N. Athimoolam Vs Income Tax Officer

M. Sathyanarayanan, J.@mdashThe assessee under the Income Tax Act is the petitioner in both these petitions.

2. Criminal Original Petition No. 27175 of 2007 is filed praying for appropriate direction directing the court of Additional Chief Metropolitan Magistrate E. O. II, Chennai, to await the orders on the compounding application filed by the petitioner herein/accused in E. O. C. C. No. 151 of 1985.

3. Criminal Original Petition No. 28081 of 2007 is filed by the assessee/accused praying for the quashment of the proceedings in E. O. C. C. No. 151 of 1985, pending on the file of the court of Additional Chief Metropolitan Magistrate E. O. II, Chennai.

4. The facts in brief necessary for the disposal of these petitions are as follows:

5. The respondent herein has filed a complaint before the abovesaid court in E. O. C. C. No. 151 of 1985 against this petitioner herein and one Mr. Navarathanmul Jain, chartered accountant for the alleged commission of the offences u/s 120B read with Sections 193, 196, 420 and 511 of the Indian Penal Code and Sections 276C, 277 and 278 of the Income Tax Act, 1961.

6. It is averred in the said complaint, that the petitioner/accused is an approved transport contractor for transport of oil, etc., from storage points and installations of Indian Oil Corporation (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum Corporation (HPCL) to various factories in and around Chennai. The second accused is an authorised representative, who prepared final account statements of the first accused.

7. It is further averred that in respect of the assessment year 1983-84, relevant for the accounting year ended on March 31, 1983, the first accused filed a return of income along with the profit and loss account and the balance-sheet as on July 30, 1983, declaring an income of Rs. 32,494. A search was conducted in the residential and business premises of the first accused u/s 132(1) of the Income Tax Act, 1961 and the said search resulted in seizure of several incriminating documents, account papers, etc.

8. The search further revealed that the first accused has deliberately understated his income and overstated his expenditure in the profit and loss account by Rs. 5,02,000. It is also alleged in the complaint that in the balance-sheet as on March 31, 1983, discrepancy has been noted with regard to the total investment made in land and building and towards cost of construction. Though the total investment made by the first accused is Rs. 10,88,980 the first accused had declared the total of the land and constructing cost at Rs. 4,25,650 and it has been done deliberately to evade the tax payable on the unexplained investment of Rs. 6,63,330 taxable u/s 69 of the Income Tax Act. The statement of the first accused was also recorded u/s 132(4) of the Income Tax Act during the search and as per the said statement, the first accused had spent further sum of Rs. 4,00,000 for the construction of the building on the plot of land at Anna Nagar, Chennai.

9. It is the specific case of the respondent/complainant that the abovesaid acts of the accused would constitute defrauds the exchequer of its legitimate revenue and to mislead and deceive the Income Tax Officer.

10. Mr. K. Ravi Anantha Padmanabhan, learned Counsel appearing for the petitioner/first accused, would submit that the first accused/assessee only after the search, came to know that his accounts and the accounts of his wife relating to Income Tax returns were not properly maintained by the second accused and acting as per the advise of his advocate, he had written a letter to the Assistant Director of Investigation, Income Tax Department, Chennai, stating that he is willing to have an amicable and peaceful settlement with the Department. The said letter was followed by an application before the Settlement Commission u/s 245C(1) of the Income Tax Act, which came to be filed in the month of January, 1985. The said application was rejected by the Settlement Commission.

11. The learned Counsel appearing for the petitioner would further submit that the petitioner/first accused has taken several steps to settle the disputes and in this regard, he submitted an application u/s 273A(4) of the Income Tax Act. The Commissioner of Income Tax had scrutinised the application and agreed for a settlement u/s 273A(4) of the Act, provided the first accused/assessee shall make full and proper disclosure.

12. In compliance with the same, the first accused/assessee has submitted an application on February 24, 1986, u/s 273A(4) for a comprehensive settlement. The Commissioner of Income Tax, Central, Chennai-I, who dealt with the said application, has directed the Income Tax Officer, Central, Chennai-V, Chennai to complete the assessment based on the petition for settlement filed by the first accused/assessee u/s 273A(4) of the Income Tax Act.

13. The learned Counsel appearing for the petitioner would submit that in terms of the directions issued by the Commissioner of Income Tax, the Assessing Officer has passed an order initiating penalty proceedings u/s 271(1)(c), (1)(a), (1)(b) and (2) of the Income Tax Act.

