Krishnaswami Reddy, J.
1. This revision petition has been filed by the accused in C. C. No. 16 of 1969 on the file of the District Magistrate, Salem, against the order dismissing their preliminary objection that the complaint against them was not maintainable.
2. To appreciate the contentions raised by the learned counsel for the petitioners, the following facts are relevant:
3. The first petitioner was a registered partnership firm. This firm, during the relevant period, was carrying on business as manufacturers of art silk fabrics and dealers in textile goods at Elampillai. They have been purchasing and selling handloom goods. The firm was an income-tax assesses within the jurisdiction of the third Income-tax Officer, Circle I, Salem. The partners of the said firm are: (1) S. Mari Chetty, (2) S. Arunagiri Chetty, and (3) S. Rajanna Chetty (petitioners (2) to (4)). They were also assessed to income-tax.
4. In response to a notice under Section 139(2) of the Income-tax Act, 1961, the petitioners filed a return of income dated 25th July, 1964, for the assessment year 1963-64, and presented the same to the Income-tax Officer on 6th August, 1964, at Salem. This return has been verified and signed by Mari Chetty, one of the partners of the firm. Along with the return, a trading and profit and loss account for the period 14th April, 1962, to 19th April, 1963, and balance-sheet as on April 19, 1963, were also filed as part of the return. A further statement forming part of the return showing a list of sundry debtors and creditors of the firm as on April 19, 1963, has also been filed. In the above return of income and the statements, the income from the business was declared at Rs. 48,261 only, whereas the real income as disclosed during the investigation by the Income-tax Officer was about Rs. 1,43,802.
5. The 3rd Income-tax Officer, Circle I, Salem, filed a complaint against the first petitioner-firm and also the three partners (petitioners (2) to (4)) of the firm at the instance of the Commissioner of Income-tax, Madras II, before the District Magistrate, Salem.
6. It was alleged in the complaint that the accused filed a false return of income and statements knowing them to be false, punishable under Section 277 of the Income-tax Act, 1961. It was also alleged that they have actively conspired, aided and participated in filing the said false return and statements. It was averred in the complaint that certain invoices were made in the name of some fictitious persons and the petitioners fabricated false ledgers, vouchers, bills, etc., for the purpose of using them before the Income-tax Officer and corruptly used the same as genuine evidence and have, therefore, committed offences punishable under Sections 193 and 196 read with Section 120B, Indian Penal Code.
7. The District Magistrate took cognizance of the case and issued processes to the petitioners-accused. The petitioners-accused raised a preliminary objection questioning the validity of Section 277 of the Income-tax Act, 1961, before the District Magistrate on the ground that it violated Articles 14 and 20(2) of the Constitution of India and requesting him to make a reference to the High Court under Section 432(1), Criminal Procedure Code, as it involved a constitutional point. By his order dated March 4, 1969, the District Magistrate overruled the preliminary objection and held that no question as to the validity of Section 277 of the Income-tax Act under Articles 14 and 20 of the Constitution of India was involved and, consequently, he held that there was no necessity to make a reference to the High Court under section 432(1), Criminal Procedure Code. The learned counsel for the petitioners contended that Section 277 of the Income-tax Act (hereinafter called 'the Act') is violative of Article 14 of the Constitution as there is no guiding principal in the Act as to when the action should be taken under Section 277, namely, the institution of prosecution or under Section 271(1)(c), namely, the levy of penalty, or under both. He further contended that the prosecution under Section 277 of the Act is violative of Article 20(2) of the Constitution inasmuch as the double punishment for the same offence, namely, penalty levied by the authorities and the punishment imposed on a prosecution by the criminal court, is barred by virtue of the doctrine of double jeopardy.
8. In respect of the first point, the learned counsel submitted that penalty proceedings under Section 271(1)(c) of the Act is a judicial proceeding in view of Section 136 of the Act and that there are no guidelines in the Act as to when the penalty proceedings should be taken and when the prosecution should be instituted and he further contended that if both are not judicial proceedings, no safeguards are provided for the institution of prosecution in the Act of 1961, corresponding to Section 28(4) of the Act of 1922, and that, therefore, Section 277 of the Act has to be struck down as violative of Article 14 of the Constitution.
