By TIOL News Service

NEW DELHI, SEPT 01, 2016: THE issues are - Whether notification issued u/s 118 by the CBDT would have overriding effect over architecture of the statute designating appellate forums and whether DCIT (Investigation) can be the appellate forum for any order of the AO or ITOs involved in search proceedings. NO is the verdict.

Facts of the case

The appellants, who are husband and wife, are residents of both Bhopal and Aurangabad. A search operation was conducted by the Income Tax authorities on 28.10.2010 at both the residences of the appellants, and their statements were recorded. On a query made by the authorities, it is alleged that they made false statements denying of having any locker either in individual names or jointly in any bank. It later transpired that they did have a safe deposit locker with the Axis Bank at Aurangabad which they had also operated on 30.10.2010. The search at Aurangabad was conducted by the Income Tax Officer and the statements of the appellants were also recorded at Aurangabad. On charges of making false statement, the Revenue lodged criminal complaint under IPC.

The Trial Court on 9.6.2011, took note of the offences imputed and issued process against the appellants. In doing so, the Trial Court, amongst others, noted that the search proceedings undertaken by the authorities under Section 132 of the Act were deemed to be judicial proceedings in terms of Section 136 and in course whereof, as alleged, the appellants had made false statements with regard to their locker and that on the basis of the documents and evidence produced on behalf of the complainant, sufficient grounds had been made out against them to proceed under Sections 191,193, 200 IPC.

The appellants impugned this order of the Trial Court before the High Court and sought annulment primarily on the ground that the search operations having been undertaken by the I.T.Os. of Nashik and Dhule, the complaint could not have been lodged by the Deputy Director of Income Tax (Investigation)-I, Bhopal (M.P.) who was not the appellate authority in terms of Section 195(4) of the Code and further no part of the alleged offence having been committed within the territorial limits of the Court of the Chief Judicial Magistrate, Bhopal, it had no jurisdiction to either entertain the complaint or take cognizance of the accusations. The High Court declined to interfere on either of these contentions.

On appeal, the Apex Court held that,

++ though the Magistrate held that the I.T.O. was not a court within the meaning of Section 195(1)(b) of the Code, the High Court, on a revision being filed by the respondent No. 2, sustained his challenge to the maintainability of the complaint. The High Court held that the I.T.O. was a court within the meaning of Section 195(1)(b) of the Code and resultantly dismissed the complaint filed by the appellant, who eventually approached this Court;

++ this Court also dwelt upon the aspect whether "judicial proceeding" as referred to in Section 193 IPC was synonymous with the expression "any proceeding in any court" used in Section 195(1)(b) of the Code. This issue surfaced primarily in view of the two classes of proceedings contemplated in Section 193 IPC attracting two varying punishments. This provision envisaged a punishable offence for giving false evidence in any stage of a judicial proceeding or fabricating false evidence for the purpose of being used in any stage of a ‘judicial proceeding’ and also for giving or fabricating false evidence in ‘any other’ case. This Court in the ultimate analysis propounded on a conjoint reading of Section 193 IPC and Section 195(1)(b) of the Code that the proceedings which are judicial under the former ought to be taken to be proceedings in any court under the latter. In this context, it was ruled that having regard to the higher sentence for the offence under Section 193 IPC qua a judicial proceeding compared to ‘any other case; the legislature thus had intended that there ought to be a safeguard in respect of complaints pertaining to the offence relatable to judicial proceedings as engrafted in Section 195(1)(b) of the Code. It was observed that an offence which was treated as more serious by the first paragraph of Section 193 IPC, being one committed during the course of a judicial proceeding, should be held to be an offence committed in a proceeding in any court for the propose of Section 195(1)(b) of the Code. In terms of the majority decision that was rendered, the view taken by the High Court was sustained and the complaint was dismissed as not filed in compliance of the statutory prescriptions contained in Section 195(1)(b) of the Code;