14. The said penalty proceedings were challenged before the Commissioner of Income Tax (Appeals) and the said appeals were also dismissed. Challenging the vires of the same, the petitioner/first accused filed Income Tax Appeals Nos. 3416 to 3434/MDS/1984 pertaining to the assessment years 1975-76 to 1984-85 before the Income Tax Appellate Tribunal, Chennai Bench-B and his wife has also filed appeals in I. T. A. Nos. 3407 to 3415/Mds/1988 pertaining to the assessment years 1978-79 to 1984-85. The Tribunal on taking into consideration the materials available on record, has decided the appeals in favour of the assessees holding that the assessees were under the bona fide belief and their explanation seems to be true. In view of the said finding, the Tribunal had set aside the penalty levied by the Assessing Officer as confirmed by the Commissioner of Income Tax (Appeals).

15. The learned Counsel appearing for the petitioner would submit that since the penalties levied by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals) u/s 273(2)(b) and 273(1)(b) of the Income Tax Act, were set aside by the Tribunal vide its order dated February, 2007, the criminal prosecution in E. O. C. C. No. 151 of 1985 are liable to be quashed. The learned Counsel appearing for the petitioner in support of his submission has placed reliance upon the following decisions:

(1) Dapel Investments Ltd. and Others Vs. Asstt. Commissioner of Income Tax Central Circle, New Delhi, ; and

(2) K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, .

16. Per contra, Mr. Ramasamy K., learned standing counsel appearing for the Income Tax Department would contend that the penalty proceedings and criminal prosecution are independent of each other and both can proceed simultaneously and therefore, de hors the orders passed by the Tribunal in favour of the petitioner/assessee/first accused, the criminal prosecution can proceed further. It is the further submission of the learned Counsel appearing for the respondent that u/s 273A of the Act, the Commissioner has power to reduce or waive penalty, etc., in certain cases and as per Sub-section (5) of Section 273A of the Income Tax Act, every order made under this section shall be final and shall not be called into question by any court or any other authority. It is also submitted by the learned Counsel appearing for the respondent that the petitioner/first accused has approached the authorities only after detection of concealment of income and hence it cannot be termed as a voluntary disclosure so as to enable him to avail of the remedy u/s 273A of the Income Tax Act. It is also contended by the learned standing counsel, appearing for the respondent that the trial of the case has already been over and the case is posted for arguments and therefore, at this belated stage, this Court need not exercise its power u/s 482 of the Code of Criminal Procedure to quash the proceedings and permit the trial court to proceed further with the trial of the case so that it can reach its logical conclusion. In support of his submissions, the learned standing counsel appearing for the respondent has placed reliance upon the following judgments:

(1) P. Jayappan Vs. S.K. Perumal, First Income Tax Officer, Tuticorin, ;

(2) Standard Chartered Bank and Others Vs. Directorate of Enforcement and Others, ;

(3) Deputy CIT v. M. Sundaram (2010) 322 ITR 196 ; and

(4) Assistant Commissioner of Income Tax Vs. N.K. Mohamed Ali, .

17. This Court has paid its consideration to the submissions made by the learned counsel appearing on either side and also perused the materials available on record in the form of typed set of documents and also the decisions relied on by the respective counsel appearing for the parties.

18. A perusal of the order passed by the Income Tax Appellate Tribunal, dated February 2005, made in I. T. A. Nos. 3416 to 3434/Mds./1988 filed by the petitioner herein pertaining to the assessment years 1975-76 to 1984-85 would disclose that the assessee/petitioner herein has submitted an application u/s 273A(4) of the Income Tax Act on February 21, 1986 for comprehensive settlement before the Commissioner of Income Tax, Central-V, Chennai, who in turn directed the Income Tax Officer, Central-V, Chennai, to complete the assessment based on the settlement petition filed by the assessee. The Assessing Officer has completed the assessment and decided the issue against the assessee/petitioner herein. The attention of this Court was also drawn to the deposition of the Assessing Officer who has been examined as P. W. 5, in E. O. C. C. No. 151 of 1985, which is the subject-matter of this petition for quash.