9. To appreciate the points raised by the learned counsel, it may be necessary to note the relevant provisions of the Income-tax Act of 1961 and the Income-tax Act, of 1922. The complaint has been filed, as noted already, under Section 277 of the Act of 1961, which runs thus :
'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, of does not believe to be true, he shall be punishable with rigorous imprisonment for a term which may extend to two years ...'
10. The corresponding provision in the old Act is Section 52 which restricts a prosecution to a false statement made in a verification mentioned in the sections therein, whereas Section 277 includes all false statements made under this Act or any rule made thereunder. Section 271(1)(c) deals with proceedings for levying penalty in respect of concealment of the particulars of income and the inaccurate particulars of such income in the return. It runs thus:
'(1) If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person-- ...
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,-- ...
(iii) in the cases referred to in Clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished...'
11. The corresponding provision under the old Act is Section 28(1)(c). In Section 28(1)(c), the word 'deliberately' has been used in respect of furnishing inaccurate particulars of the income. In other respects, Section 28(1)(c) is similar to the present Section 271(1)(c). The word. 'deliberately' found in Section 28(1)(c) is omitted in Section 271(1)(c) of the Act. Under Section 274(2) of the Act, it is provided that in respect of proceedings in relation to Section 271(1)(c), if the penalty imposable exceeds a sum of rupees one thousand, the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner for the imposition of penalty. This clause provides that the Inspecting Assistant Commissioner will also have the power in the circumstances mentioned in Clause (2) to levy penalty.
12. In this context, we have to refer to Section 28(4) of the old Act which runs thus:
'No prosecution for an offence against this Act shall be instituted in respect of the same facts on which a penalty has been imposed under this section.'
13. There is no corresponding provision in the Act of 1961. This section is omitted in the latter Act.
14. Section 136 of the Act of 1961 reads thus :
'Any proceeding under this Act before an income-tax authority shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 and for the purposes of Section 196 of the Indian Penal Code (XLV of 1860).'
15. The corresponding section in the old Act is Section 37(4) which is in part materiel with Section 136. Sections 131 to 135 of the Act provide the powers of the income-tax authorities for discovery, production of evidence, etc., search and seizure, power to call for information, power of survey, etc. Under Section 131(1), it is stated that the income-tax authorities mentioned therein will have the same powers as are vested in a court under the Code of Civil Procedure, when trying a suit in respect of the following matters, namely:--
(a) discovery and inspection ;
(b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath;
(c) compelling the production of books of account and other documents; and
(d) issuing commissions. The corresponding provision in the old Act is Section 37(1).
16. From the above provisions, it is contended that any proceeding under the Income-tax Act is a judicial proceeding and that, therefore, there are no guidelines as to when the penalty proceedings should be instituted and when the prosecution has to be launched. I am unable to see any substance in this contention. Under Section 136, it is clearly stated that any proceeding under the Act shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 and for the purposes of Section 196 of the Indian Penal Code. The learned counsel submits that the words 'within the meaning of' and 'for the purposes of' should carry different meanings and according to him, the words 'within the meaning of' are wider than the words 'for the purpose of'. It is no doubt true that these words were used to convey a different import. The words 'within the meaning of Sections 193 and 228' have been used as these two offences under the Indian Penal Code refer to judicial proceedings also. The proceedings under the Income-tax Act are deemed to be judicial proceedings within the meaning of the judicial proceedings mentioned in. Sections 193 and 228, Indian Penal Code. In Section 196, Indian Penal Code, the words 'judicial proceedings' do not occur and, therefore, the words 'for the purposes of' have been used instead of ' within the meaning of'. Consequently, though these two phrases convey a different import in the particular context, the result is that the proceedings under the Income-tax Act will be deemed to be judicial proceedings in relation to prosecutions under Sections 193, 228 and 196 of the Indian Penal Code. It is contended by the learned counsel that Section 136 of the Act should be given a wider interpretation and according to him whatever proceedings the income-tax