Concealment penalty set aside, prosecution for wilful tax evasion failed and acquittal was sustained

Where a concealment penalty is set aside because deliberate concealment of income is not established, the foundation for prosecution for wilful attempt to evade tax under the Income-tax Act fails. The Madhya Pradesh High Court treated the criminal case under section 276C as dependent on the same concealed-income allegation rejected in the penalty proceedings, and held that the trial court's acquittal was supported by the record. The appeals were therefore dismissed and the acquittal sustained.

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Issues: Whether the acquittal for the offence under section 276C of the Income-tax Act, 1961 was liable to be reversed after the Income-tax Appellate Tribunal had set aside the concealment penalty.

Analysis: The penalty imposed for alleged concealment under section 271(1)(c) had been set aside by the Appellate Tribunal on the finding that deliberate concealment of income was not established. The prosecution under section 276C was founded on the same allegation of concealed income. Once the penalty finding was reversed, the basis of the criminal prosecution no longer survived. In such circumstances, the acquittal recorded by the trial court was supported by the record.

Conclusion: The acquittal was rightly sustained and the appeals were liable to be dismissed.

Ratio Decidendi: Where the statutory penalty for concealment is set aside on a finding that deliberate concealment is not made out, the foundation of prosecution for wilful attempt to evade tax fails.

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