19. A perusal of the testimony of P. W. 5 would disclose that the petition filed by the petitioner/assessee u/s 273A(4) of the Income Tax Act was received by him on February 24, 1986, along with covering letter under exhibit 21. P. W. 5/Assessing Officer has accepted the income stated by the petitioner/Al and passed orders computing the total income for the assessment year 1984-85 at Rs. 1,33,390. P. W. 5. further deposed that he accepted the proposal made by the petitioner herein under exhibit P 23 and passed orders dated March 31, 1986 under exhibit P24 and thereafter issued a demand notice on March 31, 1986 calling upon the petitioner herein/first accused to pay back a sum of Rs. 1,00,228 which includes interest component also. Thereafter, the petitioner herein produced tax deduction certificate and after giving credit to the same, P.W.9 passed the assessment order on December 19, 1986, under exhibit P27 which was acknowledged by the petitioner herein under exhibit P28. P.W.5/Assessing Officer also initiated penalty proceedings and issued notice to the petitioner herein under exhibit P29 dated March 31, 1986, u/s 273(1)(b) of the Income Tax Act for which, the petitioner sent a reply and thereafter P. W. 5 passed an order levying penalty on January 13, 1988, u/s 271(1)(c) levying penalty of Rs. 71,206. The petitioner herein had sent a reply and the order of penalty came to be passed on December 16, 1987 levying penalty of Rs. 5,108. According to P.W. 5, in his chief examination, there was a deliberate concealment of income on the part of the petitioner herein and he has accepted the income on the basis of the application submitted by the petitioner herein for settlement and the quantum of tax sought to be evaded was Rs. 71,206. In the cross-examination, P. W. 5 would depose that on the date of his proposal, assessment has not been completed and the assessee has got right to file a revised return before passing the assessment order if he finds any omission or mistake. P.W.5 would further depose that the prosecution came to be launched before the assessment order was passed.

20. The learned Counsel appearing for the petitioner would submit that since admittedly the assessment has not been completed, the assessee has got right to file a revised return and therefore, the penalty levied was not at all proper and the Tribunal has taken into consideration the said aspect also and set aside the penalty and the same cannot be the subject-matter of criminal prosecution.

21. Let this Court consider the decisions relied on by the learned Counsel appearing for the petitioner and the learned standing counsel appearing for the respondent.

22. In K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, the appellant was a partnership firm engaged in the business of construction and sale of flats and it submitted its Income Tax returns for the assessment years 1983-84, 1984-85, 1985-86 and 1986-87 and the assessments were initially completed u/s 143(3) of the Income Tax Act. Thereafter, a search was made u/s 132 of the Act and thereafter revised returns were filed by the assessee and it was accepted by the Department and assessments were completed. The assessing authority treated the difference between the income as per original return and revised income as concealed income and hence the Assistant Commissioner of Income Tax levied penalties u/s 271(1)(c) of the Income Tax Act, 1961. The imposement of penalty was challenged by the said concern before the Commissioner of Income Tax (Appeals), who upheld the orders of the assessing authority.

23. Thereafter, the Department launched criminal prosecution by filing four complaints seeking prosecution of the appellant therein, viz., K. C. Builders and another for the commission of the offence under Sections 276C(2), 277 and 278B of the Income Tax Act and Sections 120B, 34, 193, 196 and 420 of the Indian Penal Code.

24. The assessee pending criminal prosecution, filed appeal before the Income Tax Appellate Tribunal and the Tribunal has allowed the appeals. The appellant/assessee sought to mark the said order before the Tribunal and the court permitted the appellant therein to mark the orders in evidence at the appropriate stage of trial. The assessing authority based on the orders passed by the Income Tax Appellate Tribunal, had cancelled the penalty levied u/s 271(1)(c) of the Income Tax Act and the reference sought by the Department u/s 256(1) of the Income Tax Act was also rejected.

25. The appellant filed a revision questioning the criminal prosecution and it was rejected and challenging the vires of the same, appeals have been preferred before the hon''ble Supreme Court of India.

26. The hon''ble Supreme Court of India in the above cited appeals, has decided the case in favour of the assessee and held as follows:

One of the amendments made to the abovementioned provisions is the omission of the word ''deliberately'' from the expression ''deliberately furnished inaccurate particulars of such income''. It is implicit in the word ''concealed'' that there has been a deliberate act on the part of the assessee. The word ''concealment'' inherently carries with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if takes out the case from the purview of non-disclosure cannot by itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances are found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In order that a penalty u/s 271(1)(iii) may be imposed, it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income. Where the additions made in the assessment order on the basis of which penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment and, therefore, in such a case no such penalty can survive and the same is liable to be cancelled as in the instant case.

