ASHIRWAD ENTERPRISES AND ORS. versus STATE OF BIHAR AND ANR.

Citation: [2004] 3 S.C.R. 300 · Decided: 22-03-2004 · Supreme Court of India · Bench: DORAISWAMY RAJU · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
ASHIRWAD ENTERPRISES AND ORS. 
.. 
V. 
STATE OF BIHAR AND ANR. 
B 
MARCH 22, 2004 
[DORAISWAMY RAJU AND ARIJIT PASAYAT, JJ.] 
Income Tax Act, 1961-Sections 245C, 245H and 276C-Prosecution 
(._ 
' 
c 
proceedings initiated by Revenue for concealment of income and wilfal attempt 
to evade tax-Petition before High Court under section 482 Cr.P.C. to quash 
the proceedings claiming that applications were filed before Settlement 
Commission before initiation of prosecution proceedings and they are pending-
Refusal by High Court to quash the proceedings-Correctness of-Held, 
prosecution proceedings cannot be initiated if the applications before Settlement 
D Commission were made prior to it-On facts, since immunity ordP.r was passed 
by the Settlement Commission after the High Court judgment, the prosecution 
proceedings quashed. 
1'. 
Revenue initiated prosecution proceedings against the appellant-
assessees for concealment of income and wilful attempt to evade tax during 
E the period relating to assessment year 1988-89 under Section 276C of the 
Income Tax Act, 1961 by instituting a complaint before a Special Court. 
The appellants filed a petition before High Court under Section 482 Cr.PC 
for quashi_ng the prosecution proceedings before.the Special Court since 
the applications made by the appellants under section 245C of the Act 
F before the Settlement Commission were pending. High Court declined to 
quash the prosecution proceedings on the ground that the Settlement 
Commission by then had not passed any order granting any immunity in 
favour of the appellants. 
In appeal to this Court, the appellant-assessees submitted that after 
G the High Court order, the Settlement Commission passed an order 
granting immunity to them and hence the prosecution proceedings should 
be dropped against them. 
Respondent-State contended that the immunity granted by the 
.>. 
Settlement Commission is a conditional one; and that the prosecution 
H 
300 
ASHJRWAD ENTERPRISES r. STATE OF BIHAR 
301 
proceedings against the appellai:Jt-assessees would be continued under the A 
law till the fulfilment of the conditions stipulated by the Settlement 
Commission. 
Allowing the appeals, the Court 
HELD: 1.1. Proviso to Section 245H (1) of the Income Tax Act, 1961 B 
provides that no immunity shall be granted by the Settlement Commission 
in cases where the proceedings for the prosecution under the Act or under 
the IPC or under any other Central Act have been instituted before the 
\ -I. 
date of receipt of application under Section 245C w.e.f. I.6.1987. This 
provision is intended to discourage the filing of belated applications after C 
launching the prosecution. (304-C-D( 
CIT v. B.N Bhattacharjee, (1979) ITR 461, referred to. 
1.2. The gFant of immunity in a given case is to b~ decided by the 
Settlement Com mission on the facts· of ea~h case and no straight-jacket D 
formula for any universal application can be laid down. In the instant case, 
the Settlement Commission has been satisfied that the grant-0f immunity 
) 
)\ 
is (aikd. for. Since the decision has not been questioned by the Income 
Tax Authorities,.-U has attained finality. The conditions required to be 
fulfilled before the grant of immunity are that the Commission has to be 
satisfied that the applicant has made full and true disclosure of his income E 
and the manner in which such in~ome has been derived and that he has 
co-operated with the Commission in the proceedings before it. In the 
instant case, the records reveal that application for settlement under 
Section 245C was filed on 27.5. I 991 and the prosecution was launched on 
27.2.1992. Therefore, the application for settlement was filed before 
prosecution was launched. (304-E-H( 
F 
1.3. In case there is non-compliance of the Commission's order, then 
Section 245H(J A) of the Act will become operative and the appellants 
would be rendered liable notwithstanding the earlier immunity granted 
as if such immunity had not been granted at all. It shall be open to the G 
Income Tax Authorities to ask for restoration of proceedings before the 
Special Court if there is non-compliance with Commission's order or 
withdrawal of immunity under Section 245H(2). 1305-C-D( 
1.4. After the High Court's judgment, final orders have been passed 
by the Commission according immunity on an application presented H 
302 
SUPREME COURT REPORTS 
[2004] 3 S.C.R. 
A apparently before the institution of the proceedings for prosecution. 

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