in nature were already examined by the competent Adjudicating Authority under the Prohibition of Benami Property Transactions Act, 1988, which, after due consideration, categorically held in the order dated 28.02.2019 (Annexure P-8) that the transactions in question were not benami transactions. It is submitted that the said authority specifically recorded findings that the petitioners were not the beneficial owners of the properties in question and that the persons shown as benamidars were, in fact, the true and lawful owners of the said properties. Learned counsel submits that once a competent statutory authority has already examined the matter and returned such findings, the respondent- Department cannot now take a completely inconsistent stand by alleging the very same transactions to be benami for the purpose of criminal prosecution. It is further submitted that this becomes even more significant because the approving authority under the Benami Act i.e. Additional Commissioner of Income Tax-cum-Approving Authority, PBPT Act, 1988, BPU, Ludhiana, itself belongs to the Income Tax Department and therefore, the Department was fully aware of the findings recorded in those proceedings. Despite that, the present complaint has been filed in a wholly arbitrary and mala fide manner.
3.3 It is also submitted that the entire dispute relating to tax liability arising out of the same set of allegations was subsequently placed before the Interim Board of Settlement, Mumbai, under the provisions of the Income Tax Act, where the matter stood settled. The petitioners already deposited the entire settled amount of tax along with interest, amounting to approximately Rs.10.53 crores, and the settlement was accepted. It is submitted that immunity from penalty was also granted, while immunity from prosecution was declined only on the technical ground that the present criminal complaint had already been instituted prior to filing of the settlement application. He referred to the copy of the order passed by the Board under Section 245(D) of the Income Tax Act, 1961 dated 24.02.2023 at Annexure P-9. He, therefore, submitted that continuation of the present prosecution despite full settlement of the tax dispute serves no meaningful purpose and would amount to unnecessary harassment.
3.4 Learned Senior counsel further submitted that even if the allegations contained in the complaint are taken at their face value, the essential ingredients of the offences alleged are not made out against the petitioners. There is no material to establish dishonest intention, fabrication of false evidence, execution of forged documents, or deliberate furnishing of false information so as to justify continuation of criminal proceedings. It is also argued that, despite the allegations being directed against the business activities of the firm, no prosecution has been launched against the firm itself, and instead the individual petitioners have been individually targeted, which further reflects the mala fide nature of the proceedings. On these grounds, it is prayed for quashing of the impugned complaint along with all consequential proceedings arising therefrom. In support of his overall submissions, Learned Senior counsel relied upon the judgment of Hon’ble Supreme Court in the case of Vijay Krishnaswami @ Krishnaswami Vijayakumar vs. Deputy Director of Income Tax (Investigation), 2025 SCC Online SC 1843.
4. Per contra, learned counsel for respondent No.2, while referring to the reply filed by way of an affidavit of Deputy Director of Income Tax (Investigation), Amritsar, submitted that the present petition is devoid of any merit as the complaint has been filed after a detailed investigation conducted pursuant to search and seizure proceedings under the Income Tax Act. It is submitted that the complaint case is supported by documentary evidence, banking transactions and financial analysis, on the basis of which the learned trial Court has rightly summoned the petitioners.
4.1 It is further submitted that the petitioners were involved in a planned scheme of showing bogus paddy purchases in the books of M/s R.S. Rice Mills for generating unaccounted cash, which was later routed through intermediaries and utilized for investment in immovable properties through third-party names. Learned counsel(s) further pointed out that the existence of Dalbir Singh @ Resham Singh does not help the petitioners, as the allegation is that his identity was used as a conduit for routing undisclosed funds for the benefit of the petitioners.
4.2 It is also submitted that even the settlement proceedings support the complainant’s case, as additional undisclosed income was accepted by the petitioners, and significantly, no immunity from prosecution was granted. It is therefore, prayed for dismissal of this present petition. In support of their submissions, reliance has been made to the judgments of Hon’ble the Supreme Court in the cases of P. Jayappan versus S.K. Perumal, First Income Tax Officer, Tuticorin, 1984 Supp. Supreme Court Cases 437 and the judgment passed by this Court in the case of Ambey Construction Co. And others versus Deputy Commissioner of Income Tax, Bathinda, 2026 SCC Online (P&H) 6261.
ANALYSIS
5. I have considered the arguments raised by the learned counsel for the parties and have carefully gone through the material on record.