authorities take must be deemed to be judicial proceedings without which an offence under Section 193 or Section 228 or Section 196 will not be committed. There is absolutely no basis for such an interpretation. There is no basis for an inference that all proceedings or every proceeding under this Act is a judicial proceeding for all purposes. If that was the intention of Parliament, it could have said so in a simple manner that all proceedings under the Act are judicial proceedings. Similarly, the provision under Section 131(1) of the Act declaring that the income-tax authorities shall have the same powers as are vested in a court under the Code of Civil Procedure is confined only to the four clauses mentioned in Section 131(1) which I have already noted. This is again an indication that all proceedings are not judicial proceedings and that the powers under the Code of Civil Procedure could be exercised only in certain matters. The proceedings under Section 271(1)(c) do not come within the purview of Section 136 of the Act,
17. The learned counsel for the petitioners relied upon a decision in Commissioner of Income-tax v. Gokuldas Harivallabhdas, : 34ITR98(Bom) , wherein it has been held that the proceedings under Section 28(1)(c) of the old Act, which is similar to Section 271(1)(c); of the new Act, are criminal proceedings in their very nature. It is, therefore, contended that they are judicial proceedings. In view of the decision of the Supreme Court in Thomas Dana v. State of Punjab, : 1959CriLJ392 , that the levy of penalty is different from a criminal prosecution and punishment of the criminal by a criminal court, it is doubtful whether the observation in Commissioner of Income-tax v. Gokuldas Harivallabhdas, : 34ITR98(Bom) , that the proceeding is in the nature of a criminal proceeding is correct. Even in that decision, what is stated is that such proceeding will be in the nature of a criminal proceeding, It does not equate the proceeding of levying penalty to a criminal proceeding. If certain features of one proceeding are found in another, the latter may be said to be in the nature of the former, but it cannot be the same. It appears 'that the penalty proceedings are in the nature of criminal proceedings', have been used in that decision, in the sense that penalty also is a punishment.
18. It may be true that the authority imposing penalty under Section 271(1)(c) acts judicially, but that is not the same thing as holding that that authority functions as a judicial tribunal or court. I, therefore, hold that only within the meaning of Sections 193 and 228, Indian Penal Code, and for the purposes of Section 196, Indian Penal Code, the proceedings under the Income-tax Act must be deemed to be judicial proceedings and for no other purpose any proceeding under the Act can be considered as a judicial proceeding.
19. The learned counsel contended that, even if the proceedings are not judicial proceedings, the Commissioner of Income-tax, at whose instance the complaint has to be filed, is given an unfettered discretion without any guideline as to when and under what circumstances he could institute prosecution and that there are no sufficient safeguards to protect the interests of the assessee and the absence of such safeguards may lead to an unreasonable discrimination violative of Article 14 of the Constitution.
20. To appreciate the contention of the learned counsel, we have to refer to Section 279 of the Act. Section 279 is this:
'279. Prosecution to be at instance of Commissioner.--(1) A person shall not be proceeded against for an offence under Section 275A or Section 276 or Section 276A or Section 276B or Section 277 or Section 278 except at the instance of the Commissioner.
(1A) A person shall not be proceeded against for an offence under Section 277 in relation to the assessment for an assessment year in respect of which the penalty imposable upon him under Clause (iii) of Sub-section (1) of Section 271 has been reduced or waived by an order under Sub-section (4A) of that section..,...'
21. This section clearly states that no prosecution under Section 277 and other sections mentioned in Clause (1) can be instituted except at the instance of the Commissioner. This is a protection given to the persons against whom prosecution has to be instituted. Under Section 271(1), the Income-tax Officer or the Appellate Assistant Commissioner can levy penalty in the circumstances mentioned therein after having satisfied that such proceedings are necessary to be instituted. The discretion is not left with the authorities mentioned in Section 271(1) to institute prosecution. It is left in the hands of a higher authority, the Commissioner of Income-tax, to exercise his discretion as to when prosecution should be instituted. The very fact that the institution of prosecution is left to the discretion of a higher authority than the authority who institutes proceedings for levying penalty is itself a sufficient protection and safeguard as the higher authority is expected to exercise his discretion in appropriate cases.