++ noticeably in course of the adjudication, it was marked that Section 195 was an exception to an ordinary rule that any person could make a complaint in respect of commission of an offence triable under the Code. The restrictive mandate of this provision of the Code against cognizance of any offence punishable under the sections mentioned therein, when those pertain to any proceedings in any court, except on the compliant in writing of such court or of some other court to which such court is subordinate, was underlined in particular. This Court, thus emphasised that in the matter of invocation of Section 195(1)(b) of the Code, vis-a-vis a complaint about any of the offences as mentioned therein, an exception to the ordinary rule of making complaint by any person has been carved out and by way of a safeguard, only the court in the proceeding before which such offence had been committed or such officer of the Court as it may authorise in writing or some other court to which to this Court is subordinate, has been legislatively identified as competent to do so;

++ there is thus no escape from the proposition that for a valid complaint under Section 195 of the Code, the mandate thereof has to be essentially abided and as is easily perceivable this is to prevent frivolous, speculative and unscrupulous allegations relating to judicial proceedings in any court, lest the process of law is abused and public time is wasted in avoidable litigation;

++ that the search operations did constitute a proceeding under the Act before an income tax authority and that therefore the same is deemed to be a judicial proceeding within the meaning inter alia of Sections 193 and 196 IPC and that every income tax authority for the said purpose would be deemed to be a civil court for the purposes of Section 195 is not an issue between the parties;

++ the essence of the discord is the competence of the Deputy Director, Income Tax (Investigation)-I, Bhopal (M.P.) to lodge the complaint. Whereas, according to the appellants, he is not the authority or the forum before which appeals would ordinarily lie from the actions/decisions of the I.T.Os. who had recorded their statements, as mandated by Section 194(4) of the Code, it is urged on behalf of the respondent that having regard to the overall scheme of the Act, he indeed was possessed of the appellate jurisdiction to maintain the complaint. As nothing much turns on the ingredients of the offences under Sections 193, 196, 200 IPC qua the issue to be addressed, detailed reference thereto is considered inessential;

++ as enumerated under Section 116 of Chapter XIII of the Act, Deputy Director of Income tax/Deputy Commissioner of Income Tax/Deputy Commissioner of Income Tax (Appeals) amongst others are the designated income tax authorities. Section 118 authorises the Central Board of Direct Taxes constituted under the Central Board of Revenue Act, 1963 to direct by notification in the official gazette that any income tax authority or authorities specified therein would be subordinate to such other income tax authority or authorities as may be specified in such notification. In course of the arguments, such a notification as contemplated has been laid before this Court;

++ the notification deals exclusively with the inter se subordination of the authorities mentioned therein so much so that Income Tax Officers have been made subordinate to Assistant Directors or Assistant Commissioners within whose jurisdiction they perform their functions or other income tax authorities under whom they are appointed to work and to any other income tax authority to whom the Assistant Director or the Assistant Commissioner as the case may be or other income tax authority is subordinate. Noticeably this clause does not spell out any territorial barriers but logically warrant some order/notification to activate the functional mechanism in order to address the institutional exigencies;

++ the powers of an assessing officer vested with the jurisdiction as permitted by Section 120 of the Act, extends as is clarified by Section 124, to any person carrying on business or profession, if the place at which he carries on his business or profession is situated within the limits of the area over which such officer had been vested with the jurisdiction or if the person concerned carries on business in more places than one, if the principal place of his business or profession is situated within the area over which the assessing officer has jurisdiction. In addition, such officer would have also jurisdiction in respect of any other person residing within the area. Sub-section 3 of Section 124 debars a person to call in question the jurisdiction of an assessing officer in the eventualities as mentioned in sub-clauses (a) and (b) thereof;

++ the power with regard to discovery, production of evidence etc. and the officer empowered to exercise the same has been dealt with in details in Section 131 of the Act. The procedure to be complied with in conducting search and seizure has been delineated in Section 132 of the Act. Seemingly, to this extent, the parties are one and ad idem;

