Facts of the Case

  • Search and seizure operations were conducted on 15.02.2014 at premises connected with the accused persons.
  • Multiple lockers were discovered, including lockers operated in the petitioner’s name.
  • Substantial unaccounted cash, jewellery, and incriminating documents were recovered.
  • Statements of the petitioner and co-accused were recorded by Income Tax Authorities.
  • The Department alleged false statements and active abetment in concealment and tax evasion.
  • Sanction for prosecution under Section 279 of the Income Tax Act was granted on 09.01.2015.
  • Criminal complaint was instituted on 27.01.2015.
  • The petitioner had already moved the Settlement Commission under Section 245C and the application was allowed to proceed under Section 245D(1).

Issues Involved

  1. Whether proceedings before the Settlement Commission under Section 245D(1) bar criminal prosecution by Income Tax Authorities?
  2. Whether exclusive jurisdiction under Section 245F prevents prosecution sanction under Section 279?
  3. Whether acceptance of a settlement application amounts to immunity from prosecution?
  4. Whether criminal proceedings could be quashed under Section 482 Cr.P.C.?

Petitioner’s Arguments

  • Once the Settlement Commission admitted the settlement application, all jurisdiction vested exclusively in the Commission under Section 245F.
  • Income Tax Authorities became functus officio and lacked authority to sanction prosecution.
  • Criminal complaint filed thereafter was legally unsustainable.
  • Continuation of criminal proceedings amounted to abuse of process of law.
  • Reliance was placed on earlier judgments interpreting Settlement Commission jurisdiction.

Respondent’s Arguments

  • Mere admission of settlement application does not amount to immunity from prosecution.
  • Immunity can only be granted under Section 245H after satisfaction of statutory conditions.
  • No immunity application had been filed by the petitioner.
  • Settlement proceedings and criminal prosecution operate in distinct legal spheres.
  • Department retained authority to prosecute despite pending settlement proceedings.

Court Findings / Court Order

The Delhi High Court dismissed the petition and upheld the criminal prosecution.

  • Section 245D(1) merely permits the settlement application to proceed; it does not grant immunity.
  • Immunity from prosecution can only be specifically granted under Section 245H.
  • Exclusive jurisdiction of the Settlement Commission under Section 245F relates to assessment and recovery functions, not criminal prosecution.
  • Criminal prosecution can continue independently unless immunity is expressly granted.
  • High Court’s inherent powers under Section 482 Cr.P.C. cannot be invoked to decide disputed facts at the threshold stage.

Accordingly, the petition seeking quashing of criminal proceedings was dismissed.

Important Clarification by the Court

The Court clarified an important legal principle:

Admission of a settlement application before the Income Tax Settlement Commission does not automatically suspend or extinguish criminal prosecution.

Immunity from prosecution is neither automatic nor implied and requires a specific order under Section 245H.

This judgment clearly distinguishes between:

  • Settlement jurisdiction (tax determination/recovery)
    and
  • Criminal jurisdiction (prosecution for offences)

Sections Involved

Income Tax Act, 1961

  • Section 245C – Application for Settlement
  • Section 245D – Procedure on Settlement Application
  • Section 245F – Powers and Exclusive Jurisdiction of Settlement Commission
  • Section 245H – Immunity from Prosecution and Penalty
  • Section 277 – False Statement in Verification
  • Section 278 – Abetment of False Return
  • Section 279 – Sanction for Prosecution

Code of Criminal Procedure, 1973

  • Section 200 Cr.P.C.
  • Section 482 Cr.P.C.

Indian Penal Code, 1860

  • Section 177
  • Section 181
  • Section 193
  • Section 196
  • Section 120B
  • Section 34

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:5254/RKG20082018CRLMM46662015.pdf 

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