22. The second safeguard provided is that when the penalty imposable upon a person in relation to the assessment for an assessment year under Clause (iii) of Sub-section (1) of Section 271 has been reduced or waived by an order under Sub-section (4A) of that section, the prosecution cannot be instituted. It is true that in the earlier Act, under Section 28(4), no prosecution can be instituted in respect of the same facts on which a penalty has been imposed. In the old Act, a larger protection was given. In the present, under Section 279(1A), a partial protection is given, which itself will constitute a sufficient safeguard, fettering the absolute discretion of the Commissioner in instituting prosecution. It is contended by the learned counsel for the petitioners that under Sub-section 271(4A), the Commissioner will have the power to reduce or waive the penalty imposable only up to fifty thousand rupees and if the penalty imposable is higher, he has to get the previous approval of the Board and, therefore, the Commissioner will have an unfettered discretion in instituting prosecution in respect of the imposition of a penalty of more than fifty thousand rupees as the Commissioner himself could not reduce or waive that penalty and that, therefore, his discretion in such a case will be arbitrary and capricious. It is also contended that under Section 271(4A)(i) and (ii)(a), the reduction or waiver of penalty by the Commissioner could be only in relation to the penalty imposable under Clause (i) of Sub-section (1) and Clause (iii) of Sub-section (1) and in the circumstances mentioned therein. But the penalty imposable under Section 271(1)(c)(ii) is left out. In a penalty imposable under Section 271(1)(c)(ii), it is stated that the Commissioner has no power to reduce or waive the penalty and the result is that, the safeguard provided under Section 279(1A) will not benefit those persons against whom penalty was levied under Section 279(1)(c)(ii). Even here, according to the learned counsel, it is left to the will and pleasure of the Commissioner for instituting prosecution. I am unable to agree with this contention. As already pointed out, the Commissioner being the higher authority in the hierarchy of the authorities, he is expected to exercise his discretion judicially in the appropriate cases and appropriate circumstances. The discretion given to a higher authority cannot be said to be a discrimination, but that there may be a scope for a discrimination in certain cases may not be the ground to invalidate the power itself.
23. In Matajog Dobey v. H.C. Bhari, : 28ITR941(SC) , the Supreme Court, negativing the contention that Section 197, Criminal Procedure Code, is violative of Article 14 of the Constitution as an absolute discretion was given to the authorities in sanctioning prosecution of public servants without any guideline, observed as follows:
'It has to be borne in mind that a discretionary power is not necessarily a discriminatory power and that abuse of power is not to be easily assumed where the discretion is vested in the Government and not in a minor official.'
24. In a recent case, T.S. Baliah v. T.S. Rangachari, Income-fax Officer, : 72ITR787(SC) the Supreme Court, in respect of the contention raised that the choice of the prosecution under Section 177, Indian Penal Code, or under Section 52 of the Income-tax Act of 1922, was left to the arbitrary and unguided discretion of the Income-tax Officer and that, therefore, there was a violation of the guarantee under Article 14 of the Constitution, held that the prosecution under Section 52 of the Income-tax Act was at the instance of the Inspecting Assistant Commissioner, a higher authority to the Income-tax Officer and that will be a sufficient safeguard and protection. It is also observed that no prosecution could take place if penalty has been imposed under Section 28 of the old Act. It is contended by the learned counsel for the petitioners that the second safeguard provided under the old Act and mentioned by the Supreme Court as one of the safeguards has been removed in the present Act, and, therefore, the second safeguard mentioned in the decision is not available under the present Act. As already noted there is also a protection given under the Act in respect of prosecution in cases where the penalty has been waived or reduced by the Commissioner and, therefore, in my opinion, this fetters the discretion of the Commissioner and provides a safeguard. In the present Act, it is not in dispute that, though the Income-tax Officer is the authority who can initiate penalty proceedings, it is only the Commissioner of Income-tax, the higher, authority, who has got the power to institute prosecution.