6. The core issue that arises for consideration is whether the continuation of the present criminal complaint and the consequential proceedings against the petitioners would be justified in the facts and circumstances of the present case.
7. In order to examine the said issue, it would be appropriate to refer to the relevant following statutory provisions under the Income Tax Act, 1961:-
(a) Section 276C. Wilful attempt to evade tax, etc.–
(1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable 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,-
(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 beless 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 less than three months but which may extend to three years and with fine.
(2) If a person wilfully atte mpts in any manner whatsoever 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 years and shall, in the discretion of the Court, also be liable to fine.Explanation. – For the purposes of this section, a wilful attempt to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof shall include a case where any person-
(i) has in his possession or control any books of account or other documents (being books of account or other documents relevant to any proceeding under this Act) containing a false entry or statement; or
(ii) makes or causes to be made any false entry or statement in such books of account or other documents; or
(iii) wilfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents; or
(iv) causes any other circumstance to exist which will have the effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof.
(b) Section 277. False statement in verification.
If a person makes a 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 true, 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;
(i) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine.
(c) Section 277A. Falsification of books of account or document, etc.
If any person (hereafter in this section referred to as the first person) wilfully and with intent to enable any other person (hereafter in this section referred to as the second person) to evade any tax or interest or penalty chargeable and imposable under this Act, makes or causes to be made any entry or statement which is false and which the first person either knows to be false or does not believe to be true, in any books of account or other document relevant to or useful in any proceedings against the first person or the second person, under this Act, the first person shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and with fine.
Explanation.—For the purposes of establishing the charge under this section, it shall not be necessary to prove that the second person has actually evaded any tax, penalty or interest chargeable or imposable under this Act.
(d) Section 278. Abetment of false return, etc.
If a person abets or induces in any manner another person to make and deliver an account or a statement or declaration relating to) (any income or any fringe benefits chargeable to tax)[which is false and which he either knows to be false or does not believe to be true or to commit an offence under sub-section (1) of section 276-C, he shall be punishable,-
(i) in a case where the amount of tax, penalty or interest which would have been evaded, if the declaration, account or statement had been accepted as true, or which is wilfully attempted 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 less than three months but which may extend to three years and with fine.
(e) Section 245D. Procedure on receipt of an application under section 245C.
(4) After examination of the records and the report of the Principal Commissioner or Commissioner, if any, received under-
(i) sub-section (2B) or sub-section (3), or
(ii) the provisions of sub-section (1) as they stood immediately before their amendment by the Finance Act, 2007,and after giving an opportunity to the applicant and to the Principal Commissioner or Commissioner to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Principal Commissioner or Commissioner.
(4A) The Settlement Commission shall pass an order under sub-section (4),—
(i) in respect of an application referred to in sub-section (2A) or sub-section (2D), on or before the 31st day of March, 2008;
(ii) in respect of an application made on or after the 1st day of June, 2007 but before the 1st day of June, 2010, within twelve months from the end of the month in which the application was made;
(iii) in respect of an application made on or after the 1st day of June, 2010, within eighteen months from the end of the month in which the application was made.
(5) Subject to the provisions of section 245BA, the materials brought on record before the Settlement Commission shall be considered by the Members of the concerned Bench before passing any order under sub-section (4) and, in relation to the passing of such order, the provisions of section 245BD shall apply.
(6) Every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of tax, penalty or interest, the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts.
(emphasis supplied)
8. Now adverting to the facts of the case, the principal allegations in the complaint are that the petitioners had shown bogus purchases, generated unaccounted cash, concealed taxable income, created false records, and used the identity of one Dalbir Singh @ Resham Singh for carrying out alleged benami transactions. However, from the material placed on record, it is evident that one of the major foundations of the prosecution case is the allegation that Dalbir Singh @ Resham Singh was a fictitious person created for carrying out fraudulent transactions, which appear to be unsustainable on the face of the record. The petitioners have placed material to show that Dalbir Singh @ Resham Singh was an actual person, whose existence was known to the authorities. His income tax records existed, his participation in business concerns stood documented, and even the driving licence sought to be questioned by the Department was verified by the competent authority and found to be genuine. Therefore, the prosecution’s attempt to represent the said person as entirely fictitious appears to be seriously doubtful.