++ the bone of contention lies in the interpretation of Section 246 of the Act in particular which is contained in Chapter XX dealing with Appeals and Revision. Whereas Section 246 catalogues the orders of an assessing officer other than those of the Deputy Commissioner from which appeal would lie to the Deputy Commissioner (Appeals), Section 246A lists the orders from which appeal would lie to the Commissioner (Appeals). Admittedly, the categories of orders specified under Section 246(1) of the Act do not include one stemming from any proceeding before an assessing officer under Section 132 of the Act pertaining to search or seizure. Noticeably though under Section 116 of the Act, as referred to hereinabove, under clause (d) thereof, Deputy Director of Income Tax, Deputy Commissioner of Income Tax and Deputy Commissioner of Income Tax (Appeals) have been bracketed together, it is only the Deputy Commissioner (Appeals), as is apparent from Section 246(1), who has been conferred with the appellate jurisdiction to entertain appeals, albeit from specified orders passed by an assessing officer as mentioned in that sub-section. The Deputy Director of Income Tax in particular, has not been designated to be the appellate authority or forum from such orders or any other order of the assessing officer. Having regard to the issue to be addressed, it is considered inessential to dilate on Section 246A which deals with the appeals to the Commissioner (Appeals);

++ the notification issued under Section 118 of the Act cannot be conceded an overriding effect over the scheme of the statute designating the appellate forums more particularly in absence of any order, circular, notification of any authority thereunder to that effect. The Deputy Director of Income Tax for that matter, as the framework of the Act would reveal, has not been acknowledged to be the appellate forum from any order or the decision of the assessing officer/I.T.O., notwithstanding several other provisions with regard to conferment of various powers and assignments of duties on the said office. In the teeth of such mindful and unequivocal module of the Act, recognition of the Deputy Director of Income Tax to be a forum to whom an appeal would ordinarily lie from any decision or action of the assessing officer/income tax officer would not only be inferential but would also amount to unwarranted judicial legislation by extrinsic additions and doing violence to the language of the law framed. On the contrary, acceptance of the Deputy Commissioner (Appeals) as the forum to which an appeal would ordinarily lie from an order/decision of the assessing officer/I.T.O., would neither be inconsistent with nor repugnant to any other provision of the Act and certainly not incompatible with the legislative scheme thereof. Mere silence in Section 246 of the Act about any decision or order other than those enumerated in sub-section (1) thereof as appealable /decision to the Deputy Commissioner (Appeals), does not ipso fact spell legislative prohibition in that regard and in our comprehension instead signifies an affirmative dispensation;

++ it is a trite law that there is no presumption that a casus omissus exists and a court should avoid creating a casus omissus where there is none. It is a fundamental rule of interpretation that courts would not feel the gaps in statute, their functions being jus discre non facere i.e. to declare or decide the law. In reiteration of this well-settled exposition, this Court in (2008) 306 ITR 277 (SC) Union of India and others vs. Dharmendar Textile Processors = 2008-TIOL-192-SC-CX-LB and others had ruled that it is a well settled principle in law that a court cannot read anything in the statutory provision or a stipulated provision which is plain and unambiguous. It was held that a statute being in edict of the Legislature, the language employed therein is determinative of the legislative intent. It recorded with approval the observation in Stock v. Frank Johns (Tipton) Limited (1978) 1 All ER 948 (HL) that it is contrary to all rules of construction to read words into an Act unless it is absolutely necessary to do so. The observation therein that, rules of interpretation do not permit the courts to do so unless the provision as it stands meaningless or doubtful and that the courts are not entitled to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the statute, was underlined. It was proclaimed that a casus omissus cannot be supplied by the court except in the case of clear necessity and that reason for is found in the four corners of the statute itself but at the same time a casus omissus should not be readily inferred and for that purpose, all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute;