25. Apart from this, the ingredients in Section 277(1)(c) for the purpose oflevying penalty is different from the ingredients of Section 277 in respectof prosecution. No mens rea is required for penalty proceedings whereas, under Section 277, mens rea is provided and a prosecution can be instituted only when not only the statement made by a person in verification is false but either he should know or believe such statement to be false or does not believe to be true. It is, therefore, clear that the knowledge that the statement is false is an essential ingredient for prosecution. This section is complete by itself and different from Section 271(1)(c). Without the ingredients required under Section 277, the prosecution cannot be launched even though the proceedings for levying penalty might be instituted. This is another safeguard. It is contended by the learned counsel for the petitioners that though it might be that in all cases where the penalty proceedings can be instituted that the prosecution cannot be launched for lack of mens rea, yet in all proceedings for which prosecution can be instituted, the proceedings for levying penalty can also be instituted and, therefore, in the latter event, there is no guideline as to when the Commissioner has to use his discretion. I have already mentioned that the prosecution being left in the hands of the Commissioner with his discretion being fettered in the circumstances mentioned above, will undoubtedly be a sufficient safeguard. I, therefore hold that Section 277 of the Act is not violative of Article 14 of the Constitution.
26. The second point raised by the learned counsel that the prosecution under Section 277 offends under Article 20(2) of the Constitution as there are two punishments provided under the Act, namely, penalty and punishment on a conviction by a criminal court and, therefore, the risk of a double punishment for the same offence is inherent in the provisions of the Act itself. There is no substance in this point. Under Article 20(2) of the Constitution, no person shall be prosecuted and punished for the same offence more than once. The requirements under this clause are : (1) Prosecution. (2) Punishment. (3) Both prosecution and punishment for the same offence. (4) More than once. It is therefore, necessary to consider whether the proceedings for levying penalty will amount to a prosecution and whether penalty is itself a punishment and whether the prosecution in respect of the same facts relating to the proceedings levying penalty will amount to the same offence. I have already pointed out while discussing the ingredients of Section 271(1)(c) and Section 277 that they are different. In Section 271(1)(c) there is no mens rea. In Section 277 there is mens rea. Therefore, both cannot be said to deal with same offence. It cannot also be said that the institution of proceedings for penalty is tantamount to prosecution in a criminal court and equally the punishment on a conviction which is criminal cannot be equated with the punishment of penalty which is either civil or quasi-criminal.
27. In Thomas Dana's case the Supreme Court held that the penalty imposed on a person under Section 167 of the Sea Customs Act was not the same thing as the punishment imposed by the criminal court by way of punishment for a criminal offence. It further held that when a criminal prosecution and punishment of a criminal, in the sense of the penal law, is intended, the section makes a specific reference to a trial by a Magistrate, a conviction by such Magistrate and on such conviction to imprisonment or fine or both. It further observed that the legislature was therefore aware of the distinction between a proceeding before the customs authorities by way of enforcing the preventive and penal provisions of the schedule and a criminal prosecution before a Magistrate with a view to punishing offenders under the provisions of the same section. These observations will fully apply to this case.
28. I am, therefore, of the view that Section 277 of the Act is not violative of Article 20(2) of the Constitution. Lastly, it is contended by the learned counsel for the petitioners that, in according sanction for prosecution by a Commissioner, no opportunity is given to a person against whom prosecution was intended to be instituted and, therefore, such sanction offends natural justice. I do not agree with him. The affected person will have a full opportunity of defending himself in a trial and, therefore, it cannot be said that by mere institution of prosecution, his rights are affected. He relied upon a decision of the Supreme Court in Ram Dial v. State of Punjab, : 2SCR858 , where in dealing with the contention that Section 14(e) of the Punjab Municipalities Act is violative of Article 14 of the Constitution as the State Government did not give any notice to a member and asked for an explanation from him in respect of his removal whereas Section 16(1) of the same Act provided for hearing in the manner indicated therein, it held that Section 14(e) was discriminatory and it has to be struck down. By a removal, the member is certainly affected and, therefore, it was held that an opportunity should be given to him, especially where an opportunity was given in the same Act under similar circumstances, under Section 16(1). That decision will not apply to a sanction for prosecution where it is left to the discretion of the higher authorities.
29. In the result, I do not find any substance in any of the points raised by the counsel for the petitioners.
30. The petition is dismissed.