9. Another significant aspect which cannot be ignored is that the very allegations relating to benami transactions were already examined by the competent Adjudicating Authority under the Prohibition of Benami Property Transactions Act, 1988. Admittedly, the order passed by the said authority has not been challenged by the Department and has attained finality. The authority categorically held that the transactions in question were not benami transactions and that the persons shown as owners were the actual owners. Once a competent statutory authority has returned such a finding, it would not be appropriate for the Department to proceed on a directly contradictory factual premise without any challenge to that finding.
10. It is also not in dispute that the tax dispute arising from the same set of transactions was subsequently placed before the Interim Board for Settlement, Mumbai, which examined the matter in detail and settled the issue. The Board recorded a specific finding in the order dated 24.02.2023 (Annexure P-9) passed under Section 245(D) of the Income Tax Act, 1961 that the applicants/petitioners had cooperated in the proceedings, made full disclosure of income, and explained the manner in which such income had been derived. Immunity from penalty was granted to the petitioners. Immunity from prosecution was declined not because of any specific finding of fraud or wilful concealment, but only because the criminal complaint had already been instituted before the settlement proceedings were initiated. The terms and conditions set out in therein are as under :-
“18. Terms of Settlement
The computation of income of above applicants for the different assessment years under consideration is annexed to this order as per separate Annexures.
19. The Assessing Officer shall communicate the demand payable by way of tax and interest on the total income determined for each assessment year as per this order after giving credit of taxes and interest paid on or before the date of application and after considering the refund issued, if any, in respect of total income determined in any earlier assessment or reassessment or re-computation made for assessment years covered by the applications. The AO is directed to issue demand notice as per the provisions of section 156 r.w.s 245D(6) of the Act within 7 days from the date of receipt of this order.
20. Waiver of interest
The applicants have prayed for waiver of interest. However, it is well settled by the decision of the Hon’ble Supreme Court in the case of CIT vs Anjum M.H. Ghaswalla & Others (2005) 252 ITR 1 (SC) that the Settlement Commission (now, IBS) is not empowered to grant waiver / reduction of interest chargeable u/s. 234A, 234B & 234C of the Act. Accordingly, interest u/s. 234A, 234B & 234C will be levied by applying inter alia, the position of section 234B(2A) of the Act wef. 01.06.2015.
21. Immunity from Penalty and Prosecution:
The applicants as per Terms of settlement mentioned in SOF, have prayed for grant of immunity from levy of penalty and from prosecution under the Act. On the other hand, the Pr. CIT, in his Rule 9 report has observed that disclosure of the applicants is not true and full and therefore, their request for granting immunity from levy of penalty and prosecution has no merits.
22. We have considered the request made by the applicants as well as objections of the Ld. PCIT. As per provisions of section 245H(1) read with section 245H(3) of the Act, the Interim Board for Settlement may grant immunity from prosecution and penalty if it is satisfied that the person making application for settlement has cooperated with the Board in the proceedings before it and has made full and true disclosure of its income and the manner in which such income has been derived. On examining the facts of the case on these parameters, it is noticed that the applicants have furnished all the details sought by the Board from time to time and facilitated in sorting out issues with the Department at every stage. Thus, they have cooperated with the Board in the proceedings before it. We also noticed that the applicants have fully disclosed additional income before the Board which it ought to have offered otherwise. They have also disclosed the manner in which such income has been derived. The additional income offered by the applicants is fully justified during the course of proceedings before us and we have settled the applications after making the enhancements as detailed above.
23. The additional income further determined in this order and duly agreed to by the Ld. AR were not on account of any facts which were not declared but only to take care of some explanation which could not be expressly proved and to cover some calculation mistakes and to put quietus to the matter in the true spirit of settlement. Hence, it can be said that the applicants have made true and full disclosure of their income. The applicants have also specified the manner in which such income has been derived.
Thus, we are satisfied that the conditions for granting immunity from penalty under all the provisions of the Act are fulfilled in these cases. We, therefore, accept the request of the applicants and grant immunity from penalty under the Act. However, we are not in a position to accept the prayer of the applicants regarding immunity from prosecution because of the reasons given at para 12.12 to 12.12.4 of this order.
24. The immunity granted to the applicants may at any time be withdrawn, if the Board is satisfied that the applicants have in the course of the settlement proceedings concealed any particulars or materials to the settlement or have given false evidence. Thereupon, the applicants may be tried for the offence for which immunity was granted or for any other offence for which the applicants appear to have been guilty in connection with the settlement and the applicants shall also become liable to imposition of any penalty under the Act to which the applicants would have been liable had such immunity not been granted. The immunity so granted will also be withdrawn if the applicants fail to pay the additional tax and interest, if any, as stipulated in this order.