It is settled law that levy of penalties and prosecution u/s 276C are simultaneous. Hence, once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution u/s 276C is automatic.

The appellants cannot be made to suffer and face the rigours of criminal trial when the same cannot be sustained in the eye of the law because the entire prosecution in view of a conclusive finding of the Income Tax Tribunal that there is no concealment of income becomes devoid of jurisdiction and u/s 254 of the Act, a finding of the Appellate Tribunal supersedes the order of the Assessing Officer u/s 143(3) more so when the Assessing Officer cancelled the penalty levied.

Once the finding of concealment and subsequent levy of penalties u/s 271(1)(c) of the Act has been struck down by the Tribunal, the Assessing Officer has no other alternative except to correct his order u/s 154 of the Act as per the directions of the Tribunal. As in such a case there is no concealment in the eye of the law and, therefore, the prosecution cannot be proceeded with by the complainant and further proceedings will be illegal and without jurisdiction. If the trial is allowed to proceed further after the order of the Tribunal and the consequent cancellation of penalty, it will be an idle and empty formality to require the appellants to have the order of the Tribunal exhibited as a defence document.

It is a well-established principle that the matter which has been adjudicated and settled by the Tribunal need not be dragged into the criminal courts unless and until the act of the appellants could have been described as culpable.

27. In Dapel Investments Ltd. and Others Vs. Asstt. Commissioner of Income Tax Central Circle, New Delhi, an application filed by the accused for discharge was dismissed. Challenging the vires of the same, he preferred revision before the Delhi High Court. In the revision it was contended that the Tribunal has set aside the levy of penalty u/s 271(1)(c) of the Income Tax Act and thereafter criminal prosecution on the same set of facts cannot be sustained. The Delhi High Court on taking into consideration the said submission has held as follows (page 103 of 244 ITR):

Now, the question is whether on these facts, the prosecution should be allowed to proceed. The effect of the finding of the Tribunal would be that the assessee/accused were not guilty of concealment of income or furnishing of inaccurate particulars of income justifying imposition of penalty u/s 271(1)(c) of the Act. On the same facts, it could not be said that the accused had wilfully attempted to evade any tax, penalty or interest u/s 276C(1) of the Act. In any case the chances of conviction are too remote. In these circumstances and as is also the consensus amongst High Courts as noticed above, continuation of the criminal proceedings would serve no useful purpose. It will be a sheer waste of valuable court time and unnecessary harassment to the petitioners.

28. Therefore, the learned Counsel appearing for the petitioner would submit that the facts narrated in the above cited decision are similar to that of the present case and therefore, the ratio laid down by the hon''ble Supreme Court of India in the above cited decision as well as by the Delhi High Court is squarely applicable to the facts of this case and therefore, the proceedings are liable to be quashed. It is the further submission of the learned Counsel appearing for the petitioner that though the trial of the case has already commenced, as that of K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, , still the court is having power to quash the proceedings. As the hon''ble Supreme Court of India in K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, has taken into consideration the facts that the charges have been framed and the matter is in the stage of further cross-examination, still chosen to quash the proceedings for the reason that after the order of the Tribunal and the consequent cancellation of penalty, it will be an idle and empty formality to require the appellant (K. C. Builders and another) to have the order of the Tribunal accepted as a genuine document inasmuch as the quashing of the order as aforesaid is unsustainable and unquestionable. Therefore, for the said reasons, the learned Counsel appearing for the petitioner prays for the quashment of the proceedings.

29. This court now considers the decisions relied on by the learned standing counsel appearing for the respondent.

30. In P. Jayappan Vs. S.K. Perumal, First Income Tax Officer, Tuticorin, the petitioner therein had deliberately filed a false return and in this regard, a complaint was filed against him on the file of the court of the Additional Chief Judicial Magistrate (Economic Offences), Madurai for the alleged commission of the offences u/s 276C and Section 277 of the Act and under Sections 193 and 196 of the Indian Penal Code. The petitioner thereupon filed petitions praying for the quashment of the proceedings and those petitions were dismissed by the High Court and challenging the vires of the same appeals have been preferred before the hon''ble Supreme Court of India. The hon''ble Supreme Court of India in the above cited decision, has stated that there is no provision in law which provides that a prosecution for offence in question, cannot be launched until reassessment proceedings initiated against the assessee are concluded. The hon''ble Supreme Court of India has held that the power conferred on the Commissioner u/s 273A of the Income Tax Act is an overriding power which he may exercise at his discretion. It is only where the Commissioner reduces or waives the penalty imposed or imposable u/s 273A(1)(ii) of the Act in exercise of his discretion u/s 273A. Section 279(1A) comes into operation and acts as a statutory bar for proceeding with the prosecution u/s 276C or Section 277 of the Act. Ultimately, the hon''ble Supreme Court of India on the facts of the said case, found that the pendency of the reassessment proceedings cannot act as a bar to institution of the criminal prosecution for the offences punishable under Sections 276C or Section 277 of the Act and therefore, dismissed the appeals filed by the assessee.

