Case Note & Summary
The case involved a criminal revision application filed by the Assistant Commissioner of Income Tax against an order of the Additional Chief Metropolitan Magistrate, 47th Court, Bandra, Mumbai, discharging the respondents from prosecution. The prosecution related to alleged contravention of section 269-T read with section 276-E of the Income-tax Act, 1961. The critical fact was that section 276-E, which provided for punishment for failure to comply with section 269-T, was omitted from the statute by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1 April 1989. The sanction to prosecute was granted on 27 June 1989 and the complaint was filed on 30 June 1989, i.e., after the omission. The trial court discharged the respondents holding that the penal provision was not in force at the time of institution of proceedings. The revenue contended that the offence related to a period when section 276-E was in force and the omission should not affect prosecution. The respondents relied on settled legal position that prosecution cannot be based on a non-existent provision. The High Court, placing reliance on the Supreme Court decision in General Finance Co. and another v. Assistant Commissioner of Income-Tax, (2002) 257 ITR 338, held that non-compliance with a section that has been omitted cannot be the basis for launching or continuing prosecution. Consequently, the discharge order was upheld. The court clarified that the omission did not affect the power to levy penalty, and the department could pursue that remedy if permissible under law. The revision application was dismissed.
Headnote
A) Income Tax - Prosecution - Maintainability After Omission of Section - Section 276-E Income-tax Act, 1961 - The provision was omitted w.e.f. 01-04-1989; sanction granted on 27-06-1989 and complaint filed on 30-06-1989. Held that prosecution cannot be based on an omitted provision, following Supreme Court in General Finance Co. v. Asst. CIT, (2002) 257 ITR 338 (Paras 2-3). B) Income Tax - Penalty - Distinction from Prosecution - Section 276-E Income-tax Act, 1961 - Omission of penal provision does not bar penalty proceedings if permissible under law. Held that the department may pursue penalty, independent of prosecution (Para 3).
Issue of Consideration
Whether prosecution can be instituted and continued under section 276-E of the Income-tax Act, 1961 after the provision was omitted by amendment before the institution of the complaint?
Final Decision
The revision application is dismissed. The order of discharge passed by the trial court is upheld. The court clarifies that omission of the penal provision does not affect the levy of penalty, if permissible in law.
Law Points
- Prosecution cannot be launched or continued for non-compliance with a provision that has been omitted before institution of complaint
- omission of penal provision does not affect levy of penalty
- non-compliance with omitted section cannot be basis for prosecution