25. The applicants are allowed capitalization of the additional income disclosed before the Commission and no capitalization is allowed for further additional income added in this order as discussed above.
26. The applicants have prayed for grant of instalments for payment of tax and interest in the settlement applications. Accordingly, we consider their request and grant them two equated monthly instalments starting from March, 2023 to April, 2023.
27. This order shall be declared void if it is subsequently found by the Board that the same has been obtained by fraud or misrepresentation of the facts within the meaning of section 245D(6) of the Act.”
11. The Hon’ble Supreme Court in Vijay Krishnaswami @ Krishnaswami Vijayakumar vs. Deputy Director of Income Tax (Investigation) (supra) fully supports the case of the petitioners wherein it has been held that once the Settlement Commission/Board has conclusively examined the matter and recorded findings regarding disclosure and cooperation, continuation of criminal proceedings would amount to abuse of the process of law. The relevant extract thereof are as under:-
“Perusal of the said order makes it clear that in the settlement proceedings, assessee has disclosed all the facts material to the computation of his additional income and fully satisfied the provisions of Section 245H. The Commission recorded a finding that overall additional income is not on account of any suppression of any material facts and it does not disclose any variance from the manner in which the said income had been earned. As such the immunity from penalty under IT Act was granted in exercise of powers under Section 245H. From perusal of Section 245-I, it is clear that every order of settlement shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided, be reopened in any proceeding under the Act or under any other law for the time being in force.
36. In view of the foregoing discussions in conclusion we can safely hold that the prosecution lodged with the help of proviso to sub-section (1) to Section 245H was in defiance to the circular dated 24.04.2008, which was in vogue. It was the duty of the PDIT and DDIT to look into the facts that in absence of any findings of imposition of penalty due to concealment of fact, the said prosecution cannot be proved against the assessee. It seems, even after passing the order by the Settlement Commission on 26.11.2019, it was brought to the notice of the High Court, but the authorities were persistent to pursue the prosecution without looking into the procedural lapses on their part. Such an act cannot be construed in right perspective and the Revenue have acted in blatant disregard to binding statutory instructions. Such willful non-compliance of their own directives reflects a serious lapse, and undermines the principles of fairness, consistency, and accountability, which in any manner cannot be treated to be justified or lawful.
37. It must also be noted that, in terms of Section 245-I, the findings of the Settlement Commission are conclusive with respect to the matters stated therein. Once such an order was passed, it was incumbent upon the authorities to inform the High Court that continuation of the prosecution would amount to an abuse of the process of law, in particular when the Settlement Commission did not record any finding of wilful evasion of tax by the appellant. Even otherwise, it was the duty of the High Court to examine the facts of the case in their right context and assess whether, in light of the above circumstances, the continuation of the prosecution would serve any meaningful purpose in establishing the alleged guilt. Upon a holistic consideration of the matter, we are of the view that the conduct of the authorities lacks fairness and reasonableness, and the High Courts approach appears to be entirely misdirected, having failed to appreciate the factual and legal position in right earnest.”
12. Moreover, the judgments relied upon by the respondents in P Jayappan versus S.K. Perumal, First Income Tax Officer, Tuticorin (supra) and Ambey Construction Co. and others versus Deputy Commissioner of Income Tax, Bathinda (supra) are not applicable to the facts of the present case, as the issue herein is not merely with regard to continuation of prosecution alongside tax proceedings, but the fact that the very allegations forming the basis of the prosecution have already been substantially examined by the competent authorities. The findings recorded by the Adjudicating Authority under the Benami Act have attained finality, and the Interim Board for Settlement has also specifically recorded that the petitioners made full disclosure and duly cooperated in the proceedings.
CONCLUSION
13. Keeping in view the overall facts and circumstances of the present case, this Court is of the considered view that the continuation of criminal proceedings would serve no useful purpose and would amount to misuse of the process of law.
14. Consequently, the present petition is allowed. The criminal complaint dated 20.02.2018 (Annexure P-1), bearing registration No.COMA-2391/2018, CNR No.PBAS030023922018 along with the summoning order dated 02.04.2018 (Annexure P-2) along with all subsequent proceedings arising therefrom, are hereby quashed qua the petitioners.
15. Pending applications, if any, shall stand disposed of accordingly.