31. The learned standing counsel appearing for the respondent would submit that as per the testimony of P. W. 5, the Assessing Officer, he do not know whether the Commissioner has passed any orders on the petition given by the accused under exhibit P. 21 series (petition filed u/s 273A(4) of the Income Tax Act).

32. It is the further submission of the learned standing counsel appearing for the respondent that only if an order is passed u/s 273A(4), the criminal prosecution cannot be launched and in view of the testimony of P.W.5, the Assessing Officer who made assessment in respect of the returns filed by the petitioner herein, it is too premature to arrive at a decision that the criminal prosecution cannot continue against the petitioner.

33. It is the further submission of the learned standing counsel appearing for the respondent that even assuming that the Assessing Officer in pursuant to the direction passed by the Commissioner on the application filed by the petitioner/assessee u/s 273A(4) of the Act, has passed an order arriving at the tax payable and the penalty, still it can be construed as an order passed u/s 273A of the Act and it cannot be a subject-matter of challenge before the court or any other authority including the Tribunal in terms of Sub-section (5) of Section 273A.

34. As regards the decision relied on by the learned Counsel appearing for the petitioner in K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, , the said judgment has been doubted in a subsequent decision of the hon''ble Supreme Court of India in a decision reported in Standard Chartered Bank and Others Vs. Directorate of Enforcement and Others, (three-judge Bench), the issue arose for consideration in Standard Chartered Bank''s case was that with regard to the constitutional validity of the relevant sections of the Foreign Exchange Regulation Act, 1973, are unconstitutional and prohibition restraining the authorities under the FERA from proceeding with the proposed adjudication and the proposed prosecution, in terms of the said Act. Arguments were also advanced on behalf of the appellant therein that unless adjudication proceeding u/s 51 of the FERA is completed, a prosecution u/s 56 of the FERA cannot be initiated. Both proceedings can simultaneously be launched and can simultaneously be pursued.

35. The hon''ble Supreme Court of India in the said decision, had rejected the said contention and held that both adjudication and criminal proceedings can simultaneously be launched and be pursued. In paragraph 24 of the said judgment it has been held as follows (page 359 of 130 Comp Cas):

24. Counsel submitted that the devising of a special machinery for adjudication, the limiting of the ''without, prejudice'' clause in Section 56 to any award of penalty and not the initiation of proceedings u/s 51 of the Act, the making of a contravention of any of the provisions of this Act as the key to both proceedings, would all indicate that an adjudication should precede a prosecution u/s 56 of the Act. There is nothing in the Act to indicate that a finding in adjudication is binding on the court in a prosecution u/s 56 of the Act. There is no indication that the prosecution depends upon the result of the adjudication. We have already held that on the scheme of the Act, the two proceedings are independent. The finding in one is not conclusive in the other. In the context of the objects sought to be achieved by the Act, the elements relied on by the learned senior counsel, would not justify a finding that a prosecution can be launched only after the completion of adjudication u/s 51 of the Act. The decision in K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, , is clearly distinguishable. The court proceeded as if under the Income Tax Act, the prosecution is dependent on the imposition of penalty. That was a case where the prosecution was based on a finding of concealment of income and the imposition of penalty. When the Tribunal held that there was no concealment, and the order levying penalty was cancelled, according to this Court, the very foundation for the prosecution itself disappeared. This Court held that it is settled law that levy of penalties and prosecution u/s 276C of the Income Tax Act are simultaneous and hence, once the penalties are cancelled on the ground that there was no concealment, the quashing of the prosecution u/s 276C of the Income Tax Act was automatic. We have held already that on the scheme of the FERA, the adjudication and the prosecution are distinct and separate. Hence, the ratio of the above decision is not applicable. That apart, there is merit in the submission of the learned Additional Solicitor General that the correctness of the view taken in K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, may require reconsideration as the reasoning appears to run counter to the one adopted by the Constitution Bench in Assistant Collector of Customs and Another Vs. L.R. Malwani and Another, and in other decisions not referred to therein. For the purpose of these cases, we do not think it necessary to pursue this aspect further. Suffice it to say, that the ratio of that decision has no application here.