++ the conferment of appellate jurisdiction on the Deputy Commissioner of Appeals from the orders/decisions of the assessing officers as is apparent from Section 246 of the Act, has to be construed as a conscious statutory mandate. This is more so as noticed hereinabove, the Deputy Director of Income Tax, Deputy Commissioner of Income Tax and the Deputy Commissioner of Income Tax (Appeals) have been otherwise placed at par in the list of income tax authorities provided by Section 116 of the Act. The omission to either vest the Deputy Director of Income Tax with the appellate powers or to contemplate the said post to be an appellate forum from the orders/decisions of the assessing officers cannot thus be accidental or unintended. The relevant provisions of the Act pertaining to the powers, duties and jurisdiction of the various income tax authorities do not leave any room for doubt, in our estimate, to conclude otherwise. True it is, that the Deputy Commissioner of Appeals has been construed in terms of Section 246 of the Act to be an appellate forum from the orders as enumerated in sub-section (1) thereof, but in absence of any provision in the statute nominating the Deputy Director of Income Tax to be an appellate forum for any order/decision of the assessing officer/I.T.O., the inevitable conclusion is that the said authority i.e. Deputy Director of Income Tax cannot be construed to be one before whom an appeal from any order/decision of any income tax authority, lower in rank would ordinarily lie;

++ the Parliament has unmistakably designated the Deputy Commissioner (Appeals) to be the appellate forum from the orders as enumerated under Section 246(1) of the Act. This however, in our view, as observed hereinabove does not detract from the recognition of this authority to be the appellate forum before whom appeals from the decisions of an assessing officer or of an officer of the same rank thereto would generally and ordinarily lie even in the contingencies not referred to in particular in sub section 1 of Section 246. This is more so, to reiterate, in absence of any provision under the Act envisaging the Deputy Director of Income Tax to be an appellate forum in any eventuality beyond those contemplated in Section 246(1) of the Act. Neither the hierarchy of the income tax authorities as listed in Section 116 of the Act nor in the notification issued under Section 118 thereof, nor their duties, functions, jurisdictions as prescribed by the cognate provisions alluded heretobefore, permit a deduction that in the scheme of the legislation, the Deputy Director of Income Tax has been conceived also to be an appellate forum to which appeals from the orders/decisions of the I.T.Os./assessing officers would ordinarily lie within the meaning of Section 195(4) of the Code. The Deputy Director of Income Tax (Investigation)-I Bhopal, (M.P.), in our unhesitant opinion, therefore cannot be construed to be an authority to whom appeal would ordinarily lie from the decisions/orders of the I.T.Os. involved in the search proceedings in the case in hand so as to empower him to lodge the complaint in view of the restrictive preconditions imposed by Section 195 of the Code. The complaint filed by the Deputy Director of Income Tax, (Investigation)-I, Bhopal (M.P.), thus on an overall analysis of the facts of the case and the law involved has to be held as incompetent;

++ ordinarily every offence ought to be inquired into and tried by a court within whose local jurisdiction it had been committed as is mandated by Section 177 of the Code. Section 178, however marks a departure contingent on the eventualities as listed in clauses (a),(b), (c) and (d) of Section 178 to identify the court that would have the jurisdiction to try the offences as contemplated therein;

++ though the concept of "cause of action" identifiable with a civil action is not routinely relevant for the determination of territoriality of criminal courts as had been ruled by this Court in Dashrath Rupsingh Rathod vs. State of Maharashtra and Another, (2014) 9 SCC 129, their Lordships however were cognizant of the word "ordinarily" used in Section 177 of the Code to acknowledge the exceptions contained in Section 178 thereof. Section 179 also did not elude notice;

++ on a cumulative reading of Sections 177, 178 and 179 of the Code in particular and the inbuilt flexibility discernible in the latter two provisions, we are of the comprehension that in the attendant facts and circumstances of the case where to repeat, a single and combine search operation had been undertaken simultaneously both at Bhopal and Aurangabad for the same purpose, the alleged offence can be tried by courts otherwise competent at both the aforementioned places. To confine the jurisdiction within the territorial limits to the court at Aurangabad would amount, in our view, to impermissible and illogical truncation of the ambit of Sections 178 and 179 of the Code. The objection with regard to the competence of the Court of the Chief Judicial Magistrate, Bhopal is hereby rejected;

++ the inevitable consequence of the determination in its entirety however is that the complaint is unsustainable in law having been filed by an authority, incompetent in terms of Section 195 of the Code;

++ in the result, the appeal succeeds and the impugned proceeding and the order assailed are set-aside. The respondent is however left at liberty to take appropriate steps in the matter, as available in law, if so advised.

(See 2016-TIOL-150-SC-IT)