Income-tax prosecution fails when the Tribunal sets aside the concealment finding and the criminal complaint loses its foundation.

Prosecution for concealment and false verification under the Income-tax Act cannot survive when its entire foundation is the assessment order and the Tribunal has set aside that order, including the finding of concealment. Once that of the criminal complaint disappears, continuation of the prosecution becomes an abuse of the process of court. The Patna HC therefore held the prosecution unsustainable in law and quashed the order taking cognizance.

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Issues: Whether prosecution under Sections 276C and 277 of the Income-tax Act could be sustained after the Income-tax Appellate Tribunal set aside the assessment finding concealment of income.

Analysis: The complaint and the prosecution rested on the assessment order and the finding of concealment recorded during assessment. Once the Tribunal set aside that assessment order and the finding of concealment, the foundation of the criminal complaint disappeared. In such circumstances, continuation of the prosecution would amount to an abuse of the process of court and could not be permitted to continue.

Conclusion: The prosecution was held to be unsustainable in law and the order taking cognizance was quashed.

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