36. In the said para, the hon''ble Supreme Court doubted the correctness of the view taken in K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, and further found that the said decision may require reconsideration as such reasoning appears to run contra to the one adopted by the Constitutional Bench of the hon''ble Supreme Court of India reported in Assistant Collector of Customs and Another Vs. L.R. Malwani and Another, . Therefore, the learned standing counsel appearing for the respondent would submit that K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, was decided by a two-member Bench of the Supreme Court of India and the later decision in Standard Chartered Bank and Others Vs. Directorate of Enforcement and Others, is rendered by a three-member Bench which doubted the correctness of the view taken in K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, and therefore, no reliance can be placed upon the K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, to uphold the claim made by the petitioner for quashment of the proceedings. It is the further submission of the learned standing counsel appearing for the respondent that the decision rendered by the single Bench of this Court reported in Assistant Commissioner of Income Tax Vs. N.K. Mohamed Ali, , is squarely applicable to the facts of this case as in the said case also, the Income Tax Appellate Tribunal had set aside the penalties levied against the respondent/assessee. However, this Court in the said decision, has taken into consideration P. Jayappan Vs. S.K. Perumal, First Income Tax Officer, Tuticorin, , K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, and Standard Chartered Bank and Others Vs. Directorate of Enforcement and Others, and held that the findings of the Tribunal can have no binding effect on the proceedings of the criminal court. For the said reasons this Court in the above cited decision, has allowed the revision filed by the Assistant Commissioner of Income Tax and directed the continuance of the criminal proceedings.

37. This court after taking into consideration the said decisions and in the light of the reasoning recorded by the hon''ble Supreme Court of India in Standard Chartered Bank and Others Vs. Directorate of Enforcement and Others, is of the considered opinion that the criminal proceedings launched against the petitioner cannot be quashed for the following reasons:

38. The learned Counsel appearing for the petitioner heavily placed reliance upon the decision of the hon''ble Supreme Court of India in K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, rendered by the two judges Bench and the said decision has been doubted by the hon''ble Supreme Court of India in Standard Chartered Bank''s case reported in Standard Chartered Bank and Others Vs. Directorate of Enforcement and Others, , rendered by the three judges Bench and in paragraph 24 of the said decision, the hon''ble Supreme Court of India expressed opinion that the correctness of the decision taken in K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, may require reconsideration as the reasoning appears to run contra to the one adopted by the Constitution Bench of the hon''ble Supreme Court of India reported in Assistant Collector of Customs and Another Vs. L.R. Malwani and Another, . It is a settled position of law that the decision rendered by a three judge Bench has to be relied upon than the decision rendered by the two-judge Bench. That apart, in Standard Chartered Bank and Others Vs. Directorate of Enforcement and Others, , it has been held that the view taken in K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, appears to run contra to the one adopted by the Constitution Bench reported in Assistant Collector of Customs and Another Vs. L.R. Malwani and Another, , wherein it has been held as follows AIR 1970 SC 964

Despite this finding the Assistant Collector in his complaint referred to earlier seeks to prosecute these accused persons. Hence the question is whether that prosecution is barred under Article 20(2) of the Constitution which says that no person shall be prosecuted and punished for the same offence more than once. This article has no direct bearing on the question at issue. Evidently those accused persons want to spell out from this article the rule of autre fois acquit embodied in Section 403, Code of Criminal Procedure. Assuming we can do that, still it is not possible to hold that a proceeding before the Collector of Customs is a prosecution for an offence. In order to get the benefit of Section 403, Code of Criminal Procedure or Article 20(2), it is necessary for an accused person to establish that he had been tried by a ''court of competent jurisdiction'' for an offence and he is convicted or acquitted of that offence and the said conviction or acquittal is in force. If that much is established, it can be contended that he is not liable to be tried again for the same offence nor on the same facts for any other offence for which a different charge from the one made against him might have been made u/s 236 or for which he might have been convicted u/s 273. It has been repeatedly held by this Court that adjudication before a Collector of Customs is not a ''prosecution'' nor the Collector of Customs a court. In Maqbool Hussain Vs. The State of Bombay, this Court held that the wording of Article 20 of the Constitution and the words used therein show that the proceedings therein contemplated are proceedings of the nature of criminal proceedings before a court of law or a judicial tribunal and ''prosecution'' in this context would mean an initiation or starting of proceedings of a criminal nature before a court of law or a judicial tribunal in accordance with the procedure prescribed in the statute which creates the offence and regulates the procedure. This Court further held that where a person against whom proceedings had been taken by the Sea Customs authorities u/s 167 of the Sea Customs Act and an order for confiscation of goods had been passed, was subsequently prosecuted before a criminal court for an offence u/s 23 of the Foreign Exchange Regulation Act in respect of the same act, the proceeding before the Sea Customs authorities was not a ''prosecution'' and the order for confiscation was not a ''punishment'' inflicted by a court or judicial tribunal within the meaning of Article 20(2) of the Constitution and hence his subsequent prosecution was not barred. The said rule was reiterated in Thomas Dana Vs. The State of Punjab, and in several other cases.

39. The decision relied on by the learned Counsel appearing for the petitioner reported in Dapel Investments Ltd. and Others Vs. Asstt. Commissioner of Income Tax Central Circle, New Delhi, , is in consonance with the ratio laid down in K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, and since this Court is relying upon the decision of the hon''ble Supreme Court of India in Standard Chartered Bank and Others Vs. Directorate of Enforcement and Others, it respectfully disagrees with the view taken by the Delhi High Court in the above cited decision.

40. The decision relied on by the learned standing counsel appearing for the respondent in Assistant Commissioner of Income Tax Vs. N.K. Mohamed Ali, , is in consonance with the view taken by the hon''ble Supreme Court of India in Standard Chartered Bank and Others Vs. Directorate of Enforcement and Others, and a single Bench of this Court while deciding the said case, has taken into consideration P. Jayappan Vs. S.K. Perumal, First Income Tax Officer, Tuticorin, and K.C. Builders and Another Vs. The Assistant Commissioner of Income Tax, and Standard Chartered Bank and Others Vs. Directorate of Enforcement and Others, and held that the findings of the Tribunal can have no binding effect on the proceedings of the criminal court. This Court is in respectful agreement with the view taken by the single Bench of this Court in the above cited decision.

41. It is pertinent to point out at this juncture that in respect of the case in E. O. C. C. No. 151 of 1985 which is the subject-matter of challenge in Crl. O. P. No. 28081 of 2007, admittedly the trial has commenced and the case is in the stage of arguments.

42. As per the decision reported in Amar Chand Agarwalla Vs. Shanti Bose and Another, etc., , it has been held that once the trial of the case has commenced and only some witnesses are to be examined, the proper course at that stage to be adopted by the High Court was to allow the proceedings to go on and to come to its logical conclusion, one way or the other, and decline to interfere with those proceedings. In the light of the said reasoning also, this Court is not inclined to quash the proceedings. To sum up this Court is of the view that:

(a) De hors the orders setting aside the penalty proceedings by the Income Tax Appellate Tribunal, the criminal proceedings can go on.

(b) In so far as this case is concerned, the trial of the case has already commenced and the case is in the stage of arguments. Hence, this Court is of the considered opinion that the proceedings in E. O. C. C. No. 151 of 1985 pending on the file of the Additional Chief Metropolitan Magistrate E. O. II, Madras cannot be quashed.

43. In the result, this Criminal Original Petition No. 8081 of 2007 is dismissed.

44. In so far as Criminal Original Petition No. 27175 of 2007 is concerned, the petitioner prays for postponing of the proceedings in E. O. C. C. No. 151 of 1985 pending on the file of the Additional Chief Metropolitan Magistrate E. O. II, Madras till the orders passed on the compounding application.

45. This court is of the view that the said prayer runs contra to the case projected by the petitioner. Only if the orders are passed in the compounding application in terms of Section 273A(4) of the Act, and by virtue of the explanation to the said section, the criminal prosecution cannot continue. In the absence of any orders passed under the said provision, it is open to the respondent to continue the criminal prosecution launched against the petitioner. This Court finds no merit in the said petition and therefore, Crl. O. P. No. 27175 of 2007 is dismissed. Consequently, Crl. M. P. Nos. 1+1 of 2007 are closed.